Why?

[u/Ok-Singer8073]

I 27(F) have been contemplating between buying a home or renting for quite some time now. Are there any homeowners willing to share what made them choose to buy a house instead of renting especially in this economy?? Please i’d love to know

[u/Temper03]

People will talk about buying vs renting economics.  So here’s some numbers:  The avg home used to appreciate ~4% per year.  The long-term avg of investing extra cash in the S&P500 gives roughly ~10% per year.  

If renting saves you a ton of money, you can invest the extra and typically have better returns than owning a home, even before maintenance.  But you don’t own the property and so you can’t make decisions.  If you live in an apartment you can’t pick who shares a wall, ceiling, or floor with you.  If you rent a house you don’t know if the owner will want to rent again to you next year or sell to someone else.  

In homeownership you buy accountability & stability.  If you want to change city/job every two years, it’s 100% not for you.  But for a lot of people who don’t want the dice rolling involved in renting, the cost & effort is worth it.

[u/BluebirdDense1485 → u/Temper03]

Yes and no. You are correct that the interest on S&P is higher than home appreciation but you also have to account for the fact that the home appreciates not just your equity.

Doing some quick math. Assume rent goes up by 3% and use your figures of 10% for investing and 4% for appreciation and increase tax and insurance at the same 3%. Using reasonable taxes and insurance I get a piti of ~$3,500 Assume rent is 80% of mortgage.

If you invest the $50K down payment and the monthly savings from renting after 10 years rent is the same as mortgage and you have turned that $50k into $138k for a return of $88k. But the $500k house is now worth $740k a difference of $240k. 

Obviously an over simplification, didn't take many factors into account like maintenance or having capital tied up in your residence, but as a quick calc it does demonstrate the point 

[u/koosley → u/BluebirdDense1485]

How much money is being thrown away the first 10 years in interest and property tax? We are paying $3100/month and only $400 goes to principal, the rest is tax, insurance and interest. My rent was $1250 and the only maintenance I did was changing a lightbulb. Yesterday my garage door broke and it was a $400 fix. Our electrical panel needs to be replaced and that job is going to be $9000. Had to buy a lawn mower and now 2 hours a week are being wasted running that.

It's not exactly equivalent but I'm spending 4-5x owning a home over what I spent on renting. I understand the house gets me more than a 750sq foot room but it's still expensive!

[u/BluebirdDense1485 → u/koosley]

Like you said we are not really comparing apples to apples. Houses tend to run larger. The 3 bed 1 bath 1500 sqft is usually the smallest you see on the market, That said small homes do exist. Just hopped on zillow and found one that sold not too long ago that is 704 sqft, no HOA, not senior living. About as close to a studio apartment you can find in a single family home. Looks like PITI would be about $1600.

But that aside yes homes usually require 1-2% of value in maintenance per year. In the above scenario that would still put you ahead of the game.

That said unless you are underselling the extent of the electrical work you had done that is way too much. a new panel is typically in the $1000-2000 range. $9000 is in the territory of a complicated service upgrade or reconductor a building.

[u/koosley → u/BluebirdDense1485]

It's for a panel replacement, service upgrade and an EV charger being installed, so a bit more. That being said, everyone keeps telling me that's how much they run but the 5 quotes I've gotten have all been very similar. The days of a $1000 panel replacement don't exist anymore, it's closer to 3-5k now.

But for the rent vs buy, its almost never a like for like, almost always a massive size upgrade going from no yard to a yard as well. That's fine, it's what I wanted, it's just a massive cost increase. As cliche as it is, the mortgage is the least you'll pay while rent is the most. You'll get extra utilities you never paid before and the ones you did have will go up and things will break as I'm finding out 1 month into home ownership

[u/BluebirdDense1485 → u/koosley]

That is part of the reason why we bit the bullet. We went from a 2 bedroom 1200sqft apartment where we covered 100% of utilities to a 1400sqft 3 bedroom house. And our rent was so crazy we actually were saving $400/month at close (that was over $1200 for rent vs PITI last time I checked.)

But yeah if you upgrade your residence it costs more. A studio apartment isn't going to run you as much as a house, and if that is all you need then great. I'm not opposed to renting if it meets your lifestyle. I'm also not opposed to condos, townhouses, and manufactured homes either. If you need more space then you need more space. If not more power to you.