Show HN: Should I Get a House? a better rent vs. buy calculator • Hacker News Board

Re: Show HN: Should I Get a House? a better rent vs. buy calculator

#41

Post by runako » Mon, Jul 19, 2021, 3:15 PM UTC

This looks great! A couple of comments:

- some (large?) portion of mortgages will not allow PMI to be removed until you either a) inject cash to get to 20% equity or b) get to the time in the amortization schedule when you are scheduled to get to 20% equity. That is, if your home increases in notional value by 20%, you still have to pay PMI. So the PMI line item should probably not terminate after 3 years.

- It would be awesome to include a rent growth factor. When I bought my first house, my annual mortgage was > the amount my next-door neighbor paid to buy his (similar) house. (Which would be driven in part by rents at that time.) Part of the benefit of home ownership is insulation from rising rents, and adding a rent factor would capture that.

Re: Show HN: Should I Get a House? a better rent vs. buy calculator

#42

Post by tiborsaas » Mon, Jul 19, 2021, 3:16 PM UTC

bachmeier wrote: post #27

There's no way to put this into a calculator, but this decision isn't purely monetary. Do you enjoy having to maintain a home and property? If not, maybe buying a house isn't for you. Even if you hire someone, that can be a massive hassle, you have to worry about being ripped off, ... If you're not settled in your career to where you can comfortably take off long stretches of time during the day, you probably shouldn…

> If you rent, you call the landlord and have them replace those things.

You also have to negotiate everything with landlord: color of paint, removing walls, replacing stuff you don't like because of the design alone.

Home ownership gives you almost infinite options to fit the place 100% to your needs.

So I agree that there are things hard to express with money. One can reverse the question: buying could set you back $xx.xxx, is it a fair price to be able to do anything with the property?

Re: Show HN: Should I Get a House? a better rent vs. buy calculator

#43

Post by waylandsmithers » Mon, Jul 19, 2021, 3:17 PM UTC

One piece of millenial defeatism I hear a lot is "Ugh, I'll never be able to afford a 20% down payment, home ownership is impossible"

I'm not sure where this myth came from, but as a millenial who went through the buying process in 2012 and again in 2016, I remember both times the lender just asked how much we wanted to put down. We could have gone as low as 3%, or maybe even lower.

Yes, you have to pay PMI (private mortgage insurance) for probably a couple hundred bucks extra a month if you don't have 20% equity in the house- but you can stop paying it as soon as you get to 20, and you can count increases in the home value towards that (through renovations or just market conditions). You can even have the interest rate increased very slightly instead of a separate PMI payment if you want to spread out the cost over the entire loan.

The point is, you'll likely need to have 3 months rent for first, last, and security deposit when you start an apartment rental anyway, so the initial costs might be closer than you think.

Re: Show HN: Should I Get a House? a better rent vs. buy calculator

#44

Post by seanc » Mon, Jul 19, 2021, 3:19 PM UTC

jbb67 wrote: post #34

bachmeier wrote: post #27

There's no way to put this into a calculator, but this decision isn't purely monetary. Do you enjoy having to maintain a home and property? If not, maybe buying a house isn't for you. Even if you hire someone, that can be a massive hassle, you have to worry about being ripped off, ... If you're not settled in your career to where you can comfortably take off long stretches of time during the day, you probably shouldn…

but also the reverse applies. If you want to make alterations or improvements to your house, better not rent

Yes, exactly. Or maybe you want a guarantee of being able to stay in one place for a long period of time, say to send your children to a particular school, or be close to neighbors or family.

Re: Show HN: Should I Get a House? a better rent vs. buy calculator

#45

Post by dynm » Mon, Jul 19, 2021, 3:20 PM UTC

This would be better if it included a slider for what yearly investment return you would expect for assets not in a house. If I don't spend my down-payment on a house, I'll put it in the stock-market or something. Those gains are typically a huge part of the calculation when considering to rent vs. buy. I might be mistaken, but as far as I can tell that isn't reflected here.

Re: Show HN: Should I Get a House? a better rent vs. buy calculator

#46

Post by bachmeier » Mon, Jul 19, 2021, 3:26 PM UTC

swimorsinka wrote: post #39

bachmeier wrote: post #27

There's no way to put this into a calculator, but this decision isn't purely monetary. Do you enjoy having to maintain a home and property? If not, maybe buying a house isn't for you. Even if you hire someone, that can be a massive hassle, you have to worry about being ripped off, ... If you're not settled in your career to where you can comfortably take off long stretches of time during the day, you probably shouldn…

Huge +1 to this. Don't get me wrong, I've been in my house for 10 years, and I probably won't go back to renting, but I think most people wildly underestimate these things. In the first couple of years I remember getting so irritated by all the time it took to take care of the house and yard. Nowadays, I've gotten used to it, and I view it as a welcome distraction from work, but that definitely wasn't true in the beg…

> In the first couple of years I remember getting so irritated by all the time it took to take care of the house and yard.

