Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Renting is Throwing Money Away, Right? (2015)

affordanything.com

Post reply on HN
Print view View original

141–150 of 497 posts

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

#141

Post by s17n »

klipt wrote: post #63
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…

> 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. But if inflation is 3%, you're probably paying 3% (or more) interest on your loan. So suppose your home costs X. You pay 0.2X downpayment and borrow 0.8X through your mortgage. The first year your home appreciates to 1.03X but you also pay around 3% o…

There's no such thing as a margin call on a mortgage.

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

#142

Post by jo909 »

phamilton wrote: post #70
klipt wrote: post #63

Earlier quoted context omitted.

> 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. But if inflation is 3%, you're probably paying 3% (or more) interest on your loan. So suppose your home costs X. You pay 0.2X downpayment and borrow 0.8X through your mortgage. The first year your home appreciates to 1.03X but you also pay around 3% o…

That's fair. It definitely underscores the actual point of the article which is "You should run your own numbers rather than believe 'conventional wisdom'". I'd love to see some analysis (perhaps a monte carlo sim) on how the "no recourse" angle plays out. I can only assume that a floor on losses skews the expected outcome significantly.

It underscores how little you should trust your own numbers (or numbers from strangers on the internet). Forget one small factor and the whole picture shifts a lot.

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

#143

Post by ironjunkie »

Love that article, This is one of my favorite dinner conversation and I'm always shocked to see how most people never question the whole "buying a house" social construct.

Once you do the math, you start to realize that most of it is a fallacy, and that in most cases you are way better off renting a place.

Something else that people forget is that they tend to buy a house way bigger than what they actually need. Typically a young couple would be ok living in a one bedroom, but usually would prefer to buy a house with 3 bedrooms. This means that they are now paying a mortgage (and downpayment) for something way bigger than what they need and therefore losing an even bigger opportunity cost.

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

#144

Post by conceptpad »

Ajedi32 wrote: post #118
Simulacra wrote: post #81

Earlier quoted context omitted.

My renter pays for my mortgage which includes principal and interest, landlord insurance, and taxes. Not to mention an additional $380 a month and profit that I put towards the principal and my 401(k).

This is perhaps the biggest argument in favor of ownership. Unless your landlord is _losing_ money on the deal, the price of rent takes _all_ other costs of ownership into account and then adds more on top of that. If you're renting, you most certainly _are_ losing money on the deal vs. what you'd pay if you owned _exactly_ the same property.

That's the simple logic of rent vs. buy, but as the article details, there are other considerations. Opportunity cost being one primary cost that you're not taking into account. To me the most important question is the most fundamental: "Am I a real estate investor?" - I am not, and the overwhelming majority of persons are not. And yet the moment we purchase a home, we become real estate investors. In my case the simple fact that I've only purchased one property in my entire life means that I'll do it with less education and awareness than my landlord did when he purchased the home I currently, comfortably, live in. I think my landlords own and rent more than a few properties, and they do a great job of managing them. I am not confident that I would manage this asset as well as the professionals do, and so I cannot claim that were I to buy this home from them with a mortgage, that I would gain anything. In my opinion this is the key fallacy within the argument favoring the Buy option.

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

#145

Post by mstaoru »

To me, renting vs. buying is a bit like AWS vs. own bare metal in a rack.

With AWS, you can have 1G RAM or 10000G RAM or anything in between, you can move between data centers without much trouble, and you can cancel virtually anytime. Once you spent $$$ on your own metal, you're stuck with it.

Renting gives so much flexibility, and even if it's a bit more expensive in the long run, flexibility pays. Of course, there are scenarios when you don't want to rent e.g. having kids or elderly parents living together.

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

#146

Post by jpatte »

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.

FYI my wife and I signed for a mortgage 4 months ago here in France for our new home. 325k€, 25-year, 1.66% interest rate, 0.8% insurance rate for complete coverage of the both of us. Both fixed rates.

The rates were actually going up at that time - if we could have borrowed 6 months earlier we would likely have had even better rates. Also if you can borrow for a shorter period of time the rates get much lower.

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

#147

Post by Etheryte »

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…

How can you expect anyone to take you seriously when you outright say you didn't read large portions of the article and then try to make a point on how those very points are flawed?

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

#148

Post by hvidgaard »

klipt wrote: post #63
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…

> 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. But if inflation is 3%, you're probably paying 3% (or more) interest on your loan. So suppose your home costs X. You pay 0.2X downpayment and borrow 0.8X through your mortgage. The first year your home appreciates to 1.03X but you also pay around 3% o…

What all professionals do, and what all potential home buyers should do, is run the actual numbers of expenses that is purely property taxes, interest, fees, expected maintenance, bills such as heating and electricity, and other related expenses not specifically reducing the amount of debt. That is the price of living in the house - compare that to renting a place.

The difference between owning and renting expenses, is what you should compare to the risk/reward analysis of the property value.

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

#149

Post by zw123456 »

pwinnski wrote: post #137
zw123456 wrote: post #108

I recently did the math on this myself, I just sold my Condo and right now I am renting while looking for a house. I have all cash so I can ignore interest rates which makes it easier, I also have a pretty good wealth manager so I have a pretty good idea of what my return will be if I invest the money in stocks and bonds and rent rather than buying a house. For me, renting comes out ahead strictly looking at the doll…

In Dallas, renting is generally more expensive than buying, and yet I'm still happily renting. In fact, I'm moving next month from my current 3-bedroom 1500 sq ft apartment to a (slightly-nicer) 2-bedroom 850 sq ft apartment, and cutting my monthly payment by more than a third. I previously rented a 3-bedroom 1500 sq ft house that was slightly more than the big apartment, and before that I owned an even bigger house…

Ya, sometimes there is more things to consider than just the money, depending on your priorities.

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

#150

Post by halfjoking »

littlestymaar wrote: post #130

> 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 n…

> the government subsidizes large industry X to charge American consumers a lot more

This is basically how American government works.

Post reply on HN