Buy versus rent

[mixxalot]

I have been approved for up to 700k for a loan. However, after running numbers, renting is almost 2-3x cheaper than owning. For example:

Rent 2 bedroom townhouse in San Diego – Point Loma, Pacific Beach, Mission Valley
1700-2000

Buy 2 bedroom townhouse in San Diego- Point Loma, Pacific Beach, Mission Valley
Listing price: 500-700K
Monthly payment: 3-4k

Plus taxes add up to the annual cost.

So why do people buy in this inflated market if it costs 2x to own versus rent?

[spdrun]

Serra Mesa under $450k:
http://www.sdlookup.com/MLS-160026061-5878_Mission_Center_Rd_B_San_Diego_CA_92123

[mixxalot]

True but you still need to put 10-20% down cash and cost more over time than renting.

[an]

Wow, rent in those expensive area are cheap. 2/2 condo in Mira Mesa are going for ~$1700/month and similar condo are selling for low $300k. 3/2 SFR with ~1200 sq-ft rent for about $2200-2400 and are selling for ~$500-550k.

[mixxalot]

Yeah I am paying now what I was paying 10 years ago in Loma Portal. Actually the place now I am at has a new remodeled kitchen, new carpet, wood floors. I am on the fence whether or not to buy. Yes, I’d like more room and a garage but I’d also have to spend twice as much cash for a place to live over time. So its a risk. What if I ever have to move for a job?

It is funny how coastal San Diego rents are half as much as buying same size place. Never can understand that.

[joec]

[quote=mixxalot]Yeah I am paying now what I was paying 10 years ago in Loma Portal. Actually the place now I am at has a new remodeled kitchen, new carpet, wood floors. I am on the fence whether or not to buy. Yes, I’d like more room and a garage but I’d also have to spend twice as much cash for a place to live over time. So its a risk. What if I ever have to move for a job?

It is funny how coastal San Diego rents are half as much as buying same size place. Never can understand that.[/quote]

If you need to ask folks here whether to rent or buy or to convince you one thing or the other, then I think you should just keep renting…

The math is not hard and if you are in a place that’s comparatively lower than buying and you don’t have kids/family/needs schools/may move, by all means, just rent. Usually, the math and other factors make it such an easy comparison I feel that these debates are pretty meaningless.

All I can say as a data point is all the houses near my hood now are > 4k/month rent in stucco 4S McMansion hood and my mortgage even though I am stuck with a higher rate will soon be close to 2k month without tax calculations/benefits (still have prop tax though).

Most people ran numbers and bought years ago and are sitting on 200k+ equity gains now…I think we’re over 50% equity already personally.

Also, with renting, I just heard a family friend is now forced to MOVE which is a nightmare to have to deal with if you are busy with other things in your life. Moving as a single guy in a 1 bedroom is nothing compared to moving a 4k sqft house with a family.

That and renting has gone up in nearly all the areas I watch. Maybe not yours, but certainly up > 33% here (3k -> 4k).

[mixxalot]

My point being financially it’s cheaper to rent.

[svelte]

[quote=mixxalot]My point being financially it’s cheaper to rent.[/quote]

Depends on whether you’re talking long term or short term and whether you are stable enough to live in one area long enough.

[flyer]

Exactly, Svelte. I was just going to mention the same.

Also, for those of us who bought properties here, or most anywhere, years ago, there’s no question that buying has definitely proven to be cheaper than renting.

[Hatfield]

This is sorta Homeownership 101, I think there’s a couple factors Sir Mixxalot is overlooking:

1) What is your current effective income tax rate? Because for the first many years, your mortgage payment is almost all interest (deductible) and property taxes are also deductible. So if you’re currently paying a high % effective income tax rate, that % of interest and property tax are effectively subsidized for you.

2) How long do you plan to stay put? Because in ten years your rent will have increased, perhaps significantly, but your mortgage payment will stay the same, and your property tax will have increased only marginally.

That said, I think the current market is way overheated. Of course I’ve been saying that for a decade now, but I dunno, I don’t see how these valuations are sustainable longterm, so

3) Where is it that you really want to live? If that neighborhood is significantly cheaper to rent than buy, even factoring in (1) above, by all means, keep renting and socking your savings away.

[utcsox]

It’s easy to run different scenarios using NY Times rent vs. buy calculator.

http://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html

[Rich Toscano]

[quote=utcsox]It’s easy to run different scenarios using NY Times rent vs. buy calculator.

http://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html%5B/quote%5D

+1 on the NY Times thinger.

Can’t speak to the specific properties you are looking at, OP, but generally speaking in SD it is most definitely not 2x as expensive to buy as to rent, once you consider everything (including the all important mortgage interest deduction). In fact the monthly nut ratio is not far from the lowest ever, per the second graph here: http://piggington.com/shambling_towards_affordability_midyear_2015

[bewildering]

[quote=Rich Toscano][quote=utcsox]It’s easy to run different scenarios using NY Times rent vs. buy calculator.

http://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html%5B/quote%5D

+1 on the NY Times thinger.

Can’t speak to the specific properties you are looking at, OP, but generally speaking in SD it is most definitely not 2x as expensive to buy as to rent, once you consider everything (including the all important mortgage interest deduction). In fact the monthly nut ratio is not far from the lowest ever, per the second graph here: http://piggington.com/shambling_towards_affordability_midyear_2015%5B/quote%5D

The OP thinks he can rent a 2 bedroom townhouse in Pacific Beach for
1700-2000? lol. Maybe a 600 sq ft apartment in a complex on Garnet. But not a townhouse.

[La Jolla Renter]

I used to think I was so smart renting a high end home from someone that was losing $3k a month, but over time, rent vs buy in San Diego has been a losing bet. Even the $1M-$2M homes are now cheaper to own, or at worst, break even. A newly remodeled $1.4M ish condo or home in La Jolla or PB will cost you $5-6k plus a month to rent.

I think you can pretty much buy anything in the county with 20% down and it will cash flow. 10-20 years ago it took 30% to 50% down.

[livinincali]

[quote=joec]
All I can say as a data point is all the houses near my hood now are > 4k/month rent in stucco 4S McMansion hood and my mortgage even though I am stuck with a higher rate will soon be close to 2k month without tax calculations/benefits (still have prop tax though).
[/quote]

I honestly don’t understand people renting a 4K a month property unless it’s intended to be a temporary thing. I think those kind of markets are a pretty poor gauge of the rental market.

[Author]

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