tag:blogger.com,1999:blog-3521318064826848712.post8520167123553377015..comments2023-10-19T04:51:53.516-05:00Comments on The Legal Dollar: Buying Vs. Renting - FollowupManaging Partnerhttp://www.blogger.com/profile/05130017520583425490noreply@blogger.comBlogger10125tag:blogger.com,1999:blog-3521318064826848712.post-13060439537666284532010-09-19T16:35:12.632-05:002010-09-19T16:35:12.632-05:00Nando - I was just going through some old comments...Nando - I was just going through some old comments and I realized that I had never responded to yours. That's unfortunate because I really agree with you. I think that you kit the nail on the head with regard to people taking for granted that they will always have great paying jobs and nothing will go wrong - and that this somehow justifies their leveraging their entire working lives to pay for grander and grander hosues.<br /><br />I think that you are also right with regard to the pursuit of prestige being the cause of ruin for so many great houses. I have an interest in medieval history and you can see the same thing happening time and again - the nobles overspend, end up trading income-producing resources to their lenders to pay tehir debts, but then keep spending to "keep up appearances" - and the lenders end up owning the castle!<br /><br />I also agree with you that it has become fashionable to present a distorted and unrealistic view of the world to children in the hope that the parents are somehow doing the children a favor. Nothing could be further from the truth. They are just setting up their children for a bigger fall and a greater disappointment. Parents should work with their children to explain and demonstrate how the real world works - and to prepare their children for reality rather than just cast them into a world that they are not prepared for.Managing Partnerhttps://www.blogger.com/profile/05130017520583425490noreply@blogger.comtag:blogger.com,1999:blog-3521318064826848712.post-24456923285814138332010-08-16T22:08:15.388-05:002010-08-16T22:08:15.388-05:00Hi Angel,
It's nice to be wanted! I am OK, b...Hi Angel, <br />It's nice to be wanted! I am OK, but practicing law has been very busy for the last few months. It was actually pretty deceptive - I was thinking that I would have more slow time, but then there's a project/case - and it gets interrupted for another emergency - and then another one on top of that - and then before you can even get back to the original one, another one jumps up. Time passes pretty strangely for me when I am busy, like now. It seems like I blink my eyes and it is 6 months later!<br /><br />Actually, while that is true, it is no excuse. I should have been posting more regularly. I have analyzed my thinking and I recognize that I have been somewhat fixated on the idea of providing long, detailed posts with in-depth analysis. However, because I did not have time to do that style of posting, I declined to post. Instead, I should have been more flexible with my thinking and provided some periodic mini-(at least for me) posts.<br /><br />I have put in 13+ hours today (it has been similar for the last 6 months), but your concern has inspired me to post at least a little something immediately. You and JDUnderdog should feel free to continue to kick my butt if I slack!<br /><br />Thanks again!Managing Partnerhttps://www.blogger.com/profile/05130017520583425490noreply@blogger.comtag:blogger.com,1999:blog-3521318064826848712.post-85060243287842776622010-08-16T20:06:30.639-05:002010-08-16T20:06:30.639-05:00Where have you been? Are you ok?Where have you been? Are you ok?Angelhttps://www.blogger.com/profile/07820446523257638689noreply@blogger.comtag:blogger.com,1999:blog-3521318064826848712.post-79852569483539490232010-03-18T09:45:57.047-05:002010-03-18T09:45:57.047-05:00come back to the blogging circuit, buddy! We miss...come back to the blogging circuit, buddy! We miss your perspective.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-3521318064826848712.post-51589647605849987022010-03-08T19:37:44.813-06:002010-03-08T19:37:44.813-06:00MP, how about some new insight? I'm experienc...MP, how about some new insight? I'm experiencing withdrawal!Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-3521318064826848712.post-18326061593765882682010-02-17T10:16:11.682-06:002010-02-17T10:16:11.682-06:00MP, great series. I think one major problem with ...MP, great series. I think one major problem with U.S. consumers is that many purchase houses where they think they can pay it off in 30 years. (If either parent loses their job - a very real possibility - and they can't meet their monthly payment.) Well, at an interest rate of 5%, a person will pay roughly $400K+ to pay off a $200K mortgage. <br /><br />People need to buy houses that they can reasonably expect to pay off in 10-15 years, as opposed to 30. This can be done with frugal living; not purchasing (unnecessary) large items, such as boats or luxury cars; and making double payments, making an extra payment 3-4 times a year, or simply paying an extra $100-$300 a month on the house. <br /><br />Too many Americans - including the professional classes - insist on buying nice houses in the suburbs with 5 bedrooms and a 3 car garage. Well, this increases the amount of money one will need to spend on gas, car repairs and maintenance. It will also increase a non-economic cost of stress - as 40 minute commutes each way take their toll on one's sanity. (This also takes time away from one's family, chores, and enjoyable activities.)