Why You Shouldn't Buy a Home

I'm reviewing the pros and cons of renting an apartment vs buying a home.




I just got hit with $8k in property tax and am now thinking about renting an apartment.

Buying a home does feel like a giant scam. I think the guy in the video is onto something.

The Suburbs may very well be a scam.

Everyone likes to argue differently, but I think an apartment maybe a better option for many people.

Why chuck money away in rent. Chucking you well earned cash into someone else's pocket. If you can, you should buy. That's my advice.

Also, if you buy, or rent, then for God's sake read the small print and get legal advice. In that way you don't get surprises.

originally posted by: paraphi
Why chuck money away in rent. Chucking you well earned cash into someone else's pocket. If you can, you should buy. That's my advice.

You clearly haven't seen the movie Money Pit.

a Steven Spielberg production I might add.

8000 Dollar sounds like an incredibly High tax rate per annum. There are plenty of nice places with more reasonable tax rates. Also and looking to buy a house it is sometimes better to buy a two-family so you can rent out and help pay for the expenses

a reply to: DD2029

buying a home is the single best investment a person can make. i didn't even bother to watch the video as i was a renter for 30 years and a homeowner now. i am completely out of debt, the money i was making in rent then house payments now goes to a savings account for emergency's /repairs on my home. taxes on my home is about equal to 2 months rent i was paying before. only a fool would think that renting is better then buying.

You're paying a mortgage either way.

When you buy a house, you pay the bank for the house and eventually it's yours.

When you rent a house, you pay the landlords mortgage plus profit and he eventually owns the house.

I would never buy a house in a large city. The prices are too inflated. When you can live 30-45 mins away, and pay a third of the cost to own a home with a large yard and all the amenities, it seems like a no brainer to live in a small town.

a reply to: DD2029

rent. You will be helping the economy, and funding a nice person's retirement. Property owners love renters. Just be sure you take good care of the property and don't be a douche.

a reply to: DD2029

Owning a home requires a lot of upkeep (from insurance, to taxes, to payments, to interest, to labor), and it also really restricts your mobility and freedom if it is owner-occupied.

At the same time, I've seen many people make wise real estate investments where they either resold the property for a property, or rented it out to others for another type of income stream, but the big thing is what will work best for you as an individual or family. Owning a home might be ideal for some but a bad decision for many others.

A home is many things... An investment, a scam, a money pit, a personal getaway.

A home is never worth what you pay for it. Look at the property tax bill, and it will list the SEV (State Equalized value). Double that amount, and that's what the home is actually worth. Notice how that amount is tens of thousands of dollars LOWER than what you aid for the home? Thank the "housing market" for that. (or as I like to call it, the B.S. house flipper, bank manipulated housing market).

Also, they are money pits. That 4.00% interest rate seems pretty good, until you do the math over the course of the average mortgage length, and that 4.00 APR turns into 4x the amount that you initially borrowed through the mortgage company. Not to mention you are constantly doing repairs to it, on top of paying your property taxes, because even if you buy it, it's not really yours . Lots of money spent.... Even after the mortgage is paid, you're still paying rent to the city.

However, you can always sell the home.

Apartments on the other hand, are even bigger money pits with many restrictions.

Most importantly, you are treated as a 2nd class citizen when renting. You have no property rights, many restrictions, certain additional rules to follow through threat of extortion (fines, violations, eviction and suing). You can be kicked out at any time for any reason, your monthly rent can go up at any time for no reason.

Also, you are often restricted from doing your own repairs, having to call the office or landlord to get things fixed (which can take days, weeks, even months of fighting to get done.

You can never sell an apartment, you can only rent... so they would also be considered a money pit in that respect.

Personally, I would rather have property rights and privacy over an apartment life, regardless of price

Buying a home is the best investment you can make. Most people's net worth is tied into their home. Generally, real estate is also a very stable investment.

With that said, everyone should not be a homeowner. Owning a home is a SIGNIFICANT financial commitment. You also have to factor in maintenance, taxes, and up keep of a home.

The reason home ownership is valued is that people who own their homes tend to be more invested in their communities. They take better care of their properties and surrounding areas. You will rarely see ghettos where people own their homes.

Renting is best if you are transient or not yet stable financially / career wise. The transaction costs to sell can be high and if you have not been in the property long enough, there is no guarantee you will be able to sell at a high enough price to make it worth it. I generally advise people they shouldn't buy unless they have at least a five year horizon.

High property taxes are an entirely separate issue. I live in an area where $10k property tax bills are the norm. Larger homes can have $25k bills. The money is paying for schools, parks, etc. In some ways it is worth it, but the bills are starting to put a lot of pressure on people financially though.

I've been originating mortgages for 15 years....

originally posted by: dothedew
A home is many things... An investment, a scam, a money pit, a personal getaway.

A home is never worth what you pay for it. Look at the property tax bill, and it will list the SEV (State Equalized value). Double that amount, and that's what the home is actually worth. Notice how that amount is tens of thousands of dollars LOWER than what you aid for the home? Thank the "housing market" for that. (or as I like to call it, the B.S. house flipper, bank manipulated housing market).

