Buying vs Renting

frank12

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Sep 6, 2011
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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
 
May 29, 2006
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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.
 

karlheinz

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Oct 2, 2006
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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.
 

william webster

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Jan 16, 2009
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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.
 

william webster

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Jan 16, 2009
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I haven't lost money a house yet....... its most people's most significant asset.... their savings, if you will
 

frank12

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Sep 6, 2011
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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
 

frank12

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Sep 6, 2011
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From Mr. Z...

"I doesn't seem that this question is only, or even most importantly, about return on investment. For many years in the US, the common wisdom is that you no longer buy a house as an investment. If you borrow the money for it, you can write off the interest. But otherwise, and especially since 2008, in most markets a house is not going to appreciate a whole lot.

But here in the DR, you?ve got a lot of other issues to consider, in my mind, more important than return on investment. How confident can you be in the title situation? How confident can you be in the possibility of resale? How confident can you be in the ability to seek legal recourse if there is any problem associated with your ownership of the property? How confident can you be in.... anything...in the DR?

I just back from La Vega. I really liked La Vega, and ended up spending a couple of extra days there looking at houses to rent. Even looking at renting here can be extremely humorous, especially if you?re a North American dealing with Dominican owners. Based on my experience, Dominican owners want you to rent the property, but they also want you to maintain it. Furthermore, if anything goes wrong, you?re responsible for having it fixed. Even beyond that, you?re liable for anything that happens that is related to the property.

As an example I just got through looking at a very nice Dominican home, in a nice neighborhood, and a property I would love to rent. However, I asked some very specific questions. The electrical panel box was opened and clearly there was some repair work that was being done. I asked if there was problem with the panel box while I was renting, and for example, there was a fire in the pane box. What if everything associated with the electrical system in the house had to be replaced? The answer was, of course, I would be responsible, because I was living there when it happened.

What if someone broke into the house, and broke windows, and perhaps did other damage to the house? The answer was, of course, I would be responsible, because I was living there when it happened.

What if the room was damaged, and there was water damage to the house? Would I be responsible for repairing it? Would I be responsible for the furniture and other items I would have to buy to furnish the house? The answer was, of course, I would be responsible, because I was living there when it happened.

To the owner, this was just common sense. To me, it was laughable. I rent the house, I have to maintain the house, and I also have all the liability of ownership.

And you can be sure, that no matter how good a condition the house is in when you leave it, you will lose your deposit. You might as well just consider any deposit money, dead money.

Finally, do you think you would ever prevail a a "court of law" here in the DR, if you have a dispute with your Dominican landlord? Buena suerte.

So you want to know why Dominicans will rent houses so cheap? It?s not rocket science."

PS.
And just for your numbers oriented readers, the house I was interested in was also for sale.

Asking price - $157,000
Rental price - $300 per month $3600 per year
$157,000 / $3000 = 44 time annual rental

Question: Why would anyone in their right mind rent a house for only 2.2% of it?s value?


A: The house is not worth $157,000 or
A: It?s not rocket science"


Mr. Z
 

Robert

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Jan 2, 1999
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Mr. Z. Not all landlords here are the same.

I have ceiling, doors, AC units etc repaired at the expense of the landlord.
Received my deposits back or agreed to live it out.

You just need to know how to play the game and protect yourself.
It's not rocket science :)
 

J.Baby

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Dec 23, 2012
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If you can't afford to buy then rent. If you aren't looking for a permanenet home, then rent for the short term. If you can afford to buy, and want a permanent home, have the assests to back you up - then you buy. It is that easy.
I can't stand renting, anywhere. I did that when I was younger, we had nothing but problems. All I ever hear is renters complain, the things they complain about are easy fixes, but no landlord in his right mind is going to spend a penny unless it gives him a higher rental value, especially when they are just extras that the place didn't come with in the first place. If your lucky, you will get a good landlord, if not, well that is typical. The landlord cares about his bottom line first and foremost. As he should.
 

cjp2010

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Mar 25, 2013
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Hi all. I was the original poster for this on the other forum. Thanks Frank, for posting it here. I'm very surprised that not many people chimed in with support for buying. I was actually hoping some people would offer points of view that may make me change my mind because at the moment I am heavily in favor of renting for the reasons I explained in my post. I just wonder if I'm missing something in my thought process. I do have the money to buy if I want to but I just can't seem to justify it given the buying prices vs. the renting prices and what I know I can do by investing that money in other ways. Those who did support buying didn't really offer any real reasons at least not mathematically/financially. I hear what J.Baby is saying about not wanting to rent but I have been lucky to not have any problems. My landlord is great. We pay $600/month rent for a large three bedroom house. He wants $160,000 to sell. So that is 22 years rent. Even with a simple 3% bond you can double that money in 22 years (and that includes taking the money out to pay the rent every month during that time). So then after 22 years I can have enough money to pay the rent for another 22 years plus an extra $160,000. In the States I did buy, a couple of times and was happy with the results. But here it just doesn't seem to work out financially.
 

