Renting vs. buying?

green monopoly house flickr woodleywonderworks cc

Jessica sends us a message:

I'd be curious to see what people thought of renting vs buying in Albany. Which one is cheaper, maybe a poll of how many rent vs buy?

The renting vs. buying question is complicated, in large part because each person and situation is different. And while it isn't necessarily a local question, local factors do play a big role: housing prices, rents, taxes, and so on.

There are a lot of savvy people here -- so, got some advice or ways to think about this question for Jessica? Please share!

Earlier on AOA:
+ Best Capital Region small town, village, or suburb for settling down?
+ Capital Region median home prices 2013
+ A good real estate agent for selling a house?
+ A good real estate agent?

photo: Flickr user woodleywonderworks (CC BY 2.0)


Buying definately worked out better for me. I bought a two family house near the Spectrum and rent out the top floor. My "share" of the mortgage and escrow amounts to about $300/month with the tenants paying the rest. Of course you have to have the upfront funds to buy the house and the maintenance expenses can add up, but in the long run it was totally worth it.

I just bought a house in Schenectady after three years of being a renter in Troy. I didn't have a problem with renting - our landlord dragged his feet at times about repairs but things eventually got taken care of - and I always viewed local taxes as a huge impediment to buying a house. But eventually my wife and I needed more space and we got lucky in that a friend of ours was trying to sell her house. We bought it for a very good price and with almost no hassle, since there was very little in the way of negotiation. The low price on the house helps mitigate the sting of the taxes (especially Schenectady taxes), but had things not turned out the way they did I don't know that we could have afforded to buy. There seem to be a lot more apartments around in this area compared to other places in which I've lived. I wonder if that's a side effect of the high taxes associated with homeownership in the Albany area.

The NY Times did a rent vs buy calculator not that long ago that takes into account most common factors and spits out the rent price to a similar house that would make it more appealing to buy vs rent.

It can be sort of hard to interpret and apply to a real life situation though. This is especially the case in the Albany area, imho, where it can be difficult to rent single family houses and the city is very split into areas where homes are mostly rented vs mostly owned so the concept of renting a 'similar home' to what you might buy doesn't make sense.

On the very genera comparison side the reasonable real estate prices and the high rental demand makes Albany a place where people in the buy vs rent debate get pushed to the side of buy quicker than in other places.

I have done both. 12 years ago I rented a two bedroom apartment in Guilderland, and then purchased the duplex when the landlord was ready to get out of the landlord-ing business. I am still living in my apartment, and now have a tenant living in the upstairs apartment.

Which is easier and cheaper? Depends on the kind of person you are. If you are the kind of person who just wants to pay someone a monthly amount and not have any home ownership responsibilities, then renting is the only thing you can do. You will have nothing to show for it in the end, but you won't lose anything along the journey. You will leave with exactly what you arrived with. You will have no say as to how the property is managed. There is a risk that the landlord can ask you to leave before you want to leave. You are only there on their good graces. They have the final say in everything.

Home ownership is more expensive. Because everything is dependent on you to take care of. You won't have rent to pay, but that should become your mortgage payment. If you think you have enough left to cover taxes and insurance, and all of your other bills, along with maintenance, then I would highly recommend you take the plunge and do it. Immediately, as long as you pay your bills on time, you have protection, and equity, which will mean something someday. You assume all the risk, but take the entire long as you have a pride of ownership inside you.

I was lucky in that I purchased the duplex and became the landlord. I definitely have less money in my pocket than the time I was renting the apartment. But I have chosen to update the building instead, and that costs money. My tenant is now paying for my mortgage payment every month so I don't have to think about that, however, the maintenance and upgrading issues have been very large. I accepted that responsibility as the owner, and even though I still don't have too many pennies to rub together, I own something that I am really proud of.

I was a renter with no intention of buying. But then I needed a three bedroom (new baby). The three bedroom apartments (in Bethlehem) that were at the level we were looking for were as expensive as a mortgage + taxes on a decent house. Decided to just go ahead and buy a house.

