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Renting is Throwing Money Away, Right? (2015)

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

#121

Post by phamilton »

pfarnsworth wrote: post #119
usaar333 wrote: post #109

Earlier quoted context omitted.

A few notes: Deductability of interest (and property tax) is a lot smaller than it was before with the new tax code. On a $1M house for a married couple, you might get ~$9k back but (in CA) that's offset by the $12k (EDIT: likely non-deductable due to SALT max) property tax. Anyway, using my own calculator ( https://medium.com/@usaar33/an-up-to-date-buy-or-rent-calcul... with other defaults), the situation you descri…

Property tax is deductible up to $10k.

eh... property tax AND state income tax.

Living in CA with near 10% marginal state income tax above $100k means that if you're buying a $1M home you're probably hitting the 10k without property tax.

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

#122

Post by [deleted] »

pfarnsworth wrote: post #119
usaar333 wrote: post #109

Earlier quoted context omitted.

A few notes: Deductability of interest (and property tax) is a lot smaller than it was before with the new tax code. On a $1M house for a married couple, you might get ~$9k back but (in CA) that's offset by the $12k (EDIT: likely non-deductable due to SALT max) property tax. Anyway, using my own calculator ( https://medium.com/@usaar33/an-up-to-date-buy-or-rent-calcul... with other defaults), the situation you descri…

Property tax is deductible up to $10k.

[deleted]

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

#123

Post by suff »

It's less important to point out that bad real-estate deals exist. No one is debating that. Nor is anyone debating the sliding scale that shows your first year is mostly interest. ASLO, no one (even the OP) is debating (assuming you are savvy enough to avoid a bad deal) that in 30 years, home owners have a massive nest-egg, not to mention 30 years of effectivley fixed monthly payments (even if taxes go up slightly).

Would LOVE to compare net worth with the OP.

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

#124

Post by conanbatt »

IncRnd wrote: post #42

Rent payments are set high enough to pay the owner's mortgage and give them a profit. If you already need to pay a mortgage, why not buy the house to get the interest deductions and equity?

Rent can never be lower than mortgage payments for the same property because then the bank would never give out mortgages and would just buy up all the properties.

Rent can be higher than the mortgage payment of a portion of the house, but not to the mortgage payment of the entirety of the house.

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

#125

Post by phamilton »

gonehome wrote: post #107
phamilton wrote: post #41

These articles always ignore leverage. Generally, with 20% down you are leveraged 5:1. So even if your home is just keeping pace with inflation of 3%, you actually experience 15% growth on your investment. To use the example in the article, if your investment doubled between 2009 and now, your $200k in a $1M home just became 1.2M. 6x growth beats out 3x growth in stocks in the same period. Sure, you can be leveraged…

I’m not following the leveraged point - why is a 3% increase equal to 15% growth? In the Bay Area HOA fees plus property tax add up to nearly my existing rent even before considering a mortgage which has made me nervous to buy. I’d be banking entirely on the upward trajectory of the market for it to be a better bet than renting with roommates.

> better bet than renting with roommates

Why not both?

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

#126

Post by conanbatt »

bane wrote: post #103

The answer in most cases is "yes". This post is full of the kinds of flawed arguments that usually accompany pro-rent arguments -- which do a real disservice in identifying those cases where the answer is "No". Breaking down the problems by section: Equity "Here’s the rub: Only a small slice of your mortgage payment builds equity. " There you go, the article defeats itself not even a full screen below the correct ans…

> In other words, at the end of 30 years, the rent may have made more money in some scenario of a perfect investor, but then they still have to rent to have a place to live. The homeowner now owns their property free and clear and can do all kinds of things with it, and their now future income is entirely liquid.

Not perfect investor, any investor that put their money in an index fund. Vanguard had a trillion and a half assets in 2010~ and those assets tripled while houses doubled.

Edit: I took a look at the link you provided below and its not thorough. The author should have found something weird in the fact that in the calculations he concludes that being a property owner is 1.6 million richer than the renter, and not meaning that inequivocally everyone would conclude that renting is so bad it should be illegal.

The most glaring mistakes are that he takes mortgage payments and renting as the same, which cant be true in a reasonable market, and that the renter starts with 0 while the mortgage taker starts with the downpayment.

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

#127

Post by clappski »

phamilton wrote: post #94
codedokode wrote: post #60

> You hold a 5 percent fixed-rate 30-year mortgage. Is that really so? I've read that the mortgage interest rates are around 2-3% in Europe (by the way, in Russia they start from 9%-11% and can be as high as 15%). > A house in 1897 cost the same as a house in 1997, adjusted for inflation. It is hard to believe, given new technologies that are supposed to make it cheaper. Also what the author didn't take into account…

> I've read that the mortgage interest rates are around 2-3% in Europe From what I understand, these aren't fixed rate 30-year. The rate can change year to year. The US is unique in offering one interest rate that will be consistent for 30 years.

You can get variable and fixed rate mortgages in the UK, fixed typically have higher interest rates but obviously variable can outpace it depending on markets.

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

#128

Post by shin_lao »

phamilton wrote: post #41

These articles always ignore leverage. Generally, with 20% down you are leveraged 5:1. So even if your home is just keeping pace with inflation of 3%, you actually experience 15% growth on your investment. To use the example in the article, if your investment doubled between 2009 and now, your $200k in a $1M home just became 1.2M. 6x growth beats out 3x growth in stocks in the same period. Sure, you can be leveraged…

Did you read the article?

In the beginning: "I empower you to conduct your own analysis and make your own decision, based on your own circumstances, rooted in logic and math."

And later "Your Special Snowflake circumstances don’t change the fact that everyone is responsible for analyzing their own variables. Don’t base the biggest purchase of your life on an intellectually lazy cliche."

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

#130

Post by littlestymaar »

> You hold a 5 percent fixed-rate 30-year mortgage

Wait, are you Americans paying 5% interest on mortgage, whitout even counting insurance? For real?!

Edit: Having looked at other comments in this thread, it looks like interest are taxe-deductible, which makes it more affordable, but that's also really weird: it means the gouvernment subsidizes financial institutions to charge American consumers a lot more than the normal prize …

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