House owners VS renters

[Etschell]

Originally Posted by crew

[/B]

The limit of $10k in deduction is not limited to real estate taxes. It includes all state & local taxes, including income tax at the local level.

Exactly, in other words you're never deducting more than 10k in real estate taxes assuming you don't have any local or state taxes. In reality its probably even a lower cap as most do. This is why people are moving from states like CA to those like TX.

[GB-man]

Originally Posted by brandrea

Good information Eliot



I presume that means the interest deduction is targeted to the “middle class” which makes sense.



When you say taxes are limited to 10k, are you referring to when the principle is sold? If so, that seems like an amazing deal.

There is a tax exemption in the states for the sale of a primary residence you’ve resided in for at least 2 of the prior 5 years. Individuals are exempt from capital gains of up to 250k and married couples 500k.

I chose to own but there are certainly situations and locations where renting makes more sense. My area is not one of them and I personally enjoy the fact that I can modify and make it my own. If I had to take on a mortgage that made me lose sleep at night I’d just own a less expensive home, probably a double and collect rent on half.

[brandrea]

Originally Posted by GB-man

There is a tax exemption in the states for the sale of a primary residence you’ve resided in for at least 2 of the prior 5 years. Individuals are exempt from capital gains of up to 250k and married couples 500k.

I chose to own but there are certainly situations and locations where renting makes more sense. My area is not one of them and I personally enjoy the fact that I can modify and make it my own. If I had to take on a mortgage that made me lose sleep at night I’d just own a less expensive home, probably a double and collect rent on half.

Thanks for clarification

Seems like a no brainer to own then ...

If I understand correctly, you write off the interest portion of mortgage payments and you capture tax free gain up to the stated limits when you sell.



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[SMD]

Originally Posted by brandrea

Thanks for clarification

Seems like a no brainer to own then ...

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Yes, those of who don't own aren't smart enough to do a rent vs own calculation.

[Etschell]

Originally Posted by brandrea

Thanks for clarification

Seems like a no brainer to own then ...

If I understand correctly, you write off the interest portion of mortgage payments and you capture tax free gain up to the stated limits when you sell.



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yes. plus a sale is taxed at long term capital gains rates if any gain is incurred above the aforementioned exemptions.

to me it only makes sense to rent if you cant afford to buy or if the rent is so much lower that it makes no sense to buy. realistically that never occurs in the later unless you are not paying fair value rent.

[mrs_LA]

Originally Posted by brandrea

I also think many millennials don’t aspire to owing real estate like the baby boomers and gen-xer’s do. Student loans and “experiential lifestyles seem to be more commonplace. Not judging whatsoever, as they may just have it right in some ways.

I think I still belong to this generation, but absolutely disagree with that sort of mentality. Too much "living in the now" without planning for the future. Thousands of dollars worth of vacation (or experiential lifestyle as you say) here and there, can easily be put towards something else to secure the future a little better... like saving for a down payment.

[brandrea]

Originally Posted by crew

[/B]

The limit of $10k in deduction is not limited to real estate taxes. It includes all state & local taxes, including income tax at the local level.

Originally Posted by mrs_LA

I think I still belong to this generation, but absolutely disagree with that sort of mentality. Too much "living in the now" without planning for the future. Thousands of dollars worth of vacation (or experiential lifestyle as you say) here and there, can easily be put towards something else to secure the future a little better... like saving for a down pgayment.

Well I was just trying not to be all judgy

To be fair, I don’t think home ownership is the be all end all for everyone and I’ve personally always considered it to be more of a lifestyle choice.

To each their own

[Carrera911]

A few aspects to renting vs owning:
1. Psychological - "I Own my house, it's mine"
2. Financial - "I save money by owning / not owning a house"
3. Liability - "I need/don't need to deal with XYZ if it breaks"

Where I live, if you have CASH it would make more sense renting a house and buying rental / income producing properties and using that money to pay your rent and have some $ left afterwards. You let your landlord deal with the incredibly high taxes, maintenance and depreciating items (things that just get old).
YES - The landlord does take all these into consideration when making a decision on how much rent to collect BUT he also has to deal with the market. If he's too expensive his house is going to be sitting empty while he still pays taxes, HOA and CDD.

Although I own my house, I would prefer renting a smaller one, not dealing with all the BS around owning a house and just free the cash towards investments. But I'm also married to a lady that the psychological part is important to her so for now we're going to hold on to our house.
I always tell her that if our house appreciates over $150,000 I'd like to sell and take the money. We're in a relatively new up and coming area so that can potentially happen. We'll see.

