owning or renting a home?

 Which one is better, owning or renting a home?

Buying a $300,000 house will cost about $2,000/month in mortgage payments over 15 years.

In addition insurance will cost another $150/month and $350/month for property taxes.

Estimate maintenance at another $150/month.

Total cost for your house is about $2650/month.

At the end of 15 years you own the property free and clear and now must spend about $600/month total to continue to own the house that you can sell for $300,000 plus appreciation.

To rent the same house expect to pay about $1500-$1800/month plus another $150/month for renters insurance. So about $2000/month or less until the rent goes up.

At the end of 15 years you will have nothing except the rental increases over the 15 year period.

I rented for 2.5 years at $1350/month.

That could have been a $40,000 down payment on a $300,000 house reducing the payments by $250/month.

It depends on what you can afford.

Replies:

1. I think it depends a lot on where one lives. We bought our home here in California 11 years ago for $935,000. We could get about $2.7 million for it today. Our neighbor just got $2.6 a few weeks ago, off market and it’s about 300 sq ft smaller.

When we bought the house the rental value was about $6,000 a month and today it’s about $12,000 a month. Our mortgage payment including taxes is about $3,700 a month and because in California and prop 13 our taxes remain close to the same only going up about 1% a year.

Thank goodness we bought and didn’t rent because had we done that we’d be screwed. Our income has risen roughly 50% but rents have gone up 100% and house prices 100 to 150%. We also now have about 1.5 million in equity and another 500k in mortgage pay down which gives us financial options if we ever need them and we’d have never put away that much money paying rent.

BTW, it may sound like we must live in a mansion given the figures I have quoted but we don’t. Our house is 1900 sq ft and the lot is 6600 sq ft. Just a nice, craftsman bungalow style home.

2. Wow. Crazy. I'm in New Jersey in a nice 3000sqft home with pool. Paid 650k in 2003. Now worth $1.05m. Not a huge increase.

3. I’m in Marin County just over the Golden Gate from the city. It is a very sought after and convenient area because of it’s proximity to both the city and wine country. It’s also known for it’s natural beauty being surrounded on three sides by the bay and the Pacific along with redwood forests etc. These things have helped it to see these crazy appreciation numbers.

4. Sure…it's the redwoods. Lol.

My wife works for a silicone valley software company with stock options that hasnt turned a profit, yet trades publicly. It's the massive amounts of VC money being flung at technology companies over the last decade or two that fuels San Francisco and its environs. That and the new asian money, looking for a place to be stored. (And of course massive government inflation due to covid money)

Congrats for owning in the right place at the right time.

5. Not a huge increase? It had almost doubled!

6. I built my house on 2.5 acres in 2018 for $248k, it’s valued at $1.2M today. COVID really fucked the Montana housing market.

7. Not for 20 years and add in new roof, new kitchen, decking, etc. It's not California or Richmond VA.

Would have done better renting and putting my down payment in the sp500.

8. California has over 20% appreciation per year! Most states do not have that kind of appreciation on houses!

9. Okay so your house appreciates a whole lot but you would have to sell it to get any money from it.The only way to really benefit from that would be if you live in a very expensive housing area or downsize your living situation. If you sell a five bedroom house with ocean view then move to a downtown apartment you might really make out on the deal.

10.  Exactly. Real Estate is a great wealth building source but you only can cash out if

Downsize

Move to cheaper, less desirable area

Move to cheaper foreign country

Die

Do you like to travel or live in one spot for the rest of your life?

Travel? Rent and invest the difference in stock market.

Don't like change? Buy and have a huge payment looming over your head don't get laid off or work for a company that goes bankrupt.

Good luck with the “no change” part. ⚡

11. usually who uses not their own names are extremist ready to pop.. and second low level of extremist not even good in math are the worse …

40% increase in 20 years do you think is a lot ? comparing to what ? if he put them in bonds doing nothing he would have done way more ..

12. I bought a 1200 square foot 2 bed/2 bath garden home in Alabama 7 years ago for $125000, mortgage was $560/month. House is paid for now, my property taxes are $1100/year, house ins $1000/year, I make about $30 000/year and I can make a living on that. I have no debt, my car is paid for. I live 2 miles from a state park, it’s beautiful here and no harsh winters to endure. Power bill is about $140/month, water/sewage is $70/month. I live 2 miles from work, so it’s a 5 min commute one way. I’m blessed.

13. My sister sold her home in California and moved to Kansas. With the money she bought 3 houses, new everything for the houses and 2 cars with the money and still had some in the bank. She’s retired so having a job isn’t an issue. Collecting rent from the 2 extra houses. She says life is so much more peaceful.

