buying SHOULD BE cheaper than renting

[scaredyclassic]

No. all of those things are way more expensive to rent than buy for the amt of time you’re using it. you’re paying extra to rent the car, the plane seat, for all the convenience of pick up and drop off when you don’t want it. By the hour, you’re probably paying many multiples of its actual value. For instance, if you wore a tux to work every day, it’d be insanely expensive to rent (maybe 20k a year) versus a few hundred to buy. you only need the plane seat, the rv and the tux for a couple hours, or days, so you pay an exorbitant price so you can dump it when you’re done…

the difference is you have to live somewhere, I guess, at all times.

[davelj]

You’re over-analyzing things. It’s pretty simple.

Buying is cheaper than renting IF the following apply:

(1) You assume that your exit price will be greater than your entry price (whether that’s 5 years or 25 years down the road); and
(2) The after-tax cash outlay related to owning is at or below the cost of renting the same housing; and
(3) Rents generally increase – whether 1%/year or 5%/year – over the time you own the property; and
(4) Transaction costs don’t completely offset 1-3 above.

If over the term of your “investment” in the home, prices are generally increasing (however modestly), rents are generally increasing (however modestly), your cash outlay is fixed at or below a similar rental, and transaction costs don’t eat up the economics… buying is better than renting from an economic standpoint.

I’m sure I’m missing a few nuances, but that’s pretty much it in a nutshell.

The trick is getting a price that engenders a high probability of 1-4 being true over time.

Actually, there was a long debate on this topic a couple of years back on this site and the range of opinions, as I recall, was that a “rental premium” of 10%-50% was justified, depending on the person. All agreed that 200%+ – as we saw during the crazy times – was not.

[davelj]

You’re over-analyzing things. It’s pretty simple.

Buying is cheaper than renting IF the following apply:

(1) You assume that your exit price will be greater than your entry price (whether that’s 5 years or 25 years down the road); and
(2) The after-tax cash outlay related to owning is at or below the cost of renting the same housing; and
(3) Rents generally increase – whether 1%/year or 5%/year – over the time you own the property; and
(4) Transaction costs don’t completely offset 1-3 above.

If over the term of your “investment” in the home, prices are generally increasing (however modestly), rents are generally increasing (however modestly), your cash outlay is fixed at or below a similar rental, and transaction costs don’t eat up the economics… buying is better than renting from an economic standpoint.

I’m sure I’m missing a few nuances, but that’s pretty much it in a nutshell.

The trick is getting a price that engenders a high probability of 1-4 being true over time.

Actually, there was a long debate on this topic a couple of years back on this site and the range of opinions, as I recall, was that a “rental premium” of 10%-50% was justified, depending on the person. All agreed that 200%+ – as we saw during the crazy times – was not.

[davelj]

You’re over-analyzing things. It’s pretty simple.

Buying is cheaper than renting IF the following apply:

(1) You assume that your exit price will be greater than your entry price (whether that’s 5 years or 25 years down the road); and
(2) The after-tax cash outlay related to owning is at or below the cost of renting the same housing; and
(3) Rents generally increase – whether 1%/year or 5%/year – over the time you own the property; and
(4) Transaction costs don’t completely offset 1-3 above.

If over the term of your “investment” in the home, prices are generally increasing (however modestly), rents are generally increasing (however modestly), your cash outlay is fixed at or below a similar rental, and transaction costs don’t eat up the economics… buying is better than renting from an economic standpoint.

I’m sure I’m missing a few nuances, but that’s pretty much it in a nutshell.

The trick is getting a price that engenders a high probability of 1-4 being true over time.

Actually, there was a long debate on this topic a couple of years back on this site and the range of opinions, as I recall, was that a “rental premium” of 10%-50% was justified, depending on the person. All agreed that 200%+ – as we saw during the crazy times – was not.

[davelj]

You’re over-analyzing things. It’s pretty simple.

Buying is cheaper than renting IF the following apply:

(1) You assume that your exit price will be greater than your entry price (whether that’s 5 years or 25 years down the road); and
(2) The after-tax cash outlay related to owning is at or below the cost of renting the same housing; and
(3) Rents generally increase – whether 1%/year or 5%/year – over the time you own the property; and
(4) Transaction costs don’t completely offset 1-3 above.

If over the term of your “investment” in the home, prices are generally increasing (however modestly), rents are generally increasing (however modestly), your cash outlay is fixed at or below a similar rental, and transaction costs don’t eat up the economics… buying is better than renting from an economic standpoint.

I’m sure I’m missing a few nuances, but that’s pretty much it in a nutshell.

The trick is getting a price that engenders a high probability of 1-4 being true over time.

Actually, there was a long debate on this topic a couple of years back on this site and the range of opinions, as I recall, was that a “rental premium” of 10%-50% was justified, depending on the person. All agreed that 200%+ – as we saw during the crazy times – was not.

[davelj]

You’re over-analyzing things. It’s pretty simple.