It has been more expensive with the upkeep and what not. But you know what? I am a restless tinkerer by nature so I actually enjoy all the little tasks and projects that go with homeownership. Gives me something to do.

If you have a decent, stable income and plan to be in the property for 8 or more years, I think buying is the way to go. I bought a house in Albany just last month. I'm paying more for the house in comparison to my apartment (mortgage, taxes, insurance, utilities combined), but it's not really apples to apples. The house is almost twice the square footage, and I have a two-car garage, a beautiful kitchen, outdoor space, and my own laundry, none of which I had when I rented. Plus it's quieter and of course you can make the place to your liking. And the whole thing about taxes? Well, renters pay property taxes too! You don't think landlords put taxes into the equation when they charge rent!? At least when you buy you can deduct the taxes. But really, I think it's kind of a fleeting question. Is going to Paris worth it financially? Well, who knows! There is an emotional and intrinsic value to everything as well.

We rented for two years when we first moved to the area. That gave us a good amount of time to explore the various neighborhoods in Albany and see where we fit best given our lifestyle, income, etc. While your rent money isn't going toward any kind of tangible investment, it's definitely "money well spent" if you consider the knowledge + comfort-level you've gained when it does come time to house hunt.

Overall, our mortgage is nearly identical to what our monthly rent was before. In the short-term, that doesn't mean much, but since we're planning on staying at least 5 years and our neighborhood and price are both appreciating in value, we'll almost definitely see a return on that investment. Monthly expenses are also probably a bit higher overall since there are other factors to take into account that renters don't need to worry about (upkeep, landscaping, etc). Then again, a lot of that upkeep is actually fun! and feels somewhat like a hobby since you're taking care of something you own!

Listen to a two-family and have one of the floors pay most of, if not all of, your mortgage. I rented for years until last Spring then bought a two-family. Yes, things need to be fixed but you have the opportunity to sell for a profit (well, in a few years) if you take care of it and have the time/energy/money. Plus, NO ONE gets to tell you what to do.

Let me try and boil it down: If you're settled and not going anywhere, buy a single family. If you're still restless and seeking greener pastures, rent. If you're still feeling both, buy a two-family.

I went from being a renter to being an owner/landlord and the rent that i collect from my tenants pays the mortgage, taxes and waterbill, with a few bucks left over for minor repairs. I purchased a house that needs a lot of work so I'm not at the "making money" phase of being a landlord, but it is nearing and what I'm doing is a great source of pride for me.

If you are paying $1,200 a month for a luxury apartment, you should be able to afford a house. It might not be your dream house, but most people do not purchase their dream house on the first go-around; its a starter house.

I hated the restrictions of being a renter and I much prefer owning my own home and renting out part of it to tenants. With the exception of times like when the boiler exploded over the winter, I much prefer being an owner/landlord to renting.

Despite high local taxes I've done way better owning than I ever did renting. Housing in Albany is really affordable. I think one of the reasons it's so hard to find family houses for RENT around here is because a mortgage payment would be far cheaper than rent. If I was renting my house instead of making mortgage payments it would probably be costing me another $800 per month.

I like the privacy and stability of ownership too. You have the freedom to have pets, redecorate/remodel, maintain landscaping and pick your appliances. You don't have to share a wall or floor with neighbors which is the thing I always hated the most about renting.

Of course, a mortgage can tie you down too. It can be difficult to sell in a town like Albany due it it being a busier city with lousy schools (ask me how I know!). Overall, though, despite a couple of hurdles, I'd take home ownership over renting any day of the week.

If you have the start-up capital for a down payment and don't mind being responsible for absolutely everything, then buy.

If you never want to mow yard/shovel a driveway or replace a furnace/roof, rent.

either way- get insurance.

Tough question for me. I have been a homeowner for over 10 years and cannot answer that outright. As much as owning a home has been great to us, I think home ownership is not for everyone. There are lots of responsibilities came with being a homeowner. If you enjoy doing them, great. If you don't like to do them, you may need to set aside a budget to hire someone to take care of them. My biggest issue with buying my first home was taking out a loan. Being 15 or 30 years loan, it is a long term commitment. I just don't like borrowing money. Having said that, I am glad we took the risk and bought the first home. It has been great. Truly, no one tell you what to do to your own house (well, mostly anyway -- there are certain kinds of neighbors who will), and having a garage to park your car in winter is great.

