Housing Costs-Home Owership Verus Renting

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launderess

launderess

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Not to hijack the "Black Friday" thread, and tick other members off, though to move things here if anyone wishes to continue.

Home Ownership:

IIRC, PeteK, stated at least in Canada they own their own homes regardless of mortgage. In the United States things vary state by state. For instance in New York State, you own your own home, even if you carry a mortgage.

Reason why our Congress changed the law to allow the first 250,000USD to be tax free (used to be about the same amount,but one had to live in the home as a principal residence for 7 of the previous ten years, IIRC), was because commercial property is not subjected to the same laws. That is you can sell a office building for 45 million USD and not under some circumstances pay a cent in federal taxes. Long as one plows that money into another investment that is.

Personally think it is time to go back to some time limit before selling tax free. The new law has caused lots of flipping and in some ways hurts those who wish to buy a home to live in for a good while, verus those who either a buying to flip, and change apartments like renters when they tire of an area.

L.
 
If I'm not mistaken, even now you must own and live in your home for 2 of the past five years to qualify for the $250,000 tax break. Otherwise you get slammed with taxation on the full amount of any profit.

For people in this area, they could easily exceed the $250,000 profit level if they've owned their home for the past decade and they file singly. Although there may be some tax breaks if you plow the money back into the purchase of your next live-in home. I don't plan on ever selling this place, so I haven't paid much attention to that part of the picture.
 
Laundress, what I said or meant to say was that sure even if you have a mortage you legally own the home which is the same everywhere Canada/ US etc..In Canada there is no incentive to keep carrying a mortgage because you can't deduct it from your income tax so the incentive is to pay your mortage off in full as soon as possible. 15-20 years is most common. Because of the different tax laws in the US it doesn't always make sense to pay off your mortage asap but the flip side being that people are more prone to over extend themselves.
While there are sub prime lenders here even they are way more cautious than what has happened in the US. There hasn't been any ramifications to our real estate industry. First time buyers can apply for various federal home ownership programs if they can't swing a huge downpayment.
We don't pay any tax on any amount on the sale of your principle residence. I think you have to live in the house for 6 months for it to be considered your principle residence. There is no tax on purchasing a "pre-owned" home either, only on a brand new home, but there are tax incentives that almost nullify that. Especially for first time buyers.
 
There is basically no tax on new or used home purchases here, either, but let's not talk about it too much or someone might want to tax it.

Actually, local governments do charge a "transfer tax" which is usually about 1% to 3% of the home value. I guess that is a sales tax; typically it is split between the seller and the buyer. It's pure profit for the municipality, as their people do little to nothing with regard to a transfer (other than change the names on the property records). On a typical home here, selling for $500,000, the local govt gets maybe $15,000 just for paperwork. I'm not a tax rebel by any means, but the transfer tax borders on abuse, and just adds to the misery of those who are selling at a loss.

The transfer tax has probably increased over the years in reaction to the cap on property tax mandated by Prop 13 some 30 years ago. That cap basically limits tax on assessed value to no more than 1%, unless a certain majority (I think it's 3/5) of the voters approve an increase. In addition, property value re-assessments are limited to no more than a 2% increase per year. The assessment gets reset to market value when a property is sold and bought, but a low tax assessment for one home can be transfered to another home in the county if the owners are older than 55 (I think) and are selling their home to move into one of lesser value. It's a way for seniors to downsize and not see their property taxes skyrocket. Esp since many seniors have homes with property values that were capped way back in the '70's and only allowed to rise no more than 2% per year since then.

There are problems with Prop 13, however. Businesses have exploited loopholes in the law in order in effect to buy and sell commercial properties without triggering a re-assessment. Talk of closing these loopholes has been stillborn because of the sacrosanct nature of Prop 13. I suspect the property tax structure here is also why so many businesses prefer to lease their buildings than to buy them - the owner gets to keep a lower assessment value even it the building's tenants change regularly. I believe most of the high tech companies in Silicon Valley operate out of leased buildings - but I may be wrong there. Certainly one big company I worked for used the lease arrangement to cut costs, even though they paid to build a big building that they leased back from the landowner. Oh what tangled webs, lol.
 
