Explain to me why I should EVER purchase a home / condo?

Renting is just nuts unless you know you are only going to be in an area for a very short time or the price of homes is way inflated such as it was in California.

Everyone knows people that bought the fixer upper home and is now paying less in mortgage payments than renters pay every month. The average rent in my area for a two bedroom is around $1000 or more a month, usually more. Most home owners I know are paying almost that same rate but they are building up equity in the mean time and that is for a well maintained home. If you have a fixer upper you will pay a little over $600 month in mortgage......for a freaking house.

I would never buy a condo though. A condo is far to reliant on the company that maintains it. If they hire a bad manager your condos will lose value over time as the entire complex falls into disarray. I know a couple of people that this happened to personally. At least with a home you are solely responsible for it and since presumably your neighbors want their value to go up as well, everyone has an incentive to keep their houses maintained and keep the riff raff out.

 

In most cases, even if the mortgage payment is lower, you are still paying for the taxes and the maintenance.

The argument is that people my age (20s) need to stay mobile. We aren't sticking to one company for 30 years. If you do that, you are standing still in your career. Owning a home becomes an extra burden in that sense.

 

OP should look at this

http://www.amazon.com/Die-Broke-Radical-Four-Part-Financial/dp/0887309429

It seems to largely agree with the viewpoint he was expressing

 

Taxes are already included if you have your mortgage set up that way which many people do. In the end you are just throwing away money when you rent instead of building up equity. And this idea that you are supposed to move around alot is NOT the way you should be building your career unless you are in a highly specialized field or work on retainer etc. HR people look at someone with lots of jobs over short periods of time as a negative not a positive.

 

You might wish to change jobs every 3-4 years and some will be close to each other while others might be outside of commuting distance...at least until a point in your life where you feel you are settled and you won't move and know you can find some form of suitable employment...renting/leasing is okay. And remember you can invest in income property any time in your life...

 

It is much better to have a piece of real estate as investment property as opposed to just to live in, which is why I think buying a house you know you won't be staying in is a better investment than one you will be staying in.

 

Purchasing a home has several major advantages, if you plan to stay in it for a while:
1) You build up equity as your mortgage is paid off;
2) It serves as a hedge against inflation. Prices may go up but your mortgage payments will not.
3) You get a tax write off for the interest paid.

As an investment, real estate historically is not a bad one, notwithstanding the recent experience with the housing bubble. You can invest in real estate if you research the market and have a little luck.

If you plan on moving within 5 years, it may not be worth buying. If you plan on staying put longer than that, it starts becoming a more attractive proposition.

 

The question being asked is should you pay toward owning the property in which you reside or you should you pay for someone else to own the property in which you reside.

I've been a landlord, got out and am again a landlord. When the numbers work, it makes sense to have rental income even if it is a "break even" each year.

I am in high tech but have torn off roofs, added second stories, plumbed, wired, roofed etc. I can do it all so I save a lot and I'm a sick person who thinks it's fun.

If you are the type who feels you would rather pay a plumber $200 to install your new toilet vs doing it yourself in 15 minutes then you need to factor that into home ownership consideration. Leisure time is over-rated when you're young vs accumulating wealth and adding assets is a great way to accumulate long term wealth.

But, finally, given the reduced sense of personal responsibility and work ethic in the USA as is evident by votes for Obama, maybe private property ownership should be avoided as it may be seized because you have something that others do not and that's not fair.

 

You'd pay about the same in rent if you didn't own.

 

Home prices increase at an average of 4% per year, (1% over inflation).

You pay continuous taxes and maintenance on them on top of that. How is that an attractive investment numerically when dumping money into a mutual fund returns 7-10%?

 

Where did I say it was better or had a higher return than stocks?

Your comparison with stocks is not a reasonable comparison. You can own all the stocks you want but they won't give you a place to live.

The comparison to buying a house is the other alternative, renting. And renting returns even less than 4% a year.

 

Your home is an expense, regardless of if you own or rent. Even when you own 30 years from now (and 2-3 times the home price later), you still have to pay taxes and repair it. It will always be an expense which is why it is foolish to really imply it as a productive investment.

 

I've certainly known people who have made money in the real estate business, but I would advise most casual investors to go diversified stocks.

But this thread didn't ask whether you should invest in real estate, but whether you should ever own a home. The alternative is to rent. While you will have to pay expenses of house, including maintenance, taxes, and insurance, those costs are generally going to be significantly less than renting and equivalent abode once the mortgage is paid off.

 

I think I read somewhere that the average return on investment on home ownership is about 0.2% over 30 years by the time one factors in interest, taxes, inflation, etc. It really isn't the best investment to squat on too long.

 

Perhaps they want to have more then a pile of rent receipts at the end of the year. Discuss.

 

That's just it.. I don't see how they are less than renting.

Higher utility costs, maintenance, property taxes, and the money you pay on interest alone ends up being more than the value of the house.

This is assuming the monthly payment is the same. Obviously the situation depends on the area. It is cheap to rent AND buy where I live, but flipping houses isn't lucrative unless you are a handyman that can do all the work yourself, or you invest in purchasing a double unit.

 

What is the difference?

I suppose 1/30 closer to owning something.

A lot of people don't ever actually pay of their house, either. If you do, it is certainly a big plus. Only ~33% (1/3) of North American homes are owned in full.

 

It depends on the real estate market.
But as a young man you should consider this.
If you can buy real estate and rent it, so that it covers itself, and maybe that is hard in parts of the country, easier in other parts, and you can put together 10 or so of these deals, you will be able to retire when you are 50. Your job will be to check the mail box, for checks.
Now you have been told.
When you are 50 you will remember this, and either feel thankful or regretful for what you did with this information.

 

Even if you break even when selling, you've lived rent-free.

 

IMO a good reason to own your own home is that you don't know what the future will hold. You may have a great career today, and the economy takes a (*)(*)(*)(*) tomorrow and everybody is laid off. The stock market could crash, and there goes your stock investments. You could get injured and be unable to work. Owning your own home means that at least you have a place that you can't be kicked out of (by a landlord anyway). Now, it's true that we really don't have private ownership of land in this country, and that you will always pay rent in the form of property tax to the real owner of the land, the government. So the best thing may be to just buy something cheap, with low annual taxes. Just in case.

 

It may be that intitially the cost of the house is greater than the cost of renting. That depends on market conditions. But over the long term, rents will go up, while a fixed mortgage will not. And when you rent you are never building up any equity as you do with buying a home. Plus you don't get tax breaks for rent.

If you are going to stay put for a while, owning makes sense.

 

Land is the only thing that is no longer being created.

Might want to get a little piece before it's taken.

 

I was surrounded by the same like minded peers.

There is an excellent method to determine the value of a property. Divide the cost by the rental income you will get from it. I did this calculation after I bought my house and realized that its true value was about 50% of what I had paid for it. Sure enough, it dropped by 50% within two years.

If you buy a 400K house and after expenses can only clear 12K a year renting it, you paid way too much. You should get at least 5-6% net return.

 

This is the single most important thing anyone has mentioned.

Land, land, land.

The value of real estate is location, location, location.

Land is the one thing that doesn't depreciate.

 

Land can go down in value.