Renting and reinvesting the savings from renting, will outperform owning and building equity

[#BOTHSIDES]

So now instead of putting 20% down on a 168k house and paying 3.5% interest you're gonna put 60k down on a 204K house and pay 7% interest.

According to Zillow that 20% down on a 168K house on a 30 year mortgage is a monthly payment of about $787 on 1% property taxes and 3.5% interest
That 60,000 down on that same house that's 204K today on 1% property taxes and 7% interest is a monthly payment of about $1143.

The person that bought the house in 2019 for 168k now has the following over you:
36,000 in equity
6 years closer to paying off the house
$396 extra dollars a month to invest in the market + an extra $27,000 to put into the market.

Where did that 27,000 come from? That 27,000 came from you listening to coli brehs gas you about rent + invest so you waited 6 years to buy a house that you could of gotten for 168,000 and only had to put 33,000 down on to get a $787 monthly payment. So now instead of throwing 27,000 into the market like the person that got his in 2019 can, you're throwing that into that same house to get a $1143 monthly.


So now the guy that bought his house in 2019 has an extra 400 a month + 27,000 to invest in the stock vehicle .

He'll also finish paying off his house 6 years earlier than you and can now throw damn near $1,000 more a month into the market than you just by owning his house earlier and not listening to the goofball rent+invest colibrehs who are really just coping because they can't afford to own in their city. That 5 figure short term advantage you built up will melt away real quick. This dude is beating your ass financially my guy. I left the dollar amount that would be saved on interest out on purpose because I'm too lazy to find out how much extra cash this dude would also have in 30 years from paying at 2019 interest rate vs a 2025 interest rate. Just that alone beats anything you gained in the short term market investing advantage. And we're not going to talk about the taxes you will have to pay on those stocks as well. Breh it's not even close.

Facts

Or like I said…go with the NACA program—no closing costs.
No down payment
No pmi
Below market rate interest rates

How can you argue with that

 

[Conan]

Anyways, few things to keep in mind if you're on the fence:

1. Rent is "throwing money away", the same way paying interest, taxes, maintenance and extra utilities on a house is "throwing money away". It's a silly phrase. You're paying for a roof over your head either way.

2. If you own a house, your return is in house appreciates over time. If you are renting, your return is in the money (down payment you did NOT put down on a house + the difference in rent and overall mortgage payment) invested in the stock market appreciating over time.

3. The average rent in your area, the average home price in your area, bank interest rates, and the return from a broad based ETF will determine, strictly from a financial perspective, whether it is better to buy or rent. Anyone who tells you it is always better to buy or always better to rent, is full of shyt. Run the numbers and see.

4. You are allowed to buy a house for emotional/sentimental reasons. With that in mind, treat the house as an expense, not as an investment (unless you're renting out the basement/bedroom and earning income from it).

 

[The_Sheff]

fukk all that. It's nice to know me and my family will always have somewhere to live.

Rent is crazy right now and folks can pull the rug at any time.

 

[Mordith]

This thread aged terribly.

 

[KillerPups]

I got rich off real estate but it was all luck things was bleak for a while.

Meeting my wife and a strong real estate. Agent made me make much better decisions.

 

[Mordith]

Anyways, few things to keep in mind if you're on the fence:

1. Rent is "throwing money away", the same way paying interest, taxes, maintenance and extra utilities on a house is "throwing money away". It's a silly phrase. You're paying for a roof over your head either way.

2. If you own a house, your return is in house appreciates over time. If you are renting, your return is in the money (down payment you did NOT put down on a house + the difference in rent and overall mortgage payment) invested in the stock market appreciating over time.

3. The average rent in your area, the average home price in your area, bank interest rates, and the return from a broad based ETF will determine, strictly from a financial perspective, whether it is better to buy or rent. Anyone who tells you it is always better to buy or always better to rent, is full of shyt. Run the numbers and see.

4. You are allowed to buy a house for emotional/sentimental reasons. With that in mind, treat the house as an expense, not as an investment (unless you're renting out the basement/bedroom and earning income from it).

Anyone who listens to this bullshyt is a moron.

No one who rents has made a bigger return than I have on the $1500 I spend a month on my mortgage (not including taxes or insurance). Since I bought it in 11/2021 the value of my home has increased by $200k and because I have lived here for over 3 years at this point if/when I sell all of my equity is tax free money.