Make sure you know the full cost you can afford (mortgage, tax, insurance, utilities, maintenance, etc.). Then, budget the price of your home from that number. Look around for a home that you like. If you fall in love with one that you can afford, do it. I love the idea of renting out part of your home too. If you can do that, it's a great way to build your assets. More work though. Just make sure you know what you get yourself into, and you will be fine.

As long as you plan to stay a while, buying is always cheaper. Especially in this part of the country, rents are outsized compared to the price of a house. People can complain about property taxes, but those are built into your rent anyway. I'm happy that I never again have to deal with rent payments that increase every year. A mortgage payment is always the same, unless you get some idiotic adjusting motgage. My mortgage payment is less than my rent was when I moved in 2008, and my house is 3 times larger than the rental apartment.

And if you save up enough, you can pay it off early and never have another monthly housing bill again. We bought our house in 2009 and I plan to pay it off in 2017.

I'm the owner that sold to Frank and his wife (comment above). I'm a renter now. I was over the responsibility of upkeep and maintenance, and since it's just me, I was happy to down-size and pay someone else to handle those things. Financially, if you can do it without being house-poor, I think buying makes more sense. But lifestyle has to be a consideration as well.

Renting is a great way to put extra money away, without being responsible for any of the risk that goes along with ownership (repairs, taxes, severe weather damage, ect). I think that in this economy, it doesn't hurt to make cutbacks if it helps you save money over the long run. I don't mind living in a slightly smaller place if it means I have a healthy savings and retirement account. Other small cutbacks that can add up big?
1. Review your car insurance regularly, the big guys like geico and esurance change their pricing every year. I pay $25/month with Insurance Panda and have friends who pay less.
2. Pack a bag lunch most days. Save money by eating out less in general.
3. Don't waste money in bars. They are the biggest frivolous expense in a lot of lives.
4. Get rid of financial advisors who do not bring you any value. The 1% a year they cost adds up to enormous sums over a lifetime.
5. Don't be above using coupons.
6. Do what Suzey Orman recommends and trade in expensive whole life policies for Term life. Mine from Life Ant costs $19 a month and I can sleep at night knowing my family is secure if anything happens to me.
7. Drive slower. You can increase fuel efficiency 20% by driving slightly less aggressive, and slowing down 5-10 mph on highways.

With simple changes you can probably save about 25% a year, without big lifestyle sacrifices. Just look hard.

I'm currently renting at $825/mo which includes everything (heat/hotwater/electric/etc) except for internet.

It's a nice space (two bedrooms) with parking and a big yard.

Having zero responsibilities regarding flooding, insects, entropy, roofs, driveways, hot water heaters, pluming, etc. leaves me feeling pretty happy - not sure why the stresses of home ownership seem worth the potential financial reward.

If you are even thinking about buying, please attend FREE Homebuyer 101. Very popular. Offered monthly. Get smart about homeownership in a non sales environment. Save money and find out if you qualify for downpayment assistance. Credit repair. Also check out Secrets of Successful Landlords before you decide to buy a 2 family. (We don't want to see you in our foreclosure prevention programs!) Register at the AHP Homeownership Center 434-1730 or on the website.

Pros and cons from a quality of life perspective. Generally, the financial advantage goes to renting for shorter periods 1-5 years and owning if you are prepared to make a longer commitment(5 plus years).

