stevejhx please help me out here

this seems like a setup but

opportunity cost of the money you have in the apt

and

risk of having the money in the apt

My P&I payments are let's say similar to rent payments plus I own the apartment outright later. So my future payments are equal to maintenance whereast rent would be higher at that point.

Stevejhx, how come you don't answer? I do think I have a point here. Basically, for the next hundred years people can live in the apt for just maintenance. Maintenance will always be cheaper than continuing to pay rent.

Uppereast - I think that is a good point. The problem is that it doesn't cost the same to rent as to own. it cost 2x as much to own, with no guarantee that I am going to make my down payment back when I sell it.

Owning an apartment outright is a poor financial decision. At that point you could sell, put the proceeds in a conservative investment, use the returns from that investment to pay your rent in an equivalent home, *and* have extra investment returns on top of that.

Your original point still stands: if the out of pocket cost to rent and buy is the same, buying is a smarter move. But only for the first 20 years or so, when your opportunity cost is low and mortgage tax deduction is high.

uppereast, sorry if I'm not at your beck and call. I was watching TV.

"Basically, for the next hundred years people can live in the apt for just maintenance."

Buying is to hedge against the risk of rents rising. If it is more expensive to rent, then buy. If it is more expensive to buy, then rent. If your time horizon is infinite, it will make no difference which you do.

"Basically, for the next hundred years people can live in the apt for just maintenance. Maintenance will always be cheaper than continuing to pay rent."

Yes, that is a benefit, but that benefit is not free.... you PAY FOR IT. With principal and years of interest.

If you had to pay 10 billion for the right to save on $2500 a month in 20 years, would that make sense?
Obviously not... there is a point where you pay too much for that savings. hence the multiple.

You have to compare the value of the "savings" later vs. the value of what you'd save now. It can work in one direction or the other depending on circumstances.

If rents were always lower than the monthly cost to own, then why would there be landlords? When you put your capital at risk you should get paid for it.

tech, you have to take into account the long-term growth in value of the property you own, compared to the rise in rents you will have to pay long-term. If the current ownership costs and rental costs are comparable, I can't see how after paying off your loan, you would be better off selling, investing and renting. By doing so, you are making a return on your money, true, but you are forsaking the growth in value of your property and you are subjecting yourself to rising rents over time. If you sell after a big market bubble and time things correctly, you would be better off, but good luck trying to do that.

> If rents were always lower than the monthly cost to own, then why would there be landlords?

False assumption. They simply aren't always lower.

In bubbles, however, you generally do see a separation from logic and reality.

ummm, nyc10022 that's my point. there are landlords, hence rents are NOT always lower than monthly costs of ownership.

LICC you just don't understand how markets work. Yes, the value of your property can go up. It can also go down. It can rise, but not keep up with inflation. It can fall, but fall less than other assets. Certainly if you build in the assumption that real estate prices will rise quickly from today it is obviously a good idea to buy--that's what we call a tautology. There is just absolutely no factual basis for that assumption.

"ummm, nyc10022 that's my point. there are landlords, hence rents are NOT always lower than monthly costs of ownership."

Then you don't put "if" at the beginning of the statement, and your follow up line doesn't start with "why would..."

;-)

Both infer that you don't understand that the premise you raised is incorrect.

happy, you shouldn't assume what people know and don't know. Sure, in the short-term property values can fluctuate, but history shows long-term that values rise. If property values fall long-term, there will likely be severe overall economic problems. Your money investments may not do very well either. You can't look at these things in a vacuum. When did I say to assume a quick rise in real estate prices? I've only been talking about long-term, and history does provide some bases for assumptions

nyc10022 have you ever heard of a rhetorical question?

"If rents were always lower than the monthly cost to own, then why would there be landlords? When you put your capital at risk you should get paid for it."

Read it again. "If rents were always lower than monthly costs, then why would there be landlords?" "If" means that the statement may or may not be true, in this case depending on the second clause of the sentence. Either rents are always lower than monthly costs of ownership, or they are not. Since there are landlords, rents cannot always be lower.

And if that isn't clear enough, the second sentence clearly states that when capital is put at risk, it should be compensated, WHICH MEANS that rents should be higher than the monthly cost of ownership. Why not just say "whoops, I didn't understand."

> Sure, in the short-term property values can fluctuate, but history shows long-term that values rise

But generally revert to the mean, which is usually a factor of income. A reversion to that mean seems to infer a significant decline OR a lengthly slow decline.

Or, another way to look at it.... starting at 2007 prices and beating inflation over 10-20 years would bring us to a number completely out of whack with long term terms.

So, history tells us that RE is likely to see declines, and the stock market an increase to get to traditional returns.

"with long term terms."

that should be long term TRENDS.

LIC,

I'm not assuming what you know and don't know--I'm reading it plain as day in your posts. You just said it again "history shows long-term values rise." That is irrelevant in and of itself. Do they rise faster than inflation? Faster than equity investments? Does your data take into account real estate taxes, maintenance, and upkeep? There are many situations in which it makes more sense to rent than to buy with equal monthly costs.

The growth we had was unprecendented and, IMHO, unwarranted. Trying to build a trend off the recent data just sets one up for some very wrong conclusions.

happy, you are changing your assumptions. We were discussing a situation where the carrying costs of owning and renting were the same. Your assumption takes into account real estate taxes, maintenance, upkeep, the tax deduction benefit, etc. Setting aside non-financial factors, other than a long-term decline in real property values combined with a long-term increase in other monetary investments, and static to declining long-term rents, what other "many" situations would make more sense to rent than to buy?
I think you should just quit while your behind.

LICC is talking to himself as tech_guy again. Creepy.

"When you put your capital at risk you should get paid for it."

There is a very good argument that the cost of owning should be less because of the risk of capital. HOWEVER, it acts as a hedge against future rent increases, and that likely offsets it. Which is just one more reason why the costs should be the same.

"if you build in the assumption that real estate prices will rise quickly from today it is obviously a good idea to buy"

You are correct - over long periods of time owner-occupied residential real estate does not quickly increase in value. It is constrained by incomes and leverage.

steve, do you not mind how wacko you sound by insisting that two different people are the same person arguing with himself? Hey, if it makes you happy, keep it up, but you sure are a weird guy . . .

This is like Will Ferrell playing George Bush