tag:blogger.com,1999:blog-37697766.post3573350467370291223..comments2023-10-01T07:59:30.295-07:00Comments on Grad Money Matters: Rent Vs. Own: A Look at Our Expenditure Then, and Our Expenditure NowUnknownnoreply@blogger.comBlogger11125tag:blogger.com,1999:blog-37697766.post-74083310296929996482007-07-20T20:14:00.000-07:002007-07-20T20:14:00.000-07:00Gates: Wow, that's got to be the longest comment I...Gates: Wow, that's got to be the longest comment I have ever received. Thanks for taking the time!<BR/><BR/>You make some very good points. We are relatively new home owners and at the time I wrote that article, we really did not have any repair costs. However, we recently had hail in our area, and a lot of houses in our neighborhood are getting their roofs fixed. While we have not had any visible damage, the inspector for the company doing our neighbors roof looked at our roof and said we need to get it replaced :( Our insurance will cover most of cost but we still need to pay a deductible. And at 1% the house value, the deductible is quite steep. So you are right, the maintenance cost of home ownership is quite steep.<BR/><BR/>As for transportation, in my town public transportation is almost non-existent. So irrespective of whether we rent or own, we need a personal vehicle.<BR/><BR/>And for painting, the apartment lease clearly states that we are not allowed to "modify" the look of the dwelling in any way. I suppose we could do what you suggested - paint it now to what we like, but re-paint it before we leave. But for me it hardly seems worth the effort since the longest we have stayed in the same apartment is around two years. Every time the lease expires, the apartment people jack up the rent. Basically how it works is, when we sign a lease, the management offers a bunch of incentives which when pro-rated will reduce the rent quite a bit. But when the lease is up and we try to renew it, they cannot offer us the same specials and the rent goes up. So every 1 or 2 years, we have moved. If we could stay in the same place for 10 years though, I do see your point.<BR/><BR/>Overall, what you say is right. Home ownership has its costs and before jumping into it, one *should* be well aware of what he/she is getting into!ispfhttps://www.blogger.com/profile/00928097981905476759noreply@blogger.comtag:blogger.com,1999:blog-37697766.post-34466508981780593482007-07-20T14:55:00.000-07:002007-07-20T14:55:00.000-07:00Hey, just found this via the Carnival! (Campaign a...Hey, just found this via the Carnival! (Campaign against myths part 4)<BR/><BR/>The fiancé and I have had several conversations about this home owner thing. We're both agreed on the rental life right, but I actually have several number-crunching spreadsheets about all of this and many conversations with aunts and uncles :)<BR/><BR/>Suffice to say though, on the "stuff you may have forgotten" is actually "long-term maintenance". And it may sound kind of odd, but if you're new home owners you probably haven't hit this point yet. There's going to a be time, and it's usually all at once, when "everything" seems to need replacement: the water heater will go, the paint will peel, the shingles will fall off, the fluorescent light holders will die, the AC unit will go, the fan in the bathroom just stop, etc.<BR/><BR/>You mention preventative maintenance elsewhere, but I'm actually talking about maintaining. Things like shingles and rugs and linoleum and water heaters and AC and appliances simply don't last forever. In fact, to remain competitive, many companies are selling stuff that simply won't last as long b/c it's cheaper to manufacture. This of course includes the guys making water heaters and AC and appliances.<BR/><BR/>So appliances that you "cannot live without" are likely only as good as the warranty they come with. What's the warranty on your $1800 of appliances? If they're only guaranteed for 5 years, then they're costing you 300+ / year.<BR/><BR/>Things like paint simply need to be redone every 5-10 years, shingles also seem to last in this range (depending on your climate) Rugs only last for so long and if you have kids the "rec" room carpet will quickly become the "wreck room" carpet. If the house needs 4 thousand dollars of paint (& labour) every decade that's another 400/year (plus all that other stuff)<BR/><BR/>This stuff is overhead just like taxes and utilities.