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My thoughts on renting versus buying

milesbarr.me

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Re: My thoughts on renting versus buying

#261

Post by jjav »

bnchrch wrote: post #62

I've seen these critiques for years. and while its not necessarily wrong, I believe it under weights a few points: - Fixing your housing costs against inflation: You can't count on housing price increases, but you can count on inflation. If you buy a house and your mortgage payment is > rent. Overtime it will naturally flip. $1 no longer buys me a chocolate bar, and $800/month no longer gets me a 2 bed apartment. - L…

> If you buy a house and your mortgage payment is > rent. Overtime it will naturally flip.

This is so often missed by those who compare rent today vs. mortgage today. Of course the mortgage will be higher. Today.

Look into the future. Rent will only ever go up. Mortgage will only ever go down, both in absolute terms (due to opportunistic refinancing), and due to inflation, and proportionally due to your earnings increasing over your career. These three factors will erode a mortgage into nothing.

When I first bought my 3br house, my mortgage could've rented a 5br luxury house with a pool, so yes it was painful for a few years. A couple decades later now, my mortgage is about a fourth of the cost of renting a small studio apartment.

As you age, do you want to face ever-increasing housing costs, or decreasing costs?

Re: My thoughts on renting versus buying

#262

Post by jjav »

etrautmann wrote: post #234
cramsession wrote: post #88

> People obsess over granite countertops, open floor plans, stainless steel appliances, and walk in closets. These might make you happy but they don’t make you rich. Money is a means to an end, and being happy is a fine end. I only live once and if I can be happy, well then I've pretty much won. Also you're not going to "get rich" by renting, if (and it's a huge if) you can somehow make renting work in your financial…

That’s absolutely not true. In NYC, I can get rich by investing the difference between a mortgage and my rent, and there’s literally no period over which it makes financial sense to buy. People still buy if coursed but it’s not because it makes them rich (at least in this market with this interest rate).

> I can get rich by investing the difference between a mortgage and my rent

After just a few years into ownership, mortgage becomes cheaper than renting so it is the homeowner who will have extra cash to invest for the rest of their life, not the renter.

Re: My thoughts on renting versus buying

#263

Post by pedalpete »

onecommentman wrote: post #238
pedalpete wrote: post #56

Earlier quoted context omitted.

As a renter who has recently been given notice that I must vacate my apartment in 90 days, you'd think I'd agree with you. However, I think this depends highly on the personality of the renter/owner, and that is the point this article misses. If someone is, like myself, comfortable with risks, I'm ok with changing neighbors, locations, and I've lived on 3 different continents and 9 cities? If you're someone who crave…

Values stability. You crave an addictive substance. By choosing the word “crave”, it sounds like you are pathologizing the choice to buy a home, perhaps from a need to validate your personal life choice to rent in spite of facing a forced vacation of your residence. Or perhaps you have financial interests in real estate companies that manage apartments.

I think that's somewhat appropriate. I live in Australia where buying a home does seem more of a pathology than a smart economic choice.

Re: My thoughts on renting versus buying

#264

Post by bombcar »

simianwords wrote: post #232
bombcar wrote: post #220

Earlier quoted context omitted.

Technically it doesn’t (as it means condominium which in theory could be single family homes) but practically it almost always means an “apartment you own” though sometimes “half a duplex” or similar proportions of a quad or six plex style. But in the US it usually implies neighbors above and below and on the sides.

I'm more curious now: what sort of apartment does not have neighbours nearby?

It’s the above and below; most people in the USA will think “condominium tower” when you say condo, but some (rarer) are much more like duplexes or single family homes.

Re: My thoughts on renting versus buying

#265

Post by ponector »

Gibbon1 wrote: post #76
moooo99 wrote: post #49

First of all, I fundamentally disagree on the notion that buying a home should be considered an investment (I would go as far as to argue that this attitude is part of the reason the real estate markets are so broken in many places of the world). I don't want to be rich and I don't need to be - I just want a place where my kids some day can grow up, where I can enjoy the sun in the garden and invite family and friend…

When I bought me house what I eventually decided is you can't use ordinary financial metrics for owner occupied housing. The reason is buying a house on credit is essentially the only investment you can make with the money you have available for housing. My opinion is the issue with renting and housing in general is the world wide financialization of real estate. It's being treated as a primary investment instead of…

>> My bet is the crashing fertility rates are likely what's going to put a stop to it.

