Rent or buy?

I have a decent job now and a little bit of money saved. I'm 21 and tired of living with my parents. I am trying to decide if I should move out and IF I do should I rent or buy? I could probably stay home for a few more years and save more money but I'm really tired of everything here. I know very little about what I need to know when moving out. If I were to rent I'm guessing it would be easier for me to move if I got sick of that neighborhood. everyone keeps telling me I have it made now and should stay home as long as I can. My parents aren't that great at giving advice so maybe some fellow cpf members can help?

thanks

The best things about owning is you build equity. If you sell that's money back into your pocket. As long as you buy again real soon. Otherwise Uncle Sam will tax you into oblivion. If you rent, all you get back is your deposit. Minus whatever you don't quibble over the landlord with.

At tax time you can itemize your deductions. At least you used to be able to. It's been a while since I owned a home.

The best thing about owning is you can make all the improvements you can afford and get a building permit for. The downside is, when the toilet's broken you can't call the landlord. You have to fix it yourself or pay someone to do it. If you live in a crummy apt. then I guess that doesn't matter.

Ask yourself this... "Am I going to wanna live in one house in the same neighborhood for the next ten years?"... At your age? ... I'd guess the answer is no... no matter how good your job is... If you buy a house, you'd best plan on staying in it for awhile... and you will have to buy all of the furniture for it... some appliances... landscaping (mow the lawn yourself)... pay taxes... fix the toilet, pay the water bill, electric bill, oil bill, trash pickup, cable, phone... if you're in a 'community'... home owner's association dues... blahblahblah... do you want to do that for the next ten years? ... That's how long you'll need to stay in that place until you won't lose your shirt in selling it... or as David put it... get taxed into oblivion when you sell... Rent, my man... until you find a young lady that you want to spend the rest of your life with... then buy your first house together...

Phil is 34, and has some sage advice for you...

Basically, if you buy right (And I'll explain what that is later), you'll always do well. Renting isn't a bad situation, either. Both have advantages, but there are "hybrids" that someone your age can take advantage of:

My favourite is:

Rent a HOUSE in a college town. Sublet the rooms (check the regulations) for the price of the rental. You live free. Try renting them with all girls. It's nice.

Oh. Where was I? Oh. Buying RIGHT.

It means buying cheap.

Basically, no one likes to admit this, but you make your money when you BUY. Not when you sell.

Buy at the right price, you can sell at a distressed (Quick, cheap) price and still make money.

Think of it like flashlights. If I had a truckload of ARC AAA LE's for $10 you'd buy a bunch, right? You couldn't HELP but make money at that price!

If you bought them at $40, you might have a problem.

Basically, as a first time buyer you'll have to stay away from Condo's. You'll almost always end up with a "Handyman" special.

Or, you could check out "distressed properties". Just be careful. The best distressed properties are emotional (Divorce) rather than physical.


Never fall in love with anything physical.

And never fall in love with the property because the real estate agent says a beautiful blonde moved in next door. (Bullshit)

Treat it as the wood and brick it is. Unemotional.

(Three book recommendations: Winning thru Intimidation -Ringer, Millionaire mind/Millionaire next door -stanley)

--Phil

Ah, renting out your property. This is advice from someone who is successful at it. (Not me.) And another person who was not. (Still not me. ) Both mesh. Don't get a condo thinking you can rent it out when you decide to move on. You'll lose money. The only people who begin to make it worth while are the ones who get at the very least a duplex. A young guy like you with a 4 plex? Unheard of outside of trustfund kids. But that's when you stop breaking even and start making a little money. But I've never known anyone who owned a boarding house. I don't know how that goes.

Also, nice homes in nice areas. They make money if you choose wisely. Because there are corporate employees who move from area to area and don't really want to buy. But can through their own means and/or company funds pay exorbitent rents.

Some of my friends have bought houses while they were teenagers still. It didn't seem to slow them down.

Another plus of buying I just remembered is it gives you great credit rating. The downside is you get credit card and 2nd mortgage offers in the mail almost daily. If you buy a house and keep up on the payments you'll have great credit for later on. Just don't abuse it or get into serious debt.

Thanks Sasha and Phil. More info to file away for when I'm 21 again.

Another feather or 2 to stick in your hat: When you do decide to buy a house keep these very important things in mind:

If you don't TAKE HOME in a month 3-4x what your morgage payment will be, don't bother. There are a LOT of bills associated with owning a house including property taxes, utilities, etc. If you're not careful, you'll own a beautiful house but you'll starve to death because you can't afford food.

When you go to get a loan, whatever the bank tells you you "qualify for" is a crock of s**t. They're out to get as much interest out of you as they can and if they foreclose, more for them. Use the rule of thumb above to see if you can afford the house.