<br /><br />Thank you for posting this here, MP. We live in a very prestige-driven society. "Oh, your husband is an attorney. Why do you both own 8 year old cars? Why don't you buy a house in suburb X?" <br /><br />My mother's father had 8 daughters and they lived in a house that only had 4 bedrooms. My father's parents lived in a nice, 3 bedroom house - with five children. This was common for the time. Houses also had front porches, and people KNEW their neighbors. Today, houses are built with porches on the back - so you can avoid your neighbors. We have lost our way. <br /><br />I know I am going off-topic (forgive me). I also see a dangerous trend of parents buying their kids 20 gifts for Xmas. They also tell their kids that they can accomplish anything they set their minds to. And they seldom say "No" to their kids - or punish them. (Well, playing video games and watching 5 hours of TV a day does not necessarily prepare one for success in the real world.) Such kids will be in for some MAJOR DISAPPOINTMENT, when they realize that it is damn tough to find a good-paying job or career.Nandohttps://www.blogger.com/profile/06423524039657355134noreply@blogger.comtag:blogger.com,1999:blog-3521318064826848712.post-5607663415874190502010-02-15T22:01:40.315-06:002010-02-15T22:01:40.315-06:00nycsolo - You are certainly right - it is a pain i...nycsolo - You are certainly right - it is a pain in the butt to move. However, it's also a pain to get the unit cleaned, paint it, and then be losing rent while you are trying to fill it. Also, my tenant base is pretty mobile. Also, I would feel pretty bad about making a family with kids or old people pay above-market rent.<br /><br />With regard to the written quarantee, I would not go for it. As I mentioned above, I think that over 30 years you are going to see appreciation at about the rate of inflation. However, I don't think that is going to be the case over the next 5 years, so your question becomes more interesting if the guarantee was limited to 5 years. If the person definitely had the means to pay, then the cost for a 5 year lease might be pretty reasonable.Managing Partnerhttps://www.blogger.com/profile/05130017520583425490noreply@blogger.comtag:blogger.com,1999:blog-3521318064826848712.post-11350608733426324072010-02-15T21:14:09.134-06:002010-02-15T21:14:09.134-06:00"With regard to stickyness, tenants are not s..."With regard to stickyness, tenants are not shy about asking for rent reductions -"<br /><br />They may not be shy, but as the landlord you have a bit of an edge in the discussions, particularly if the tenant is an old person or a family with small children. Because it's a pain in the (*^% to move and everyone knows it. <br /><br />"The building is in one of the most desirable areas in Chicago and the average rents in that area certainly did NOT regularly outpace inflation - at least since 2002."<br /><br />Well my experiences have been different. But let me ask you this:<br /><br />Suppose your next potential tenant asks for a written guarantee that his rent will not be raised for the next 30 years. How much (if anything) would you charge for such a guarantee?nyc solonoreply@blogger.comtag:blogger.com,1999:blog-3521318064826848712.post-40490964065641508472010-02-15T10:44:45.142-06:002010-02-15T10:44:45.142-06:00nycsolo - Yep. If rent tracks inflation and infla...nycsolo - Yep. If rent tracks inflation and inflation is at 3%, then the rent doubles in about 24 years. Also, I agree that there are several rent markets - both geographically, by property type, and by income level.<br /><br />With regard to your comments about a landlords, I have owned a multi-unit property since 2002. The property is in a good, desirable area in Chicago and typically rents to young professionals. From 2002 to about 2004, rents declined about 20% - primarily because the "market" that I was renting to was going straight into buying condos. Rents are back up now, but really only slightly above 2002 levels - 8 years later. If the rents had been increasing at 3%/year, I would be much happier about my purchase.<br /><br />With regard to stickyness, tenants are not shy about asking for rent reductions - and you are really at the whim of the supply/demand marketplace. For example, in 2002 I had an open house and about 30 interested parties came by. In 2004, same open house, same space, same advertising - and only 3. Frankly, I had to get the space filled if I was going to pay the mortgage, so I had to bow to the market.<br /><br />Now, fortunately, demand is strong. Mostly, I think it is strong because the young professionals can no longer qualify for the crazy, zero-interest loans. With strong demand, the rental rates can go back up.<br /><br />My point? The building is in one of the most desirable areas in Chicago and the average rents in that area certainly did NOT regularly outpace inflation - at least since 2002.Managing Partnerhttps://www.blogger.com/profile/05130017520583425490noreply@blogger.comtag:blogger.com,1999:blog-3521318064826848712.post-91773755364819384132010-02-15T04:36:46.337-06:002010-02-15T04:36:46.337-06:00Even if rent goes up every year at exactly the rat...Even if rent goes up every year at exactly the rate of inflation and no more, that still has a big impact on the calculation.<br /><br />Compare it to the situation where buy a house using a traditional 30 year fixed mortgage and your monthly payment can be expected to drop every month in real terms. <br /><br />Here's another way to look at it: How much would you be willing to pay your landlord for a clause in the rental contract saying your rent cannot be raised any time in the next 30 years?<br /><br />Seems to me such a clause would be worth a lot.<br /><br />Also, I would be wary of using statewide average rents for the calculation since individual rents tend to be stickier downward and it averages changes in all markets. <br /><br />If the rental market is down, it's unlikely that the landlord will reduce your rent. He knows you are settled where you are. On the other hand, if the rental market starts heating up there's a pretty good chance he will start jacking up your rent.<br /><br />Also, statewide rent averages include rentals in undesirable locations. I think it's pretty likely that if you looked at average rents in desirable locations, those rents regularly outpace the state average.nyc solonoreply@blogger.com