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Renting is Throwing Money Away, Right? (2015)

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Re: Renting is Throwing Money Away, Right? (2015)

#13

Post by saosebastiao »

dyarosla wrote: post #9
code4tee wrote: post #5

The financial arguments assume one only pays the minimum mortgage payment amount. Many people add a bit extra each month which can quickly turn a 30 year mortgage into a 9-12 year mortgage. It also ignores many of the other benefits of owning, such as having a lot more say over what you do with the propert and not always having to worry about rent increases or what happens when the lease ends. The rent vs buy equatio…

"...and honestly sounds like someone trying to justify their decision to not own property." The author literally states that they are a homeowner themselves.

Not just a homeowner but a real estate investor.

https://affordanything.com/how-we-made-43211-67-in-passive-i...

Re: Renting is Throwing Money Away, Right? (2015)

#15

Post by dkural »

Mortgage interest tax deduction, especially for high-tax-bracket people, is often a major factor in calculating returns and should not be looked over for any 'opportunity cost' based arguments. It's also worth noting that most people, compared to a mortgage, don't have access to similar financing at similar interest rates for any other kind of investment/venture and have no hope of breaking out of a month-to-month living situation. 15 years may seem long, but eventually owning a home & not paying rent during retirement, having an asset to borrow against for a child's college or a health emergency, is a decent prospect for most people.

Re: Renting is Throwing Money Away, Right? (2015)

#16

Post by jimmy1 »

When the goal is to have a roof over your head, between renting or buying, the better option is to buy. If the goal is to invest wisely, of course buying a house is worse than say something like an index fund. But the problem is: I can't sleep in an index fund. A house isn't a depreciating asset. Renting is not an asset at all. Mortgages are fixed. Rent tends to frequently increase, skyrocketing at worse.

This article takes the very common scenario: 30 yr mortgage at market interest rate to compare to renting. Even on these terms its still lopsided. What about the people who do 15 year mortgage? What about those with large down payments? What about those who pay a little extra to their mortgage each month?

The overall home market keeps with inflation, but in markets where the land is trending towards scarcity, you are poised to make money as what happened in my first home. I like to think those who were lucky to purchase a house in the valley area before the extreme scarcity made a nice profit if they decided to sell.

The author fails to find a third point: in many cases, owning is cheaper than renting, especially in my city and cities like it. Rent here is around 1300 for a 1 bedroom 500 - 900 sqft apartment, depending on where you live. If you want multiple bedrooms, well now you are in 1800-2000 territory for 1300 sqft. You can own a 1800 sqft house for about 850 a month. You can put away half of your savings from rent for unexpected expenses, and use the other half to pay the mortgage off sooner, or you can spend it, either way it's roughly half the cost.

Re: Renting is Throwing Money Away, Right? (2015)

#17

Post by KillerRabbitt »

ouid wrote: post #12

Rent, in an arbitrage free economy, should be exactly equal to the interest on the mortgage plus wear and tear on the house.

There is an old story about a financial economist and passionate defender of the efficient markets hypothesis (EMH) who was walking down the street with a friend.

The friend stops and says, "Look, there is a $20 bill on the ground!"

The economist turns and coolly replies, "Can't be. If there was a $20 bill on the ground, somebody would have already picked it up."

Re: Renting is Throwing Money Away, Right? (2015)

#18

Post by chrisabrams »

saosebastiao wrote: post #8
chrisabrams wrote: post #3

As a technologist who is a part-time real estate investor, this article, like many others, fails to take into account the context of the situations that people can face. There are plenty of situations where buying is better than renting, and plenty where renting is better than buying. One major concept that breaks the traditional buy/rent arguments is that today we have the internet which creates a new type of opport…

> As a technologist who is a part-time real estate investor, this article, like many others, fails to take into account the context of the situations that people can face. There are plenty of situations where buying is better than renting, and plenty where renting is better than buying. I think the article very adequately explained exactly what you're talking about. Did you read it all the way through? It's pretty lo…

Sure everyone should take into account their own situation, but assuming that most situation are going to pay the minimum each month...the author's math is very misleading.

Re: Renting is Throwing Money Away, Right? (2015)

#20

Post by cVwEq »

Reminds me of a Harvard Daily Stat from 2012, inspired by Zillow data, which comes to a different conclusion. The Zillow data was based on a larger sample size as compared to the article above, which I felt was too qualitative.

The Daily Stat: After Just a Few Years, Home Ownership Beats Renting[1]

In three-quarters of American towns and cities, it takes 3 years or less for a homebuyer to begin seeing savings over the cost of renting, according to a CNN report on data from Zillow[2].

Factoring in such costs as mortgages, rents, down payments, commissions, taxes, and maintenance, Zillow calculates that the "breakeven horizon" is as low as two years in some areas. But in New York City, which has some of the nation's highest rents, it still takes more than a decade before ownership makes more financial sense than renting.

[1] Harvard Daily Stat, 9/12/2012 [2] http://money.cnn.com/gallery/real_estate/2012/09/06/buy-rent...

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