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
"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