Make sure when you go to buy you will have roughly 5% of the value of the house left in cash in your bank account after the deal. You'll need blinds, furniture, lawn mower, weedwacker, tools, carpets, appliances, etc.

To be really safe, after all of the above, make sure you have 3-4 months of "emergency funds" in cash in a separate account - enough to live off of and pay ALL your bills for 3-4 months in case you get laid off. Remember the bank and how they foreclose on houses if they don't get their monthly money?

Fun stuff to think about...

thank you everyone for all the info. Maybe my parents aren't so bad after all I've been looking around and apartments in a good neighborhood are probably 500 dollars + a month. I would be able to do it but I think I will enjoy living at home a while longer. that way I can still put 75% of what I get in the bank and buy all the flashlights I want. maybe in another 5 years I will find a lady to move in with and would have enough money to buy a nice little house in cash. People keep telling me stay at home til your 30 and never get married! thank you for all the great information. I will think about this some more.

Chris

How many people have told you:

"You HAVE to buy an ARC AAA?"

How many have said:

"You have to have at least 1 Surefire"

Now...

How many have said...

"YOU HAVE TO GET MARRIED"

??

Nuff said.

buy a motorcycle. drive all over the country visiting friends in colleges. if you plan ahead most all colleges will put you up in their 'guest room' for free, if you don't crash at friend's..drop in classes, go for hikes in the mountains, there are lots of parties in college towns -- maybe get a job delivering pizza for a week or two, or longer, eventually you get to know every one and every place... maybe buy a van, nothing shameful about living 'down by the river' for a few days.. find a place with people you like? rent a big house with alot of rooms and start a food co-op..
after a few months check a college rifde board and hitch a ride cross country..travel up the West coast, look for bigfoot, visit Craig, eat smoked salmon, meet some one, go to Mexico, build a hut on the beach, eat fruit and fish for a few months..see how the pescaderos live..get the idea?
You get a unique view of life when you step outside your culture, if you can...

<BLOCKQUOTE><font size="1" face="Verdana, Arial">quote:</font><HR>Originally posted by Ted the Led:
buy a motorcycle. drive all over the country visiting friends in colleges. if you plan ahead most all colleges will put you up in their 'guest room' for free, if you don't crash at friend's..drop in classes, go for hikes in the mountains, there are lots of parties in college towns -- maybe get a job delivering pizza for a week or two, or longer, eventually you get to know every one and every place... maybe buy a van, nothing shameful about living 'down by the river' for a few days..

find a place with people you like? rent a big house with alot of rooms and start a food co-op..
after a few months check a college rifde board and hitch a ride cross country..travel up the West coast, look for bigfoot, visit Craig, eat smoked salmon, meet some one, go to Mexico, build a hut on the beach, eat fruit and fish for a few months..see how the pescaderos live..get the idea?

You get a unique view of life when you step outside your culture, if you can...

<HR></BLOCKQUOTE>

you will only hear this from a californian however it sounds very apealing

I agree it's best to stay at home & save most of the money you make! This will make life much easier when you do decide to move out. I've been told by so many people that by renting you are throwing your money away because you get nothing out of it. That's a CROCK! Unless you got a house for free, paid for a house in cash or only have a 10-15 year low interest motgage with a BIG down payment. It will be difficult to truly recover & profit from you home investment! (And yes, I am a homeowner)

Look at some facts,
If you spend 85,000 on a home:
Put 5,000 down & mortgage 80,000 @ 7% for 20 years
Your monthly payment is: $620 +
Say your taxes are $200/month
Say your PMI is $50/month

You pay $880 a month, home owners insurance always always goes up, taxes always go up & in 20 years your home is paid for. (good news)

The bad news is that in 20 years you have paid the bank your 80,000 + almost $70,000 in interest. Hopefully your house more than doubled in value but you most certainly had to renovate the house at your own expense: new roof, windows, etc. So if you sell it you will not make a lot unless you got lucky and live somewere that property values tripled. But you have also paid about 30,000 - 40,000 in taxes too (in 20 years).

So If you can find a good deal renting, and can put away a lot of money while renting, then this is a better route to take.

Then there are those that would rather rent than pay the bank for a mortgage, pay taxes, pay for home repairs & improvements, mow the lawn, etc.

My point is to be fully aware of what you really are going to have to pay before you go through with moving out.

Sean - I've been saying this for years and nobody believes me - glad to see a similar point of view.

BTW - you can look at home ownership from all different points of view. From the point of view of "$ per square foot" - you may find that despite taxes, interest, etc. on a MONTH to MONTH basis, some houses are cheaper than many apartments. My wife and I TRIPLED our square footage by buying and moving into a house, but our "monthly rent" payment (now called mortagage/taxes/etc) increased only by 50-60%. Plus we have a garage to put our cars in, no neighbors above or below us pounding away or waking us with a stereo, a yard, a barbecue grill (not allowed at most apartment complexes), etc.

