Renting is Throwing Money Away, Right? (2015) • Hacker News Board

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

#241

Post by BoorishBears » Mon, Apr 23, 2018, 9:59 AM UTC

ShadowFaxSam wrote: post #220

maccard wrote: post #216

Earlier quoted context omitted.

If you had moved to Europe with a lease, you probably wouldn't have been able to hand over the car and walk away (unless you were at a certain point in the lease), so you would have been on the hook for the lease payments.

True, but the average term of a lease is only 24-36 months while the length of term for financing a car is 60-84 months. (I had a 72 month plan). So you can get out of a lease much earlier, and if you do exit early, you typically only have to make the next 6 months of payments.

To be fair, not long ago 24 months was the common loan term.

Now people are getting 7 year and even 9 year loans. We live in a time when you can finance a 400$ watch for 2 years.

The renewed focus on chipping away at people’s monthly income is almost impressive.

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

#242

Post by BoorishBears » Mon, Apr 23, 2018, 10:00 AM UTC

loxs wrote: post #240

digianarchist wrote: post #239

What I really want as a renter is not to buy a house but to protect myself from rises in the residential housing market in whatever area I'm living. I want to invest a portion of my income that will grow when the housing market grows. That way I can continue renting but hedge against big swings should I want to buy in the future.

How do you protect yourself from drops in the local housing market? Especially if you have a mortgage?

Isn’t the idea that you don’t worry about it? You’ll still have your home.

On the other hand, if the market explodes and renters who are paying prices below market start getting forced to pay more or move out, you’re left with no options

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

#243

Post by lotsofpulp » Mon, Apr 23, 2018, 10:01 AM UTC

phamilton wrote: post #204

garmaine wrote: post #134

Earlier quoted context omitted.

> 6x growth beats out 3x growth in stocks in the same period Was that a typo? Average market returns are much higher than that.

The article states that since 2009 the stock market has tripled while housing markets have doubled. I'm just reassessing that example with 5x leverage.

I find it hard to believe if even the majority of housing markets have doubled. Economic growth mostly seems contained to a few established and up and coming cities.

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

#244

Post by loxs » Mon, Apr 23, 2018, 10:02 AM UTC

BoorishBears wrote: post #242

loxs wrote: post #240

Earlier quoted context omitted.

How do you protect yourself from drops in the local housing market? Especially if you have a mortgage?

Isn’t the idea that you don’t worry about it? You’ll still have your home. On the other hand, if the market explodes and renters who are paying prices below market start getting forced to pay more or move out, you’re left with no options

Yeah but if the market collapses and you lose your job, you'll be forced to sell at a huge loss

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

#245

Post by neffy » Mon, Apr 23, 2018, 10:04 AM UTC

He's assuming that the rent stays constant.

A lot of what he says is correct, but this is a critical point. Buy, with a standard compound rate mortgage, and you essentially freeze your rental payment. Yes, for the first few years of the mortgage you won't pay back much equity - but you can compensate for that if you overpay your mortgage (make sure terms and conditions allow you to do this without penalty), say by the amount your rent would have otherwise increased. Do that, and you can make quite a dramatic difference in the cost, and the duration of the mortgage...further reducing your rent.

Broadly, house prices track the money supply growth, and money supply growth is approximately 2x a decade in the USA. Unless you're moving a lot, it is usually better to buy if you can.

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

#246

Post by scarface74 » Mon, Apr 23, 2018, 10:05 AM UTC

ProAm wrote: post #90

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…

Your forgetting the tax write off of mortgage interest. Which needs to go into you equation no? That can be sizable.

Not really. The average home price in the US is $200K (https://www.cnbc.com/2017/06/29/what-the-median-home-price-o...). You would have to buy a house with a mortgage of over $500K as a couple to make the interest more than the standard deduction. If you include the $10K cap on state taxes and property taxes, still with the average household income being 60K, most people won't be taking advantage of the mortgage interest deduction.

The standard deduction is $24K for a couple.

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

#247

Post by quickthrower2 » Mon, Apr 23, 2018, 10:06 AM UTC

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…

1,2,3 don't apply in Australia. Here are some things do that apply in Australia, that are advantages, but not sure about the US:

1. Primary Residence has no Capital Gains Tax 2. Can rent out Primary Residence for up to 6 years at a time and keep it exempt from CGT. 3. Pension eligibility ignores Primary Residence value. So you can own a $1m house, $0 cash and get the pension. But $100,000 cash and renting you are SOL.

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

#248

Post by scarface74 » Mon, Apr 23, 2018, 10:07 AM UTC

dingaling wrote: post #187

ProAm wrote: post #90

Earlier quoted context omitted.

Your forgetting the tax write off of mortgage interest. Which needs to go into you equation no? That can be sizable.

That's a uniquely American benefit. Most Western mortgage-payers have to pay out of post-tax income.

As well as most Americans. You can either take the standard deduction of $24,000 as a couple or itemize. Most Americans don't buy homes where the interest is high enough to be over the standard deduction.

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

#249

Post by quickthrower2 » Mon, Apr 23, 2018, 10:09 AM UTC

A point that is not mentioned is being smart about where you buy your house. If you can do some research and estimate the future demand for the area you are buying, buy a place with more of the cash going into the land value than the residence, not buy brand new (generally) etc. then your carefully chosen residence/investment might beat the stock market especially when leverage is applied.

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

#250

Post by lotsofpulp » Mon, Apr 23, 2018, 10:10 AM UTC

code4tee wrote: post #97

monkmartinez wrote: post #78

Earlier quoted context omitted.

I own my home in a relatively cheap COL area... I would rather rent. Houses nickel and dime you to death. The expenses pile up at both the front and back of the transaction... that is, when you buy and finally sell. Please show me how the small increases in property value multiplies my initial investment. The problem is most people don't move sideways or down... they move up, thus negating any windfall in investment…

People tend to move up as they establish and grow a family but then sideways or down in retirement. That equity stays even if you move up into a bigger house. It’s not uncommon for someone say in an extensive Northeast community to retire to a warmer climate down south, sell their house, use the proceeds to buy something much nicer (in a low COL area) and cash out a nice payday from their equity.

It's not uncommon, but I doubt it applies to people who did not buy within commuting distance of a major city. The housing stock is old in the Northeast, the taxes high and getting higher, and unless there's more high paying jobs coming, there's no one to buy the houses.