The Rise of the Rich Renter • Hacker News Board

Re: The Rise of the Rich Renter

#41

Post by johntiger1 » Sat, Oct 07, 2017, 9:34 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…

I saw an article recently about how an American immigrant was purchasing a home in Germany and was actually forced to pay LESS by the housing authority! Despite German economic strength, house prices are not outrageous. Whatever Germany is doing, they are doing right

Re: The Rise of the Rich Renter

#42

Post by hiram112 » Sat, Oct 07, 2017, 9:35 PM UTC

Mid 30's guy - make over six figures, no wife, kids, or other expenses. I could easily buy my own modest home with cash, but instead I pay about $2K for a tiny studio in the middle of an expensive city.

I actually have been looking to buy a home in my high COL East Coast city this year, and here is why I'm holding off on it:

1. An actual 'home' like I grew up in with a few bedrooms, garage, yard, etc. within a one hour commute to most jobs would be $750K. Maybe I could get that down to $400K with a 2 hour each way commute. That's simply way too much money (taxes, insurance, upkeep) for a single guy, and the commute isn't worth it anyway.

2. I could buy the same type of tiny studio / one bedroom where I live for about $500K - way more than I'm paying for renting, all things remaining equal. In other words, renting is lower cost than owning at the moment.

3. I could buy the same tiny condo with an hour commute for $250K, but then I'm stuck there. The equity I gain is minimal since half the costs (about $1k / month) are HOAs, taxes, insurance, etc which will only go up over time.

When it's all said and done, there is almost no reason for someone like me to own. If I had a wife and kids, maybe. But as a single guy no way.

The low interest rates of the fed and lack of new construction ( NIMBY) have again pushed up prices to 5x-6x the median family income in my area - about as high as 2006. Mortgage interest deduction is worth almost nothing because rates are so low (contrary to the Realtor and mortgage industry), and it may be going away anyway.

Jobs aren't stable enough where I'm comfortable being tied to one area. In our industry, even if your company doesn't lay you off or go under or whatever every 3 years, it's a bad idea to get to comfortable with one way of doing things - one framework, language, stack, etc. You need to keep jumping jobs if you ever want a raise.

Nor do I feel like being tied to one locality or another when it's apparent many of them are woefully underfunded with their pensions / health insurance for retirees. Gouging home owners for higher property tax bills will be the main way they balance their books.

Re: The Rise of the Rich Renter

#43

Post by jeffdavis » Sat, Oct 07, 2017, 9:36 PM UTC

walshemj wrote: post #32

jeffdavis wrote: post #26

Earlier quoted context omitted.

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.

not if you run it as a property company and not directly own them

Can you please explain?

Re: The Rise of the Rich Renter

#44

Post by bradleyjg » Sat, Oct 07, 2017, 9:37 PM UTC

htormey wrote: post #38

If you are in an apartment with rent control it really changes the rent/buy equation. I’ve lived in a two bedroom rent controlled apartment in San Francisco for the last 7 years. I pay significantly below market rate for rent. I also have enough to afford a down payment on a house here. Their is no incentive for me to purchase a house unless I lose my rent controlled apartment and even then I probably wouldn’t buy. I…

Rent control unbundles the bundle of rights that is property ownership. The result from the renter's perspective is a hybrid between tenancy and ownership.

It's not the only way to unbundle it either. Consider the more traditional life estate, for example.

Re: The Rise of the Rich Renter

#45

Post by monort » Sat, Oct 07, 2017, 9:38 PM UTC

walshemj wrote: post #6

seqastian wrote: post #5

Earlier quoted context omitted.

Cause they can't find other save investments and have cash burning in their pocket.

Why are not stocks /funds on the LSE NYSE the same unless the cash is from the black market and they cant pass money laundering regs?

I think upcoming CRS (the global version of FATCA) is one of the reasons. Investment accounts will be reported to homeland automatically.

Re: The Rise of the Rich Renter

#46

Post by nerfhammer » Sat, Oct 07, 2017, 9:39 PM UTC

rentcontrol wrote: post #35

nostrademons wrote: post #23

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 w…

The difference is that with average appreciation rates in California, when they sell they get all of their money back (minus fees, of course). You? Well, you had a place to stay. As long as appreciation + inflation over the period you stay in a house you buy is greater than your interest rate, buying a house is effectively free (minus the downpayment). People bring up maintenance, however this is already taken into a…

this is sort of like an intergenerational pyramid scheme. what could possibly go wrong

Re: The Rise of the Rich Renter

#47

Post by rentcontrol » Sat, Oct 07, 2017, 9:46 PM UTC

nostrademons wrote: post #39

rentcontrol wrote: post #35

Earlier quoted context omitted.

The difference is that with average appreciation rates in California, when they sell they get all of their money back (minus fees, of course). You? Well, you had a place to stay. As long as appreciation + inflation over the period you stay in a house you buy is greater than your interest rate, buying a house is effectively free (minus the downpayment). People bring up maintenance, however this is already taken into a…

You can't count on that appreciation going up forever, though. Once the number of buyers or wealth of buyers declines, home prices will too. I look at a lot of the houses here and see Detroit in 50 years. I moved here in 2009 and there was a big drop in house prices then, enough that everyone who bought in the boom years of 2004-2007 went underwater and many were foreclosed upon. Yes, I'm kicking myself for not buyin…

Unless all of your money was in Google stock options, in the example mentioned earlier, one could buy a house and have Google stock options, so...

Re: The Rise of the Rich Renter

#48

Post by gerdesj » Sat, Oct 07, 2017, 9:47 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…

I used to be a British Army brat in (West) DE ('70s-80's) and my received wisdom was that Germans would generally rent and save up for ownership of a property out of town for retirement. Whereas us Brits would aspire to home ownership earlier.

All of that is obviously bollocks, sort of.

As another ahem European, I'm more interested in a German's views on home ownership and why I'm commenting here.

You said: "That's why we haven't bought and I don't want to." implying it is all about tax. I'd be intrigued to explore this farther. You mentioned earlier "The taxes alone for "owning property" i.e. renting it from the government until you die are extremely high" - could you clarify that.

Re: The Rise of the Rich Renter

#49

Post by barrkel » Sat, Oct 07, 2017, 9:49 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…

Property taxes as a brake on house prices make sense, and since we all need to pay taxes, they can be revenue neutral should the government structure them that way.

The way it seems to work in the Anglosphere is that house prices are mainly limited by the cost of money. When interest rates are low, long mortgages for enormous sums are affordable so people bid up the cost of desireable places to live. But it's a zero-sum game - increased property prices don't create more land in the desireable area, and due to planning laws and nimbyism they usually don't increase density much either. Everybody works harder and pays more for approximately the same distribution of physical assets - except for the windfall for people who got in early, who turn into a political support base for parties that then need to keep house prices propped up. And the cycle needs to continue, otherwise those mortgages would have negative equity.

Re: The Rise of the Rich Renter

#50

Post by htormey » Sat, Oct 07, 2017, 9:53 PM UTC

hiram112 wrote: post #42

Mid 30's guy - make over six figures, no wife, kids, or other expenses. I could easily buy my own modest home with cash, but instead I pay about $2K for a tiny studio in the middle of an expensive city. I actually have been looking to buy a home in my high COL East Coast city this year, and here is why I'm holding off on it: 1. An actual 'home' like I grew up in with a few bedrooms, garage, yard, etc. within a one ho…

This plus rent control is very similar to my situation in San Francisco.

The only thing which would change this is if I had kids.