[SloRolexfan]

I'd love to own a home, but just like the guy in Spain that is a laughable goal here.

I work incredibly hard and being able to buy a home is seems sooooo out of the realm of possibility.

In a strange way its another reason i really like my Rolex, its something i worked hard for, could afford and will always be valuable.

[zengineer]

Do renters think they are not the ones funding the property taxes?

There will always be exceptions but if you expect to stay put for decades, buying is generally going to be the way to go.

Some of the property tax examples in here are real but also very extreme cases...high tax rate states and high end homes. In Michigan, a $1 Million house is a 5-7,000 square foot pretty nice home in a very nice area and will be under $1000/month in taxes. A more typical very nice 4 bedroom home is half that.

[crazymcmichael]

If i hear these prices about taxes in the USA, i am completely ''shocked'' just like the guy from the UK posting here somewhere.. We can't even imagine that you have to pay so much taxes on a house.. Raise the question how much a normal american make? And how much does a average American keps over? Zero i guess …

[austinp]

Property taxes in my area are 1.5% of the assessed value. The assesed value is usually 15% under market value.

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[R G]

Originally Posted by crazymcmichael

Guys,

Considering anyone here spends crazy money on watches i was wondering are there any guys that actually don't own a house but rather rent it?
I'd actually would rather rent something than buy something as sonetimes it can be even cheaper on the long run.. Not when you rent something nice offcourse.

Anyone???

How can renting be cheaper in the long run????

No offence, but I’ll make the assumption you don’t understand investments.

[Tri-Tip]

I rent out the townhouse that I used to live in. Over the last 7 years, my tenants have paid almost as much in rent as I paid for the place.

Better to be a landlord than a tenant!

Originally Posted by superdog

Agree 100%.

I actually have a rental fully paid for too. My renter pays all my home costs, for both homes. It’s glorious.

And way way way more important than toys.

The net income of my rental property pays 1/2 of the monthly mortgage on my home.

[tudorbaja27]

Originally Posted by R G

How can renting be cheaper in the long run????

No offence, but I’ll make the assumption you don’t understand investments.

I can provide a few scenarios when renting is more profitable.
Something tells me I'd waste my time

[Tri-Tip]

Originally Posted by Dan Pierce

Homeowner here, paid in full a couple of years ago.
dP

Originally Posted by Dan Pierce

Agreed! So relieved we refinanced to a 15y mortgage early on. Not only saved multi thousands but could enjoy the thrill of paying it off.

I can remember when my parents paid off their home w/ a monthly payment of $98.00. At the same time my VW car payment was $110.00 per month.
dP

I'm working mine down, took a 30, but pay extra principal every chance I get. Being self-employed, I didn't want the 15 year mortgage with the higher payment just in case business wasn't good. My current philosophy is that when I have extra money to invest, 2/3 goes into investments and 1/3 goes to pay down the mortgage. I'm 8 1/2 years in and I've paid down over 50% of it already, it will just accelerate from here.

[Tri-Tip]

Originally Posted by piratfisk

I'm born & raised in Park Slope and during my junior year in HS, we moved out to Union County. My parents (both close to 70) are fed up with "the f*ing taxes and the f*ing snow" and have had a house built in North Carolina. They're both very excited to be unburdened by tri-state taxes. My wife & I are soon to be San Diego residents, so clearly I haven't learned a thing.

We're planning on renting for the first year, then buying a condo.

San Diego is beautiful, you won't mind the higher cost of living, it's well worth it!

[Dan Pierce]

Originally Posted by Tri-Tip

I'm working mine down, took a 30, but pay extra principal every chance I get. Being self-employed, I didn't want the 15 year mortgage with the higher payment just in case business wasn't good. My current philosophy is that when I have extra money to invest, 2/3 goes into investments and 1/3 goes to pay down the mortgage. I'm 8 1/2 years in and I've paid down over 50% of it already, it will just accelerate from here.

Well done, my friend!
dP

[R G]

Originally Posted by tudorbaja27

I can provide a few scenarios when renting is more profitable.
Something tells me I'd waste my time

Hahahaha yes because you can make a profit with something you don’t own!?!?!

Stick with renting, buddy.

[austinp]

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Originally Posted by Tri-Tip

I'm working mine down, took a 30, but pay extra principal every chance I get. Being self-employed, I didn't want the 15 year mortgage with the higher payment just in case business wasn't good. My current philosophy is that when I have extra money to invest, 2/3 goes into investments and 1/3 goes to pay down the mortgage. I'm 8 1/2 years in and I've paid down over 50% of it already, it will just accelerate from here.