IIRC when I owned in California, we were never re-assesed for taxes. Whatever the home sold for was what the basis of tax was, until the home was transferred. There were homes in Nob hill worth a million or two that paid less property tax than I did in Noe Valley for a $225,000. 950 square foot home(back then)

The state of New York constantly re-asseses and give its villages and towns the right to do so based on comp. sales near you. This just sucks. Especially for retired people like my father.
 
pturo,

Yep, one of my neighbors, who is in his 80's, pays 1/3 the property tax that I pay. Why? Because he bought his place in the 50's, and got the lowest possible assessment at the start of Prop 13. Prop 13 was initiated by senior homeowners back in the 70's, and they have benefitted the most from its provisions. Not so much the senior renters, who got at most a $60 tax refund at the end of each year, depending on income level. Naturally, there was no other requirement to pass on Prop 13 tax savings to tenants, except in the few cities that have some form of real rent control, like SF and Santa Monica, and even then it's nowhere near as comprehensive as that in NYC.
 
Excluding the sky high cities and regions that may not be affected by the current crisis or not affected as severely I would think it a great time for someone with a good down payment to take advantage from some of the bargains out there. I'm on realtor.com daily looking at properties across the river in Michigan, we're going to go and take a look at some rental properties.
 
I didn't think you "Owned" the home until the mortage loan was paid off by the buyer and the home buyer than has the deed or title to the home that was purchased.Until you build up any equity-you are just paying rent to the bank or mortagage lender.Equity build up may take a few to several years depending on the interest rate of your loan-higher interest rate the equity builds up more slowly.At least most landlords will repair or help you repair and maintain the house-the banks do not!An at present-with the mortage lenders and the housing market having problems hope I don't have to sell my home anytime soon.in the meantime its a BUYERS market-lots of homes at good prices-if they have been on the sale market for a long time-but you have to get the loan to buy the home.Thats also where the problems are-lenders are screening buyers more thouroughly.It may be more difficult to get your loan.
 
I luckily found a house for sale by owner needing mostly interior cosmetic repairs for about 40.000 under value,I did all the work myself,so I have sweat equity,the morgage is the same as my old apartment,but have to pay taxes and insurance,but it is worth it,I should have bought something in my 20's instead of 41,it would be almost paid for,so I always encourage younger people to buy something if posible,I loved my 3rd floor apt. with a great view of the lake until the property went into disrepair and was bought and renovations began,one day without notice they ripped out the upper two walkways and stairs,so if I looked out myfront door there was nothing three storys down so the whole day I couldn't leave the apt. Thats what I don't like about apts. you have no control or say about what is going on,they turned the water off several times for repairs without notice,the lawn people would come early in the morning and wake you up,and blow grass and dirt all over the cars. I always paid my rent on time or early,but if you are just a little late they will lock you out,its much better to own your home and not rent. Mark
 
sudsmaster~

Here in Orlando it is very much the same with property taxes.

In my neighborhood where the average home is worth anywhere from 500k to 700k, property taxes vary.

I have a neighbor a few houses down whose home is new construction... they are paying $12,000.00 a year for property taxes which I think is insane for Orlando. Our property taxes are quite low in comparison thankfully. My neighbor across the street put their home on the market recently with an asking price of 1.3 million. Their property taxes are roughly half of the other neighbor with new construction.
I still find it amazing how incredibly expensive Florida has become.
 
MaytagMark~

"I always paid my rent on time or early"

Imagine that, a tenant who pays on time or early..You are a landlords dream! (LOL)

I will have a condo in Downtown Orlando available for rent in February..My tenant never pays on time and waits until the last day before she is charged a late fee.

If you ever want to move to Florida, let me know...lol
 
It's insane not to own a home where I live, in rural southwestern Minnesota. I bought a split-level, front walk-out, 3-bedroom, 1-1/2 bath house with an attached garage that has a floor drain and is heated and air-conditioned. There is a wood-burning fireplace in the family room on the lower level. It has a medium-large, fenced yard. It was built in 1963.

