Abandon ownership, join the rentership society instead!

[Matt Collins]

Thoughts on this article?
http://www.wired.com/magazine/2010/11/st_essay_ownership/

 

[Nanerbeet]

I'm fine with everyone renting as long as I own the property.

 

[legion]

Too NYC-centric of a viewpoint. Not owning a car makes life very difficult outside of NYC.

 

[fuzzybekool]

Let's face it. No one really owns their property. You lease your property from your local government or State after you finish paying off your mortgage. If you don't pay your taxes (lease fee), you lose your property.

 

[KCIndy]

Sounds like the author simply can't handle the stresses of being an adult with adult responsibilities.

There are also some strange (at least by my way of thinking) assumptions being made in the article. The author states he can rent at half the price of owning. Maybe true for Manhattan, but patently untrue for most of the rest of the country.

He also assumes that by renting, he'll be renting from a kind and caring landlord who will fix all problems immediately upon request. Uh, yeah.

Last, there's a simple logic fail here: if everyone took the author's advice and became a renter, from whom would they rent?? (Oh, wait - the guy is from New York city - I'm betting he would think it was great if the government owned the property and rented it to the peons - er, citizens.)

 

[Zippyjuan]

Renting does give you flexibility if you think you will not stay there for several years. Renting means you don't have to fix anything yourself- but you have to call the landlord and schedule time for a repair person to come. If you are an owner you can call a repair person yourself. Same result. You pay for the repairs too- either directly if you own, or included in your rent if you are a renter. Ditto for taxes. Which is cheaper will depend on your area and how much you are willing to pay. I bought at a little higher than the comparable local rents but now what I pay (including property taxes) is lower than current rents and when it is paid off will be considerably cheaper that renting.

Which is better for you? Depends on your situation. There is no "one way" which works for everybody. Buying is working out extremely well for me so far. Once I end my mortgage payments, my cost of living drops dramatically and I still have an asset which can be resold and get my money back (how much of course depends on the price of real estate at the time - if you rent you don't get any of that portion- it goes to the person you are paying rent to). Rent money is gone.

 

[Jeez]

One thing to remember it is never a good idea to buy anything when the rates are at the lowest unless you think interest rates are going to plunge further...

 

[Seraphim]

One thing to remember it is never a good idea to buy anything when the rates are at the lowest unless you think interest rates are going to plunge further...

Unless you get a fixed 5 year term on a 15 year amortization (high principal payment RIGHT AWAY) where the interest on your debt is very low and you use the property as both your home AND you rent the basement out for roughly 35% of the TOTAL cost of operating the house (mortgage, taxes, bills etc).

My brother and I are doing that. At the end of the 5 year term we will have roughly 70k in equity.

The house was 247K. If the house drops to 200K we still have positive equity(which I have budgeted for as worst case scenario, here in Canada and in the location we bought the house should stabalize around 235K).

The other option is to rent and perpetually throw money into someone elses mortgage.

Even if the house drops 20% (unlikely, 5% much more likely), we will still be positive equity by a fair bit and housing prices around would drop too, meaning that the loss on property value is largely negated.

I think the key to real estate now is find a stable area, use the buying markets leverage to wittle the house price down from the buyers asking price, take a shorter than 20 year amortization (10 or 15 is best), go fixed rate for 5 or so years and RENT OUT AS MUCH OF IT AS POSSIBLE.

I like the 15 year fixed we took. Closing is Dec 1st. I move in, in less than a week. WOOT.

The 15 year on a low rate allows us to eat up the principal rather quickly with little going towards interest AND it gives us enough breathing room to use the extra cash (largely from the renter) to invest into other areas like commodities.

Basically the goal is to use the house as a saving account and use the positive cash flow to invest into higher return assets.

I'm 22 and he's 20. We make a very solid wage for our age, but nothing amazing.

Other than a few areas, I'd stay away from buying in the USA for another 3-6 years. Real estate around the world is over valued, Canada not too badly though. The area we bought is an area where population is exploding and demand is very strong. It's commute distance from the big city (Toronto). I bought in an area that may be one of a few with stable values, that may even go up starting in a couple of years.

 

[ILUVRP]

A buddy of mine in Datona Beach Fla rented a house for 2 years , the only thing the guy he paid rent to was not the owner , there are so many empty houses there the guy busted into a empty house , changed all the locks and adv it for rent , the bank didn't know anything.

 

[Zippyjuan]

One thing to remember it is never a good idea to buy anything when the rates are at the lowest unless you think interest rates are going to plunge further...

This is backwards. If you will be borrowing to finance a purchase you want to do it now if you think rates will be going UP. Higher interest rates means higher costs of borrowing meaning paying more in the long term.

 

[Icymudpuppy]

I own two places now. I "rent" one to one of my employees. Actually, he's on salary, and I reduced his salary by a bit so now he no longer has to pay income tax on his "rent" money. I also claim my entire mortgage and interest and all maintenance as a tax deductible business expense on the employee "bunk house".

We both get tax deduction this way.

 

[legion]

delete

 

[Icymudpuppy]

icemudpuppy might want to delete that comment...

Why? It's perfectly legal.

 

[legion]

delete

 

[legion]

IRS love to be a thorn in of tax protesters. i would hate to see you get in trouble for publicly disclosing something on the internet for no reason.

from the IRS website

"You own a small apartment building. An artist trades you a painting in return for six months’ rent-free use of an apartment. You must report the fair market value of the artwork as rental income on Schedule E Supplemental Income and Loss on Form 1040. Generally, this would be the fair rental value of the apartment for six months. You can claim your normal rental expenses associated with the barter of the apartment. The artist must report the fair rental value of the apartment in income on Schedule C, Profit or Loss From Business (Sole Proprietorship), or Schedule C-EZ, Net Profit from Business, of Form 1040 as the artist would for any other sale of a painting. The artist can claim the normal cash business expenses associated with the bartered work of art such as canvas, paint, brushes, supplies and materials."

 

[psi2941]

delete

+1, u don't need unnecessary attention

 

[Icymudpuppy]

I'm not renting it. I'm keeping a bunkhouse for labor, and paying my labor a very low wage. Just like what most farmers who hire transient labor do, except mine is on a permanent basis, like a live-in butler or nanny.

You guys are a little too paranoid.

This is a common practice, and encouraged to promote small business operations, or how wealthy people can afford house servants.

Instead of paying the guy $25/hr and then having him go out looking for a place to live, I give him a place to live, and pay him $12/hr. Since the housing is part of my employee benefits, I get to deduct its cost as a business expense, just like you can deduct things like paid vacation, or health insurance. And he only pays the withholding on the income of $12/hr rather than a higher rate.