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

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

#331

Post by uxp100 » Mon, Apr 23, 2018, 1:29 PM UTC

VLM wrote: post #316

hvidgaard wrote: post #148

Earlier quoted context omitted.

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,…

Expected maintenance, LOL. Just saying as an older guy if you're not factoring in HVAC replacements, roof replacements, driveway replacements, appliance replacements, even the expenses of major yard work, you will miss thousands per year on average. I'll see these estimates online where people laughably expect to spend less than $1K/yr on home maint, LOL I spend that much on the roof averaged by year, and I spent mor…

I think this is a good post and a good perspective to take, but its worth pointing out you bought an expensive washing machine, though if its more reliable, then that's probably the better purchase. On good days I do like my house hobby.

I mainly bought a house because I kept having to move every year, renting flats in houses where they decided they wanted to sell, or move in themselves, etc. So now only the bank and the state can kick me out, and not relatively more capricious property owners.

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

#332

Post by zrail » Mon, Apr 23, 2018, 1:33 PM UTC

rlpb wrote: post #207

dash2 wrote: post #153

Earlier quoted context omitted.

> If you leverage 5X in a personal residence and the market drops by 30% (and you live in a no-recourse state), then you mail the keys to the bank and walk away. Very unique situation. But that seems dishonest.

> But that seems dishonest. It's not. The bank has calculated and accepted the risk and factored it into your interest rate and other charges. Considering it to be dishonest is financially equivalent to considering a (not fraudulent) insurance payout to be dishonest. Think about it this way. The bank has effectively bought an insurance policy to protect itself against this event and is paying the premium out of your…

In the US if you put down less than 20% the bank literally takes out an insurance policy called Primary Mortgage Insurnace for this risk and makes you pay for it.

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

#333

Post by dagw » Mon, Apr 23, 2018, 1:33 PM UTC

rhodysurf wrote: post #261

simonsquiff wrote: post #136

Earlier quoted context omitted.

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

Why does the buyer need their own realtor for just buying a normal house?

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

#334

Post by nkohari » Mon, Apr 23, 2018, 1:36 PM UTC

libertyhouse wrote: post #51

Renting or owning from a purely financial point of view is a relatively straightforward problem and is answered quite nicely with the NY Times Rent vs. Buy calculator (with the caveat that the calculator has not been updated to reflect the new tax laws). That being said, the biggest reasoning mistakes I run across are: 1. "You pay the landlords expenses plus some profit." Not true. The rental market is just that - a…

> There are plenty of landlords who are losing money on their rental property.

Only until your current lease term expires, at which point your housing costs will unexpectedly rise (and sometimes quite dramatically). Unless you live in such an undesirable location that the landlord is desperate for any tenant, they aren't crazy enough to agree to a lease on which they'll lose money.

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

#335

Post by paulsutter » Mon, Apr 23, 2018, 1:40 PM UTC

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?

Since they rent the property they’re leaving behind, the rent counts towards their income. Strictly speaking there’s a delay for the rent to qualify but you get the general idea.

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

#336

Post by bojan » Mon, Apr 23, 2018, 1:46 PM UTC

ghaff wrote: post #323

code4tee wrote: post #315

There are a lot of short term periods where renting certainly makes more sense than buying. However over a lifetime it’s extremely hard to make the numbers work out if you only ever rent vs someone that conservatively owns. That of course also ignores all the non-financial benefits of owning. Many people just want to own their little part of the world and make it fit just for them—decor, style, renovation, landscapin…

That's really the thing. At some point, many/most people want a place that's their own which they can modify to their liking. And many of them will want a house of the sort that's difficult to rent long-term. And eventually, when retiring or looking towards retirement, they're going to want to live somewhere that can't be sold out from under them or have rent raised to the point they can't afford to live there any lo…

Something always breaks.

But that doesn't mean it's not predictable. If you treat it as a monthly payment to the repairs fund, you are probably good.

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

#337

Post by jonbarker » Mon, Apr 23, 2018, 1:47 PM 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…

Yes, and leverage can also cause more rapid destruction of personal net worth too. I could make leveraged purchases of other assets too and the examples would be the same. The no recourse thing is interesting, but it doesn't solve the problem of having to move, in which you have to either find a renter or pay a mortgage on an empty house. This seems to be effectively the same consequence.

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

#338

Post by rb808 » Mon, Apr 23, 2018, 1:48 PM UTC

jo909 wrote: post #142

phamilton wrote: post #70

Earlier quoted context omitted.

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.

Exactly - so if I buy a Bay Area house, what numbers do I put in? Will it go up 10% a year, or down 10% a year? I can see either happening. Certainly doesn't have much to do with inflation.

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

#339

Post by jronsomers » Mon, Apr 23, 2018, 1:54 PM UTC

scarface74 wrote: post #286

jayess wrote: post #277

Earlier quoted context omitted.

Having been burned badly in the real estate meltdown, there is a lot more freedom in renting than buying. I'm just now getting slightly inclined to consider buying again, but it would have to be a whopping deal. I've enjoyed renting since at least 2010. I especially like the ability to call the landlord and tell them that the sink is leaking and they need to get it fixed. Or the water heater stopped working, come out…

When it comes to making a trade off for convenience vs. cost, I usually choose cost within reason and I also got burned by the real estate meltdown. I was in no hurry to buy. But the rent where we were staying went from $1300 to $1800 within 3 years for a 3 bedroom, 1650 square foot apartment. We were able to buy a house, a brand new build 3000 square feet 5 bed/3.5 bath for $2000/month with only 3.5% down in a neigh…

That is awesome and you are able to buy a house like that, especially a brand new build (to your liking). However, I want to mention it seems you are in the right place at the right time. Your case is an outlier in my opinion and I'm happy you are taking advantage of it. Especially considering that it is in a great school zone. I just felt that this isn't normal, even for the Midwest (which is where i can only imagine you are).

That is a neat 'home warranty' thing you have though. I've never seen that before. Whenever I own a home, that sounds enticing to have.

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

#340

Post by Mvandenbergh » Mon, Apr 23, 2018, 1:55 PM UTC

swebs wrote: post #289

>Are you better off: > - Tying up your cash into a home > - Finding an alternative investment, coupled with a rent payment? This is the part I don't get. That would require renting to be cheaper per month than having a mortgage, yet it will always be more expensive for the same property because the landlord is paying the mortgage* plus marking up the price to make a profit. *Or at least charging the equivalent market…

It really depends on the local price:rent multiple. In some places the price gets driven up because landlords are counting on future capital appreciation rather than cash flows from rent.

" The gross rental yield on the average London property last year stood at 3.5 per cent, according to research from Deutsche Bank. In other words, a landlord buyer at these levels, according to the bank, will typically require 200 years to pay off their mortgage after tax and interest are taken into account using only the cash flows from their property, assuming a 65 per cent loan-to-value ratio, a 35-year mortgage term and a constant rate of interest." https://www.ft.com/content/922574d8-5cc4-11e7-b553-e2df1b0c3...

In other words - the landlords are taking a levered risk that renters are not.