Purchase price? $73,000---and several friends have said I could have easily bargained it down to $69,000. Taxes? $700 a year. Mortgage is $683/month.

My friends from Minneapolis are astounded at how little it cost, but the flip-side is that I'm in a town of 4,500 in the middle of nowhere. We have 2 stoplights, a McDonalds, a Hardees, a Subway and Godfather's Pizza. When McDonald's opened about 15 years ago, the local radio station had live coverage there all day, LOL!

Mankato, with a state university and plenty of shopping is only an hour away, though, which is nice. Minneapolis is a 2 hour and 20 minute drive, divided highway for all but the first 25 miles. Sioux Falls, SD (a smaller version of Minneapolis) is only a 90-minute drive.
 
I'll never rent again, if I can help it

My last rental home was sort of a disaster. The landlady was difficult to deal with, and it required a long argument to get her to fix anything. And when she did, she'd bring in people of dubious reputation and skills to do half-assed jobs. I remember the leaky roof over the little porch where the water heater and Whirlpool washer sat (there was no room for anything else). The paint was peeling off the ceiling as a result of the leak, and she had the gall to tell me it was my fault for leaving the lid up on the washer when it wasn't in use! I had a friend who owned his own roofing business, and he said the roof on the whole house was in need of complete replacement. I told the landlady that and she snorted that it was fine. I asked her how long it had been since it was replaced, and ... she didn't know ... lol ...

I lived there 12 years, though, in large part because finding good places to rent in the SF Bay Area can be very frustrating. The last bit of joy from her was in the last month or two of my tenancy. She hired a crack addict to paint the outside of the house - which had been so neglected it was just bare, weathered wood in many places. This guy broke into an upstairs window so he could plug in his heat gun to try to burn the rest of the paint off. Needless to say, my last electric bill was quite high. He also stole anything I left in the enclosed little back yard, piled hedge trimmings two feet deep in front of my garage and left for a few days, etc... Fortunately I had already closed on my first home and was spending the month fixing that up before I moved in. On the last day, after she started giving me attitude about my cleaning job (I left it cleaner than when I moved in) I told the landlady that she was a slumlord who didn't know how to take care of things and who shouldn't be allowed to own property. Boy, was she pissed, lol.

I also couldn't help but smile when another tenant (apt house on the back of the property) told me that the "painter" had fallen through the rotted roof of the garage - the same roof he had walked on to break into my home and steal electricity. He was apparently not hurt, but I still thought it was grand. Two birds with one stone. Landlady shown as criminally negligent, and painter given a small measure of punishment.
 
As long as we are talking about homes and real estate.
We have a friend who is a real estate agent. She said most people are pretty good about preparing their homes for sale. But the people she really can't stand are most of the "flippers".
On those HGTV shows where they show people flipping homes, notice that they usually do the job properly. She said in the real world it's a different story. Have mold? Just paint over it with Kilz. Rotted siding? Just cover it up with new wood. Slap on the cheapest paint you can find. Do anything you can the cheapest you can. New cabinets? Huh? Just paint the old ones and install granite tile counter tops and BOL SS appliances and people will not notice! The flippers then add $100K to the cost of the house. But in this real estate crunch, a lot of them are caught with these houses and can't sell them.
A lot of these "flipped" homes are time bombs waiting for the next owner to fall for the trap.

And what's with buyers these days? My brother went to sell his house about 2 years ago and had a difficult time. But he kept running into people coming in with offers that were OK, but they expected him to paint the house and all the rooms in the colors the buyers wanted, replace the carpet to the kind and color the buyers wanted. Install new appliances (SS) according to the buyers specs. Whatever happened to the days when you bought a home and decorated it yourself? Besides, he had installed new carpet and repainted the place. It looked good.
He told them no, and they dropped their offers. He finally got someone to buy it at the price he wanted. But it was a mess.
 