Crushing fertility rates will not drive real estate prices down. It will create ghost cities, but business centers or any other desirable to live place will have high prices, maybe even higher as people are going to escape from dying towns.

Re: My thoughts on renting versus buying

#266

Post by JackMorgan »

I've yet to see the solarpunk argument: buying a house lets you generate value with the land/building.

For example, perennial fruit and veggie gardens in your backyard let you invest a small amount of time and energy building a long term yield of high value food. This year I spent about 25 hours growing $800 of clean organic veggies. I also prepped areas to plant fruit trees and bushes that I expect will increase my yields in a few years.

Solar on the roof / yard can reduce electricity costs for decades.

Rainwater capture and filtration can reduce water costs.

Renting out a bedroom can produce dollars.

Building a climate battery into a yard can reduce heating and cooling costs.

I ran some numbers and figure I can shave several hundred dollars a month off at a 30% ROI.

And it's not just about dollars, there's something very powerful about knowing my property is supporting my life with these investments.

Re: My thoughts on renting versus buying

#267

Post by jokethrowaway »

cramsession wrote: post #187
pton_xd wrote: post #184

> People rarely buy with a purely rational investment mindset; they buy based on lifestyle and emotion. > If you bought a home equivalent to the apartment you’d rent, or a slight downgrade, you might come out ahead financially over five years. This is really the key point. Everyone I've known personally who buys a home does so with the intent to "upgrade" their lifestyle. Even if they were perfectly content before in…

If they want children, they’ll need more room. Same if you want/need a home office or to move an elderly parent in. I wouldn’t really classify those things as “feeling nice”, more going through natural life stages that renting a 2 bd may retard.

We have kids, we're a bit crammed in our current place and we're building a 3x bigger and much nicer place. Location is a small LCOL country in Europe with high foreign income. So, I see your point about naturally needing more room with kids, but there is also a lifestyle upgrade factor for us. We would be comfortable with 2x the space and without modern / luxury finish, spending less than half.

The rent I pay now is 1/12 of the rent I would get charged on the property I'm building. I'm happy paying my current rent, but I would never rent a fancy property and spend all that money with no equity, even if it would be less than 30% of my monthly income.

Re: My thoughts on renting versus buying

#269

Post by dbish »

jjav wrote: post #262
etrautmann wrote: post #234

Earlier quoted context omitted.

That’s absolutely not true. In NYC, I can get rich by investing the difference between a mortgage and my rent, and there’s literally no period over which it makes financial sense to buy. People still buy if coursed but it’s not because it makes them rich (at least in this market with this interest rate).

> I can get rich by investing the difference between a mortgage and my rent After just a few years into ownership, mortgage becomes cheaper than renting so it is the homeowner who will have extra cash to invest for the rest of their life, not the renter.

Not in New York.

Re: My thoughts on renting versus buying

#270

Post by carlosjobim »

foxglacier wrote: post #226
carlosjobim wrote: post #139

Earlier quoted context omitted.

What? That cash goes to the landlord.

In the same way the interest payments on a mortgage go the the bank. And the interest is often the majority of the payments people make on a mortgage. If you're renting, in a market where rents are about the same or lower than mortgage interest, then you keep the leftover cash that the buyer put into their house and you can put into whatever investment you choose.

Paying rent is the same as paying 100% interest. You lose everything you have paid, it counts towards nothing for you.

Paying a mortgage, you pay part amortization and part interest. Even if only 10% of your monthly payment is amortization each month, it's better than paying rent.

> If you're renting, in a market where rents are about the same or lower than mortgage interest, then you keep the leftover cash that the buyer put into their house and you can put into whatever investment you choose.

Such a market doesn't exist anywhere on this planet. Rent is always higher than mortgage + interest.

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