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[Wcdhtwn]

Originally Posted by SunTzu

Property taxes too. My folks pay $18k a year for a postage stamp in Jersey. My grandparents were married almost 70 years and never once owned a home. They rented a lovely apartment with a garage for decades and decades despite being well off enough to own a home.

That’s not uncommon in that part of the country. People in NYC will rent an apartment for years and will spend their own money to redo kitchens, baths, closets, etc. Insane in my opinion anyone would do those improvements on a rental. Property taxes in NJ, laughable. Unless you’re the one paying.

[SunTzu]

Originally Posted by Wcdhtwn

That’s not uncommon in that part of the country. People in NYC will rent an apartment for years and will spend their own money to redo kitchens, baths, closets, etc. Insane in my opinion anyone would do those improvements on a rental. Property taxes in NJ, laughable. Unless you’re the one paying.

My town is loaded with NYC/Brooklyn transplants (early 30's couples, metrosexual men, more well off, 1.5 kids) because I'm on a train line direct into NYC in 30 minutes and a jitney to take you to the train station.

[superdog]

Originally Posted by SunTzu

My town is loaded with NYC/Brooklyn transplants (early 30's couples, metrosexual men, more well off, 1.5 kids) because I'm on a train line direct into NYC in 30 minutes and a jitney to take you to the train station.

Montclair NJ?

[walds11]

Originally Posted by SunTzu

My town is loaded with NYC/Brooklyn transplants (early 30's couples, metrosexual men, more well off, 1.5 kids) because I'm on a train line direct into NYC in 30 minutes and a jitney to take you to the train station.

Maybe I’m old...not really mid 40s, but what is 1.5 kids?

[austinp]

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[Proof Morgan]

Originally Posted by zengineer

Do renters think they are not the ones funding the property taxes?

There will always be exceptions but if you expect to stay put for decades, buying is generally going to be the way to go.

Some of the property tax examples in here are real but also very extreme cases...high tax rate states and high end homes. In Michigan, a $1 Million house is a 5-7,000 square foot pretty nice home in a very nice area and will be under $1000/month in taxes. A more typical very nice 4 bedroom home is half that.

Here in Illinois where I live property taxes for a $1,000,000 home is $36,000 a year. In Florida my area for a $1,000,000 it is $10,500 a year. Besides that the sales tax if I'm not mistaken is the highest in the nation in Chicago. I wonder why so many are trying to leave Illinois.

[CamSLC]

Originally Posted by Proof Morgan

Here in Illinois where I live property taxes for a $1,000,000 home is $36,000 a year. In Florida my area for a $1,000,000 it is $10,500 a year. Besides that the sales tax if I'm not mistaken is the highest in the nation in Chicago. I wonder why so many are trying to leave Illinois.

We considered moving there for my girlfriends grad school (3 years). Needless to say that is a city we would rent in for sure. We looked into condos for sale and the mortgage would have been $1500+ more than similar rent.

[crazymcmichael]

Originally Posted by R G

How can renting be cheaper in the long run????

No offence, but I’ll make the assumption you don’t understand investments.

Nah, it is a personal reason you can PM me if you like but my situation is unique. I do understand that you normally need to buy to be cheaper in the long run))
If i want to have some profit i need at least to not buy a appartment but a free standing house anyway considering that every 30 years or so it can need a new roof my profit will be gone.
Offcourse houses increase over time, but on the other hand it can be a pain in the ass to sell them, and thats also something you don't really want :)

[R G]

Originally Posted by crazymcmichael

Nah, it is a personal reason you can PM me if you like but my situation is unique. I do understand that you normally need to buy to be cheaper in the long run))
If i want to have some profit i need at least to not buy a appartment but a free standing house anyway considering that every 30 years or so it can need a new roof my profit will be gone.
Offcourse houses increase over time, but on the other hand it can be a pain in the ass to sell them, and thats also something you don't really want :)

Understood.

[FiftyTwoEighty]

In California, we rent the house we live in, but we own a cash flow positive property a mile away at the Beach. It’s cheaper for us to rent and plow the spread into investments and savings. In practice, we are putting away the equivalent of a mortgage payment — and then some.

With a growing family, we needed a house that fit our needs better. Instead of selling, or pulling equity out of our rental, or liquidating anything, to buy another property that fit our needs better, we are stockpiling cash for the next pullback and buying opportunity. Instead of trading-up for a house that fits our needs, we are saving-up to add a house that fits our needs.

Freedom from day to day maintenance! We have a property manager for our rental (and tenants) and our landlord takes care of the house we rent. At least, we have one aspect of “freedom” from maintenance of toilets/trash/tenants.