Tolivac:

That depends upon state laws. Again, in New York State you indeed "own" your own home regardless of the mortgage. New York State also has a rather long and some would say pro-home owner foreclosure laws. This means it takes longer for a bank or some such to foreclose upon property, giving the homeowner time to find the funds to pay up. Other state's I've heard it can be as little as 30 to 60 days, in NYS it takes about a year or to to get the ball rolling.

Owning versus renting:

Is a personal choice. Some people, despite the tax advantages simply are better off renting than owning. Homeownership requires serious committment, even if it is only a condo or some such apartment. Will agree that it is better to buy young (like most of our parent and grand-parents), and pay things off before say one reaches Social Security age.

Did you know?

The greatest asset for retirement for Americans is their home? Right now tons of seniors and such who bought their homes before the 1980's or in some cases 1960's are sitting pretty in most areas of the country. A house in say, Queens NY, that cost 25,000USD in 1965 is worth the better side of one-half millon or more today. That is where all these seniors get their retirement money. This is especially true if the homes are located in high cost and good areas like parts of Long Island, Westchester and such. Today people are so busy draining every cent of equity out of their homes via loans, they treat their homes like a credit card. That only works if the house will appreciate enough to sell at more than one owes, which we are seeing now is not always the case.

L.
 
Buying a house

We are in the process of buying a new house due to a job transfer. We would never sell or house in the market we are in if we didn't have to. We are ending up taking the company buy out, which is MUCH lower than what we paid for it just 2 years ago. There is not much that we can do, we have to move ASAP. There are not that many qualified buyers out there.

That being said, we are going into houses in the new area (semi-rural Wisconsin) and they are overpricing their homes, so we are coming in with low offers ($399K market price and we came in with $360K as a starting point). The seller's agent was disappointed since the sellers owe more than that on the house. Guess what? Not my problem! They have to move overseas due to a job transfer and they should feel lucky that we are making an offer on their property at this time of the season/year. Their house has been on the market for 4-5 months already.

Also, we are looking at another house that a builder has on the market. It's be up for 6--8 months completely finished and no buyers. They reduced the price from $469K to $429K and it's a 1900+ sq ft ranch with a walkout basement. The only way we will take it is if they finished the basement in a basic fashion(about 75% with 25% storage). They are balking at that. It would take them just a couple weeks with their own employees to do it.

I thought it was a buyers market out there but the houses we have come across and like, the people are firm on their price and I guess they don't really want to sell.
 
Everyone keeps talking about how so many sellers won't come down in price, even in this "buyers market". Bottom line is many sellers just have it stuck in their mind what their home is worth, and won't budge. Only deals I've seen are those in foreclosure, foreclosed or near enough to have a gun to their heads, so sellers (or the bank), has to do a deal. Then again lots of developers are being caught with excess stock they need to move, so they should want to do a deal. Though it really puts them in a bind for some cases. Many people who bought in a development and paid top price, are quite upset, and rightfully so when the same homes in their area are now going for 25% or more less to get them sold. I'd be MAD as hell, and looking for someone to hang if I paid $450K for my house and some family next door swans in for $200K.

L.
 
I totally understand that thinking Laundress. I feel so bad that our home is not selling for near what we paid for it (and we can't get a buyer either-that's a huge problem!). I wish we didn't have to sell but there is not anything that can be done about it.

We did see a foreclosed property but oh my, there was at least $50-60K of work that needed to be done before it was livable. Needed a whole new kitchen, all new carpet in the upstairs and 3 of the 4 bathrooms needed full remodel, and a new garage door. The sad thing is that this house was only 3 years old. The house was demolished by previous owners. All appliances broken (rocks in the dishwasher), kitchen cabinets with holes, walls with holes, huge scratches and cracks in the hardwood floors, FILTHY everything, etc. The bank was still asking $391K for it, but I am sure that they will end up taking a lot less. We just don't have the time it would take to make it ready to live in.
 
