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A debt crisis looms as renters turn to credit cards to stay afloat

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Valued Contributor

Re: A debt crisis looms as renters turn to credit cards to stay afloat


@BaronHK wrote:


Well, normally I just see people put down roots in Illinois and then get eaten alive by property taxes that are, by themselves, much higher than my rent, utilities (most of which are included in my rent), upkeep (which is the landlord's problem when you rent), homeowner's insurance (which is about 18 times more expensive than my renter's insurance policy), and then there's interest (which eats up about as much as the value of the property increases in some markets).

 

Yes, my in-laws took out a HELOC because they bought three luxery vehicles, none of them are practical, one can't even be driven in the snow (which is a problem when you live near Lake Michigan up near Wisconsin), all with outrageous payments and insurance, and all three of which are breaking down and needing expensive repairs only 4-5 years into the life of the car.

 

I usually just drive a beater. The insurance is dirt cheap (liability, say $15-20 a month), if it does need fixed it's maybe $500-700 a year in repairs at a shop vs. a car payment totaling that in under 2 months. In fact, I just had the majority of the engine rebuilt over the last couple years and it wasn't anywhere near as outrageous as payments and insurance.

 

So I'd say that even if you aren't managing your finances like an idiot, the property taxes here alone are sucking all that value right back out of your house. True, not every state goes after your money like Illinois and California, but still.....


I was a bit skeptical that IL broke the top 3 in property tax rate, so I plugged it in to compare to my (what I think is rather favorable rate). Can't say you're wrong -- they are high and my property taxes in IL would be around $35,000/year. At that rate, I should at least get a free coffeemaker or engraved ruler or something thrown in.

 

I AM still skeptical about HO insurance costing 18x renters. An HO6 policy is effectively the same thing as renter's insurance in most cases, and if I were to go to a HO3, or in my case add in the master insurance costs for an entire building to the HO3 costs for my unit, I'm still nowhere near 18x. I'd believe 1.8x, but not 18.

 

The only way I could see that is if someone with a rather expensive home compared their insurance with a renter's policy that was appropriate only for a dorm, aka 'give me three grand for all my crap if the place burns down' policy, which isn't anywhere near enough to replace even furniture in a home.

Message 41 of 49
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Member

Re: A debt crisis looms as renters turn to credit cards to stay afloat


@iced wrote:

@BaronHK wrote:


Well, normally I just see people put down roots in Illinois and then get eaten alive by property taxes that are, by themselves, much higher than my rent, utilities (most of which are included in my rent), upkeep (which is the landlord's problem when you rent), homeowner's insurance (which is about 18 times more expensive than my renter's insurance policy), and then there's interest (which eats up about as much as the value of the property increases in some markets).

 

Yes, my in-laws took out a HELOC because they bought three luxery vehicles, none of them are practical, one can't even be driven in the snow (which is a problem when you live near Lake Michigan up near Wisconsin), all with outrageous payments and insurance, and all three of which are breaking down and needing expensive repairs only 4-5 years into the life of the car.

 

I usually just drive a beater. The insurance is dirt cheap (liability, say $15-20 a month), if it does need fixed it's maybe $500-700 a year in repairs at a shop vs. a car payment totaling that in under 2 months. In fact, I just had the majority of the engine rebuilt over the last couple years and it wasn't anywhere near as outrageous as payments and insurance.

 

So I'd say that even if you aren't managing your finances like an idiot, the property taxes here alone are sucking all that value right back out of your house. True, not every state goes after your money like Illinois and California, but still.....


I was a bit skeptical that IL broke the top 3 in property tax rate, so I plugged it in to compare to my (what I think is rather favorable rate). Can't say you're wrong -- they are high and my property taxes in IL would be around $35,000/year. At that rate, I should at least get a free coffeemaker or engraved ruler or something thrown in.

 

I AM still skeptical about HO insurance costing 18x renters. An HO6 policy is effectively the same thing as renter's insurance in most cases, and if I were to go to a HO3, or in my case add in the master insurance costs for an entire building to the HO3 costs for my unit, I'm still nowhere near 18x. I'd believe 1.8x, but not 18.

 

The only way I could see that is if someone with a rather expensive home compared their insurance with a renter's policy that was appropriate only for a dorm, aka 'give me three grand for all my crap if the place burns down' policy, which isn't anywhere near enough to replace even furniture in a home.


My policy with Lemonade covers $10,000 of stuff, $6,000 to relocate, drain backups and water damage, landlord claims that I broke stuff up to $3,000, liability for people who come in and get injured, muggings and personal property theft away from home for me and my spouse, and quite a lot else for about $12 a month.

 

I had them deposit a check for over $900 into my account a couple years ago to cover a mugging which got away with my cash, a nice backpack, a smartphone, and a Nintendo Switch.

Message 42 of 49
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Valued Contributor

Re: A debt crisis looms as renters turn to credit cards to stay afloat


@BaronHK wrote:

@iced wrote:

@BaronHK wrote:


Well, normally I just see people put down roots in Illinois and then get eaten alive by property taxes that are, by themselves, much higher than my rent, utilities (most of which are included in my rent), upkeep (which is the landlord's problem when you rent), homeowner's insurance (which is about 18 times more expensive than my renter's insurance policy), and then there's interest (which eats up about as much as the value of the property increases in some markets).

