[CmdllbF11]

Originally Posted by BigK

Again, I don't think I can agree with these "lifestyle" choices you outlined because I can make an counter-argument on every one of them:

1. I'd like the freedom to move at a moment's notice.
Tenants sign rental agreements with terms, in most cases we can't move freely without a big penalty. Homeowners on the other hand can decide whenever they want to move.

2. I don't want to waste my Saturday afternoon mowing the lawn.
Not likely an issue anywhere in the world but suburbs in America, we simply don't have lawns...

3. I don't want to worry about fixing the roof if it leaks.
This I agree, but again, I think usually your insurance takes care of that.

4. Etc.

As far as my rent goes, that's the downside of paying $2M for a property that doesn't really worth that much. But since I rent, it's not really my problem...

Nice and simple example here....

Mr A pays £2000 per month for a mortgage for a house that's worth, say, £400,000.

Mr B pays £2000 per month in rent for Mr Cs house that's worth £600,000.

In 25 years time, Mr A has paid a total of £600,000.

In 25 years time, Mr B has paid the same.

Over 25 years, the capital value of Mr A's home has increased to £980,000 (what inflation has done in UK over last 25 years).

Mr A has increased his wealth by £580,000 and has mortgage free home. He now pays nothing to live in his own house.

Mr B has has nothing apart from more £2000 per month payments to make (not allowing for inflation!) and a very happy Mr C who has over £1m in the bank thanks to Mr B paying Mr C's mortgage for 25 years.

Who is the saddest person 25 years down the line? Mr B!

The moral of the story? Owning property is financially AND lifestyle wise the better choice.

I thank you.

[Noggie]

Originally Posted by CmdllbF11

Nice and simple example here....

Mr A pays £2000 per month for a mortgage for a house that's worth, say, £400,000.

Mr B pays £2000 per month in rent for Mr Cs house that's worth £600,000.

In 25 years time, Mr A has paid a total of £600,000.

In 25 years time, Mr B has paid the same.

Over 25 years, the capital value of Mr A's home has increased to £980,000 (what inflation has done in UK over last 25 years).

Mr A has increased his wealth by £580,000 and has mortgage free home. He now pays nothing to live in his own house.

Mr B has has nothing apart from more £2000 per month payments to make (not allowing for inflation!) and a very happy Mr C who has over £1m in the bank thanks to Mr B paying Mr C's mortgage for 25 years.

Who is the saddest person 25 years down the line? Mr B!

The moral of the story? Owning property is financially AND lifestyle wise the better choice.

I thank you.

Totally agree.

Now this does depend a lot on the market. A lot of people lost a lot of money in the wake of the 2009 financial crash when they were forced to sell their home.
But usually the long term investment in property is profitable.

i was lucky, I bought an apartment in 04, sold it in 11, by then it had doubled, this allowed me to buy a house.
The market has not had the same increase since I got my house, but regardles, I expect it to increase over the next few years.
In 20 year it is paid for, and by then it is probably worth double or more of what I paid for it.

Buying and not renting a place to live is the best financial option.
A car, well, that is just a consumer toy

[Sum1.]

Fellas, not one of you/us needs to be driving such an expensive vehicle. It's just what we want because we can. Regardless of income, we're all guilty of indulgence. Want it. Don't need it.
Move on.

[noixd]

Originally Posted by BigK

If Mr A took a £400,000 mortgage, at the end of the 25 years, he’ll most likely have paid £685,000 (not sure about the interest rate in UK, so I assumed 5%) for the entire amount. He would also have paid personal property tax in 25 years for about £200,000 (assuming 2% rate), insurance £37,500 (avg £1500 a year). And let’s say Mr. A repaired his house 15 times (big and small) during the 25 years that have cost him £7500 (£500 deductible each time). Plus misc. maintenance fees such as lawn, trash and recycle (£100/mo) which totals to £30,000 in 25 years. Sum them up, Mr A would have paid £960,000 over 25 years.

I checked the inflation rate for the past 25 years in UK which averages about 4%, and given the performance of the UK housing market I’m not confident it will always keep up with the inflation. But for comparison sake let’s say Mr A’s house is worth £980,000 at that time. He would’ve made £20,000. Not so optimistic like you described.

Mr B pays £2000/mo in rent, his rent goes up 3% every year. He would’ve paid about £850,000 at the end of 25 years. And let’s say that he have paid £50,000 over that time for fees and insurance. He would’ve paid a total of £900,000 in 25 years.

So according to your analogy, after 25 years, Mr A would’ve made £20,000 more than Mr B in a best case scenario. That’s £800 a year, not sure if I would call that a drastic change. And given that Mr B paid £60,000 less out of pocket than Mr A, I would say it's fair to call the benefit a wash.

Mr C is out of the equation because he has to have at least two houses in order to rent one out, in that case I would assume Mr C is much better off financially to start with.

I'm not trying to say owning is bad. I just don't think renting is as negative as you guys made it sound like.

BigD your scenario tells a story about profit. Like I said you shouldn't be buying a home for pure profit. The concept you quite don't understand is that Mr. A recovered everything back from their mortgage and plus 20k. Mr. B didn't get jack shiet back. So when Mr. A decides to buy another home, he has 980k in the bank and can pay it all off. With what equity does Mr. B have? Stop trying to beat the bush. Your fictitious stories are of no eloquence nor logic.

