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Renting is Throwing Money Away, Right? (2015)

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

#421

Post by ghaff »

BeetleB wrote: post #405
VLM wrote: post #316

Earlier quoted context omitted.

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…

Sorry: $1K/month is ridiculous. I've owned a non-new home for a few years now. I have all the records of repairs/maintenance. So far the average is less than $130/mo (that includes buying two microwaves and a washer) My roof needs to be reshingled. That'll cost about $6K (got a bunch of estimates from roofers). Maybe $12K 20-30 years down the road for a full replacement. That'll likely be my biggest expense, which is…

Plumbing work, electrical work, trees that need trimming, kitchen or bathroom remodels (which may not be absolutely necessary but are part of a house not getting more and more rundown), painting, replacing windows and doors, furnace work including annual cleaning, etc. In a newer house in good condition, it may be less than $1K/month but it does add up over time. A lot of maintenance can be deferred but over 10+ years, there's a lot that needs to be done eventually.

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

#422

Post by enraged_camel »

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.

>>Why do drug dealers, foreign nationals, and the ultra wealthy park their money in big city properties? Tangible value.

The real answer: because real estate is an extremely convenient money laundering tool.

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

#423

Post by coryfklein »

You know what else is throwing away money:

* Every house paying to own and store all the tools for maintaining a yard.

* Every home owner spending 1-4 hours each maintaining said yard, when economies of scale make outside labor about 400% more efficient. Unfortunately, much of these savings don't apply when 20% of the houses in a neighborhood outsource, and they all use 8 different companies.

* The ridiculous cost of building, heating, cooling, and maintaining an 8 sided cube (read: house) vs when building them adjacent to each other (read: townhouse) and pooling resources for half the maintenance.

* Every house even having its own yard, as opposed to plotting residential spaces with a shared "small park" adjacent to 4-10 residences, with even larger parks dispersed throughout. (Those houses with a tiny yard the breadth of a human wingspan are exempt from this criticism.)

I swear whoever is designing rural areas needs to take a look at master-planned communities like Daybreak in South Jordan, UT [1]. Sure some folks may have a libertarian, give me some land leave me alone I'll take care of myself kind of mindset, but we humans evolved in tribes. We need to build more communities that encourage random interactions with the other homo sapiens around us, while getting rid of this wasteful (both economically and from a time-wasting perspective) emphasis on owning a home and maintaining a yard.

[1] http://www.daybreakutah.com/daybreak-story/

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

#424

Post by lmm »

enraged_camel wrote: post #420
lmm wrote: post #280

Earlier quoted context omitted.

> Please show me how the small increases in property value multiplies my initial investment. You're leveraged 5x (say), so you get 5x as much growth. Just pulling numbers out of nowhere, let's imagine you buy a $200k house with 40k down; after ten years the house is worth a nominal $400k which is $300k in today's dollars. You've gained 100k on your initial 40k, whereas if you'd invested the $40k in the stock market a…

>>You've gained 100k on your initial 40k You haven't really gained 100k. You have gained 100k multiplied by your percentage of equity , i.e. the amount you have paid so far into your mortgage principal. Assuming it's a 30-year mortgage, that will be around 30%, so around 30k. (And of course, the house price doubling in 10 years is a bit unrealistic unless you live in a booming area.)

> You haven't really gained 100k. You have gained 100k multiplied by your percentage of equity, i.e. the amount you have paid so far into your mortgage principal. Assuming it's a 30-year mortgage, that will be around 30%, so around 30k.

No, you've gained 100k. Your asset is worth $300k, your mortgage liability is $160k minus however much you've paid off; your book value is $140k (plus a bit) where before it was $40k. The bank may "own" the other 70% of your house but they don't get to increase your loan amount because it's gone up; you pocket 100% of the rise in the house's value (unless you end up defaulting on the mortgage).

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

#425

Post by uxp100 »

VLM wrote: post #374
uxp100 wrote: post #331

Earlier quoted context omitted.

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…

Not so, I bought the cheapest washing machine I could get. I dropped about $1200 cash on a speed queen that'll last me maybe 20 years. Joe 6 pack finances a new LG every three years at 29.99% credit card interest for $600 and thinks I'm getting ripped off. Its just like the situation with hiking boots, I can only afford the $250 boots that last many years, I'm not rich enough to afford the $100 boots that only last o…

The cheap washers are not $650, that's still an expensive washer. The cheapest new washers are more like $350. And probably not any less reliable that the $650 washer, just less neat buttons, no glass top. Yeah, probably less reliable than the speed queen.

Hoses are quite the racket. Because of where I put the washer, I had to get extra long ones.

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

#426

Post by phamilton »

garmaine wrote: post #417
phamilton wrote: post #204

Earlier quoted context omitted.

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.

Oh I didn’t realize those gains were leverage adjusted. But shouldn’t you compare to trading on margin to be apples to apples?

In this case I'd argue that apples is "what an average person would do". That's the comparison the article is making.

Millions of Americans are leveraged in their homes. Relatively few trade on margin. I think that makes it a valid comparison, even if it's not a fair comparison.

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

#427

Post by emodendroket »

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.

From the article:

> As with all articles on Afford Anything, these high-level concepts can be applied anywhere. But specifics about laws, taxes, inflation, etc., are geared at a United States audience.

So I think it's fair to go ahead and mention US-specific counters to the arguments without specifying.

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

#428

Post by paulclinger »

Rylinks wrote: post #380
Ajedi32 wrote: post #118

Earlier quoted context omitted.

This is perhaps the biggest argument in favor of ownership. Unless your landlord is _losing_ money on the deal, the price of rent takes _all_ other costs of ownership into account and then adds more on top of that. If you're renting, you most certainly _are_ losing money on the deal vs. what you'd pay if you owned _exactly_ the same property.

Prices are not set to guarantee profits for landlords. If it's a cold rental market, the owner of the property still would prefer to lose only a small amount, rather than having the unit sit empty and losing all of the fixed costs.

This cuts both ways though: the landlords will increase their profits when they can (when the market allows) to compensate for the risk they take on during "cold" times.

The rent being paid also includes other expenses that the landlord has, like marketing of the property, that the owners don't have.

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

#429

Post by rory »

rhodysurf wrote: post #343
dagw wrote: post #333

Earlier quoted context omitted.

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

They technically dont, but if youre an engineer like me who is working full time, having someone work for you to do all the annoying parts of buying a house for free its a no brainer. If the seller is paying why wouldnt I use one?

Since you are paying the seller immediately before they pay the agent, "the seller is paying" seems like a technicality. In theory, if you could remove the seller's obligation to pay that additional 3%, you could get up to a 3% discount on the house.

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

#430

Post by traytonwhite »

Simulacra wrote: post #81
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…

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).

Your renter pays the market rate for rent for that property (in general). In your case, that happens to work out in your favor. But in a place like SF, a 2 bedroom apartment costs $1.5 million, which is ballpark $7k+ a month. I can rent a 2 bedroom for less than half that because the market is simply not paying $7k a month for 2 bedroom apartments.

I've also rented a house where my rent payment did not even cover the mortgage (I knew the landlords - they had bought in 2006 and were still waiting on the market to rebound so they could cash out and move on).

So as the article says - it all depends.

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