<BR/><BR/>Another "forgotten" is transportation accessibility. I'm living in a major Canadian city and out here bus lines and shopping centres tend to cluster very close to rental units and apartments. Easy bus access and a grocery store (and everything else) across the street means that I don't "need" a car. Many homes in suburbia simply can't be run without a personal vehicle. Many have reasonable commuter access, but cannot leave the house after 6 without waiting an hour for the bus. The situation is aggravated if you don't have any public transportation access (live outside the city).<BR/><BR/>If you own a non-bus friendly home, you're pretty much stuck with car ownership as well. It's easy to write this off until the car breaks down and you <B>can't</B> get to work for an important meeting (or some similar crisis). It's really bad if a financial crisis strikes and you can't make the car payments (or the insurance). B/c it's not like you can just move, right?<BR/><BR/>And bad access means that you'll be driving your teen to and from the mall for their work shift.<BR/><BR/>I don't know if it's easy to measure the annual cost of this, but let's say that it's an attached cost on some homes or even a "lifestyle lock-in". The same goes for moving, moving for rentals is far cheaper than moving houses, b/c you have lots of overhead going around. So commitment to the "owning" lifestyle usually means that you're accepting extra overhead on your next move.<BR/><BR/>And what's this with not painting a rental? Why not? You can totally paint a rental you just have to paint it back before you leave. If you're renting instead of owning, you're planning to be there for a while, so painting once now and once again when you move out in 10 years is no different from painting your "own" home.Gates VPhttps://www.blogger.com/profile/13840555181094178187noreply@blogger.comtag:blogger.com,1999:blog-37697766.post-63535818140507039432007-05-28T09:49:00.000-07:002007-05-28T09:49:00.000-07:00Like few others pointed out here, in general ownin...Like few others pointed out here, in general owning a home is more expensive but it builds up your equity and if your home get appreciated in value, that's where your gain will be.Brian Parkhttps://www.blogger.com/profile/05039080578202011681noreply@blogger.comtag:blogger.com,1999:blog-37697766.post-18216477344399483662007-05-28T08:03:00.000-07:002007-05-28T08:03:00.000-07:00Debbie: Thanks! I don't know how I could forget th...Debbie: Thanks! I don't know how I could forget the appliances since we spent a *lot* of time in researching and picking them!!! Thankfully though, we did not have to do anything in terms of painting and remodeling! I have updated the post to include these. Thanks, again.ispfhttps://www.blogger.com/profile/00928097981905476759noreply@blogger.comtag:blogger.com,1999:blog-37697766.post-39745485826047067742007-05-27T21:52:00.000-07:002007-05-27T21:52:00.000-07:00One more thing--people are much more likely to spe...One more thing--people are much more likely to spending money on decorating a place they own than a place they rent. Besides the extra furniture you mentioned, there's also repainting, switching out the flooring, getting fancier countertops, etc.<BR/><BR/>And you didn't mention all the applicances. Most people have to buy their own refrigerator, washer, dryer, etc.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-37697766.post-53454711615293346732007-05-23T19:00:00.000-07:002007-05-23T19:00:00.000-07:00Cristopher: That's a pretty accurate analysis you ...Cristopher: That's a pretty accurate analysis you did... impressive!<BR/><BR/>About paying off mortgage early, I wrote about it <A HREF="http://gradmoneymatters.com/2007/05/why-do-some-people-prefer-to-pre-pay.html" REL="nofollow">here</A>. We do understand that we could do better, but we want to get out of the mortgage as soon as we can. I think the peace of mind and freedom it brings is well worth it (at least for us).ispfhttps://www.blogger.com/profile/00928097981905476759noreply@blogger.comtag:blogger.com,1999:blog-37697766.post-28420047945819431812007-05-23T09:00:00.000-07:002007-05-23T09:00:00.000-07:00Good review. Buying a home is a key to your long-...Good review. Buying a home is a key to your <A HREF="http://www.equityscout.com/real-estate-vs-stocks" REL="nofollow">long-term financial stability</A>, but now isn't always the right time to buy. A lot of new homeowners don't realize what they're getting into and end up in hot water. <BR/><BR/>The big reason to own a home is for <B>appreciation purposes.