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Renting is Throwing Money Away, Right? (2015)

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

#471

Post by erispoe »

tempuser24 wrote: post #446
erispoe wrote: post #165

Some of the countries with the lowest homeownership rates [1] are also amongst the most financially secure on the planet. In Switzerland only 43% of households own their home and swiss households are, on average, way more secure than their american counterparts. [1]: https://en.wikipedia.org/wiki/List_of_countries_by_home_owne...

I agree with freddie_mecury I am not sure I see the argument or what you mean by "financially secure". But if I can guess at your point I would say that if "financially secure" means having cash then it would make sense that higher percentage renter countries would be that. Another point I'd like to add is the US isn't far from Switzerland on that list. Also Singapore being in the #2 spot with 90% home ownership, but…

Homeownership isn't necessary to achieve financial security and/or build equity. The idea that it is, all the time, everywhere, a necessary step does not hold. In countries where the state does not heavily subsidize homeownership via tax incentives (Switzerland or Germany by contrast with USA or France), many households choose to invest in other assets. On the contrary, the fact that states have to subsidize homeownership to make it a competitive investment for households (at the expense of renters paying taxes and not benefitting from incentives), is evidence that in a tax-neutral environment, homeownership doesn't make much sense.

Singapore is misleading, because 82% of the population actually lives in public housing (HDB). I suppose they're counted as "homeownership" because they are leased for 99 years [1], but that's a strong authoritative state with central planning and management of housing. Lease doesn't build that much equity because at you get closer to the term the value of the lease naturally declines. And you're not free to sell or buy to who you want.

[1]: https://en.wikipedia.org/wiki/Public_housing_in_Singapore

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

#472

Post by barrkel »

nvarsj wrote: post #183
barrkel wrote: post #171

Earlier quoted context omitted.

A mortgage payment is a lot lower than current market rent, however. (I bought a 4 bedroom house in London and we pay about £1200 per month mortgage on that, although we actually overpay to decrease the principal faster). Part of the reason I was able to buy, of course, was that I had saved a bunch of money, some of it invested in shares. Most people renting probably don't save as much as I habitually do, mind.

> A mortgage payment is a lot lower than current market rent, however. How do you figure? Rents in London are substantially cheaper than a mortgage. In my current house, a mortgage with 10% down would be around 30% larger than the rent I'm paying. Unless you bought 5-10 years ago, but that's not really a fair comparison.

I bought about 2 years ago.

Sounds like we're in different areas of the city. I'm in Enfield.

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

#473

Post by alien_at_work »

nojvek wrote: post #438
misja111 wrote: post #158

Earlier quoted context omitted.

You are forgetting that you don't only get the leverage of the $1M, you also have to pay the loan for the full sum of $1M. There is a section in the article about 'opportunity cost' which covers this.

You don’t have to pay full. When you’re done, you can sell. Buy for $500k, put down 100k as downpayment. Suppose it’s an interest only loan and you pay $1500 a month for all house costs. In 5 years you’ve paid 90k. If the house price doubles, you’re walking away with 410k. Renting you’d be putting at least 2k a month, so total 120k. 190-120=70k. For 70k in stock market to become 410k , that’s a 5.8X growth. Really ha…

Can you get an interest only loan on a home in the USA?

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

#474

Post by jamaicahest »

_nalply wrote: post #432
VLM wrote: post #374

Earlier quoted context omitted.

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…

If you can't estimate the quality of things, buy the cheapest you get. Because nobody hinders someone selling you crap for double the price.

In this day and age, with trustworthy online review sites like Consumer Reports, I find it is fairly easy to find quality products at a price somewhere in the middle.

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

#475

Post by zeveb »

uxp100 wrote: post #425
VLM wrote: post #374

Earlier quoted context omitted.

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.

> Yeah, probably less reliable than the speed queen.

Sadly, according to an article HN sadly killed[0], the Speed Queen is no longer particularly good: https://thewirecutter.com/blog/speed-queen-washer/

[0]: https://news.ycombinator.com/item?id=16576899

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

#476

Post by kcanini »

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…

Leverage only matters if your home appreciates (or depreciates!) in value relative to inflation. There is a very large section of the article devoted to explaining that on average, this does not happen.

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

#477

Post by gangstead »

VLM wrote: post #382
hvidgaard wrote: post #330

Earlier quoted context omitted.

If you budget with $1k/yr for maintenance you're in for a bad ride. If you go with something like $2/sqft*year from the house is build, you're closer. But buy any 10-20 year old house and it will be far higher.

I would agree with your evaluation and propose an even more accurate prediction would include the aspect that a 50 gallon water heater or a dishwasher costs the same regardless of 1500 sqft or 6000 sqft so the ideal formula is probably some linear equation with a fixed amount plus a sqft amount. $1500 plus $1/sqft per year maybe a good start.

Except the 6000 sqft house has 2 water heaters, 2 or possibly 3 hvac systems and another bathroom or 3.

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

#478

Post by zeusk »

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…

In financial speak, leverage is always the source of ruin especially when taken to extreme levels (which mortgages do).

To attain that leverage, you pay a financial cost in terms of interest which btw - can be replicated in the market for much better returns and if you know your math and derivatives - for a much lower cost of capital (equity options and index futures) in a market that is highly liquid with transaction fees as low as single digit dollars.

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

#479

Post by Simulacra »

Bartweiss wrote: post #414
Simulacra wrote: post #87

Earlier quoted context omitted.

Very interesting. I put in all of my details. There is no way in hell I could find anything comparable for $500 or less a month.

Yeah, running that tool produces exactly the opposite conclusion from the article. Renting is easily 50% higher than the break-even price provided. An interesting experiment: go back and use the article's numbers for "what does the future hold?" That is, 2% home price growth, 2% rent growth, 8% investment returns. For me, those numbers say I could rent for $5,000 and come out ahead. Using the recent-history numbers f…

I live outside of DC now and it's very expensive. Rent is constantly being pushed up and up, no matter how good of a tenant you are. I'm hoping to buy again later this year to lock in a stable monthly payment.

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

#480

Post by Simulacra »

CamTin wrote: post #312
lmm wrote: post #284

Earlier quoted context omitted.

If you intend to live in a home for the rest of your life then you're effectively short one home (or half a home if you're going to share). So I see buying your primary home as more like covering your short than making a positive investment in real estate.

This is an incredible way of putting it. I'm not sure if I like what it implies, though, but I'll definitely be mulling it over. It's not a perfect analogy to securities shorting, because no one is going to lend you a house to immediately sell, so effectively all us renters would actually be naked short-sellers! Maybe there is a business model in lending out houses so people can short the housing market? Again, not s…

Lending out houses.. Explain. I'm intrigued. My long term goal (we're not counting my husband here) is to buy a townhouse, live in it for a few years, then rent it out and buy a free standing house - with a backyard! Now we'll have two or more rental properties in competitive markets hopefully bringing in some income. I've been extremely lucky with the house I own now. Good tenant that I did not raise the rent on at renewal. $380 is plenty for me. She knows my goal is to protect the house, not make money off of it, so maybe I'm not the best person for an example in real estate investment.
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