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  1. #1
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    Default Buying vs Renting

    I just found this on another internet forum, but find it very interesting.

    "This is a serious question. Every time our lease is up I consider buying but I can never seem to justify it. So for those who think it is the right thing to do or those who sell property and have convincing arguments I'd like to hear them.

    First, where I come from you typically buy for 100x rent. Actually where I came from you don't see the same place for rent and for sale at the same time like here but I mean you would buy an equivalent place for 100x rent. But here it seems like everyone wants 200x rent.

    So some basic math. 200x rent is nearly 17 years. From the owner's side they'd have to rent the place for 17 years to break even IF IT WAS NEVER VACANT. But here you are lucky to have your place occupied 1/2 the time so now you are already looking at 34 years. Add maintenance and repair on top of that and just the hassel of dealing with renting to other people and nonpayment and you can probably take it to 40 years pretty easy. Most owners won't be living another 40 years. So it would make sense for them to be willing to sell a little cheaper.

    From the buyer's side 17 years rent and done seems like a good deal. But with that you now inherit paying all the maintenance and repair costs so you can take that to 19 or 20 as a ture break-even point. But I invest and I do well with investments. So for me to give someone 20 years of my rent up front is not worth it. If I invest with the same track record I have had I will be able to triple that money in 20 years which means I can have paid my rent and then a whole lot more. BTW, it isn't that hard to do. < 6% yearly return does it. Despite the big crash in '08 even the Dow is at better than triple for the last 20 years and playing just the index is as basic as you can get. Property value is certainly not worth 3x more now than it was in 1993.

    Is it just people that don't do well with investing and think buying a house and selling it later is the only way to make money? History shows that investment markets outpace housing over the long haul. I know we had the big housing bubble a while back but that bubble sure burst didn't it? In fact prices are still going down here year over year as I have seen. So even if I did think I wanted to buy I would wait for them to drop some more.

    Is it inflation? But again I don't buy into that as the property and rent values have been dropping here for the past few years. I am able to keep neogtiating lower rent each year because every place around us is going lower. So we currently have deflation.

    Is it just people that paid too much when they bought their place and now need to recoup that money? Maybe they are willing to rent cheap until they sell but are holding on hoping the market comes back? I think we are in trouble on the north coast. Even if global tourism picks up I don't know how much we can expect here. I don't think it will go back to how it was in the late 90s. Punta Cana is killing us. They have so much more to offer and we've done hardly nothing to grow. I wouldn't want to live in Punta Cana but it is going to be the winner for tourism for a long time. Which means more new expats will end up going there. After all most of us end up in places we visited as tourists before we left our Country. In fact government (DR) stats show that the number of foreign property owners is growing in the Punta Cana area but is staying pretty flat on the north coast. I think here the expats are leaving as fast as they are coming these days. I see some new faces, but I miss some old ones.

    So for me the real thing is I can't justify paying 200x rent when I know I can invest it and do better but I'm wondering if I'm missing something."

    CJP2010

  2. #2
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    Default

    And that's if you can pay cash and don't need financing.. In upstate NY at least, the rule is 72 times rent. At 200, you have to assume the property will double in value or more.

  3. Likes frank12 liked this post
  4. #3
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    Default

    You answered your own question, rent.

  5. #4
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    as much as I'd sometimes like to have a "place of my own" I've been a lifelong renter. Owning something just ties you down - what happens if you can't rent it or you want to move somewhere else? but then i'm a lifelong military type vagabond who likes to move often so what do I know? lol

    I've rented three different apartments here in the colonial zone over the past 4-5 years. I stick with one I have now for 3 years because of the location, reasonable price and a landlord that doesn't raise the rent.

  6. Likes cobraboy liked this post
  7. #5
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    Default

    Quote Originally Posted by bilko View Post
    You answered your own question, rent.
    I agree!

  8. #6
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    Default

    OP is clearly on the rent side of the equation.

  9. #7
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    I have done both..... own and rent --- still do.

    Whenwe moved to the US in 1995, I did the normal thing - rent and look around to see the "lay of the land".

    While I was looking at that land, a dozen really good , cheap deals blew by me -I stuck to my guns --- RENT.
    WRONGO..... should have jumped into the deep end.... missed the proverbial boat.

    To compound the problem, we fell in love w/ the rent and stayed there until evicted - by reason of the property selling - 12 yrs later.

    Think about it - falling in love w/ the rental is like falling in love with a hooker..... agianst all things natural in the universe.

    Just keep paying by the minute, hour, day, month , year...... never fall in love.....
    Sort of like sucking and blowing at the same time......

    A lose / lose situation.

    I still rent in the US..................... and am still in love..... different rental - same game.


    In reality, most people rent b/c they can't afford or don't qualify to buy.

  10. #8
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    When you rent, you have the luxury to leave on the hour when you want a new view. As a homeowner you are stuck with the house key and all the stress that are included.

  11. #9
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    I haven't lost money a house yet....... its most people's most significant asset.... their savings, if you will

  12. #10
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    From Paul...

    "That sounds like me. There is no point in buying here. I pay $700/mo. which includes everything-electric, gas, water&sewer, Wi-Fi, and cable. I run the AC all the time. Possibly only $550 is going to the owners pocket after he pays the utility bills but he still has to pay $250 for the condo fee and additional amounts for repairs and upgrades. So maybe he clears $250 per month for this condo he spent $125,000 back in the day which he could instead be making lots of interest off of in a Dominican bank. It will take him 41 years just to get his money back and by then he will be owning a very old old condo and he will be either dead or too old to spend the money he makes on it assuming the economy is decent enough to sell it at a good price.

    My personal opinion is that Cabarete will grow when the global economy returns. There is nothing to stop it. People from around the world like to invest in property in the tropics, we are not talking about a piece of desert in the Sahara or a lot on Antarctica. We are talking about a beach which is world renown for Kite boarding and windsurfing. People have been chipping away at this place throughout the recession hoping that they can just pay the bills and scrape by. Imagine what will happen when we are in a booming economy when people see dollar signs when thinking about buying here and when people spend more for vacation and add to that the baby boomers reaching retirement age."

    Paul

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