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The Rise of Renting in the U.S

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Re: The Rise of Renting in the U.S

#181

Post by SilasX »

turar wrote: post #42
derekp7 wrote: post #21

Earlier quoted context omitted.

That tax deduction does get smaller every year (as the interest/principal balance changes). The biggest issue I found with owning is that the equity doesn't build up fast enough at the beginning (with a 30-year mortgage), so if you sell after 10 years the costs pile up to the point that you have almost no net proceeds (5% commission, survey/title/transfer tax/inspections, plus prorated property taxes). A 200K propert…

I would argue in the current situation of 3.5% mortgage rate, the best scenario is to invest the cash in the stock market. If your returns are anything above 3.5% over the 30 year load amount, you're good.

I've worked through the same logic myself. I don't deny that it generates better financial returns. However, the devil is in the details.

Let's say after 30 years you have a big bag of money. Well, now you have to invest it for the passive income to continue paying rent. But, per my recent comment[1], inflation-protected passive income will pay something like 2.1%. Oh, and you're taxed on the interest income. So, more like 1.7-8% (in addition to whatever hit it because you couldn't put it all in tax-deferred retirement accounts). I hope interest rates return to something sane, but we can't assume that.

In contrast, if that extra money paid off a house, it's implicitly "paying your rent" ... except that it's not an actual income flow, so it's not taxed at all! You just pay property tax, whose increases are capped because you're just an elderly person whose estate shot up in value.

Plus, factor in rentals being generally targeted a lower-income people (or high-income yuppie singles) and therefore less desirable neighborhoods and less optimal for your lifestyle and it's looking steadily worse -- definitely need more than 3.5% for the break-even point (which would have to be the real, not nominal return anyway).

[1] https://news.ycombinator.com/item?id=11027774

Re: The Rise of Renting in the U.S

#182

Post by javanix »

awakeasleep wrote: post #154
kazinator wrote: post #110

This article is full of "no kidding" like, oh: > In fact, metros with greater shares of renters have higher wages, higher productivity (measured as economic output per capita), and greater concentrations of high-tech firms, according to Mellander’s basic correlation analysis. People are attracted to where the jobs are, and so everything gets bought up and inflated, and the late comers have to rent. In related news, y…

Property taxes should basically kill the dream of "and don't pay a fucking thing to anyone" for anyone that lives in the US. Especially city dwellers. I was surprised to see tax for properties I could technically afford cost more per year than I had been paying in rent.

Well, in some areas, but it really depends on the market - the property taxes on my home in a University city of 200,000 are 1/3 of what I was paying in rent - with the interest on my mortgage the amount of "lost" money comes out to roughly the same amount for now.

As long as property taxes do not outstrip my interest rate, that ratio should stay in my favor going forward.

Re: The Rise of Renting in the U.S

#183

Post by rm_-rf_slash »

Kluny wrote: post #173
rm_-rf_slash wrote: post #129

Earlier quoted context omitted.

You are dead right about small cities. There are like 3 landlords aside of the (big) colleges where I live, and rent is a nightmare. It doesn't help that one very infamous landlord prefers to leave storefronts in vital communities vacant instead of lower the rates, just because he still makes money by leveraging his properties for his investments in China.

Sounds like Vancouver, or maybe Victoria. I wish they would tax the everliving fuck out of vacant storefronts. Whatever price the owner intends to rent for, they have to pay that amount to the city every single month the place is vacant, with strict enforcement and publishing the rent prices so that they can't jack it up once someone moves in. And let the tax money go to homeless shelters for all the people who are o…

That's a good idea. My proposal is a "mega-landlord tax," which has a progressive property tax levied on all properties owned for rent after the first 5-10.

Re: The Rise of Renting in the U.S

#184

Post by gozur88 »

JustSomeNobody wrote: post #68
csomar wrote: post #38

Earlier quoted context omitted.

Apples to Oranges. If you are renting you are prioritizing the location rather than the house. You can't find a house with your ideal gym, but you can't change your city to New York city. The way I see it: If you don't plan to live in that place for the next 15-20 years, then you shouldn't buy. You can always invest your money in more liquid assets.

The money you're not using to pay rent you mean?

I don't know how it works most places, but when I bought my first house my payment was almost double what I was paying to rent the apartment I vacated.

Re: The Rise of Renting in the U.S

#185

Post by roymurdock »

taurath wrote: post #162
lowglow wrote: post #64

I've sorta turned my back on the standard american dream. Racing to new areas of growth, working to build someone else's dream, getting paid well immediately for performance, paying high rent, etc to afford the image of success, and making friends that participate in this same high ambition culture. Instead of making markets, markets start making you. All the rules, and "norms" we've collected around ourselves to par…

This is a big generational thing. My brother and I have been there as our parents moved us out to the country to buy a big house, my dad work his life away for a bigco only to be laid off 3 years before his retirement, and now they sit in their house with a lot of stuff and very few hobbies and not much of a social group. We've seen how far striving can take you, and the real cost of the sacrifices you make for posse…

Well, they earned the financial stability to raise you and your brother and put you through school, which I'm they wouldn't consider a waste.