"C'mon MENG"

[Noggie]

Originally Posted by BigK

If Mr A took a £400,000 mortgage, at the end of the 25 years, he’ll most likely have paid £685,000 (not sure about the interest rate in UK, so I assumed 5%) for the entire amount. He would also have paid personal property tax in 25 years for about £200,000 (assuming 2% rate), insurance £37,500 (avg £1500 a year). And let’s say Mr. A repaired his house 15 times (big and small) during the 25 years that have cost him £7500 (£500 deductible each time). Plus misc. maintenance fees such as lawn, trash and recycle (£100/mo) which totals to £30,000 in 25 years. Sum them up, Mr A would have paid £960,000 over 25 years.

I checked the inflation rate for the past 25 years in UK which averages about 4%, and given the performance of the UK housing market I’m not confident it will always keep up with the inflation. But for comparison sake let’s say Mr A’s house is worth £980,000 at that time. He would’ve made £20,000. Not so optimistic like you described.

Mr B pays £2000/mo in rent, his rent goes up 3% every year. He would’ve paid about £850,000 at the end of 25 years. And let’s say that he have paid £50,000 over that time for fees and insurance. He would’ve paid a total of £900,000 in 25 years.

So according to your analogy, after 25 years, Mr A would’ve made £20,000 more than Mr B in a best case scenario. That’s £800 a year, not sure if I would call that a drastic change. And given that Mr B paid £60,000 less out of pocket than Mr A, I would say it's fair to call the benefit a wash.

Mr C is out of the equation because he has to have at least two houses in order to rent one out, in that case I would assume Mr C is much better off financially to start with.

I'm not trying to say owning is bad. I just don't think renting is as negative as you guys made it sound like.

Think you are forgetting a small detail.
Mr A still has a house worth £980.000, Mr B has.......nothing.

Mr. A can sell his house, rent a smaller apartment and enjoy a nice retirement.
Mr. B has to continue to rent and has no extra retirement money.

Mr. C has two houses to sell an can do what ever he wants.

And that is why owning property is better than renting, property always has a value, renting a place to stay just fills up someone elses "savings account".
You cant look at cost alone, you also has to look at the assets.
All the other expenses you mention are covered by the rent you pay, so in a way you are paying those things every month.

In my case I dont pay property tax, because we don't have that, and even the places that do it's just £1000 a year on average.
Also, I get a 28% tax break on my mortgage interest, which means I pay less tax than someone who is renting (same income assumed).

So less tax, paying on something you will eventually own and that is not depreciating.
Sorry, I dont see any disadvantage to owning here, quite the oposite in fact.

[SouthernBoy]

This thread is out of control! Make it stop!

[BigK]

Sorry, didn't mean to offend anyone here. Just giving my .02. Let's just end it right here.

[VWtoBMW]

Originally Posted by SouthernBoy

This thread is out of control! Make it stop!

+1

Dumbest post ever.

[SpineDoc]

Originally Posted by CmdllbF11

Nice and simple example here....

Mr A pays £2000 per month for a mortgage for a house that's worth, say, £400,000.

Mr B pays £2000 per month in rent for Mr Cs house that's worth £600,000.

In 25 years time, Mr A has paid a total of £600,000.

In 25 years time, Mr B has paid the same.

Over 25 years, the capital value of Mr A's home has increased to £980,000 (what inflation has done in UK over last 25 years).

Mr A has increased his wealth by £580,000 and has mortgage free home. He now pays nothing to live in his own house.

Mr B has has nothing apart from more £2000 per month payments to make (not allowing for inflation!) and a very happy Mr C who has over £1m in the bank thanks to Mr B paying Mr C's mortgage for 25 years.

Who is the saddest person 25 years down the line? Mr B!

The moral of the story? Owning property is financially AND lifestyle wise the better choice.

I thank you.

I pick Mr. D in the library with the candlestick. Wait, what?

[AppStoreMoney]

Originally Posted by ezmaass

My own personal rule of thumb has been that a car shouldn't be worth more than 25%, or 30% absolute max, of my annual income. I say "personal" rule because everyone will have their own priorities, and I wanted to make sure I was prioritizing a home, retirement savings, college savings for children, etc (not important to everyone).

Those percentage rules don't make much sense. Let say you moved from California to Texas. In California, you had a $1million home, but in Texas you can buy an equivalent home for $500k. If your salary didn't change at all, and you just cut your mortgage in half, all of the sudden you can spend a LOT more for your car payment.

This is a realistic example btw, except I had the opposite happen to me. For family reasons, I moved from Texas into a part of the country where houses cost 3 times as much, without a significant increase in compensation. Unless I get more money, I don't see how I can afford another BMW.

I would argue, where you live has a lot more to do with how much you can spend on your car than your salary. You might be able to purchase a car that's worth 50% of your salary in Texas... And in another state, you might only be able to spend 5% of your salary. And it's possible that the person in Texas is putting more money aside for retirement...even with that large car payment. While the person in California, having the same salary, might not be able to put any money towards retirement.

[SonicEndeavor]

There are many variables in peoples financial situations and until one knows another persons situation completely, any advice on how they should invest their money should be considered academic.
Case in point, a friend was told by several people "buy a home, live the American dream". He decided instead to put the money into his business and it paid off FAR greater than buying a home would have, even here in California.
I've done very well with my real estate purchases, but many homeowners in Detroit for example certainly haven't, nor have the people who bought homes based on others advice back in 2007 then went upside down or even worse, were laid off when the US economy and housing market tanked.
Many of the points in these posts provide sound advice for certain situations, but again there are too many financial variables to understand and consider before emphatically stating that one approach is better than the other.

[EmArAsOnS]

Originally Posted by VWtoBMW

+1

Dumbest post ever.

+zillion.

[ARKONE]

I think income is a terrible way to look at whether you can afford a car. It should be based on your net worth....