 

Yes, my in-laws took out a HELOC because they bought three luxery vehicles, none of them are practical, one can't even be driven in the snow (which is a problem when you live near Lake Michigan up near Wisconsin), all with outrageous payments and insurance, and all three of which are breaking down and needing expensive repairs only 4-5 years into the life of the car.

 

I usually just drive a beater. The insurance is dirt cheap (liability, say $15-20 a month), if it does need fixed it's maybe $500-700 a year in repairs at a shop vs. a car payment totaling that in under 2 months. In fact, I just had the majority of the engine rebuilt over the last couple years and it wasn't anywhere near as outrageous as payments and insurance.

 

So I'd say that even if you aren't managing your finances like an idiot, the property taxes here alone are sucking all that value right back out of your house. True, not every state goes after your money like Illinois and California, but still.....


I was a bit skeptical that IL broke the top 3 in property tax rate, so I plugged it in to compare to my (what I think is rather favorable rate). Can't say you're wrong -- they are high and my property taxes in IL would be around $35,000/year. At that rate, I should at least get a free coffeemaker or engraved ruler or something thrown in.

 

I AM still skeptical about HO insurance costing 18x renters. An HO6 policy is effectively the same thing as renter's insurance in most cases, and if I were to go to a HO3, or in my case add in the master insurance costs for an entire building to the HO3 costs for my unit, I'm still nowhere near 18x. I'd believe 1.8x, but not 18.

 

The only way I could see that is if someone with a rather expensive home compared their insurance with a renter's policy that was appropriate only for a dorm, aka 'give me three grand for all my crap if the place burns down' policy, which isn't anywhere near enough to replace even furniture in a home.


My policy with Lemonade covers $10,000 of stuff, $6,000 to relocate, drain backups and water damage, landlord claims that I broke stuff up to $3,000, liability for people who come in and get injured, muggings and personal property theft away from home for me and my spouse, and quite a lot else for about $12 a month.

 

I had them deposit a check for over $900 into my account a couple years ago to cover a mugging which got away with my cash, a nice backpack, a smartphone, and a Nintendo Switch.


This pretty much hit what I was thinking at the end of mine. My policy is around 15-20x the cost of yours, but it also covers more than 100x the value. I can't ever realistically expect to spend tens of dollars per month for a policy that covers over $1 million in assets.

 

The takeaway you're going for is that as a renter, your costs are lower because the only assets you're really on the hook for are your personal belongings and lawsuits that start in your apartment.

Message 43 of 49
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Regular Contributor

Re: A debt crisis looms as renters turn to credit cards to stay afloat


@adelphi_sky wrote:

@SouthJamaica wrote:

Personally I don't think we should be blaming people who don't have an emergency fund stashed away.

 

This country is a tough town, and a lot of people have it rough.


People usually don't take the same paths in life either willingly or unwillingly. And let's be honest, this country doesn't make it easy for a lot of people to be financially secure. This nation's personal finance journey is wrought with precarious pitfalls. 


I lost my fortune through downturn in the economy (2008) and taking care of my elderly father. But I do not blame others. Down falls happen and I never felt sorry for myself. I used my college degree and got back into the work force. Buckled down and scrimped until I rebuilt my financial foundation. I learned quite a lot that I did not properly prepare for my first collapse. Today though, I am very savy and actually are doing better than pre-2008. 

I am also saving for a new sports car. Either a Corvette or a Porsche GT3. I am half way there. I want to pay for these in cash rather than finance them.


Message 44 of 49
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Established Member

Re: A debt crisis looms as renters turn to credit cards to stay afloat

This article is just fear mongering and untrue! Most Americans are easily able to service their debt.

 

see this chart

https://fred.stlouisfed.org/series/FODSP

Message 45 of 49
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Community Leader
Super Contributor

Re: A debt crisis looms as renters turn to credit cards to stay afloat

1) there is no Q2 data.  Is that because there was insufficient data, or because they didn't trust the veracity of that data?

2) there is no context presented as to why the sudden shift.   Is it for example due to impact from the various rental and loan (mortgage, other installment, unsecured) forbearance programs and they are choosing to not treat them as obligations?

 

I don't see where that graph in itself refutes the point that the author of that article is attempting to make.



(10/2020)
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Message 46 of 49
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Established Member

Re: A debt crisis looms as renters turn to credit cards to stay afloat

You don't need exact numbers, just look at the trend. After 2008, almost every American wisened up and deleveraged. We came into this recession being the most prepared we've ever been. In fact, the savings accounts of Americans are balloooning! Net worth is also at an all time highs. Fear mongering like the Op is just hyperbole if not hogwash. You'll see, we will have the biggest stock rally America has ever seen! Americans are under leveraged right now.  

Message 47 of 49
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New Contributor

Re: A debt crisis looms as renters turn to credit cards to stay afloat

So fair argument people are positioned to pay their debts but that is not indefinite with constant QE potentially causing inflation and trashing the dollar. Jobs gone for good. Lots of potential issues.

Message 48 of 49
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Established Member

Re: A debt crisis looms as renters turn to credit cards to stay afloat

Who needs to work when you can just open a Robinhood account and triple your money buying stocks! Best stock market in the world, stocks only go up! 

Message 49 of 49
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