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Renting is Throwing Money Away, Right? (2015)

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

#261

Post by rhodysurf »

simonsquiff wrote: post #136
imbur wrote: post #26

Home buyers often overlook the cost of selling their home when considering if renting is cheaper. That is 6% in realtors fees and another 2-3% in closing costs. Renting is a great deal if you are not going to live somewhere for 5+ years before moving

6% for realtors fees is outrageous! I had no idea it was anything like that in the US. Here in the UK, it’s about 1.5%. That can often be haggled down to 1% if you have an expensive house that’s desirable enough to sell itself. And even that is getting majorly distributed by online agents, who are offering a flat fee service rather than % of property, which can be an enormous saving. At 6% it seems a market with a hu…

You are missing that the seller pays both his realtor and the buyers realtor

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

#262

Post by elvirs »

paulsutter wrote: post #152
elvirs wrote: post #73

I guess the main determinant should be mobility. If you are 23 and you dont have a career yet, want to go to a law or medical school, do your phd or whatever then chances are next 5-10 years you will be moving a lot and have no idea where you will end up settling down. In such cases having had committed to such an investment is a bad idea. But if you are 30 years old registered nurse married to your high school sweet…

Several of my friends have bought a new house whenever they move, and rent our their prior house instead of selling. It has worked out really well for them. Past performance is no guarantee of future returns, of course, but it's worth considering

they get approved for a new mortgage every time they move while the old one isnt even 10% paid off?

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

#263

Post by loxs »

BoorishBears wrote: post #253
loxs wrote: post #244

Earlier quoted context omitted.

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

How does a drop in the local housing market lead to you losing your job? A general market crash causes many people to lose their jobs, it doesn’t discriminate against homeowners. The renters are probably in a worse position in that case too, stop paying rent for a month and you’ll be evicted the next month. Stop paying your mortgage and the bank will at least work with you for a little longer.

Yeah, like the landlord won't work with you for a little longer in a global crash? They will be very eager to start looking for new tenants?

Of course, if your job is remote, a local crash won't make you lose your job, but if it's local... prices just don't drop locally without reasons.

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

#264

Post by k__ »

scarface74 wrote: post #236
chatmasta wrote: post #232

Earlier quoted context omitted.

But with renting there is no reward. EDIT: In addition to mobility cited by a reply to this comment, another advantage is the saved opportunity cost of investment in real estate vs other markets.

There is mobility.

Also, rents go up all the time, especially while moving into a new flat.

If you rent a flat for 20-40 years, the rent won't change as much as when you move around every few years.

So you might end up with super low rent compared to the rest of the city after 10 years or so.

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

#265

Post by koolba »

fdr wrote: post #173

The strictly financial part of the calculation is important, but personal cost of volatility may be even more important for those in a position to choose to rent or buy. I suggest it should also give pause to those who plan to build extensive social capital somewhere long term, but continue to rent. I view real estate ownership as a personal hedge. As we've seen in San Francisco from displacement of those in less luc…

> I view real estate ownership as a personal hedge.

It’s also a solution to the problem of most people having no self control.

Put $X into a separate untouchable savings/investment account without fail every month sounds simple but most wont do it. Instead they’ll keep raising their monthly misc spending and the money will disappear.

Change it to “do this or lose the roof over your head plus your down payment” and suddenly your success rate skyrockets.

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

#266

Post by loxs »

neffy wrote: post #245

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 th…

No, he is not assuming that. Go read the article again

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

#267

Post by scarface74 »

k__ wrote: post #264
scarface74 wrote: post #236

Earlier quoted context omitted.

There is mobility.

Also, rents go up all the time, especially while moving into a new flat. If you rent a flat for 20-40 years, the rent won't change as much as when you move around every few years. So you might end up with super low rent compared to the rest of the city after 10 years or so.

Rent control is only a thing in a few areas of the country. In most of the country, rent can increase at the end of a lease as much as the market will handle.

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

#268

Post by azeotropic »

scarface74 wrote: post #234
chii wrote: post #225

Earlier quoted context omitted.

> This in turn is relevant because your mobility becomes relevant. you don't need to sell, just rent out the apartment when you move. With the rental income, you can pay for a similarly priced location in the new place. Then, when the market fits, make the sale, and you've lost very little (if anything), except upkeep costs due to rental damage, etc.

You say just rent it out like renting doesn't have its own downsides like finding decent tenants, dealing with repairs, having to carry the mortgage when you have vacancies, dealing with evictions when they don't pay. Even in a landlord friendly state it can take 2-3 months to evict someone for non payment. In some states I've heard that it can take a year. I've been a landlord, never again.

This is also the downside of renting -- the other tenants can be lousy. Banks know this and will not lend in buildings without a minimum rate of owner occupied units.

I'd guess that one of the reasons home prices in 'nice' neighborhoods are so high (or HOAs charge high dues) is a sort of signaling, similar to nuptial gifts in animals, that you have your act together and are invested in being a good neighbor.

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

#269

Post by Aaargh20318 »

ShadowFaxSam wrote: post #200

This same principal can be applied to buying or leasing a car. When I first graduated college and had my first "adult" job I wanted to purchase my first car. The general mantra I heard was "Leasing is throwing money away". I ended up financing my first car, (used) thinking I was making the correct financial decision. The problem with someone fresh out of college buying or financing a car is they really have no idea w…

If you're talking about leasing/financing, then I'm assuming you're getting a new car. Why does your first car out of college have to be a new car ? Why not just buy a cheap used car outright ? You can get something that'll last you a couple of years for €1000.

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

#270

Post by sokoloff »

s17n wrote: post #141
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…

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

Not on a typical residential mortgage, but commercial balloon mortgages often have a provision for the loan being called early.
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