It's always been a problem for me. My work keeps me so busy (that's how I can afford the house) and much of the limited free time I have goes to my son's activities. The only thing that allows me to get it done is that my son is old enough to help me.

> I don't think I've had a single year where I didn't have to spend 10K on maintenance.

I kept hearing $150-200 a month for maintenance before I bought my house. That was just a bit on the low side. I had one year where I paid 20K for maintenance on a house less than 20 years old. There's always something, and if you postpone your maintenance (when it's even possible) you're going to have to find a way to catch up in the future.

Re: Show HN: Should I Get a House? a better rent vs. buy calculator

#47

Post by drfuchs » Mon, Jul 19, 2021, 3:26 PM UTC

Where do I enter the intangible value of owning: "Don't have to worry about getting priced out if the neighborhood becomes popular; can do any improvements I want, when I want, how I want, and they become an asset; don't have to worry about not getting lease renewed at an inconvenient time (perhaps in the middle of a school year) when the owner's nephew gets divorced and needs a place; on the other hand, don't have to worry if I do want/need to move unexpectedly, but I'm in the middle of a lease."

Versus, of course, for renting: "don't have to worry that the roof will need replacement, etc."

Finally, you can do all the calculating you want, but retrospectively the biggest effect on financial outcome is liable to be whether you bought in what turns out to be the Detroit vs. Silicon Valley of say 40 years ago. Who knew back then? Who knows now? You pay your money and you take your chances.

Re: Show HN: Should I Get a House? a better rent vs. buy calculator

#48

Post by monkeybutton » Mon, Jul 19, 2021, 3:26 PM UTC

runako wrote: post #41

This looks great! A couple of comments: - some (large?) portion of mortgages will not allow PMI to be removed until you either a) inject cash to get to 20% equity or b) get to the time in the amortization schedule when you are scheduled to get to 20% equity. That is, if your home increases in notional value by 20%, you still have to pay PMI. So the PMI line item should probably not terminate after 3 years. - It would…

+1 to including some kind of rent-growth factor. Where I live the amount a landlord can increase rent every year is capped fairly low (like 3%?) and I stayed in the same apartment for 7 years. In the beginning my rent was market rate and by the end it was way below. By not bouncing around apartments every couple of years I saved a ton of money which I ended up using for a down deposit on a house. On paper the decision looks crazy because the mortgage payments are higher than the rent I was paying but it doesn't take into account that moving wasn't an option, I'd have to stay in the same place forever (or at least until I got "renovicted").

Re: Show HN: Should I Get a House? a better rent vs. buy calculator

#49

Post by anomaloustho » Mon, Jul 19, 2021, 3:31 PM UTC

bachmeier wrote: post #27

There's no way to put this into a calculator, but this decision isn't purely monetary. Do you enjoy having to maintain a home and property? If not, maybe buying a house isn't for you. Even if you hire someone, that can be a massive hassle, you have to worry about being ripped off, ... If you're not settled in your career to where you can comfortably take off long stretches of time during the day, you probably shouldn…

Being in a unique position of renting out properties that I own while simultaneously renting, it seems like some of this is taken a little out of proportion.

My net experience is that the burden of dealing with said landlord to get something fixed or maintained is roughly similar to fixing it yourself with equal pros and cons on both sides.

Consider a $150 repair for your AC going out in 95F weather, 70% humidity. Landlord can and is allowed to take 2 weeks to fix that. (even with the best of intentions, he might still take 2 weeks) Whereas you can easily call and have it fixed within 5 hours if you owned it. Also, many repair companies will refuse repair if you are a renter unless they receive authorization. Also, consider that you want to upgrade to a smart thermostat, because your mercury-laden thermostat is from the 1980s.

Also worth noting that a home warranty program helps a lot with these things both for my landlord and for myself as a landlord.

Also, seems like some of the conversation implicitly revolves around “renting an apartment” vs “buying a house”. I own 2 apartments and rent a house. I don’t have to maintain the yard for the apartments I own. I do have to maintain the yard for the house that I rent.

Re: Show HN: Should I Get a House? a better rent vs. buy calculator

#50

Post by bachmeier » Mon, Jul 19, 2021, 3:32 PM UTC

jbb67 wrote: post #34

bachmeier wrote: post #27

There's no way to put this into a calculator, but this decision isn't purely monetary. Do you enjoy having to maintain a home and property? If not, maybe buying a house isn't for you. Even if you hire someone, that can be a massive hassle, you have to worry about being ripped off, ... If you're not settled in your career to where you can comfortably take off long stretches of time during the day, you probably shouldn…

but also the reverse applies. If you want to make alterations or improvements to your house, better not rent

This is true, but it really only applies to someone with a pile of money laying around. It's nice to have the option to remodel your kitchen. The percentage of new homeowners that can afford to do it is likely small.