To any of you renters in here tell us how much of a return you have made off of the rent you've paid.

 

[Gloxina]

This thread aged terribly.

Man I swear.

Everyday my family is like “we are so glad you aren’t renting.” Because they know that if my rent jumped like $500 out the blue I’d be on the phone

 

[R.E.N. Spells Ren]

This thread aged terribly.

It was terrible from inception.

*sigh*

I'm always very leery when I see folks advising people, especially Black people not to buy homes....have y'all been paying attention???

Putting aside investment properties because it seems that the OP is comparing dropping a down payment on a house vs investing that money and continuing to rent.
The median house sale in September 1989 was $120,000 per the US Census so 20% of that would be $24,000. People always look at how much more than that purchase price you end up paying the bank, but that's faulty, so let's play this out. With a 5% fixed rate 30 year mortgage, your monthly principal+interest payments would be $515.35. Over the course of the 30 years you would've paid the bank $185k to borrow that initial $96k. But you also have taxes, the median per this site is 1.2% of the home's value (escalating monthly per the US Census data, so yes your taxes will increase over time), and maintenance, which I'll assume is 1% of the home's value, again escalating (1% is probably way to high too, but it's about $61k over the 30 years, so maybe not if you include a major kitchen or bathroom upgrade in that timeframe). Over the course of those 30 years, you would have spent $346k (including the downpayment). If instead, you chose to rent, following this escalation in median rents in the US, you would have spent about $342k over those 30 years. Note that the 1989 rent is $600 while the 1989 Mortgage + taxes is about $640, so comparable with the home being a little more expensive monthly....at first. The costs of living expenses in each scenario is pretty much a wash over these 30 years.

Now, the rental spend doesn't include the $24k, cuz the OP is saying invest that. From Sep 1989 to Sep 2019, the S&P 500 rose by 315% (11% ARR turning your $24k to about $100k)) per this site while the DOW Jones rose by 387% (13% ARR turning your $24k to about $117k) per this site and the NASDAQ rose by a whopping 724% per this site (which is a very healthy 24% ARR over 30 years). So let's say you had the foresight to invest heavy in tech in 1989 (i.e. the NASDAQ) and saw your $24k investment blossom to about $198k in 30 years.

The buying route saw you spend $345k including the $24k downpayment. The house you bought in 1989 for $120k is now worth $299k (again using the US Census data for the median house in September 2019). $299k from an initial investment of $24,000 is a 38% ARR. Then when you consider the tax implication (you're not taxed on the first $250k of profit from selling your official residence; $500k if you're married vs paying ~15% capital gains taxes) and it's clear that the home buying route is the winner.

Of course there are a lot of variables, but you would've needed a damn good investment prospect to beat out the long term returns associated with owning your home.

 

[Gloxina]

It was terrible from inception.

 

[Conan]

Anyone who listens to this bullshyt is a moron.

No one who rents has made a bigger return than I have on the $1500 I spend a month on my mortgage (not including taxes or insurance). Since I bought it in 11/2021 the value of my home has increased by $200k and because I have lived here for over 3 years at this point if/when I sell all of my equity is tax free money.

To any of you renters in here tell us how much of a return you have made off of the rent you've paid.

Emotional motherfukkers

I rent. My equity in the stock market (brokerage, 401k, HSA, Roth) beats the equity in your house

What return did you make off your mortgage interest and tax and insurance and maintenance?

 

[Conan]

"You can win either renting or buying. Run the numbers and see what works for you"

Homeowners: "shut the fukk up you retard"

 

[Mordith]

Emotional motherfukkers

I rent. My equity in the stock market (brokerage, 401k, HSA, Roth) beats the equity in your house

What return did you make off your mortgage interest and tax and insurance and maintenance?

How much return have you made on your rent alone?

Homeowners receive tax write-offs for property taxes and mortgage interest every year.

You can't touch funds from 401k, HSA, or Roth accounts before age 59.5 with out paying penalties and taxes out of the ass. Also when you withdraw funds from a brokerage account without reinvesting it you have to pay capital gains taxes.

This is how I bust you frauds everytime because your arguments are always from the view point that it's either or like homeowners don't have other investments besides our homes.

Lastly do you plan on renting for the rest of your life? Because as time has shown since this thread was started in 2019 real estate prices just keep going up and up so the price of entry for homeownership for you renters just keeps getting higher and higher.