My husband and I, like many of the folks above, bought a duplex. There was no other way we could afford to buy and have me go down to part time hours once I had a baby. Despite the hassles, it has been well worth it for us, and we just put an offer on a second duplex today. It's not for everyone, but we took a landlording class, read the books, found a good lawyer, and carefully screen our tenants. Our tenant pays all but $350 of our payment each month. Cheaper than rent, plus we get to keep the equity. Sign me up! :)

NYTimes calculator was more user-friendly before their new version. Try Trulia's:

I'm under contract for a 4-family in Troy where I can live not only for free, but with extra income. On getting paid to live for free:

With many single- or multi-families in or around Albany going for less than $175k, some for less than $100k, the breakeven horizon is 1-2yrs

While this goes more to geography, rather than rent vs. own, one thing to keep in mind in the whole puzzle is the "car tax." While not the rule, renters typically live in more urban environments closer to transit, whereas most families decide to buy a home in the suburbs (a trend that is starting to change, thankfully) and become shackled to one if not two cars. I was actually the reverse, renting in the suburbs and spending close to $8000 a year on average in car insurance, gas, repairs, etc. Once buying a house in the city of Albany, I've saved a tremendous amount of money.

I still have my car, but rarely use it and easily save $5k or more a year. I often hear that the suburbs are cheaper in terms of taxes or you can get more home for your buck, but then folks discount the "car tax" and I find my peers paying far more in housing/renting alongside their car combined, than if they had lived closer to work or in a transit friendly area. Just another thing to factor in :)

Condos/Townhouses are not very popular in Albany but there are a few nice buildings around. For me, I wanted the equity that comes with owning a home but without the maintenance. I rented for a few years before buying and hated throwing my money away and having no control over the space... I pay less for my mortgage + association fees than the rent on a similar apartment in the same neighborhood (assuming utilities are not included in either scenario).

There are downsides of course... close neighbors, limited space, etc. But it's pretty convenient! (Click my name for AOA's profile on my house from last year).

When looking at one's finances before buying a house, people often try to figure out how much house they can afford.

Personally, I think this is the cause of many problems.

Housing is one of the biggest expenses anyone will have. To make sure you have more pennies to rub together, one should really try to buy *less* house than they can afford. And ideally you should try to do that on a 15 year mortgage.

If you're done paying off the house before the kids go to college, you'll be well ahead of the game. And don't forget to put away for retirement too.

1) I think people need to think about the interest rate piece of the equation a little differently, especially if they do not see the home as a long term holding or do not predict stability in their income. People think that "rates are so low that I have to get in now." But the side effect of lower interest rates is that it has propped up home prices perhaps a little artificially. People look at a monthly payment that is within budget and that tends to be the end the analysis. However, we are in a world where interest rates policy is being driven by a poor economy. If monetary policy changes after you buy at the top of the market, you might be looking at a significant equity hit if rates correct upward and you are forced to sell. Thus, it might be better to come in lower on the budget if you only see this as a 5 to 10 year holding.

2) Be prepared to tap out of a bidding war. Analyze what you would be able to rent the property for if you had to. If your monthly mortgage, tax, and home improvement saving. etc, carry exceeds that amount, you are paying too much.

3) I loved owning a condo, until I had to sell it when I moved to a new state. Condos always have a much smaller market audience, unless you are living in a place like Manhattan. People are also looking for turn key places with state of the art fixtures and amenities. If your condo needs work, or doesn't have things like central air or covered parking, you are going to take a hit on the secondary market. Condo owners also have to investigate how their dues are managed. Dues need to be structured in order to plan for major capital expenditures, such as the roof. Poorly run associations wind up assessing owners huge amounts at the time of the capital expense, instead of scaling the dues and saving over a longer time period. Part of the issue here is that other condo neighbors might not appreciate the fact that dues need to increase. In addition to the need to raise capital for major expenditures, all those chores you used to do around the house are now monetized because you are hiring someone to sweep the floors and do the landscaping and painting of hallways. The previous owner of my condo had to pay off a $25,000 assessment for a capital improvement before he sold it to me. Ouch!

I've considered buying a home, but personally i find renting to be the best option for myself. I'd rather invest my money in order to save for retirement instead of "investing" in a home. Too many people rather have things now and try and compete with the Jones instead of being financially responsible.

I would sit down with a professional and determine if buying a home is right for you, instead of asking strangers what they think. Everyone is in different situations and have different priorities, learn your options then decide.

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