The Rise of the Rich Renter • Hacker News Board

Re: The Rise of the Rich Renter

#21

Post by kenhwang » Sat, Oct 07, 2017, 9:13 PM UTC

walshemj wrote: post #3

jseliger wrote: post #2

It may also be that smart rich people have gotten over the cult of homeownership: https://www.ft.com/content/00bf5968-f518-11e2-b4f8-00144feab... or http://www.slate.com/blogs/moneybox/2013/07/29/political_eco... . Or search for the term "The cult of homeownership" for more. There are well-known possible positives to owning but the negatives are vast too, especially compared to investing in an ultra-low-fee index fun…

realy so why are non residents buying housing as an investment in London Sf NY and Vancouver? And if your rich diversifying from just a me to index fund makes a lot of sense hint if the Rothschild's and other mega rich families run actively managed funds its probably a good idea for you to - I have done very nicely out of RCP on the LSE

It's very difficult for the Chinese government to discover or seize foreign property. If you illegally exported money from China, you couldn't exactly keep it in a bank where the Chinese government could claw it back. So you buy property in safe markets; housing doesn't drastically change in value (and often appreciates), the money gets "washed" in escrow by random citizens, it's very hard for housing to get stolen or lost (unlike other high value items, like precious metals, diamonds, cars), there's enough supply where the government couldn't possibly monitor all the markets, and it's high enough value where so you only need to succeed a handful of times.

Re: The Rise of the Rich Renter

#22

Post by jfaucett » Sat, Oct 07, 2017, 9:15 PM UTC

jquery wrote: post #4

Don’t kid, most people aren’t renting because they prefer it. We shouldn’t glorify unaffordability. My “rich” coworkers would largely love to own but they can’t afford the mammoth down payments, and the sky high rents plus sky high taxes make it difficult to save. “One of Aesop's best-known fables is “The Fox and the Grapes.” On its surface, or its literal level of meaning, the story tells of a fox who wants a bunch…

> Don’t kid, most people aren’t renting because they prefer it.

I can't speak for the USA but in Germany - specifically where we live, home ownership is not/barely worth it financially speaking. The taxes alone for "owning property" i.e. renting it from the government until you die are extremely high. You pay 6.5% (varies by state) of the property value in "Grunderwerbsteuer" when you initially buy and then for a home valued at around 250k (fairly normal prices) you're looking at a 2-4k per year in taxes. Throw on top of that all your upkeep costs in time and money and it really doesn't look like such a nice deal.

That's why we haven't bought and I don't want to. Nowadays, "home ownership" is just another name for renting where the costs are slightly less and the upkeep to you in time and effort is more.

Re: The Rise of the Rich Renter

#23

Post by nostrademons » Sat, Oct 07, 2017, 9:16 PM UTC

This is dual to "the rise of wealthy foreign landlords that buy homes site-unseen as investment properties."

My wife and I, despite being able to afford a home, have chosen not to buy one. Why? Because home prices in our area run at $2.7M for a 3BR [1], while we're paying $2600/month to rent a 2BR townhome. People we know who have bought are now paying $6-7K/month on housing, for something not much better than what we have (they have a yard and an extra bedroom, but we have a pool). Even with the mortgage interest tax deduction, you're still paying more on interest alone (let alone principal, property taxes, or maintenance) than we're paying in rent.

[1] This is perhaps an overestimate - it was a news story about a couple that were outbid 4 times and wanted a fairly nice property. But even so, minimum prices on a 2BR condo in the area now range around $1M+, so the math still doesn't work out.

Re: The Rise of the Rich Renter

#24

Post by tedmiston » Sat, Oct 07, 2017, 9:16 PM UTC

efficax wrote: post #15

I make a decent living, way above median household income, but my wife and I rent in a dense urban center for the simple reason that even with our income we couldn't afford to own in this area. Even if we weren't paying student loans it would take several years to build up a down payment that would result in cheaper mortgage payments than our rent burden, which would be crucial since homeownership adds property taxes…

Likewise for me. I chose to live in an apartment in the city center / startup hub (and walk to work) vs buy a house in the suburbs with a half hour commute every day. There are condos here but the market is much higher.