Also, they are money pits. That 4.00% interest rate seems pretty good, until you do the math over the course of the average mortgage length, and that 4.00 APR turns into 4x the amount that you initially borrowed through the mortgage company. Not to mention you are constantly doing repairs to it, on top of paying your property taxes, because even if you buy it, it's not really yours

. Lots of money spent.... Even after the mortgage is paid, you're still paying rent to the city.

The average mortgage is only 7 years old... Most people don't keep a mortgage for 30 years. People typically refinance or move. If you are going to be in the home for a long time, you should try get a shorter amortization loan like a 15 year fixed. You will pay substantially less in interest over the life of the loan. The downside is the payment is larger, but most of it is going towards principal instead of interest.

On the other hand, with rates in the 4's, you could make an argument that you can get a higher return investing the money elsewhere.

All loans with interest will have you paying back a lot the longer you keep the loan. Cars... Student Loans... why else would a bank lend you money if they can't make money? Would you lend someone you didn't know hundreds of thousands of dollars and not expect to earn interest?

a reply to: DD2029

You must be a landlord.

For what its worth: I paid rent for eight years once, paid off a total strangers mortgage. Then he died and his wife sold the place. I got the boot.

Paying rent sucks, theres nothing to show for it. Good luck getting any equity along with the lease 'con' tract. Might as well expect shares of stock from the corporation you work for, or bonus, retirement, pension, golden parachute, healthcare, benefits, tenure, seniority, even a friggin cost of living wage increase.

Propagandistas need not respond.

Yes please rent my house while I live in the Van. and help me buy a condo in the Keys that I will eventually rent to someone else and eventually sell when the property value increases. It's an established pattern....

originally posted by: superman2012
I would never buy a house in a large city. The prices are too inflated. When you can live 30-45 mins away, and pay a third of the cost to own a home with a large yard and all the amenities, it seems like a no brainer to live in a small town.

Homes in the city cost more because far more people rather live in a city than a far out suburb. Simple supply and demand. Many people rather have walkable neighborhoods with shops, restaurants, etc right at their door step instead of having to pile into a car and drive 20 minutes just go to the grocery store.

Not saying one is better than the other, but home prices reflect the values that people place on them. location. location. location. This why a 1200 sqft condo in downtown chicago may set you back $650,000 while for that same price in a suburb 50 miles away you can get a 4000 sqft house on 5 acres.

All I'm saying is the game has changed in 2018.

depending on your children, financial situation, job, time, and all the other variables you can think of...

renting a luxury apartment at $1500-$1800 a month vs owning a $300k house makes you wonder...

if you own the house... Why not sell and put the money (300k) to work in other places? 5% interest rate alone just about covers the rent of an apartment.

Not to mention all the time and headaches you save dealing with the house.



Move around for 5-10 years... get 3 or 4 different apartments... settle down in a house when you get old... in your 50s.

a reply to: DD2029

Those apartment owners also pay taxes. Even higher taxes. They pass it on to you. On top of their mortgage. And then you pay even more for updating the house etc...

And then they actually own it while you pay for it.

a reply to: DD2029

Renting or buying, you still pay a mortgage and property taxes. No way to get around it.

Other elements of the discussion depend on personal preference and/or circumstances but not those two.

I fully appreciate someone's desire to have no home owning responsibilities. To the same degree, I fully appreciate someone's desire to own a home and make it theirs.

originally posted by: DD2029
All I'm saying is the game has changed in 2018.

depending on your children, financial situation, job, time, and all the other variables you can think of...

renting a luxury apartment at $1500-$1800 a month vs owning a $300k house makes you wonder...

if you own the house... Why not sell and put the money (300k) to work in other places? 5% interest rate alone just about covers the rent of an apartment.

Not to mention all the time and headaches you save dealing with the house.



Move around for 5-10 years... get 3 or 4 different apartments... settle down in a house when you get old... in your 50s.

Because the vast majority of people wind up getting married and having kids. With kids, you need more space and good schools. Neither of these are typically available when renting apartments.

A house is a store of wealth. It is a stable and in most cases, appreciating asset. When you pay the mortgage off, you have that equity and when you sell it is real money.

I bought my first place in 2003. I sold it two years later and made $80,000 on the sale. here is the kicker... I put ZERO down when I did that. If I had chosen to rent, I would have pissed away two years of rent and had nothing to show for it.

My current home hasn't appreciated a ton, but I have been in it 13 years now. It will be paid off entirely in about another 10 years, maybe sooner. The house is worth about $600,000. That is real net worth. When I sell that is money that will help set my kids up for a better opportunities than I had. I could also do a reverse mortgage and live off that equity in retirement.

Waiting to buy a home in your 50s isn't a bright idea as most people are nearing retirement. The goal then is to reduce your housing expense, not increase it. By that time, most folks are nearing having their mortgages paid off.

a reply to: DD2029

Unless you're paying into a number of TFSAs and investing your income aggressively and wisely then renting is not 'worse' but not a solid investment compared to buying into a house.

The only thing that I find better in a renting situation is that you aren't in massive debt and are not obliged to stay put for long periods of time, you are essentially free to do what you want with your money and use it where ever you want. I guess it's a sort of not putting your eggs into one basket. There are risks involved in owning a house and massive over head and maintenance. Renting, you just pay some guy to live in a space, if anything goes wrong you just up and move or get the land lord to fix the issue.