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Renting is Throwing Money Away, Right? (2015)

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

#461

Earlier quoted context omitted.

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.

So I can tell you the rationale for why my sister is getting a brand new car straight after uni - she lives in a foreign country, with no family/friends around and zero car maintenance skills. So it's far easier to buy a new car on a very low monthly finance, where she knows that if anything happens she has warranty for 4 years + full assistance, no need to risk getting ripped off at some random garages. Plus the car…

How much would it cost you to find out who the most reliable mechanics in the city are? And to learn the (very, very) basic maintenance skills?

I think paying $1000 for that knowledge would more than cover it. Why pay a lot more not to gain that knowledge?

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

#462

I recently did the math on this myself, I just sold my Condo and right now I am renting while looking for a house. I have all cash so I can ignore interest rates which makes it easier, I also have a pretty good wealth manager so I have a pretty good idea of what my return will be if I invest the money in stocks and bonds and rent rather than buying a house. For me, renting comes out ahead strictly looking at the doll…

Your wealth manager might be good, but you have no idea what your return will be from stocks or bonds. The only more-or-less guarantee you can have is about half of the official rate of inflation, and you don’t get there with stocks and very rarely with bonds.

[deleted]

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

#463

Earlier quoted context omitted.

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

Gotta say I always found this incredible. Rent control is so stupid that even it has to put rules on not being used. Who is being harmed by a rent-controllee sub-leasing? Literally no one. Because the harm to the owner is already made in the form of rent control.

> Who is being harmed by a rent-controllee sub-leasing? Literally no one.

The owner is harmed, because otherwise they could have gotten a new tenant and raised the rent back up to market rate.

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

#464
post #300

Earlier quoted context omitted.

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

Really? In UK it's not unusual to get approved with as little as 5%.

I'm guessing in the UK 30-year fixed-rate mortgages are not the norm.

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

#465
post #368

Earlier quoted context omitted.

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.

The analogy seems obviously flawed. You can get the world's best cow and give it the world's highest standard of care but there's no way it's going to live over 100 years.

Additionally, while I don't want to downplay home maintenance, I don't think it's as big a responsibility as taking care of and regularly milking a cow. And it's not like you might have a week here and there where you don't really need lodging.

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

#466
post #230

Earlier quoted context omitted.

US mortgage rates are generally quoted for 30 year fixed rates (about 4.5% currently.) Rates in the U.K. are much lower but those tend to be variable rates which will increase in line with central bank interest rates when those economies begin to recover.

I've just signed a 3-year fixed term @ 1.49% (at which point i'll then have to find another...). I'm pretty amazed at how different it seems to be in the US.

The 30-year fixed-rate mortgage is a result of substantial government intervention in response to a bunch of people losing their homes in the Great Depression. Prior to that, the US system was more similar to what I've heard of in other countries. https://www.marketplace.org/2013/11/25/sustainability/who-th...

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

#467
post #357
post #207

Earlier quoted context omitted.

> 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…

"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." That's not a true equivalency. Unless your loan has language or provisions for "mailing back the keys", doing so is an act of default and regardless of how well (or poorly) the l…

> That's not a true equivalency. Unless your loan has language or provisions for "mailing back the keys", doing so is an act of default and regardless of how well (or poorly) the lender(s) has/have hedged against the default you are breaking the agreement.

It depends on what you mean by "breaking the agreement." The state of default, its triggers, and its consequences are part of the agreement. You are acting within the scope of the agreement by triggering that state.

If you write a program like this:

    if (foo) { doX(); } else { doY(); }
does foo being false "break" the if statement? In a mortgage, it is (vastly simplified):

    if (youKeepPaying) {
      youGetToLiveInTheHouse();
    } else if (youSendUsTheKeys) {
      exit();
    } else {
      weWillSendTheSheriff();
    }
If anything, the last condition is the exceptional one. The contract doesn't generally contemplate what happens if you stop paying but also refuse to leave the dwelling.

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

#468
This is one of the most annoyingly formatted and written articles. So antagonistic and condescending, with not-as-funny-as-you-think jokes and images inbetween, half a dozen single sentence, hell, single line paragraphs with white space inbetween, constant repetition and using up half my screen width.

As for content, meh. The point of the story is: it depends. Renting isn't throwing away money in every situation, fair enough. But it begs the question, what reasonable assumptions can be made for your situation. And here the author mostly fails to deliver, as it builds on a tens of assumptions without rooting them in evidence, or only partially.

So the author will happily use a timeframe of multiple decades to show interest rates are historically quite high, and thus a 5% rate is warranted, but then disregards a historical timeframe of a few decades and just assumes houses will appreciate 2% per year (!) and inflation is also 2% a year, aka houses haven't appreciated in real terms at all. Despite the fact the timeframe she uses for interest rates, shows housing prices vastly outpace inflation.

In short, awfully written, with a very basic point: it depends on assumptions, and then pulls assumptions out of thin air (no surprise, as the story ends with the buyer/renter being exactly as well off, indicating the author picked assumptions accordingly) without evidence, which often aren't even realistic in the first place.

But yes, agreed, renting certainly isn't always throwing away money. And dropping out of school certainly isn't always a bad thing. And amputating your leg certainly isn't in every single case bad for you, it can sometimes be good, like when you have gangrene. But all of that is silly without seriously talking about assumptions, taking 10 pages of antagonistic writing to tell someone to run their own numbers is beyond me.

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

#469

> 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…

The US has 30 yr fixed rate mortgages which is only made possible by the presence of government sponsored entities like Fanny Mae and Freddy Mac in the market. The very low interest rates charged for short fixes that we see in most of the world reflect current low borrowing costs for banks. American interest rates reflect forecast borrowing costs over the length of the loan. That's why they're much higher, they price…

Your explanation sounds logical, but it doesn't hold in practice: In France, you can also have 30-year fixed-rate loans and the interest rate is a bit below 2% (without counting loan insurance, a bit above 2% if you count it).

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

#470
post #316

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…

As another data point, I really enjoy home maintenance and improvement but totally understand why others may not.
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