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

#391

Post by ska » Tue, Jul 20, 2021, 3:53 PM UTC

runako wrote: post #310

ska wrote: post #80

Earlier quoted context omitted.

There are also jurisdictions with capped rent increase amounts, which can be in favor the other direction

Genuinely curious, having lived in 6 major metros across 5 states from coast to coast. Are these jurisdictions anything like common? Where are some of them? I would love to do some further research. I've heard of rent-stabilized units, but never an area where rent increases are capped.

I had colleagues living in Ontario (Canada), perhaps just limited to Toronto? Anyway they had rent increase caps based on age of building which was surprising [1]. Also California has something like this since 2020 if I understand correctly. Some areas of UK also. I'm sure there are more.

[1] If I recall correctly there was a process to apply an above-limit increase if you could demonstrate expenses, say a renovation.

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

#392

Post by [deleted] » Tue, Jul 20, 2021, 4:01 PM UTC

BTCOG wrote: post #375

JMTQp8lwXL wrote: post #254

Earlier quoted context omitted.

If you had a significant other with a similar upper middle class wage, e.g., $220k * 2 = $440k you could probably swing it with more breathing room. You are wise to avoid the burden, in the chance you technically qualify for the mortgage but barely so in the Bay Area (e.g., leaving you house poor). The fact that home affordability requires a HH income in the top 2-3% is, to put it mildly, highly concerning. It makes…

$200k+ yearly salary is in no way at all, middle-class.

[deleted]

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

#393

Post by prewett » Tue, Jul 20, 2021, 4:11 PM UTC

tuananh wrote: post #316

chiefalchemist wrote: post #183

Earlier quoted context omitted.

Regardless of age, needs and priorities change. There's no joy in moving, but it's still better than the time suck of hiring a contractor, electrician, and/or plumber. AND having to pay them. Owning is nice. But it's more limited and more time consuming. There's a cost associated with that.

> Owning is nice. But it's more limited and more time consuming. There's a cost associated with that. I'm living in SEA.the cost of owning a house isn't a lot where i live. so I'm surprised to keep hearing this from those living in US. can you elaborate a bit more what kind of cost do have when owning a house?

Mow the lawn, water the lawn, tend the flower bed, paint the house (or replace the siding), replace the shingles on the roof after the hailstorm, fix the A/C, replace the refrigerator, etc. Some of the those are more frequent that others, of course, but things break over time.

Other costs of ownership are property tax (generally about 1% of the property value per year), gas/water/electricity are more expensive than renting because the house is bigger, there is home owners' insurance, and possibly neighborhood association fees. And then when you sell, you have capital gains tax and seller tends to pay the broker's fees for both the buy and seller, which totals up to about 6% of the selling price. There's probably sales tax, too.

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

#394

Post by kbelder » Tue, Jul 20, 2021, 4:26 PM UTC

dragontamer wrote: post #341

RHSeeger wrote: post #324

Earlier quoted context omitted.

> $1000 is principal, $400 is interest Your numbers don't seem normal. Looking at a mortgage calculator, given a new $370,000 home price, with 20% down, 3.92% interest... the P&I is $1,399. Of that, $967 is interest and $432 is principal. Those numbers are almost the reverse of yours. It wouldn't be until ~year 20 of the mortgage that the numbers would match yours.

Try again: 15-Year mortgage 2.375% interest. Aka: current market conditions. With interest rates so low, your monthly payments are minuscule right now and make the 15-Year a good option. Any homeowner with good credit scores can right now switch off their current mortgage into a 15-Y 2.375% ish loan.

I bought a house three years ago. It burned down one year ago. I am buying another house this month that is 40% more expensive, and will be paying less on a monthly basis. This is due to (1) rolling over money invested into the first house, and (2) stupidly low interest rates.

If you can realistically afford a house, I don't see how renting could ever make sense, at least not when the prices are close. Basically, consider a mortgage payment as a rental payment where they match 50% of your rent into a nice investment fund you can cash out anytime you like.

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

#395

Post by refurb » Tue, Jul 20, 2021, 4:27 PM UTC

snowwrestler wrote: post #376

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.

Your landlord doesn’t save on HOA fees, repairs, taxes, or insurance because they bought 20 years ago. Those are all costs that are charged in present dollars. Repair services want to get paid in 2021 dollars. Property taxes are based on assessments of current value. Insurance premiums are set to cover present replacement costs. The only thing your landlord saves on by buying 20 years ago is the nominal cost of the p…

Owner owns the building, he’s the HOA.

