Does buying (near term) make sense if your rent is low, and you foresee large increase in monthly expenditure with mortgage payments? Currently my rent is somewhat on the lower side (2100 pm, 2 bedroom), and the cheapest I can find an equivalent house/townhome in a similar good area is at least 700 - 800k. Somehow the argument to buy doesn't seem as persuasive, as I'm looking at a 1500-2000 increase in monthly payments. Can't help to think of the opportunity cost of not putting this money in the stock market. Granted, we've seen great returns on Bay Area housing in the past 5+ years, but with the signs of slowing property prices, the future seems uncertain. Since my rent is low enough, I'm inclined to wait for some time (~1 yr) for any possible decline to bottom out than buy now. Is this a sound strategy? TC 300k
With buying you can get some tax benefits with property tax+ interest. Two things to consider- these days cost of ownerships really high(as you already cAlculatwd but it was not the case 3-4 years ago when rent = mortgage, now mortgage >> rent)and tax benefits are negligible. Secondly trump tax made it even worse. Keep in mind you have a big down payment along with monthly rent to pay.
Single = rent, married with multiple kids = buy. Invest = mortgage/rent
married, no kids. What do yoy mean by mortgage/rent?
If you're an "investor" don't get into a negative cash flow situation. positive cash flow means mortgage+tax is less than rent. If you anticipate kids, buy in good school district and rent out spare rooms until you have kids.
If u don’t have kids don’t buy . At some point when u have kids u will need a lot of space that is prohibitive expensive to rent , then it makes sense to risk all ur money 💰 in a illiquid market in an asset trending downwards
Sometimes rent is the right answer. Rent provides you optionally. You can right size your living quarters better as a renter. As a buyer, you anticipate (near) future needs (at least). The rent for a 320sf studio is significantly different than mortgage for a 4600sf house. At a certain time in your life, the former is sufficient. And at some point the latter is what you need. Do your pros and cons and do what makes sense. Cheers.
Buying is about convenience of sorts, there’s a value in owning a place, you have more control over certain aspects of living. For instance, I can set my speakers as loud as I want. Silly stuff like that has nevertheless value. It’s also hedging against shelter costs. For instance, if the rents go up unexpectedly your cost of owning in USA will generally increase at much slower pace. On the other hand there’s a lot of headache with owning a property, it’s illiquid and not easy to get rid of when you need money. It’s also expensive when the rent is low. So it’s not a simple math, you’ll have to weigh in the relative advantage and disadvantages to your personal situation. There’s no one answer. I can see how renting can make a sense as long you invest the surplus money not just spend it. One thing ownership does is it disciplines you and forces you capitalize your cash. It’s not the most efficient deployment of cash but it’s better than wasting it on parties and Booz
thanks! I do see the convenience argument, but in our case, even that doesn't make for a huge difference. We currently stay very close to the Apple spaceship and my commute is super short. Condo pricing at a similar distance is >700k, putting the price to rent ratio at a whopping 28. We can move near my wife's work place, but even there we're seeing upward of 500k for a condo equivalent to our apartment, and upward of 800k for a house. As far as investing excess cash is concerned, we're extremely disciplined with money, and pretty much everything except for rent and living expenses ends up in ETFs. Buying a house would primarily be a venture if the expected gains can exceed market returns (seen in the Bay Area over the past few years). However want to avoid buying at a (possible) market top above everything. Hence thinking of monitoring prices over the next year or two (keeping a down payment ready), and buying i if there's indeed a dip.
If I were you and your wife is not pushing for a nest, then renting would be s better option. I still like having real estate in my portfolio, not just reit but a physical house. A small portion of assets less than 10%.