Home ownership

[CouttsClient]

I learned to always rent the primary residence and buy others...The American "dream" sometimes is just that.

 

[MasterOfReality]

What about us poor souls in Australia?

No tax benefits on primary residence

Income tax tops out at 45c in the dollar for every dollar over $180,000 plus medicare levy of 1.5%. So if you earn $180,000 a year, your tax bill is $58,550. If you don't have private health insurance you get stung an additional 1% of your income.

I would say that the more I earn, the bigger tax break I would expect - especially when a decent chunk of your income vanishes in tax if you happen to earn a decent amount.

 

[otc]

Originally Posted by tj100

But if you're looking at 'the' house where you'll spend 20+ years, you've got inflation on your side. With the mortgage, you've got fixed payments and you're still paying $3K a month - but your rent has gone up to $3,350 (if we experience the same inflation rate over the next 20 years that we did over the previous 20 years).
Most online calculators take into account a variable for inflation as well as a variable for rent increase. You have to remember that over a long period of time, the interest becomes more important...you end up earning many years worth of interest on those early $1000+ price differences that weigh against the fact that at the end of the mortgage your rent has reached the value of your mortgage payment.

Originally Posted by CouttsClient

I learned to always rent the primary residence and buy others...The American "dream" sometimes is just that.
I have actually been thinking that this might be the way to go. After reading a lot of things that are negative on the whole home ownership thing...I like some of the opportunities offered by renting. That being said, I am the kind of person who likes to tinker and would be prone to "home improvement" type projects which are not typically within the realm of renting. If you rented your primary residence and owned a frequently used vacation home (like chicago residents owning cottages an hour or two away in MI)...things would be different. Since you don't own your primary residence, you are free to move around when you change jobs or have kids without issue but you still get the lake house feeling and only have to make one down payment. If you are for some reason forced to sell the vacation property (hardship or time to move on, or a better deal down the beach, etc), you aren't stuck with the conundrum of uprooting your family.

 

[photoguy]

I agree with otc's comments. The option value of renting is often overlooked.

 

[otc]

Originally Posted by photoguy

I agree with otc's comments. The option value of renting is often overlooked.

I should note though since I keep making these arguments.

I will still most likely become a homeowner someday *despite* its less than stellar investment quality (mostly because I would consider it a straight expense with a chance of a reasonable return). Once I am settled and have a family...I will probably be unable to overcome my want for an architecht designed home (maybe not commissioned for me...but not some cookie cutter build) with the option to change in whatever way I want.

I will however most likely try and skip the "condo stage" that people my age here in chicago seem to get caught up in. Sure, a lot of nicer units are condo but there are still many nice rentals and owning a piece of a building where I don't get to set the rules or control who/what is on the other side of my bedroom wall does not appeal to me (so long as similar quality is available as rentals)

 

[photoguy]

That's perfectly understandable. The emotional aspect of ownership has value as well.

For me it really just isn't even a consideration at the moment given that the rent to buy ratio in good NYC neighborhoods is so lopsided.

 

[CouttsClient]

Originally Posted by otc

Most online calculators take into account a variable for inflation as well as a variable for rent increase. You have to remember that over a long period of time, the interest becomes more important...you end up earning many years worth of interest on those early $1000+ price differences that weigh against the fact that at the end of the mortgage your rent has reached the value of your mortgage payment. I have actually been thinking that this might be the way to go. After reading a lot of things that are negative on the whole home ownership thing...I like some of the opportunities offered by renting. That being said, I am the kind of person who likes to tinker and would be prone to "home improvement" type projects which are not typically within the realm of renting. If you rented your primary residence and owned a frequently used vacation home (like chicago residents owning cottages an hour or two away in MI)...things would be different. Since you don't own your primary residence, you are free to move around when you change jobs or have kids without issue but you still get the lake house feeling and only have to make one down payment. If you are for some reason forced to sell the vacation property (hardship or time to move on, or a better deal down the beach, etc), you aren't stuck with the conundrum of uprooting your family.
You would probably be very surprised at the terms one can get in a long-term lease...some of mine have allowed "improvements" and fantastic financial benefits for doing so. I like living this way as it keeps me mobile and I can move to any city I like with very little notice...doesn't work for everyone though as some need more "security" than others.