Buying is cheaper than renting IF the following apply:

(1) You assume that your exit price will be greater than your entry price (whether that’s 5 years or 25 years down the road); and
(2) The after-tax cash outlay related to owning is at or below the cost of renting the same housing; and
(3) Rents generally increase – whether 1%/year or 5%/year – over the time you own the property; and
(4) Transaction costs don’t completely offset 1-3 above.

If over the term of your “investment” in the home, prices are generally increasing (however modestly), rents are generally increasing (however modestly), your cash outlay is fixed at or below a similar rental, and transaction costs don’t eat up the economics… buying is better than renting from an economic standpoint.

I’m sure I’m missing a few nuances, but that’s pretty much it in a nutshell.

The trick is getting a price that engenders a high probability of 1-4 being true over time.

Actually, there was a long debate on this topic a couple of years back on this site and the range of opinions, as I recall, was that a “rental premium” of 10%-50% was justified, depending on the person. All agreed that 200%+ – as we saw during the crazy times – was not.

[urbanrealtor]

[quote=scaredycat]No. all of those things are way more expensive for the amt of time you’re using it. you’re paying extra to rent the car, the plane seat, for all the convenience. but fi yoou were to use the thing all the time, it’d be cheaper to buyt he tux. you only need the plane seat, the rv and the tux for a couple hours, or days, so you pay an exorbitant price so you can dump it when you’re done…[/quote]
Very true.

However, this is an apples-to-bowling balls comparison.

A perfect market involves goods that are interchangeable and not too costly.

Real estate goods are generally rather distinct, immobile, extremely expensive.

Also, usually those with higher risk tolerances are the ones who gain greater reward potential so it should not be a surprise that desire and demand maintain strength. Whether that reward potential is realized is really a product of the skill of the investor.

[urbanrealtor]

[quote=scaredycat]No. all of those things are way more expensive for the amt of time you’re using it. you’re paying extra to rent the car, the plane seat, for all the convenience. but fi yoou were to use the thing all the time, it’d be cheaper to buyt he tux. you only need the plane seat, the rv and the tux for a couple hours, or days, so you pay an exorbitant price so you can dump it when you’re done…[/quote]
Very true.

However, this is an apples-to-bowling balls comparison.

A perfect market involves goods that are interchangeable and not too costly.

Real estate goods are generally rather distinct, immobile, extremely expensive.

Also, usually those with higher risk tolerances are the ones who gain greater reward potential so it should not be a surprise that desire and demand maintain strength. Whether that reward potential is realized is really a product of the skill of the investor.

[urbanrealtor]

[quote=scaredycat]No. all of those things are way more expensive for the amt of time you’re using it. you’re paying extra to rent the car, the plane seat, for all the convenience. but fi yoou were to use the thing all the time, it’d be cheaper to buyt he tux. you only need the plane seat, the rv and the tux for a couple hours, or days, so you pay an exorbitant price so you can dump it when you’re done…[/quote]
Very true.

However, this is an apples-to-bowling balls comparison.

A perfect market involves goods that are interchangeable and not too costly.

Real estate goods are generally rather distinct, immobile, extremely expensive.

Also, usually those with higher risk tolerances are the ones who gain greater reward potential so it should not be a surprise that desire and demand maintain strength. Whether that reward potential is realized is really a product of the skill of the investor.

[urbanrealtor]

[quote=scaredycat]No. all of those things are way more expensive for the amt of time you’re using it. you’re paying extra to rent the car, the plane seat, for all the convenience. but fi yoou were to use the thing all the time, it’d be cheaper to buyt he tux. you only need the plane seat, the rv and the tux for a couple hours, or days, so you pay an exorbitant price so you can dump it when you’re done…[/quote]
Very true.

However, this is an apples-to-bowling balls comparison.

A perfect market involves goods that are interchangeable and not too costly.

Real estate goods are generally rather distinct, immobile, extremely expensive.

Also, usually those with higher risk tolerances are the ones who gain greater reward potential so it should not be a surprise that desire and demand maintain strength. Whether that reward potential is realized is really a product of the skill of the investor.

[urbanrealtor]

[quote=scaredycat]No. all of those things are way more expensive for the amt of time you’re using it. you’re paying extra to rent the car, the plane seat, for all the convenience. but fi yoou were to use the thing all the time, it’d be cheaper to buyt he tux. you only need the plane seat, the rv and the tux for a couple hours, or days, so you pay an exorbitant price so you can dump it when you’re done…[/quote]
Very true.

However, this is an apples-to-bowling balls comparison.

A perfect market involves goods that are interchangeable and not too costly.

Real estate goods are generally rather distinct, immobile, extremely expensive.

Also, usually those with higher risk tolerances are the ones who gain greater reward potential so it should not be a surprise that desire and demand maintain strength. Whether that reward potential is realized is really a product of the skill of the investor.

[scaredyclassic]

i dunno. those tract homes look about the same to me.

[scaredyclassic]

i dunno. those tract homes look about the same to me.

[scaredyclassic]

i dunno. those tract homes look about the same to me.

[scaredyclassic]

i dunno. those tract homes look about the same to me.

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