14. so if you were to sell your house for $2.7 million, how much would you need to spend to buy another home in California in the same area? I assume you would move out of state to make a profit and not end up paying the same or higher price for a similar home.

15. From your lips……

This is the fallacy of home price inflation. You can’t eat the house. It would cost you just as much plus the transference costs to move. And, borrowing against equity is risking the very thing a home provides; a roof over one’s head.

A house is a roof over one’s head. Nothing more. Nothing less.

One cannot live well without that roof. So it’s monetary value is of little consequence.

The correct answer to buy vs rent in housing is, it depends.

16. But having appreciation in a house is far superior to having no house in most instances. In my home town in Australia, house prices were around $120,000 in 2000. Now in the same area, houses are worth $800,000. Renting is cheaper than a mortgage in the area (in 2000 was about $150 per week and is now around $600 per week for an average house), but even if you saved 100% of the difference and invested it in shares it would be difficult to make such a return. Most renters though don’t save 100% of the difference between what they are paying in rent and a mortgage however, so it’s nearly always better to own your own home longer term if you can possibly afford one.

17. By your line of reasoning, you can’t eat money so it’s worthless. So throw $800,000 dollars away because it’s useless. Not it’s not useless, you can sell the asset and use the money for other purposes. With the example of my hometown you can downsize from a house worth $800,000 and move to North Queensland when you retire where houses are $400,000 and have $400,000 in savings. When my father took out his mortgage, it was almost unaffordable at $100 per month but when he finished paying it off 25–30 years later, inflation had made that $100 per month a totally laughably small sum. With renting the amount you pay is generally increasing in line with inflation (in the case of the last 4 years rents have increased far in excess of inflation). So it’s much harder to save consistently long term. As I said, if you can rent and save 100% of the difference between that and the cost of owning a home AND invest it in an asset that appreciates faster than property than yes you are better off renting but how many people do you know that can actually accomplish that ! Otherwise long term (20 years + ) it is always financially more beneficial to own a property than rent. Finally I have to comment on your nonsensical comment about assets still depreciate in areas of appreciation. Huh? What a strange thing to say! By definition if an area is appreciating than the value of all the properties in the area are increasing ! The depreciation of the actual building doesn’t matter in the long term as the value of the land appreciates so much over the longer term (once again I’m talking a 20 year + time frame). Of course over the short term properties can lose value and that’s how people lose money owning, they buy a place and then sell it 2 or 3 years later. But buying and holding for a long term is a totally different proposition.

18. Ya that’s how Toronto is heading too. I am in my first house at a mil (already made my mortgage back since buying as prices are only going up). Sure I enjoyed living downtown, but I decided to make the investment & bought close to the GO (one of fastest developing areas in TO). Ppl don’t think ahead. I love hearing this cause I was sad leaving dt, but know I’ll be that much further ahead later (houses always appreciate quicker & it’s yours to own & do whatever with it)

19. It depends. Both have there pros and cons. My wife and I are renting an apartment, our rent went up $500 in just one year of leasing which is outrageous. I know people who have rented houses for years and their rent has not gone up.

20. No rent increase is an exception to the norm.

Also most rents in Canada don't include utilities any more, so add that to the rent cost too.

21. Our rent here in America is far more expensive than in Canada. I know many people who live in Canada that pay less than we do and have more. Our utilities are not included in our rent. We have to pay them separately. It’s not normal for rent to go up every year, not from $1100 to $1600 for a 1 bedroom.

22. You don't add utilities to rent cost and more than you'd add to mortgage cost. Utilities are expenses anywhere and anyway you live, they aren't an investment with return like home ownership is.

23. $500 increase sounds high but it totally depends upon what the rent is per month. If your rent is $1200 - $2000, then $500 increase is hefty. But if you rent is $3000, 4000, 5000 or 6000 per month then a $500 increase is in-line.

24. My rent was $1100 when my wife and I moved in. 1 year later when we renewed our lease it went up to $1600.

25. That’s just about a 50% increase!!! Wow…. I can see why you’re not happy. I rent out my 1 br apt for $950 and just increased it by $75 to $1025. I have a new tenant this month. Before she signed I advised her that I plan to raise the rent in 2024 by $100, so that if she’s adverse to that she could avoid renting my place. Currently in my area my 1100 sq ft apt is about $400–600 less per month than comparable units. I plan to keep it that way. Just for your info, she’s leaving her current apt complex because they raised the rent $400 on top of the $1200 monthly rent.