 

[winb83]

So now instead of putting 20% down on a 168k house and paying 3.5% interest you're gonna put 60k down on a 204K house and pay 7% interest.

According to Zillow that 20% down on a 168K house on a 30 year mortgage is a monthly payment of about $787 on 1% property taxes and 3.5% interest
That 60,000 down on that same house that's 204K today on 1% property taxes and 7% interest is a monthly payment of about $1143.

The person that bought the house in 2019 for 168k now has the following over you:
36,000 in equity
6 years closer to paying off the house
$396 extra dollars a month to invest in the market + an extra $27,000 to put into the market.

Where did that 27,000 come from? That 27,000 came from you listening to coli brehs gas you about rent + invest so you waited 6 years to buy a house that you could of gotten for 168,000 and only had to put 33,000 down on to get a $787 monthly payment. So now instead of throwing 27,000 into the market like the person that got his in 2019 can, you're throwing that into that same house to get a $1143 monthly.


So now the guy that bought his house in 2019 has an extra 400 a month + 27,000 to invest in the stock vehicle .

He'll also finish paying off his house 6 years earlier than you and can now throw damn near $1,000 more a month into the market than you just by owning his house earlier and not listening to the goofball rent+invest colibrehs who are really just coping because they can't afford to own in their city. That 5 figure short term advantage you built up will melt away real quick. This dude is beating your ass financially my guy. I left the dollar amount that would be saved on interest out on purpose because I'm too lazy to find out how much extra cash this dude would also have in 30 years from paying at 2019 interest rate vs a 2025 interest rate. Just that alone beats anything you gained in the short term market investing advantage. And we're not going to talk about the taxes you will have to pay on those stocks as well. Breh it's not even close.

So the $88K I've invested since 2019 that turned into $168K total (up $80K in 6 years or 90%) is less valuable than his $36K in equity? You're really gonna sit up here and say that?

Do you understand how compound interest works? The longer you allow it to compound the greater it grows.

Those stocks aren't a retirement account it's just something I do with my spare money. I could decide today to liquidate it all combine it with my cash savings and buy a home putting all of it down with little to no mortgage on such a house out here.

You seem to think the equity in his house is more valuable than my investment portfolio equity. I completely disagree. My investments also put out $1200 a year annually in dividends. When I do buy a house I can take the income produced there and put it on the house mortgage trimming time off my loan if I choose.

His home is a dead asset that cost him annual taxes, insurance, maintenance and when he goes to sell will have a commission he has to pay on it. Thats not even getting to the interest that will have been paid on the home.

My stocks cost me nothing but the capital gains taxes on the dividends and the capital gains when I sell.

 

[winb83]

How much return have you made on your rent alone?

Homeowners receive tax write-offs for property taxes and mortgage interest every year.

You can't touch funds from 401k, HSA, or Roth accounts before age 59.5 with out paying penalties and taxes out of the ass. Also when you withdraw funds from a brokerage account without reinvesting it you have to pay capital gains taxes.

This is how I bust you frauds everytime because your arguments are always from the view point that it's either or like homeowners don't have other investments besides our homes.

Lastly do you plan on renting for the rest of your life? Because as time has shown since this thread was started in 2019 real estate prices just keep going up and up so the price of entry for homeownership for you renters just keeps getting higher and higher.

A stock portfolio doesn't cost you money to own. A home does.

My rent doesn't get me any return but that's not the point. My rent is part of a strategy to minimize my cost of living and maximize what I can do with my income from my job.

A home that you live in is not an investment. Your equity is meaningless unless you sell or borrow against it. Any day I can decide to liquidate part of my portfolio and do as I see fit with it adding no debt and not impacting where I stay.

If you were talking an investment property you own and rent out that's completely different than a home you live in that cost you money instead of producing income.

 

[Conan]

A stock portfolio doesn't cost you money to own. A home does.

My rent doesn't get me any return but that's not the point. My rent is part of a strategy to minimize my cost of living and maximize what I can do with my income from my job.

A home that you live in is not an investment. Your equity is meaningless unless you sell or borrow against it. Any day I can decide to liquidate part of my portfolio and do as I see fit with it adding no debt and not impacting where I stay.

If you were talking an investment property you own and rent out that's completely different than a home you live in that cost you money instead of producing income.

Let's wait for a response breh