Criss Colon

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Jan 2, 2002
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"RENT!!!!"
"I" could move in as your "Neighbor From HELL!
There goes "The HOOD!"
CCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCC
I bought here, in Arroyo Hondo" 16 years ago.
I paid $120,000 US for a nice house.
"IF ONLY" I had invested that capital, and rented, I would still have that 120K, and hopefully a LOT MORE from investing it, I could rent a "Palace" now,with a pool, etc., etc., here with only the income from that inicial 120K.
AND, I would still have that capitol in an account.
 

dv8

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Sep 27, 2006
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ok, let me chip in a bit here....

i come from a different frame of mind. i grew up in a communist country where most properties (apartment blocks) belonged to the state. to own something meant a lot: you could rent it out, pass it to your kids, sell it. you would never be evicted. yes, the power, gas, heating and water can be cut but the place itself could not. i come from the background there property is not an investment. you are not meant to sell it at a profit and be merry. the property is your security, your backup, your lifeline. bear in mind that in my city most of the properties (houses) were never actually purchased as such. all the area was spoils of war, if you may. people became owners by simply occupying vacant houses.

now. how does it translate to a modern day and a tropical country? i still do not see the house as something that is made to bring you money. of course i only own (with miesposo) this one house we live in. to me the money we paid for it is lost. gone. spent. eaten away. burnt. no longer there. i know that if we own this house for 20 years we will never recuperate the money we paid for it because initial price (quite low) would be followed by 20 years of maintenance, upkeep and changes. and i do not care. as i said, this money is gone. we spent it.

but i also know that in case of financial trouble we do not have to worry about the rent. we could lower down the costs and eat at suegros house but still have a place of our own, need be. and i know that we can always sell. and since the money spent on the house initially i consider lost and gone then whatever we sell the house for, on that very day will be cold hard cash, in case we really need it.

now you are free to call me stupid, go ahead.
 

keepcoming

Moderator - Living & General Stuff
May 25, 2011
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We bought our place for one basic reason really, to hand it down to our children / child. Living here for the rest of our lifes has never been set in stone but what we wanted was something that was somewhat of a financial asset down the line. If we were to move out of the Capital (we have talked about it) we would probably rent. Years ago the mindset (especially with my parents) was owning was the way to go. It is yours and like DV8 said really can't be taken away for the most part (although some do). But when people ask me about moving to the DR and buying and renting..I always say rent at least until your 99.9% sure this is where you want to be. Selling a property here is a nightmare or at least in my experience.
 

frank12

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Sep 6, 2011
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I agree with you guys, but i have a different perspective about owning vs renting.

I only rent. I currently rent a condo on the beach in Cabarete. I've been here now for almost 3 years. I've had two neighbors from hell. they both lived above me. One was a Canadian girl that had parties in her condo every night after the bars closed. after her party was finished, she would start banging her Dominican boyfriends--in which case the headboard on her bed would start hitting the wall and this caused our chandelier to start swaying wildly above our heads, and then the concrete on the ceiling would begin to crack and then rain down on us. It would wake us all up, and then our mouths would be filled with concrete chalk, and it would cake around the edges of our mouths. I would go to work in the morning looking like the Pillsbury Doughboy with concrete chalk around the edges of my mouth. I looked like Batman or the Joker, depending on the angle.

She moved out and then an older man took her place. he did the same banging, but with Haitian prostitutes. Thankfully, he was in bed snoring by 12 midnight. I cold deal with that. I could get behind that. He was on my schedule and sometimes we found ourselves both banging away at the same hours of the night. It was almost as if we were both synchronized. We kept similar banging sessions, and i found myself trying to outlast him. No joke. it kept me young. But then one day, last spring, the cops came and hauled him away and he got deported for having sex with ugly Haitian girls.

Previous to that, i had another neighbor in Sosua performing god's work on Sosua prostitutes after 2am. He was a nice guy, but he got in trouble with the law for both throwing the girls legs up to Jesus and impersonating a Interpol agent. he got deported as well.

In all three cases, i was on the verge of simply moving to another building within the perimeter of the same condo building and renting from someone else. I can move out in less then one hour and have the same view of the ocean. Problem solved. However, if i was owning, i would have gone upstairs and probably shot or maimed my neighbors, and then i would have had to either cook them (i eat a lot. I have a big appetite) or find some place to bury them (digging is hard on the back. i have a bad back).

For these, and many more reasons, i will never buy a property here.

Meanwhile, the money i have here, i have it in a bank account accruing 10% interest. The interest pays my rent and then some--i eat a lot..did i mention that? And i still have my principal untouched. I've been doing this now since 1992. It's worked out so far and it funds my chocolate and coffee habit.

Frank
 

keepcoming

Moderator - Living & General Stuff
May 25, 2011
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Frank12 probably the most interesting perspective / view I have read in a long time. Crazy thing, it made sense.
 

DRob

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Aug 15, 2007
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I'm generally a huge fan of buying IF you know the area and are looking at a long-term hold. However, I gotta agree with Frank's perspective.

DR is one of the easiest countries in the world to buy a property. It's also one of the hardest places to sell.

I'm a big fan of peace and quiet, and the only headboard noise i'm interested in hearing is what I make from my own.