Foreclosed homes being trashed by previous occupants, sadly is not new and a very frequent occurance. Has been reported on the news and such. Guess people have to take their fustration out some where, and since murder and arson are felonies. *LOL*

The double whammy in this "crisis" is that getting a mortgage has tightened up! If one is self employed or a business owner, or anyone else without proper documents, getting a mortgage is damn hard if not difficult. Even those with documents, good credit including scores over 700 are having problems. Banks and brokers are going so far up in their checks, they might as well look for polyps. *LOL* This is hurting the market because those who can afford to do a deal are being pushed out.
 
I guess those previous owners were not too happy about being foreclosed and evicted. Still, they should face charges for the vandalism they committed on what was probably a pristine home. How sad.

When I bought this place, a realtor wanted me to look at another home in the hills. The current owner was in the process of being evicted due to foreclosure. I passed on the chance - I just didn't want to deal with the drama. Plus the home was perched on the side of a ravine - and that is earthquake/landslide/forest fire country. I bought in the flatlands instead and have not regretted that... except on those occasions when I crave a bay view. Then I can just drive up to a turnout in the hills and soak it in all I want ;-).

Re: home as an asset. Yes, I suppose that is true. For me it's sort of a safety net - if I run out of funds in retirement I would consider a reverse mortgage. But I'm trying to avoid that scenario. I don't want to have finally paid off the mortgage and then turn around and put the home back into hock ;-). Plus, although I plan on making this my last residence, there's always the possibility that I could sell this place and move to a more peaceful rural (cheaper) locale for my golden years.
 
I still have mixed feelings about trying to buy a home-One time while playing around with one of those "mortgage calaculators" on the computer-you will find if you pay the full 30yr term of a 30yr mortage-depending on the interest-what you pay in interest could be more than twice to four times the value of the home.But I do like the possiblity of having the place and being able to do with it what you want.I kinda made the mistake of buying a 30+ year old place that needs much work.At present don't have the time or money to do it.Its difficult when you do the shift work.At the same time trying to live in an apartment working mids is impossible.I have tried-the LANDLORD made more racket than the other residents of the apartment house.I then moved to a house-mids was a lot easier to do.Next home will be a newer one that doesn't need as much work-then could keep up with it.That is kinda bad about homes being trashed by the previous householder during a foreclosure-the house then goes back to the possesion of the bank or lender.They try to auction or sell the place off to try to pay the balance of the loan.Many folks don't like lenders or banks these days-esp the big ones.I am sort of hoping the home I am in is the last I have to get.But jobs may be the determining factor-If your job goes south-then you have to move to another.
 
My understanding is in NY state you can own your own home, deed and all.

a)There would be a lien on it by the bank holding the mortgage.
b)There is also the possibility of a "mechanic's lien" which is placed by a tradesperson when owed money for working on your house.
c) Tax liens are liens placed by tax-collecting entites when one has not been up-to-date.

ETC.

Ownership includes not only the subject property but the level of the total bundle of rights included in the sale.

FEE SIMPLE estate- outright transfer of property and full bundle of rights. (no tenants or leases involved). ["Do with me what you will."]

LEASE FEE estate- The transfer of a property that has one or more lease encumbrances (and one or more tenants). It includes the right by the tenant to use a space for a fee. This, of course, reduces some the rights of the owner from the total pool of the bundle of rights.

LEASEHOLD estate- Generally the rights of the TENANT when a lease exisits. May include the value of the difference between contract (lease-stipulated) rent and market rent, which is value to the tenant in a sub-let situation. These rights are often transferable for a fee (by the tenant to another tenant).

With a condominium one owns a specific unit with a deed and common ares are shared deeded and shared as tenants-in-common. Condominiums may look like private homes, townhouses, apartments in a building or even a retail/commercial unit/store. It is a form of ownershp, not a physical type of structure. (In the same way "rented" could be any type of property). Fees are called "common charges", and tend to be minimal, as most of the time unit owners pay for their own heat and utlities.

