is it OK to rent "forever"? (San Jose, Fremont: rental, loan)

[allison7]

Originally Posted by llowllevellowll

In San Jose, it remains cheaper to rent than it is to manage a mortgage on comparable properties, and that doesn't even take into consideration the down payment necessary to start making PITI payments.

In my case, I rent a 2-bedroom apartment for $2600. The closest I could come to owning a comparable 2-bedroom condominium in a similar neighborhood was roughly $4500 after a 60,000+$ down payment at 10% down.

Houses? Rents are around 4200-4600 for a 3/2 in nice neighborhoods, and 3200-3600 in lesser-ish neighborhoods. If you stick around a 5% down payment, you'll shell out about $40,000 on your down payment and pay upwards of $5000-$5400 per month for a comparable. Is it nice to lock in your rate for 30 years? Yeah, sure, maybe your rents keep accelerating... but maybe they don't. And how long until you reach the break even point? Because you're already paying more to own than to rent. And what if there comes a time when San Jose's economy isn't pumping and people are sitting on 900,000 dollar mortgages and they're severely underwater?

I definitely agree that a case can be made for home ownership, but I struggle to see the pure benefits of ownership right now, and I fear the way people jump into it, it's probably the case that we never learned our lessons from just a decade ago.

All I can say is I am gleeful I did what I did when I did it. I bought in San Jose 7 years ago. There is never a time when everyone can all agree prices are going up or down. There isn't a perfect time. If we all had a crystal ball, it would be so much easier.

Rents are always going to go up, and you have nothing to show for it, and you can't control who your neighbors are or who is making noise above or below you. You also get such little privacy and control over your living space.

[fluffythewondercat]

Originally Posted by neutrino78x

That aside...I think some of us are willing to sacrifice home ownership to live among people with values and goals similar to our own.

So you’re intolerant of people who think differently from you. We’re also supposed to believe you’re “sacrificing home ownership” when we know you live in shared housing and have a low income. Nothing wrong with having a roommate or just scraping by, of course.

[expatCA]

Originally Posted by llowllevellowll

I definitely agree that a case can be made for home ownership, but I struggle to see the pure benefits of ownership right now, and I fear the way people jump into it, it's probably the case that we never learned our lessons from just a decade ago.

You are correct if you can't afford it right now. For many it takes time to reach a point where they can begin to save enough to have a decent down payment anad afford the monthly payment. For those who can't afford it rent is best. I bought my first home at 36 in another State. My next home, after moving back to CA and renting and then moving again, was in TX and I was 48 then. Since then I have bought in CA, sold and have bought 2 more homes with cash. It takes time and effort and when younger it is definitely hard, so rent is the only viable option.


For those jumping into it right now, even a recession is not a problem for them if they are careful and still have the employment to pay the mortgage. the ones who lost homes, either paid too much, borrowed against equity driving their over all costs up or lost their job. I bought in 2000 and sold in 2009 and made 50% more than I paid for it because I was careful with my debt and had no employment issues.

[Mister 7]

Originally Posted by fluffythewondercat

So you’re intolerant of people who think differently from you. We’re also supposed to believe you’re “sacrificing home ownership” when we know you live in shared housing and have a low income. Nothing wrong with having a roommate or just scraping by, of course.

Well, lol, to be fair California is the probably "best" state to be um, low-income or on government assistance. Poor people there live better or have it easier than the middle class in some areas. Just call some 900 number billed to Washington, DC, and give a(ny) name and address and you're in, thank you taxpayers. Like how easy it is to get hired at the Waffle House..

[llowllevellowll]

Originally Posted by expatCA

You are correct if you can't afford it right now. For many it takes time to reach a point where they can begin to save enough to have a decent down payment anad afford the monthly payment. For those who can't afford it rent is best. I bought my first home at 36 in another State. My next home, after moving back to CA and renting and then moving again, was in TX and I was 48 then. Since then I have bought in CA, sold and have bought 2 more homes with cash. It takes time and effort and when younger it is definitely hard, so rent is the only viable option.


For those jumping into it right now, even a recession is not a problem for them if they are careful and still have the employment to pay the mortgage. the ones who lost homes, either paid too much, borrowed against equity driving their over all costs up or lost their job. I bought in 2000 and sold in 2009 and made 50% more than I paid for it because I was careful with my debt and had no employment issues.

For me, it's about where I want to see my investment dollars go. Instead of purchasing here, I purchase properties elsewhere and hire management companies to oversee them and then I have more money left over to put into IRAs and 529s. I can think of some really beneficial places to invest $40-80,000 and it's difficult for me to justify putting it into a down payment into a market that is a giant, probably unsustainable bubble. Moreover, if I chose to purchase in San Jose, I would invest squarely in one sector and probably nowhere else. I prefer diversification.