Property taxes are capped in terms of growth. Likely paying 10% of what I’d pay if I bought.

And biggest of all, he locked in his mortgage payment while rents went up 4x. And rents were still lower than cost of owning as housing prices priced in appreciation.

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

#396

Post by kbelder » Tue, Jul 20, 2021, 4:55 PM UTC

sokoloff wrote: post #168

carabiner wrote: post #99

Earlier quoted context omitted.

> can do any improvements I want, when I want This is the main thing I'm wondering about. Most people I know who own homes enjoy working on them. Home improvement becomes a hobby that they like, whether it's basic plumbing or painting the walls or building a deck. I despise this work (even though I do basic carpentry), and I fully consider it work that detracts from my life. It's like doing the dishes, it's a chore,…

I do a substantial majority of the repairs and maintenance on our cars and our house. It's a hobby of sorts, but it's also a real stretch to say that I enjoy it . I do it because it's a phenomenal way to save money (and that savings is not taxed, meaning that if I avoid paying a contractor $5000, it's about the same financially as earning an extra $8500) and many of the jobs don't take an extraordinary amount of time…

I enjoy part of it. I like creating something new... building a shed or trellis, adding a new light fixture. I don't like fixing leaks, patching walls, and so on.

But doing this stuff yourself is so much better financially. You don't turn a profit by paying contractors to improve your house; you profit by investing your own labor to do it at 20% of that cost.

Imagine investing in a stock where you could put in some labor now and then, and have that actually result in substantially higher stock prices.

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

#397

Post by seoaeu » Tue, Jul 20, 2021, 5:15 PM UTC

plank_time wrote: post #131

alach11 wrote: post #2

My wife wants to buy a house, but I'm unable to make life decisions without trying to minmax them. I wasn't satisfied with existing rent vs. buy calculators, so I decided to build my own! I'm not a developer, so I apologize if it's a little rough looking... Some things it takes into account: - The actual rate of return on your down payment and extra costs of a house - Inflation - Itemized deductions on your taxes - T…

Some decisions aren’t mathematical. Sometimes it’s better to make a decision based on whether or not it makes sense for the family as opposed to dollars and sense. If your wife wants to buy a place, I suggest finding a compromise to figure out how to make both parties happy.

At the same time, you should be highly skeptical of anyone encouraging you to make what might be the single largest purchase of your life without carefully working through the financials. Maybe your preferred option will cost you an extra $50,000 over the next decade and you decided to go with it anyway. That's totally fine as long as it is a conscious choice. If the difference is $500,000 then perhaps you should consider how strongly you actually care about renting vs. buying...

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

#398

Post by adi4213 » Tue, Jul 20, 2021, 5:47 PM UTC

BTCOG wrote: post #375

JMTQp8lwXL wrote: post #254

Earlier quoted context omitted.

If you had a significant other with a similar upper middle class wage, e.g., $220k * 2 = $440k you could probably swing it with more breathing room. You are wise to avoid the burden, in the chance you technically qualify for the mortgage but barely so in the Bay Area (e.g., leaving you house poor). The fact that home affordability requires a HH income in the top 2-3% is, to put it mildly, highly concerning. It makes…

$200k+ yearly salary is in no way at all, middle-class.

Do you mean to say they are > or < than middle-class?

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

#399

Post by rashkov » Tue, Jul 20, 2021, 6:04 PM UTC

motioncuty wrote: post #350

pessimizer wrote: post #118

Earlier quoted context omitted.

> rate of return the money you would otherwise use for the down payment Really the most important number, but all of these suggestions are crucial to the calculation. Money that doesn't get invested in a house gets invested in other things. Pretend it's in an index fund.

But when you take out a morgage you can leverage 800k of the banks money at negative real interrst rates, effectively paying you tens of thousands over the course of the loan and any appreciation of that asset gets multiplied by 5x on your initial down payment.

Negative because the loan interest rate is below inflation?

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

#400

Post by motioncuty » Tue, Jul 20, 2021, 6:22 PM UTC

rashkov wrote: post #399

motioncuty wrote: post #350

Earlier quoted context omitted.

But when you take out a morgage you can leverage 800k of the banks money at negative real interrst rates, effectively paying you tens of thousands over the course of the loan and any appreciation of that asset gets multiplied by 5x on your initial down payment.

Negative because the loan interest rate is below inflation?

Yup, mortgages are around 3% and the fed rate is near 0 for the next year or 2. If inflation averages over 3% per year, you are getting paid the difference to borrow.