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

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

#381

Post by anotherman554 »

majormajor wrote: post #157
alach11 wrote: post #125

Earlier quoted context omitted.

The determination of whether to buy the house is based on the calculated rate of return. So even if you make a profit, if the time horizon is large you’d be better off investing that money in stocks. The UI doesn’t make that clear enough.

> The determination of whether to buy the house is based on the calculated rate of return. So even if you make a profit, if the time horizon is large you’d be better off investing that money in stocks. Can you give a more detailed example? What time horizon are you picturing? After you pay off the house you lose the leverage advantage of returns on selling a house you bought with a mortgage vs selling stocks, but you…

It doesn't always make sense to buy rather than rent, but it all depends on your assumptions for stock returns vs house prices changes, inflation, maintenance, real estate tax increases, rent increases, how long you expect to live in a house and if there's an arbitrage in the local market between renting and buying.

Also most people don't buy a house for life, and if you sell the house through a realtor they get 6% or so of the proceeds.

This isn't something you can just logic an answer for without running it through a rent vs buy calculator, but investment expert and author William Bernstein suggests a rule of thumb that you should not spend more than fifteen years of market rent on a house purchase. In other words you can look up what the house you are considering buying would cost to rent, and as a rule of thumb if the sale price is more than 15 years of rent it's a bad deal. This is obviously an imprecise rule of thumb since it doesn't account for variations in real estate tax per region, but it's a starting point if you don't have a good rent vs buy calculator.

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

#382

Post by packetlost »

mauvehaus wrote: post #119

You get old enough, and you get tired of somebody else making decisions from afar that affect your day to day life with no real consequences to them. Little things like the kitchen layout being moronic and having zero drawers get old when it isn't your choice to remodel or live with it. And while it's nice to say "just move", let's not forget that moving costs a couple months rent and a massive time investment to fin…

Conversely, to me that the flexibility to just pick up and leave is far more appealing than settling down and owning something. I've moved 7 times in the last 6 years, and I'll probably move again when my current lease is up next year.

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

#383

Post by dragontamer »

ramraj07 wrote: post #358
dragontamer wrote: post #241

Earlier quoted context omitted.

But I'm not ignoring them. I'm currently paying a $1600 / month mortgage, of which $1000 is principal, $400 is interest and $200 is escrow (tax / insurance) in an area with $2000/month rent. So I'm really paying $600 / month for interest, tax, insurance. It's another $1400/month before I get to rent prices. And even with a new roof and new deck last year, I'm no where close to renters prices in terms of actual cost.…

If your mortgage is lower than the rent that means your location appreciated very significantly. Given stagnant prices mortgage being lower than rent doesn’t make sense. Now the question for someone buying today is if they expect that to happen in the future. For me the answer is not positive enough to gamble buying a place.

It's a townhome, so the appreciation I got is far less than the larger single family homes in my area. Furthermore, I've ignored appreciation from my calculations above (since my property has appreciated considerably, its as if I've gained $60,000 in equity). Frankly, appreciation of assets is one of the biggest reasons to own rather than rent.

Townhomes are like apartments but no worries about bothering people below your floors (or people above you annoying you when they move chairs). They also build equity at higher rates than renting. Bonus points: I have a dedicated driveway + garage while my neighbors are sharing their parking space with each other (and often run out).

Also like, +1000 sq. feet. 3 stories of space helps a lot compared to the apartment sizes.

-----------

Look, not everywhere is the crappy San Francisco housing market. There are plenty of locations in the USA where rent prices are terrible and ownership is much better financially. Any location that's constantly building new homes (pushing home ownership prices down, and therefore rent prices down) will probably have a market like mine where ownership is in fact the better financial decision.

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

#384

Post by vel0city »

TravHatesMe wrote: post #289
vel0city wrote: post #283

Earlier quoted context omitted.

Yeah, but the taxes I pay is less than a quarter of my monthly outlay of mortgage+escrow. Even if my taxes double from my home's value doubling my monthly outlay won'd double. Meanwhile my rent will easily double, probably even more than that in the same market.

Sorry I meant to say that if all houses double in value, and municipal costs don't change, then your taxes do not change. Just because the value goes up does not imply that taxes go up.

If they don't change the tax rate, and my home doubles in appraised value, my tax liability on the property doubles. True, the city might reduce tax rates if property values explode like that but they might also just continue to take in the revenue. ¯\_(ツ)_/¯ Another example of why its good to be active in local politics.

FWIW, I live in Texas so this place gets a good chunk of its tax revenue from property taxes. The odds of them cutting the tax rate just because your house shot up in cost at least to me seems pretty low. This is one of the problems of gentrification, where long time owners find they are unable to continue owning in the $90k house they bought 20 years ago because now they pay property taxes on a $750k property.

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

#386

Post by forgingahead »

gwbas1c wrote: post #291
crazygringo wrote: post #149

Earlier quoted context omitted.

Funny, I'm the opposite. The more I get older the less I want to deal with bullshit home maintenance, and the infinite time suck that is customization and endless improvements. Really part of a general life shift from "if you want it done right, do it yourself" and "if it's worth doing, it's worth doing right" -- to "outsourcing is a valuable tool" and "perfection is the enemy of the good". I realize my time is valua…

Honestly, I think both of you have much better insight into the "rent or buy" tradeoffs than any calculator can provide. Personally, I only think renting is "worth it" if you can't afford the house you want, or you just don't like homeownership. I also think owning is only "worth it" if you like the freedom to do whatever you want to your property or plan to stay put for a long time. No calculator can decide that for…

Regarding the point about "freedom to do whatever you want to your property" - how does that fit with the rules that condo boards, home owner associations, and other relevant groups place on owners in their "jurisdiction".

