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Renting is Throwing Money Away, Right? (2015)

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

#291

Post by bryanrasmussen »

chii wrote: post #225
neuxenian wrote: post #208

Earlier quoted context omitted.

Leverage cuts both ways, though. As someone who just sold their house, the costs are a percent of the sale. You don't get taxed on the sales (generally) but you will probably have to pay real estate sales costs. So yes, if your home increases by 3%, you've gained 15% growth on your investment, but if the sale cost is 5% of the the sale price, then things aren't so clear anymore. The real calculation is the total mont…

> 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.

renting out an apartment when you move does affect your options however because as such you will have the legal obligations of a landlord, and if not that because you have signed a deal with someone else to have those obligations on your behalf you will still need to pay those people and keep track of them.

Owning things adds friction one way or another.

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

#292

Post by nmeofthestate »

I bought my first flat (got a mortgage on my first flat - £34.5k) in the mid nineties, I moved once, and now have no mortgage and a house worth £250k. If I had rented, I doubt I would now have savings to that amount.

Also I'm kind of a saddo who likes being able to change my home to how I like it.

People who rent often seem embittered by the experience, and angry that houses are too expensive to buy.

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

#293

Post by IncRnd »

conanbatt wrote: post #124
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.

  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.
That's not how things work. Banks give out mortgages based upon the repayment ability and credit-worthiness of each borrower. The mortgage amount won't be too far out of line of comparables.

---

  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.
Who says so? Even one tenant in a multi-family home can pay for the entirety of the mortgage.

If you own and rent out a single-family home, you most certainly can charge rent higher than the entirety of your mortgage payment! Sometimes, landlords without mortgages rent out their property...

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

#294

Post by code4tee »

k__ wrote: post #287
scarface74 wrote: post #267

Earlier quoted context omitted.

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.

Ah okay. I'm from Germany, where we have rent control everywhere. But I also know a guy from NY who rented a flat for a few hundred bucks decades ago and now subrents it to other people for thousands.

What he is doing is probably illegal then (if he’s rent controlled). You can’t profit like that.

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

#295

Post by swebs »

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…

>but that's also really weird: it means the gouvernment subsidizes financial institutions to charge American consumers a lot more than the normal prize…

Yeah, it sucks, and it's 10x worse with student loans.

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

#296

Post by loxs »

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…

What if you build "social capital" in a place where most people rent... then situation changes and most of your social contacts move away, because it's no more economically feasible to live there? What happens to your social capital then?

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

#297

Post by code4tee »

alanbernstein wrote: post #92
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…

> The problem is most people don't move sideways or down... they move up, thus negating any windfall in investment prowess. But the investment is what allows moving up, no?

Exactly. Someone buying a home for a million dollars typically isn’t buying that from scratch. They sell an existing home, roll their equity into the new property and trade up. People can argue forever if real estate is a good investment (relative to other investments) but on the home you live in if you rent your whole life you get nothing at retirement. If you own you do slowly but surely build up a real asset over time.

The best argument for owning in a given market over the long term is that if you rent you’re only winning if the landlord is losing money. The whole reason the landlord is renting to you is that you more than cover the cost of owning the property.

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

#298

Post by ghaff »

baxtr wrote: post #188

The topic is almost esoteric, in a sense that they are "true believers" on both sides that always have the next argument ready why the other side can't be right. My conclusion is: the whole thing is a classic bet. If house prices develop really well, you are better off, if not you might be better off renting (assuming you are comparing same lifestyles). That's like forecasting the stock market.

And there's also a bet on mobility versus stability. Something comes up in a year or two that makes you want to move? Renting was the better choice. End up staying in the same place for a few decades and customize a lot of things to your liking? Buying was.

Personally, I think this is the biggest factor compared to a lot of financial calculations that people argue over endlessly of which many of the inputs are ultimately speculative at best.

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

#299

Post by erikb »

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…

There are so many buts. For instance, but this doesn't work in other countries where you can't downpay so little or where you can't get that kind of credit on a house. Or, but what happens if you default and you live in the house? And I'm not so sure they can't come after your other assets without further protection. If they can't turn that house into money then they'll certainly try, or if you did just the slightest mistake and they find out about how to leverage that.

If you don't have 100+ hitmen with guns, 5 lawyers and a politician in your back pocket always assume they come after you.

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

#300

Post by vageli »

elvirs wrote: post #262
paulsutter wrote: post #152

Earlier quoted context omitted.

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?

I don't know of many lenders that will give you a mortgage with 10% down.
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