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

shouldigetahouse.com

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

#61

Post by bachmeier »

anomaloustho wrote: post #49
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. La…

> Consider a $150 repair for your AC

These are precisely the examples I was cursing after I bought my house. They were the ones existing homeowners always talked about.

A $150 repair for the AC is nothing. The prospective homeowner needs to think about things like:

"Your roof is shot." The lowest bid is $15,000. Check is due before they leave your property.

"Your trees are dying." Cost of cutting them out and replacing them is $2000. When you give us the check, we'll start the job.

"Your water heater needs to be replaced." And what you learn is that it's a special type of gas water heater that costs $2500 and up. Payment is due before they leave your house.

On any of these, you call the landlord (or don't even need to in the case of the dying trees) and you don't think about it again.

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

#62

Post by jartelt »

mrfredward wrote: post #58
jartelt wrote: post #20

Earlier quoted context omitted.

The first several years of the mortgage you are paying mostly interest and not as much towards equity. Plus, you have paid closing costs when you bought, will pay 6% to a realtor when you sell, and have paid property tax and homeowners insurance. If you sell after 5 years, you are only making money if your home value happened to have gone up. This is by no means a guarantee on a short time frame.

I am a few months in to a 15 year mortgage after recently refinanced at a 2.125%. Here's a rough breakdown of where each dollar of my last mortgage payment went: Principal: 60% Interest: 22% Escrow(Taxes + Insurance): 18% And of course the percentage going to interest only goes down with each passing month. The conventional wisdom that you are paying mostly interest in the beginning a) really only applies to 30 year…

Yea, you are right about the 2% interest rates changing the breakdown. I was referencing numbers I ran back when rates were 3-4%. That said, most folks still rely on 30 years mortgages!

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

#63

Post by alach11 »

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…

Great point about the PMI.

For rent growth, do you think I should use the home price appreciation rate or make a new rate? Right now rent goes up with inflation.

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

#64

Post by alach11 »

cmpolis wrote: post #21

Thanks for posting - this is really helpful (reminds me of this similar NYT tool: https://www.nytimes.com/interactive/2014/upshot/buy-rent-cal... ) A few notes: - "Final Cumulative Profit" is a bit confusing since this is not necessarily profit - this is how much less of a cost a house is over an apartment? - Is there a way to factor in opportunity cost of down payment being in the market instead of tied up in the ho…

Would it make more sense to invert it and plot cumulative cost?

Rate of return in the results is basically the opportunity cost of your increased spend on the house. That can be compared to other possible investments.

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

#65

Post by alach11 »

jolmg wrote: post #26
alach11 wrote: post #5

Earlier quoted context omitted.

It is accurate! While the house cashflow is negative in the example, it's at least less negative than the apartment cash flow. Maybe the moral of the story is living with your parents for free is better than either option!

If this calculator is rent vs buy, why does the graph compare house vs apartment? For both houses and apartments, they can be bought or rented. Are you someplace where one type of home can only be bought and the other can only be rented?

Nah this is just bad terminology on the site. I’ll fix it. In my personal situation I’m deciding between continuing to rent my apartment vs. buying a house.

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

#66

Post by gruez »

pestatije wrote: post #51
gruez wrote: post #22

Earlier quoted context omitted.

>My assumption is that houses have tended to increase faster than inflation in most markets. It does? Random chart I found: https://www.aei.org/wp-content/uploads/2020/01/cpi2020-875x1... . It seems to be higher, but only slightly.

That "Housing" in the chart is the housing component of inflation (rental, household furnishings, etc.)

Good point. The CPI increased 20.4% from june 2012[1] to june 2021 was 20.4%, but the "Rent of shelter" component increased 29.7% in the same time period.

[1] that was the earliest year that was available at https://www.bls.gov/cpi/tables/supplemental-files/home.htm

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

#67

Post by iso1631 »

gus_massa wrote: post #4

"Apartment" means rent and "House" means buying? I think that's confusing. It would be nice to auto update the graph every time something changes. It's nice that it has tips. Hi from Argentina! We have a somewhat different customs here so some fields are hard to guess. For example, I don't know if I can fill my taxes jointly. Another detail that confused me is that I didn't expect to sell the home after 14 years. It'…

A lot of things out of SV are built around American culture. "HOA", "State income taxes". "Property tax" as a percentage.

Which is fine, but it's sad how it's just assumed a site on a .com is for america only. Of course a monoculture of 350 million customers is more than pretty much any other country which explains why SV produces so many successes.

Defaults are crazy too - $2,750 for home insurance?!

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

#68

Post by Aulig »

mandeepj wrote: post #33
Aulig wrote: post #25

Earlier quoted context omitted.

No it's not. In many cases it can be beneficial to rent and invest your money instead, as stocks have a higher longterm ROI than property.

Does it have to be mutually exclusive? My current mortgage and previous rent are almost the same. A friend of mine bought his house in 2011-2012 for $200k. Now, it's worth ~$500k. >stocks have a higher longterm ROI than property. That's debatable. And, it depends at what point you were in and for how long you can stay as there'll be set backs during the ride. Unfortunately, if you have to cash out due to emergency du…

Selling your house in an emergency would be similarly bad as exiting the stock market at an unfortunate time.

The long-term ROI after costs and inflation of stocks (global) is about 3% higher p.a. than of property (global). Unfortunately this source is in german, but it cites research papers too, you can check those for further investigation: https://www.gerd-kommer-invest.de/die-rendite-von-direktinve...

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

#69

Post by runako »

alach11 wrote: post #63
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…

Great point about the PMI. For rent growth, do you think I should use the home price appreciation rate or make a new rate? Right now rent goes up with inflation.

I would make a new factor, so that people can input expected increases for their areas. I would expect many urban areas will continue to see rent increases far in excess of the broader inflation number. Rents may not track home prices due to supply issues.

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

#70

Post by runako »

jrs235 wrote: post #53
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…

If your home value has increased you can usually ask/tell the lender you believe the value has increased enough that PMI should fall off and that you'd like/are willing to pay for an appraisal (typically a few hundred dollars). Or, if your loan is owned by Fannie/Freddie, you may not even need an appraisal if the new value/increase is within certain percent range. I know this because I spoke toy lender (a credit unio…

> Your mileage will vary depending on your lender.

This is why I raised the issue. Some big prominent lenders do not allow this practice. (IIRC Wells Fargo & BofA fall into this category; they hold roughly $600B of mortgages between them.) IMHO it's not something to bank on before purchase unless your lender is willing to write the specific terms into the mortgage.

Reviewing the Fannie Mae requirements [1], it appears that you also need to either get to 75% LTV (not 80%) unless you have held the property for 5 years, so the 3-year timeout in the calculator is still not likely to be valid in many cases. (Also note the Fannie Mae requirements have changed in the last ~2 years and are subject to change going forward. I would not bank on this provision being exactly the same in 5 years.)

1 - https://servicing-guide.fanniemae.com/THE-SERVICING-GUIDE/Pa...

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