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Originally Posted by zx10guy
The whole homeownership thing is sort of a controversial topic these days....at least with me. I think one has to really look at their situation and see if buying a home makes actual financial sense; especially with the current housing market. I wish I remembered the video I saw where the author did an analysis of two fictional people. One bought a house and focused on that as their main means of investment. The other rented and used the money that would have gone into a house for investing into the stock market. The renter in the long run made out better than the one that bought the home.
A guy by the name of Jaspreet Singh that has a Youtube channel called Minority Mindset has a similar thinking as me with a home. It's a liability first and a required expense for a place for me to live in. Aside from the cost of borrowing money to buy said property which results in interest payments, you have property taxes, possible HOA/condo fees, insurance, maintenance, and one could argue utilities as often utilities are rolled into monthly rent. And with those expenses, you can be assured they'll all go up over time. While one can write off some of the interest paid, that wouldn't offset the expenses typically. Need to replace a roof? You're looking at a few thousand to possibly $20k and beyond. HVAC needs to be replaced there's another few thousand. Hot water heater goes bad, that's a few hundred to a couple thousand. Then one can say the appreciation in the value of the home should be factored in. But the appreciation is only paper until it's realized by selling the home which also costs money to pull out through realtor fees.
Don't get me wrong. I'm not totally against purchasing a home. But it has to make sense and not done because it's what society says is what you should do.
For me, my two homes are just diversification of my total assets. My monthly mortgage is very low compared to my monthly income. I think it's about 25%. I bought my primary home in 2001. Based on homes that have sold recently in my neighborhood, my house has possibly appreciated by $400k over what I paid for it in 2001. My vacation home purchased in 2012 to what similar homes have sold for in that development has appreciated by about $100k.
With paying off a home, there's something to be said about holding on to a mortgage. As I said, having money locked into a home makes it illiquid and requires you to spend money to get it out. Also depending on how you do it, there is going to be some lag time before you can actually get the money in hand. As where with stocks, I just call my broker with a sell order and the money will be in my account by the next day. Also the performance of the home appreciation and the returns from investing in the stock market isn't even close. For me, my investments have far exceeded the appreciation of both properties I own combined by a large margin. The other aspect is the cheap money aspect of a proper mortgage. I refinanced my primary home before rates shot up. I'm locked in at 2.874% for 30 years. That's cheap money and it makes no sense financially to pay it off early. My vacation home has had a 3.25% 30 years fixed rate since I purchased it. Still crazy cheap money. I'd probably shoot to have this one paid off when I retire because I just don't want the obligation of having to have payments on that house in retirement. Heck I may just sell both homes and consolidate down to something else that would be bought outright.
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We own two houses, primary residence & the house next door which we rent out. Very similar houses but because we have owned the primary residence since 2006, they are paying rent close to double our house payment (includes insurance, property tax) & it will continue to rise. Yes you can potentially make a lot more money in the stock market if you get it right, could also lose a lot more. People are buying houses, renting to others & making money at it.
Any decent landlord has the renters paying for all the expenses you listed, whether property taxes or a new roof, difference is landlord takes in money each month & needs to budget for potential expenses. Renter just pays the payment which continues to go up.
As for owning a house long term over renting, I am assured that I will soon not be paying for the house, increases can only consist of property taxes/insurance/maintenance. The house next doors renters will continue to see rent increases (that the market will allow) that are based on the value of the house/insurance/maintenance/property taxes. Their payments will likely increase a lot more than mine.
I personally would work towards buying a house, maybe only a decent investment but also comes with the security of being unlikely to be priced out of an area in the future & an end goal of paying off the house and the total cost to live there per year dropping like a rock.