Re: The Rise of the Rich Renter

#25

Post by buf » Sat, Oct 07, 2017, 9:16 PM UTC

I rent simply because I cannot afford to buy in the area I desire and I refuse to commute an hour.

Re: The Rise of the Rich Renter

#26

Post by jeffdavis » Sat, Oct 07, 2017, 9:17 PM UTC

sidlls wrote: post #16

blackguardx wrote: post #12

Earlier quoted context omitted.

Rich people invest in property because they have enough money to view a million dollar condo as a diversification strategy. Property can be a good investment, but shouldn't be your only investment.

I'd take 10 houses for $200k in the Midwest over one $2m house in the Bay Area. Appreciation is lower, but rents (as a percentage of cost) are much, much better. The shortfall in appreciation can easily be made up for in better rent yield.

Consider maintenance costs, vacancies, and management fees. Those can take a huge bite out of your rental income and easily drive you into the red.

Re: The Rise of the Rich Renter

#27

Post by joe_the_user » Sat, Oct 07, 2017, 9:19 PM UTC

jfaucett wrote: post #22

jquery wrote: post #4

Don’t kid, most people aren’t renting because they prefer it. We shouldn’t glorify unaffordability. My “rich” coworkers would largely love to own but they can’t afford the mammoth down payments, and the sky high rents plus sky high taxes make it difficult to save. “One of Aesop's best-known fables is “The Fox and the Grapes.” On its surface, or its literal level of meaning, the story tells of a fox who wants a bunch…

> Don’t kid, most people aren’t renting because they prefer it. I can't speak for the USA but in Germany - specifically where we live, home ownership is not/barely worth it financially speaking. The taxes alone for "owning property" i.e. renting it from the government until you die are extremely high. You pay 6.5% (varies by state) of the property value in "Grunderwerbsteuer" when you initially buy and then for a hom…

Let me rephrase it,

People in the US aren't paying outrageous rent for tiny spaces because they think it's a great way to live.

Re: The Rise of the Rich Renter

#28

Post by matt_wulfeck » Sat, Oct 07, 2017, 9:20 PM UTC

efficax wrote: post #15

I make a decent living, way above median household income, but my wife and I rent in a dense urban center for the simple reason that even with our income we couldn't afford to own in this area. Even if we weren't paying student loans it would take several years to build up a down payment that would result in cheaper mortgage payments than our rent burden, which would be crucial since homeownership adds property taxes…

7 years of saving I believe is the average for a down payment. It doesn’t sound like your story is too outside the range of normal.

Re: The Rise of the Rich Renter

#29

Post by rentcontrol » Sat, Oct 07, 2017, 9:21 PM UTC

Personally, I ask my friends who complain about rent why they just don't change what they want, e.g. roommates, worse quality, further away, worse amenities, etc. and generally they say they want it all.

Well, unfortunately to have it all you have to pay. Paradoxically, those who want to live in the city will want to enjoy the amenities, which cost money. Money that will take them that much further from buying a house. Clearly, from the behavior they must not want a house that much.

Re: The Rise of the Rich Renter

#30

Post by walshemj » Sat, Oct 07, 2017, 9:21 PM UTC

noobermin wrote: post #11

paulpauper wrote: post #9

Here’s the upshot: rich households—those earning more than 120 percent of the metro median income—saw their renter share rise by 1.2 percent between 2012 and 2015. Since 2006, that growth was a striking 6.2 percent. The renter share among households making less than 50 percent of the median income, on the other hand, remained roughly the same since 2012. Since 2006, it grew by a modest 2.9 percent. More educated subs…

That does seem super weak sauce. Also, the "striking" 6.2% included 2008, who's to say that the even among the 1.2 X median people, that the economic hurt wasn't enough to explain the delta there?

120% of the median income is not "rich" in this day and age