Cooperatives are very common in NYC, (which did at one time not allow condominium ownership). Take an ordinary large aparmtment buildng (even with common utilities, such as heat and hot water) incorporate it as a corporate entity. Each unit owner then buys shares into the corporation which gives one the right to occupy an apartment. Income to the corporation is in the form of fees collected (from the tenants) which are called "maintenance fees" and include things such as fuel for heat, water, landscaping, snow removal, repairs, salaries and often electricity when purhcased in bulk (not individually metered to tenants). No deed. Harder to get a mortgage. One does not technically own real property. Due to uderlying mortgage or land-lease, maintenance payments are often quite high.

Of course the price of real-estate is all about supply and demand which hinges upon location, and amenities and attraction therein. Undeveloped land "in the middle of nowhere" also serves to keep prices low. Here in my area most of the prmary and secondary sites (land) is gone and it's now tertiary sites that are undeveloped. To get a prime site you generally have to buy an exisitng property and improvement and demolih it. (And you can't demolish it if landmarked). The process does get pricey.
 
sudsshane

Thanks for the offer,If I ever decide to move to Florida I will look you up,When I bought this house I said it would be my last move,you really can't beat the weather here or the house prices. Mark
 
In some places, ie. Vancouver, there are/were two different types of condo ownership.. Leasehold and Strata title. IIRC Leasehold condo's were for a duration of 99 years therefore less expensive. Strata title was enduring.
 
Re buying a condo especially a new built you should be aware that initially the monthly maintenance fee is likely to be on the low side. A reflection that since the building and all of its systems are brand new and haven't cost anything in repairs or maintenance, yet. That will no doubt change as the building ages in a few years and money from the reserve funds gets spent on repairs requiring an increase in monthly maintenance fees from each of the owners. It can turn into a nightmare if the building was poorly constructed
 
Like with everything, you just have to do the math.....

Long story short, I looked at renting vs. buying. When I bought my current house in 2001, I didn’t have much money for a down; I had to do some creative financing. But what I came up with was this:

Based on the selling price, my “net” per month is around $930 a month. This includes mortgage payments, HOA fees, property taxes and insurance (but, you also have to take into account your mortgage insurance and property taxes are deductible—and now PMI). This was clearly less than anything I could possible rent for the same space.

Even when the average home price is well over $600k, here in Southern California, and if you look past the sizable down on one of these homes, your “net” monthly cost is still well below the price you’d be renting for the same amount of space. Don’t forget, as the housing prices skyrocketed, so did the rents. All in all, the cost difference has maintained itself.

So, for me, buying is always more desirable than renting. It just makes economic sense.
 
Of course, a lot depends on your lifestyle and temperament.

If you move around frequently, buying and selling can be a pain. If, like me, you tend to stay in one place for a long time, there's a definite benefit to buying. And with a fixed-rate mortgage, your principal and interest payments never go up.

I also want my home to be mine. Really mine. Not only do I want to have a title to it, but when I decided to tear out a closet in the uselessly laid-out upstairs kitchen in order to remodel it into a bar, I just did it.

When I wanted to divide a strangely proportioned bedroom downstairs into two studios, I didn't have to get permission.

When I wanted to cut holes in walls to install some oddball vintage record-playing equipment, nobody tried to stop me.

No landlord, Condo Association, or Home-Owners' Association has any say in what I do -- and that's the way I like it.

-kevin
 
~your “net” monthly cost is still well below the price you’d be renting for the same amount of space.

This is, of course, why outrageously high purchase prices are frequenlty overlooked. It's about the monthly costs.
Ditto why when taxes go up, prices fall, and when interest rates go up, home prices fall. Bottom line is what is it gonna cost me "mensualmente".

My house on Long Island has outrageously high taxes.
Same house in NYC is double the price, but FAR FAR FAR less in taxes. End result: the monthly payments would be comparable.

BTW, in NYC selling featurses are the neighborhood and for some folks, access to public transportation. On Long Island it's the school district.

So if in some states you don't technically own your home when there is a mortgage, by what mechanism/documents does all that work?
 
Home ownership is one of the most effecive ways to beat inflation, and is one of the best ways to get relatively guaranteed return-on-investment.

(Just don't buy next to a crack-den or a whore hosue--same thing!).
 

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