Having said that, if I am here long enough to enjoy the fruits of a downturn in the housing market, I'll absolutely do it. Allison made the right choice at the right time.

[expatCA]

Originally Posted by llowllevellowll

For me, it's about where I want to see my investment dollars go. Instead of purchasing here, I purchase properties elsewhere and hire management companies to oversee them and then I have more money left over to put into IRAs and 529s. I can think of some really beneficial places to invest $40-80,000 and it's difficult for me to justify putting it into a down payment into a market that is a giant, probably unsustainable bubble. Moreover, if I chose to purchase in San Jose, I would invest squarely in one sector and probably nowhere else. I prefer diversification.

Having said that, if I am here long enough to enjoy the fruits of a downturn in the housing market, I'll absolutely do it. Allison made the right choice at the right time.

You are doing things in a good manner. Buying rental property can be an excellent source of income and your saving money in IRA's etc., will also work well for you.



I would not worry about a bubble as almost none of the issues that caused the last one to occur exist. That recession was very unusual and is not likely to occur again unless a massive drop in the economy occurs and then the rich will be buying a lot of homes up and investors doing the same and both types will turn them into rentals. Flattening and slight drops are normal after the prices have risen for a while, but no bubble.


Unfortunately hard to know when a down turn will occur VS normal flattening, etc.

[80skeys]

Years ago I did a financial comparison between renting forever versus owning a home. The end result is that both are equivalent. Your net worth at the end of 40+ years of renting is the same as 40+years of owning a home. So, financially there's no difference. The only reason I can see for preferring to own a home is if you want to make a lot of structural changes to the house or you need to have a yard.

[JJonesIII]

Originally Posted by 80skeys

Years ago I did a financial comparison between renting forever versus owning a home. The end result is that both are equivalent. Your net worth at the end of 40+ years of renting is the same as 40+years of owning a home. So, financially there's no difference. The only reason I can see for preferring to own a home is if you want to make a lot of structural changes to the house or you need to have a yard.

That's interesting being every place in the country is different and things don't remain the same as "years ago". The only definitive answer I've ever come up with is it depends. Because interest rates don't remain the same, areas run out of land to build on (and environmentalists restrict building in addition to zoning laws), some people are under rent control...some are not, and then there's that thing called the economy. I have no idea how you could have run any kind of specific scenario with so many changing factors (heck you might even have a significant difference between neighborhoods in the same city). About the only thing people can really do to see how things have gone is back track on their situation. Running anything out 40+ years is an exercise in futility as there is no way you could get anything to hang your hat on (there are way too many assumptions that would go into something like that). And backtracking on my individual situation, there's no way a renter would have done better. However, someone else could have a different situation.

[Mister 7]

Originally Posted by 80skeys

Years ago I did a financial comparison between renting forever versus owning a home. The end result is that both are equivalent. Your net worth at the end of 40+ years of renting is the same as 40+years of owning a home. So, financially there's no difference. The only reason I can see for preferring to own a home is if you want to make a lot of structural changes to the house or you need to have a yard.

Wonder if that would be the same today?

Here's the thing I struggle with:

People who pay outrageous rents have an extra $xxxx amount of money on top of that and life's other bills to invest for 30 years? (to give them the exact same net worth)

I don't know one person who does that, and it would be next to impossible to do out there in coastal CA. Unless you're just super wealthy, and in that case one could probably afford to buy something.

If the end result is the same you might as well be paying for a roof over your head that's all yours; that's just how I see it.

Big differences in owning vs. renting rhetoric when it comes to coastal CA and, well, pretty much everywhere else.

[neutrino78x]

Originally Posted by fluffythewondercat

So you’re intolerant of people who think differently from you. We’re also supposed to believe you’re “sacrificing home ownership” when we know you live in shared housing and have a low income. Nothing wrong with having a roommate or just scraping by, of course.

It's the same thing. I could move to a cheaper area and own a home, I'm sure. But I don't wish to do so, for various good reasons. I'm not sure what your point is. Both statements are true: yes, I am sacrificing ownership to live in the Bay Area, and yes, I have a roommate and am just scraping by. But again, the point of your post is not clear. Are you trying to say I am wrong to live with my father so I can afford to send him money, rather than move and be unable to help him? If so, I disagree. This is the best of several bad options. I'm working on it but this is the best I can do right now at this moment. I'm glad to hear that you're enormously successful and that everyone looks up to you and everyone should emulate everything you do, because your life is perfect. Mine is not.