26. Yeah it’s a crazy increase in rent especially for a 1 bedroom apartment. I have a friend who rents a 4 bedroom house and has for 10 years and his rent has never went up. It’s cheaper than our rent.

27. Well, I must point out that his situation is very very unusual. Please don’t expect that. Most landlords go up at least 10% every year. I think that some landlords went up huge amounts this past year because they had not been raising the rents much over the last few years. What tenants simply don’t understand is that our costs / expenses go up every year . If we don’t build in rent increases, we can’t cover our cost increases and get caught with high maintenance expenses we didn’t plan on.

28. Not sure I believe that maintenance expenses are going up 10% every year to justify raising rents that much annually. Inflation in normal years is 2%. Why would maintenance costs go up 10% when normal inflation is 2%?

It’s not likely property taxes are increasing that much either. There are plenty of ways to keep property taxes low too (appeals to the appraiser’s office). Property taxes are slow to catch up to sales prices or market value. Too easy to piss off a lot of homeowners if property tax appraisals reflect true market value.

So there really is no legitimate excuse for raising rents, except to reflect the market value, which is a euphemism for “getting away with it.” It’s greed. Simple capitalistic greed.

29. I was told the same thing. Not normal for rent to go up that much. The apartment complex my wife and I live in have a lot of section 8 tenants so their rent is lid by our tax dollars. We are looking to get a house soon anyway. We only moved into those apartments because it’s our first time living together and it was actually the cheapest at the time.

30. Wow, that is a lot.

31. I would do anything to have my own house. The owner won't let us do anything because he says it would take away the appreciation of a house. I’m disabled & it’s hard for me to get up & down the steps so I asked if I could put a ramp out front. He said “no” but he said I could put it in the back yard. That wouldn’t work. I have Cerebral Palsy & I can only use one hand (it affects my left side). So if I had a house I would have it built because I need it accessible for me.

32. I totally understand. I have MS and was having trouble getting my disability scooter from the underground parking to the elevator. I own my condo and asked the council to put door openers in. They asked the other owners, decided it was a good idea and it was done. Now you just push a button and the doors open. I wish your issue had gone so well Kellie.

33. I’m sorry for that, but the owner is correct. It takes away from the street appeal, which is important. You’ll have to purchase your own house. And it’s too bad he won’t allow you to pay to have a nice looking, quality ramp in the back. But there are so many issues with him approving that. When you move or leave he is left with the back ramp which he must take down. That costs him money plus having to pay to repair any damages ( and there will be some) left from removing the ramp. We’re talking hundreds if not thousands of dollars. This is what renters simply do not realize or understand. There always simply seems to be that the landlord has “money”, I don’t and so the landlord should pay for all this stuff. With that attitude a landlord will lose his property in short order due to poor judgement in managing the expenses.

34. Ooop’s that should’ve said 30yrs. not 15 … as for the Question of one being better that the other, this is really dependent on your personal needs & abilities … True case scenario: My brother could no longer give his home the care that's required (due to his health) when you own and really couldn’t afford to hire for the repairs and maintenance (with the increased costs of his health condition) that comes and goes with Owning, and the amount of these tend to increase as the home ages just like people. In his case it was a good decision to spend his late life years in a Rental unit where he no longer had to worry with getting the grass cut or buy a new refrigerator when his old one failed….. Everyone’s situation is different. For my brother it was better for him to give up Ownership….. Good luck…

35. If your brother had his place paid off or had equity in the home, selling it would help pay his rent and expenses for a while. That’s the way I look at it.

36. You and your brother have experienced the real costs of maintaining a home. You were spot on. The earlier Quora commenter Mark is a naive, inexperienced property owner. He’s EXACTLY the type tenant that landlords don’t want. He doesn’t get what it costs to keep things up, like you mentioned. When things need repairing or replacement he just thinks “that’s part of his rental deal”. Well, it’s part of the landlord’s “deal” to raise rents incrementally every year to cover these maintenance costs. Surely the tenant doesn’t want to be hit with a $2000 - $8000 increase in one year to cover an appliance cost does he???? Well, then the only way to pay for these costs are incremental annual rent increases.

37. Lastly I have a suggestion for “ Mark”….. try moving to Section 8 housing paid by the governments. You’ll love the neighbors and how quickly government responds to maintenance issues! You’ll love it

38. Depends on the cost of living in your area, but I can tell you from personal experience there’s no better feeling than having a paid up mortgage.

