Market heating up short-term?

I agree with both your short and long-term predictions. But you say you can't rent forever? I am debating doing that. I have a great rental, which I could never afford to buy (in this market), and I have liquid assets, which gives me both comfort and flexibility. Maybe I won't rent forever, but I am definitely considering renting for a long time. Which is a huge change from how I used to think.

In the 30 years I've been selectively buying (residential) real estate, I have known a few people who adhere to the philosophy that it's a waste of money, renting is cheaper, better, etc. Every single one of those people are worse off financially today than they would be if they had made a solid investment in a primary residence, and a few of them have almost been ruined financially by the vicissitudes of economic cycles. If you don't put your money in RE, are you so certain of your ability to succeed in other investments? I know it can be demonstrated that certain specific investments have outperformed RE along the way, but how do you know that you are going to choose that specific investment? Anything short of it and you're at the mercy of landlords for the rest of your life.

"because you can't rent forever"

Who says?

"Who says?"

I says. But you can't own forever either. Something about dying or something. But maybe I'm being too literal...

Please, not another rent vs. buy arguement...life is too short

sisphus

I am a hybrid. I've bought and sold real estate outside Manhattan over the last 15 years, but commercially. I've been living in Manhattan 12 years and renting the entire time.
Though I half agree with what your saying, it really is case by case.

Over 12 years I've averaged renting apartments in the 1000 sq ft size ranging from $1200 to $4000.
I've paid in rent in that time period maybe a total of $325K. No repair costs for anything. Furnishings over that period (tvs, sofas,etc) maybe 20K?
So for 350K I lived in Manhattan for 12 years while back in '98, the apartments I looked at ranged in the 600K to 750K range. One could say I would have owned half my apartment by now.Yes and No. I didn't have the money then to do it.
That 140K went to my business.
On a 700K apartment I'd have to put down 140K plus closing costs at the time. Over 12 years, I would have probably had to renovate and fix something....another 30K?
Mortgage deductions? Sure but the first 12 years I'm paying mostly interest and not principle.
What can I buy that same 1000 sq feet for today? 900K? 1mil?

An old formula my dad told me was so wise, and it holds safe in just about any environment...a third a third a third.
1/3 of your assets in real estate, 1/3 in your business (or you can substiute with stocks) and 1/3 liquid/cash (money markets/cds,etc) You can adjust 5% up or down for trends but stay close to that.

Today that has put me in a position to be able to buy a larger apartment and for all cash.

Mercy of landlords is both good and bad. Freedom to just get out of a lease instead of anchored with a property in the wrong time has it's positives too.

"Every single one of those people are worse off financially today than they would be if they had made a solid investment in a primary residence, and a few of them have almost been ruined financially by the vicissitudes of economic cycles. "

Very easy to say near the top of ANY bubble. People in 2000 made the same arguments about buying dotcom stocks.

One of the fundamentals of investing in a market is... past performance is no indicator of future returns.

Can't rent forever because it's not yours. A home is partially a family and emotional decision (yes I said emotional).

And this isn't investing. We'd be buying one home and living in it for the long-term. Not investing, not a market. Sure we have to make a decision about other alternatives. But when I decide to buy an iPhone instead of the new Palm, that's not investing either even though I'm spending money on one alternative vs. another.

Sold at top, now sideline sitter. Renting now affords us so much flexibility. Buying now would feel like folly. Prices are still way too high. We try to keep "emotions" out of it... would've bought a fab Classic 6 gut reno by now if our emotions ruled the day. In that case, our rent-vs. own ratio would've been waaay outta wack, for waaay too long. Both of us are long-time homeowners, we enjoy the feeling of owning our own home.... but we both feel just fine about where we are today.

What about a 7 year lease on an apartment that we have been in for 5 years and that we like, with no rent increases until year 4 (+2.5%) and then again in year 6 (another +2.5%) - if we do this, and we are negotiating with LL currently then we'd want to put some money into renovating, but would be spreading the price of those renovations over 84 months, which might bump the rent up +/-10% - but which would result in our having a great apartment in a neighborhood we love with the security of the next 7 years. am I crazy to be considering "sinking" that much dough to renovate something which I don't (snd never will as they are not going to convert)) own