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Renting is Throwing Money Away, Right? (2015)

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

#31

Post by oillio »

dkural wrote: post #15

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 li…

The article takes tax deduction into account in the calculations. It also discusses most of the other things you mention as well

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

#32

Post by dqpb »

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.

You would still have supply and demand dynamics in an arbitrage free economy. If there is too much supply, no one's going to care what your mortgage is.

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

#33

Post by hb3b »

kaishiro wrote: post #4

As a commitment averse 30-something perpetual renter I've always felt like I was "throwing money away" by renting - but having breakages, plumping, electricity, etc be someone else's problem was how I often justified it to myself. While I'm sure, like anything, the decision to rent or own is highly situational this article still gives me some hope that I haven't made every wrong decision when it comes to "build or bu…

I'm your age living in the NYC metro area and had the same feelings. I opted for a renovated co-op which only cost a few hundred K and has a maintenance charge under $1000/mo. that includes all utilities. By getting a co-op or condo you limit your responsibility to what's within the walls. Sure you'll have the occasional plumbing/electrical issue but for that you can hire a maintenance guy or neighbor. No need to worry about the big issues.

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

#35

Post by pgwhalen »

chrisseaton wrote: post #21
jimmy1 wrote: post #16

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 articl…

> owning is cheaper than renting This is the key thing! Obviously owning is cheaper than renting, as renters have to cover the costs of their landlord owning, and then some profit for them on top of that.

While this is mostly true, it’s important to understand that rents are not just “cost + profit.” They are market based. Sure, the market often pushes it towards something close to that formula, but it is not a guarantee, and many of the subtleties of buying vs renting are lost on those who reduce it to that formula.

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

#36

Post by nostrademons »

cVwEq wrote: post #20

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 th…

I'd be curious how that stat changes if weighted by population rather than municipality.

The article acknowledges that the calculus is vastly different for major metropolitan areas like SF or NYC. Thing is - a good portion of the population lives in those major metropolitan areas. It doesn't do much good to know that buying beats renting in, say, Kansas or Tennessee if you happen to live in SF or NYC.

Similarly, I wonder how they'd compare either strategy to the "Move to SF or NYC for 10 years, make bank, live cheaply, then buy 5 houses in Kansas or Tennessee, living in one and renting the rest out. Never work again."

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

#37

Post by somethingsimple »

cVwEq wrote: post #20

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 th…

I resisted buying for years, but last year my wife convinced me we should buy a condo and I don’t regret it. We bought a unit with the same square footage as the place we rented, in a better location, and mortgage + property taxes + insurance is less than what we paid in rent, and that rent was only going to continue increasing every year. With a mortgage we fixed our biggest monthly expense.

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

#38

Post by progre »

gefh wrote: post #24
saosebastiao wrote: post #13

Earlier quoted context omitted.

Not just a homeowner but a real estate investor. https://affordanything.com/how-we-made-43211-67-in-passive-i...

Ah, so he's trying to reduce the competition :)

Paula sounds like a womans name

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

#39

Post by flukus »

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…

> The financial arguments assume one only pays the minimum mortgage payment amount.

They also tend to ignore that mortgage repayments remain static while rent goes up, that interest payments goes down if you pay in advance (offset accounts) and that once it's all payed off your rent is $0.

A mortgage for a home within my means is one of the best financial decisions I've ever made.

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

#40

Post by lsc »

Look at the author's "history of home prices" graph (that amusingly is from 2006)

The author cites that graph, then goes on to make the claim that housing costs rise with inflation. The graph certainly doesn't look like any reasonable measure of inflation I have ever seen.

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