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

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

#361

Post by ghaff » Mon, Apr 23, 2018, 2:28 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 own an old house and $1K/month is a pretty good guesstimate. I probably spend more than that but around $1K/month is probably around the point where, if I spent a lot less than that, I'd be going into maintenance debt.

I agree with your point that owning a house is a lot about lifestyle. I have a lot of sports gear, like canoes, that would be more difficult in an apartment setting. Yes, you can rent storage units but you definitely have to make compromises.

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

#362

Post by OtterCoder » Mon, Apr 23, 2018, 2:30 PM UTC

chaosbutters314 wrote: post #310

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.

I get to live closely with a bunch of cool people and not isolated in some house in a suburb. I think renting has a nice social benefit. Plus, the mobility aspect to just pick up and leave gives me a ton of reassurance. There is also the bonus that someone else has to fix the appliances and do maintanance than me.

That's exactly why, as a family man, I hate renting. You end up changing neighborhoods every few years, and none of your friends are permanent.

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

#363

Post by usaar333 » Mon, Apr 23, 2018, 2:30 PM UTC

justherefortart wrote: post #320

code4tee wrote: post #54

The “pro renting” crowd has a lot of consistent falacies in arguments: - Financial calculations ignore the leveraged nature of buying a home. Small increases in property value are multipled relative to your initial investment. - Calculations also often assume someone just pays the minimum mortgage payment for the full term of the loan. Even small additional principal payments (which most mortgages allow without penal…

Everyone I know that's wealthy owns lots of real estate. That's the difference between stocks and properties, at least property is real . Why do drug dealers, foreign nationals, and the ultra wealthy park their money in big city properties? Tangible value.

What's your threshold for wealthy? I know plenty of younger millionaires (via tech) who don't have real estate other than perhaps REITs.

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

#364

Post by gambiting » Mon, Apr 23, 2018, 2:30 PM UTC

scarface74 wrote: post #252

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).

Until your renter stop paying and if takes you three to six months to evict them or until they trash the place and you have to pay for repairs. Been there. Done that.

Isn't there insurance for this exact kind of thing?

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

#365

Post by usaar333 » Mon, Apr 23, 2018, 2:32 PM UTC

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…

It depends on the market.

The SF Bay Area has many places where a case can be made that renting forever wins:

https://medium.com/@usaar33/why-you-shouldnt-buy-a-home-in-t...

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

#366

Post by jonkho » Mon, Apr 23, 2018, 2:36 PM UTC

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…

Leverage still outperforms fixed interest payments. Rising home prices compound on previous years’ appreciation. Your leverage rides on the back of this compounding. In contrast, your interest payments are fixed on the value of the dollars the year the loan was written.

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

#367

Post by joncrocks » Mon, Apr 23, 2018, 2:36 PM UTC

code4tee wrote: post #297

alanbernstein wrote: post #92

Earlier quoted context omitted.

> 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…

In your example you cite when you get to retirement and have 'nothing', what you should have is a diversified portfolio of investments that would have given you a less risky place to put the money that you haven't put into property.

The best argument I've heard is that one thing owning property does do is focus you on saving towards something in a way that saving towards 'the future' doesn't.

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

#368

Post by _Tev » Mon, Apr 23, 2018, 2:36 PM UTC

chrisseaton wrote: post #162

KKKKkkkk1 wrote: post #159

Since housing is an emotional subject, let's try to argue by analogy. I regularly buy lots of dairy products. Milk, yogurt, cheese. Why shouldn't I save some money and buy myself a cow instead? That way, I could satisfy all my dairy needs, and maybe even have some extra milk to sell to my neighbors. No more making the dairy farmers rich at my expense. Now, assume that I sell my cow ten years later. And let's say that…

So what are you arguing? You’ve just posed exactly the same questions we already had but in a cow theme.

He is arguing that it is not clear that "buying cow is obviously better". Because many people really do argue like that when it comes to rent vs. buy.

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

#369

Post by kerbalspacepro » Mon, Apr 23, 2018, 2:40 PM UTC

This article has a bunch of pictures and stupid shit in between paragraphs and makes it hard to read. Not HN worthy at all.

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

#370

Post by phamilton » Mon, Apr 23, 2018, 2:44 PM UTC

jonkho wrote: post #366

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…

Leverage still outperforms fixed interest payments. Rising home prices compound on previous years’ appreciation. Your leverage rides on the back of this compounding. In contrast, your interest payments are fixed on the value of the dollars the year the loan was written.

Ahh... Great point!