It's a competitive world we live in, and I often feel like I'm wasting every minute that I'm not actively working towards learning something new/planning my next cool experience/my next job opportunity. I wonder when I'll have the time to settle down and raise a family. Hopefully we can let some of the hot air out of housing market to make starting a stable, nuclear family somewhat tenable again in the near future.

Re: The Rise of Renting in the U.S

#186

Post by rpgmaker »

timmaah wrote: post #122
seivan wrote: post #89

Earlier quoted context omitted.

How does it work with having a companion. It might be easier to find someone with the same outlook. But if you're already in a relationship it's going to be an uphill battle.

My wife was into it 100%. We sold the big expensive house and moved into a 25' Airstream almost 4 years ago. I felt like I wasn't getting ahead. A bit stuck. I know she did as well. A bit different from the grandparent we still work a normal 40 hour week with normal (remote) jobs but have kind of checked out of the normal american dream. http://i.imgur.com/FQfQIlu.jpg That little dot in the middle is where we are spe…

Where you already working the job and then talked management into letting you work remotely? Also, do you use some form of satellite comm service in order to get internet connectivity in remote areas? I'm interested in knowing how people go about getting these (apparently) high paying remote jobs...

Re: The Rise of Renting in the U.S

#187

Post by ryandrake »

turar wrote: post #156
JackFr wrote: post #142

Earlier quoted context omitted.

> On top of that, it also depends where you think the interests rates will be in 10-20 years from now. If you believe that they will be higher than they are currently, then that's even more reason to keep that loan locked in for 30 years instead of paying it off sooner. That makes no sense. You'll be better off paying a lower interest rate than you would be not having a loan in a high rate environment?

Remember, the loan is locked in. Everything around you may be a high rate environment, but your loan is still 3.5% when regular bank savings account would be paying, say 7%. So, if you bought shares of an Emerging Markets ETF [1] with the money that you would have otherwise paid for accelerated mortgage payments. Today these shares are paying you around 3.5% in dividends alone. Fast forward ten years to a high rate e…

You need to discount your calculations because your ETF is not risk free.

Re: The Rise of Renting in the U.S

#188

Post by Mikeb85 »

Not a big surprise. Whether or not people want to admit it, economists like Piketty, and many others (even Marx) have predicted this. And the trend isn't going to stop.

The future is looking more and more like Elysium than Star Trek...

Re: The Rise of Renting in the U.S

#189

Post by Grishnakh »

toomuchtodo wrote: post #95
seivan wrote: post #89

Earlier quoted context omitted.

How does it work with having a companion. It might be easier to find someone with the same outlook. But if you're already in a relationship it's going to be an uphill battle.

I might be able to answer that. My wife and I are early 30s. I spent my 20s in the rat race, working 60-80 hour weeks for material possesions (nice vehicle, luxury townhouse, etc). At some point, I got tired of it and said, "Can we try something different?" I switched to a fully remote job. We disposed of the townhouse (no equity in it). We downsized our lives (1 car! I ride a bicycle everywhere! You would not imagin…

Yeah, but where do you find the right partner? Lemme guess, you found yours in college, or around that age.

I have to go the opposite way: I'm recently divorced (I violated your Rule 1), and currently living just a bit too far from a major metro area for women there to want to date me, and there's absolutely zero women around here I have any interest in. So my next move is to move into the metro area, as close to downtown as affordable (considering both rents/CoL and job availability/location), because if I want to have a social life at all, that's where I have to go to find available women in my age range who I would consider dateable.

The other problem I see with your plan is that it sounds like you might not have any other friends or family (kinda hard to bring your friends with you on a 5-year sailing trip). I did that with my last wife: I didn't have any friends besides her, and moved around several times with her because of her career, and I think I got tired of her (it didn't help that we had some compatibility issues). Most common advice about marriage seems to include something about having friends outside the marriage. Living in a city gives you better access to that; living on a sailboat virtually guarantees you won't.

Re: The Rise of Renting in the U.S

#190

Post by superuser2 »

lowglow wrote: post #64

I've sorta turned my back on the standard american dream. Racing to new areas of growth, working to build someone else's dream, getting paid well immediately for performance, paying high rent, etc to afford the image of success, and making friends that participate in this same high ambition culture. Instead of making markets, markets start making you. All the rules, and "norms" we've collected around ourselves to par…

I'm not sure it's the "American Dream" you're arguing with. To my understanding that phrase specifically refers to owning a home in a suburb. It is formulated explicitly against having a landlord, living paycheck-to-paycheck, and living in an urban center.
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