I agree with you on your points, I have this rent-vs-buy mental agonising every few months. I'm just curious what folks are doing - if freedom is the key value, then basically you buy land somewhere where the least amount of people can harass you, and hope property prices and crime/services are at levels one can tolerate.

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

#387

Post by forgingahead »

mrep wrote: post #370
refurb wrote: post #338

Earlier quoted context omitted.

I see this claim a lot - "you can't save on rent because your landlord has to cover their costs". But this is only true if your landlord purchased at the time you rented. I rented a $1.8M apartment for $3,000 per month (~1/3 of total ownership costs). That's because my landlord bought 20 years before when the apartment was worth $200k. His monthly costs were maybe $1,000.

I am extremely doubtful of the claim that an apartment that only nets 36,000 in rent per year is somehow worth 1,800,000. That's a 2% return before any associated costs. I literally just looked at another rental property that was netting 8k a month across all tenants and was listed at 1,150,000. There is no way that other owner could actually sell that place for 1,800,000.

There are plenty of places that rent far below what they cost the landlord in mortgage/taxes/HOA/repairs/etc.

Home ownership, especially buying a home as an "investment" is such an emotional thing that plenty of people buy property just to buy property, the math doesn't come into it. Most of the time, even with the appreciation of the property that they sell, the landlord would have been better off putting their money into other more liquid investments with higher returns.

But, many people just buy property because they don't know any better.

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

#388

Post by throwaway09223 »

WarOnPrivacy wrote: post #323
throwaway09223 wrote: post #270

Earlier quoted context omitted.

Yeah, but people are listing low to attract more eyeballs. I sold a place in the bay area 5 years ago. I knowingly listed it about $200k under what we expect it to go for based on comps. Huge swarm of interest and many buyers offering a price at around what we expected. It's just a sales strategy.

> Yeah, but people are listing low to attract more eyeballs. Any other year I'd accept that. However, that's unlikely to be true this year - in most US markets. Buyers and renters alike are bidding up properties because there is one property or less for every 100 prospects. Here, landlords get 400 applicants the first day a rental is listed. The second day they get 400 more unique applicants. The rental we just moved…

Look, you don't have to take my word for it, the data is public. Go look up the comps and you'll see they match. There's nothing to "accept," it's just a fact.

There have always been hundreds of prospects for each house sold. When I sold the aforementioned house we got roughly 500 people the first weekend and we were in contract after just a few days. It's been a hot market for a very long time.

Sellers set a low price because the price doesn't matter. It will be bid at the market price regardless.

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

#389

Post by ramesh31 »

ramraj07 wrote: post #172
mauvehaus wrote: post #119

You get old enough, and you get tired of somebody else making decisions from afar that affect your day to day life with no real consequences to them. Little things like the kitchen layout being moronic and having zero drawers get old when it isn't your choice to remodel or live with it. And while it's nice to say "just move", let's not forget that moving costs a couple months rent and a massive time investment to fin…

Eh, almost no one I’ve seen has ever spent less by moving to their own home. They’ll typically end up spending at least half of what they spent as rent just on things other than the mortgage (which would typically be much higher than the rent by itself). Now of course they often would get a larger, nicer place that’s exactly what they wanted, but let’s not kid ourselves that home ownership is somehow cheaper. It neve…

>let’s not kid ourselves that home ownership is somehow cheaper. It never is (except during the times when the prices went up no matter what).

It's important to take into account the intangibles of buying vs. renting. It's not just a straight up financial calculation. Buying makes your living situation far more stable than renting. If I miss my rent for 3 months, I'll be getting a knock from the sheriff and put out on the street. If I miss my mortgage for 3 months it can take over a year to be foreclosed on. On top of that, buying puts you in a community of owners. It's a completely separate population from renters. People are far more incentivized to act civil and be considerate of their neighbors when everyone owns and lives somewhere long term. Not to mention the ability to renovate, add on, and otherwise make a house into a home. Buying is an emotional decision as much as it is financial.

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

#390

Post by lumost »

jandrewrogers wrote: post #363
sakopov wrote: post #344

Earlier quoted context omitted.

> 220 is a wage at the upper end of what can be typically made by the time your 30 if you’ve chosen the right careers. This is typically true if you work for a fang. These insane salaries rarely exist anywhere else.

It is more common than you might expect across industries if you are good at what you do. I know a biz dev person at a mediocre book publisher that earns that much and they’ve worked remote much of their career.

It's not an uncommon salary - but its not typical as of 2021. The individuals with this compensation are typically either experienced, or educated in a remunerative field (including comp sci grads).

A society that sets the bar for home ownership at this level is going to have trouble, in an inflationary environment home ownership completely changes the savings rate for an individual as inflation eats away at the mortgage payment. By the time 30 years is up and the individual owns the home, they benefit from massively reduced housing costs into their retirement.

If instead these individuals are renting into their 30s/40s/50s they won't have the cash flow to backstop their retirement, fund college, create businesses, or other activities that result from capital accumulation.

What's worse is that a larger fraction of the eventual benefits that these individuals require will be paid into rent on properties that are likely owned by investment banks and others whose borrowing power is unconstrained.

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