</B> But I'd also argue that leaving out your tax savings considerably undervalues your investment. <BR/><BR/>Based on the fact that you pay <B>$986</B> principal + interest per month at 5.125 percent it seems that your mortgage had an intial balance of around <B>$181 thousand.</B> If that's the case then you paid around $9,220 in interest over the first year of the loan. If you're in the 25% tax bracket then that's a savings of around <B>$2,305</B>. That's not chump change - that's enough to offset a lot of those other charges. <BR/><BR/>A second issue: being in a hurry to pay off that 5.125 thirty year mortgage isn't always the best use of your dollars. Paying off high interest credit cards: <B>good. </B> Paying off your low interest home mortgage which gives you a tax writeoff: <B>maybe you could do better. </B>Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-37697766.post-11674598123599578942007-05-22T21:28:00.000-07:002007-05-22T21:28:00.000-07:00Golb: We spoke to some of our friends before buyin...Golb: We spoke to some of our friends before buying the house and were actually expecting a lot of these additional expenses. But, boy, there is a huge difference between knowing about additional expenditure and actually having to spend it :)<BR/><BR/>I dont have an exact estimate of the difference in total expenses since some of the expenses are one-time only, and others are annual etc. But if I were to make a rough estimation, I would say we spend about <B>$1000 more per month</B> now compared to before (that includes all the listed items above). But there are some tax breaks at the end of the year which offsets it a little. It got a bit complicated when I started to look at the difference in taxes, so I left that part out. <BR/><BR/>After you are done planting veggies at your friends house, wanna stop over at mine? Both the better half and I have distincly non-green thumbs. Anything we touch seems to start wilting the moment we step away :)ispfhttps://www.blogger.com/profile/00928097981905476759noreply@blogger.comtag:blogger.com,1999:blog-37697766.post-39456050038836587372007-05-22T20:06:00.000-07:002007-05-22T20:06:00.000-07:00Ispf, that's very interesting. Were any of those *...Ispf, that's very interesting. Were any of those *not anticipated* before buying the house? I mean were there moments like "wow...we did not see that coming"?<BR/><BR/>If I may request...would you please add a section to the effect "Total expenses - rent and own"? Sort of summarizing your total per month costs - just for a better feel. :)<BR/><BR/>I am far far away from buying a house yet...but I can already see the attraction of a backyard. In a couple of weeks, we are heading over to our friends' house to mess with their backyard by planting some veggies. ;)Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-37697766.post-18535087360675103472007-05-22T05:43:00.000-07:002007-05-22T05:43:00.000-07:00Brett: Yeah, the backyard was a big draw for us to...Brett: Yeah, the backyard was a big draw for us too. That and a lot of other intangibles that make the additional cost worth it - like being able to paint the walls whatever color we want (not that we would, but still!), never having to worry about space crunch, having separate guest rooms for our guests when we have more than one couple visiting us, parties at neighbors not keeping us awake, having a garage for our cars so they are not out in the elements, trees in the front and backyard, and just the sheer joy of ownership :)ispfhttps://www.blogger.com/profile/00928097981905476759noreply@blogger.comtag:blogger.com,1999:blog-37697766.post-80923308782372821082007-05-21T13:56:00.000-07:002007-05-21T13:56:00.000-07:00Hmmm... looks like owning a home is expensive. My ...Hmmm... looks like owning a home is expensive. My wife and I have talked about moving into a condo when we're done with school. Not only do you save some money, you save time not having to worry about planting a garden and mowing the lawn. <BR/><BR/>We'll probably end up buying a house, though. The idea of having a little backyard where the kiddos can run around is very appealing.Anonymousnoreply@blogger.com