Of course, the fee to get all this is a hefty down payment....... Rent first and save your pennies. Buy a house when it's feasable.

<BLOCKQUOTE><font size="1" face="Verdana, Arial">quote:</font><HR>Originally posted by Sean:
I agree it's best to stay at home & save most of the money you make! This will make life much easier when you do decide to move out.
..
You pay $880 a month, home owners insurance always always goes up, taxes always go up & in 20 years your home is paid for. (good news)
..
My point is to be fully aware of what you really are going to have to pay before you go through with moving out.<HR></BLOCKQUOTE>

Very true-
And I'm finding out owning your own house doesn't give you the freedom you might expect-
My taxes have doubled over the years I've owned the house, seemingly at the whims of the town- As I'm not using the school system, I'm subsidizing all the renters who are- Certainly I don't mind footing part of the bill for the system, but it's become a heavy burden, and there's really no say in the matter for the individual homeowner. The renters don't need to pay real estate taxes, and they can benefit from the school system equally. Too bad it couldn't be set up a bit more equitably.

And, just the other day, I find out that I'm not allowed to keep any cars on my property if they're unregistered, regardless of whether it's in my own yard, out of sight. I've got a few cars in my collection,and normally only register the ones I'm currently driving, but now I have to get rid of them all or pay for insurance and registration on them, which isn't cheap..
A safety code of some sort; lots of town codes in a big book that they can pull out when they feel the need.
With this current situation, I'm feeling like I'm in some co-op rather than my own home- there's probably some town code dictating the color of paint I must use too- sigh.
Social aspects of it aside, you'll likely save much by staying home longer- but it's a sort of gamble too; if you get into the housing market during the beginning of a boom, you'll make out fine, but in my case, I happened to get in at the peak... oh well.

<BLOCKQUOTE><font size="1" face="Verdana, Arial">quote:</font><HR>Originally posted by wingerr:
As I'm not using the school system, I'm subsidizing all the renters who are....<HR></BLOCKQUOTE>

I have no knowledge of New York's school financing arrangements, but if it's primarily through property taxes you're not subsidizing anything. Those with property to rent include the taxes they pay as a determining factor in the amount of rent they charge. The landlord charges, in addition to what he would charge without the taxes, enough to generate a profit from the taxes he pays. The renter pays not only the taxes, but a mark-up on the taxes. No one subsidizes renter's share of the education expense.

<BLOCKQUOTE><font size="1" face="Verdana, Arial">quote:</font><HR>Originally posted by Quickbeam:
Sean - I've been saying this for years and nobody believes me - glad to see a similar point of view.

BTW - you can look at home ownership from all different points of view. From the point of view of "$ per square foot" - you may find that despite taxes, interest, etc. on a MONTH to MONTH basis, some houses are cheaper than many apartments. My wife and I TRIPLED our square footage by buying and moving into a house, but our "monthly rent" payment (now called mortagage/taxes/etc) increased only by 50-60%. Plus we have a garage to put our cars in, no neighbors above or below us pounding away or waking us with a stereo, a yard, a barbecue grill (not allowed at most apartment complexes), etc.

Of course, the fee to get all this is a hefty down payment....... Rent first and save your pennies. Buy a house when it's feasable.<HR></BLOCKQUOTE>

The home I have now is a big improvement over my old apartment. My house is not big, but big enough. I pay slightly less now per month for my house than apartment rent (not including taxes). You just have to be careful to look before you leap!

Advice: Do your own figuring, don't let someone else decide if renting or buying is better for you.

<BLOCKQUOTE><font size="1" face="Verdana, Arial">quote:</font><HR>Originally posted by Empath:
I have no knowledge of New York's school financing arrangements, but if it's primarily through property taxes you're not subsidizing anything. <HR></BLOCKQUOTE>

Oh sure, it's nothing official, but those homeowners that are renting out and getting these payments don't pay extra taxes based on the extra load introduced into the school system here. It'd be all well and good if I was renting out my house, but because I'm not, I don't see any of that. Suppose I'm now forced to rent out my house to get the benefits of the rental payments described-
Not everyone is renting out their house, and unfortunately, I don't, so effectively I AM subsidizing the others, even if not in an official sense..

All this aside, it's definitely an individual situation that would determine whether to rent or buy, no yes or no answers by any means.

looks like renting will be for me when I move out. It will probably be another few years so I can get a nice chunk of money in the bank. maybe when I retire I will get a house. I'm ready to retire right now! but I guess I have another 20-30 years to go. I went full time where I work (UPS) and they make us give up our vacations for a whole year. finally get mine in june.