39. Agreed! One of the best feelings in the world : smile 😊 

40. I’m bet depends on your situation. It’s not that easy. Are you living here a long time? Not sure, is your job secured, how’s your credit, do you have a down payment? What are your ratios. So many factors to consider. It’s always better to own your house,  unless you are in no position to buy or maintain a house but it should be a long term goal and see a lender ( banker) a few years in advance to get the best advice.

41. Don’t forget non-financial reasons for renting vs owning. If you don’t like to deal with home repair or maintenance, or contractors, being able to call you landlord and having them deal with it is a huge plus. Also, if you may not know, if you will/want to stay in a particular location, renting gives you more flexibility than owning then having to sell or manage a rental.

Another thing to be aware of, now that you own an asset, there are more considerations to make that may not even be related to the home itself. For example, do you have enough car insurance coverage? In case you’re found liable for an accident, they can come after your house (but not the place you rent). Do you have a will? Do you need a trust? Do you need life insurance to help with mortgage in case you’re not around? Lot of these are financial but some aren’t. Like, do you need to house family and friends when they visit from out of town?

So, many people talk about the good reasons for home ownership but few mention the bad, or at least things to be aware of. That said, I’m an advocate for home ownership as it’s the best and easiest way to build wealth. Still though, evaluate your own situation for what best suits you (and your family).

42. Good point. You could also consider owning a condo, to help mitigate having to deal with the maintenance side of things.

43. Very wise advices. Thank you. really appreciate your help.

44. Buy a house for $300K? Where is that possible in a state that isn’t hot & humid in the spring, summer and piled under with snow in the winter?

45. You can buy a very nice home for $300K , in Texas . In fact you can buy a brand new home , for $300K ; a brand new home with all the higher grade details.

46. I don’t think you could even buy a bachelor condo for that here!

47. You can buy a nice house for under $350,000 in Anderson Township on outskirts of Cincinnati OH . Nice area, virtually no crime, lots of nice restaurants and 30 minutes tops to downtown Cincinnati. Property taxes 4,000/yr. Only drawback is no public transportation other than from local terminal to downtown. ( In 2023 context)

48. The number one consideration in buying a home overall is the house downpayment and loan approvals. Banks need to be able to or allow them to take a chance on people that have a perfect 5–10 year spotless rental record. This is the only way to get people into homes.

The reason that investment property companies and bigger landlords are buying up the market is because of the upfront costs.

Sure, it is clear that owning is better than renting. But wage increases are few. Cheap property near work station is hard to find and bank loans are hard to get approved.

Until we find ways to tackle that, then we’re less likely to get good families into home ownership. My 2¢ opinion.

49. Good opinion. So many of us work paycheck to paycheck.

50. This is not quite true. I was able to buy my first house within 2 years of working in the USA and renting rooms prior to that. My daughter was also able to do the same after her first full time job, having 2 years work history and no rental history.

Financial institutions want to see that you have stable income to cover your mortgage and other monthly obligations, a solid credit score and it helps to have some reserves depending on the loan product you're taking out. There are also programs which don't a require W2, while these rates would be higher and more geared at investment properties they exist.

Now to answer the question, if you buy correctly, owning house builds wealth, renting  house should be a short term solution unless of course your rent is hopefully covered from other wealth building source(s) that afford you a certain lifestyle by renting your current place.

51. Agreed. As we all know that banks take a risk. This doesn't take away the fact that hard working people, living paycheck to paycheck, are not able to buy homes because of “lack of credit” when there are other ways to determine a payment history. Rent is one of them. There's no real reason to deny someone a homeloan if they had perfect rent/utility payments for many many years. The interest rates are just a gatekeep and greed designed to keep many people from owning homes. What's the worst that can happen? The banks will own the property. They can sell that property for more than the loan amount. Banks just do a poor job of not qualifying potential good loan candidates.

52. Unfortunately in many instances of a bank taking ownership of a house after payment default the bank is stuck with a house full of trash, unpaid water bills (water and sewer payments stay with house not owner or tenant) and lots of property damage. Recovering loan balance is difficult if not impossible. Banks are in business to make money through making loans. Banks have no motivation to keep people out of houses. Foreclosures are expensive and generally result in losses for a lender. There is a point at which no interest rate is worth the risk.

53. The rent you paid could be a $40,000 down payment. But then again, you have to live somewhere. This is the issue. In order for people to say for the down payment and a cushion, they have to have somewhere to live for free. Because the current rates are astronomical. And they’ve been going up since 2008 and it doesn’t look like it’s coming down at all anytime soon. At least not work I am in Florida.