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My thoughts on renting versus buying

milesbarr.me

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Re: My thoughts on renting versus buying

#271

Post by mizzao »

kibwen wrote: post #15

> The Flexibility of Renting Is Undervalued And the stability of buying is undervalued. It's telling that this article frames housing as an investment vehicle rather than as a basic necessity. And it's not just a necessity because it shelters you from the elements and gives you storage for your stuff; it anchors you in a neighborhood and allows you to begin forming a local community. The flexibility of renting that t…

It seems like the position in this article pops up frequently among the FIRE crowd... anyone know why this is? It does seem to square with the objective function of maximize financial outcome as much as possible (perhaps ignoring other goals).

Re: My thoughts on renting versus buying

#272

Post by rob_c »

dnissley wrote: post #255
rob_c wrote: post #149

Earlier quoted context omitted.

In what possible scenario is burning cash vs keeping a fraction of it a bad financial decision? I can only imagine it makes financial sense to rent if you live somewhere where you're not paying off someone else's mortgage and are paying a fair renting price. (Otherwise paying your own mortgage just makes more sense) As an actual honest question, where in the world is like that any more?

In most HCOL cities it's cheaper to rent than to buy

not in the UK.

Which is why I asked.

I can name 4 cities easily where you're paying mortgage+extra driven by the "buy-to-let" craze over here. I'll assume you mean the UK is a phenomena in that case.

Re: My thoughts on renting versus buying

#273

Post by dbish »

rob_c wrote: post #272
dnissley wrote: post #255

Earlier quoted context omitted.

In most HCOL cities it's cheaper to rent than to buy

not in the UK. Which is why I asked. I can name 4 cities easily where you're paying mortgage+extra driven by the "buy-to-let" craze over here. I'll assume you mean the UK is a phenomena in that case.

I think the difference for the UK is it’s HCOL but low pay, so people there can’t afford the mortgage down payment as much, which is not normal for say American HCOL cities.

Re: My thoughts on renting versus buying

#274

Post by cramsession »

dbish wrote: post #269
jjav wrote: post #262

Earlier quoted context omitted.

> 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.

Rents in New York are notoriously high.

Re: My thoughts on renting versus buying

#275

Post by eweise »

ForHackernews wrote: post #69
eweise wrote: post #4

All I know is my mortgage is $1,800 a month and to rent my place now is at least $6K/month. I love knowing that my monthly payment can't go up.

Sounds like you're stuck there forever. Golden handcuffs, real estate edition.

Well, not really but I really like where I live so I don't consider moving.

Re: My thoughts on renting versus buying

#276

Post by ethbr1 »

mizzao wrote: post #271
kibwen wrote: post #15

> The Flexibility of Renting Is Undervalued And the stability of buying is undervalued. It's telling that this article frames housing as an investment vehicle rather than as a basic necessity. And it's not just a necessity because it shelters you from the elements and gives you storage for your stuff; it anchors you in a neighborhood and allows you to begin forming a local community. The flexibility of renting that t…

It seems like the position in this article pops up frequently among the FIRE crowd... anyone know why this is? It does seem to square with the objective function of maximize financial outcome as much as possible (perhaps ignoring other goals).

Because it's an easy "hot take" to post for people hungry to change their lives?

Arguing the actual optimal approach would require crunching numbers, which would take time by authors and readers, ergo the surfeit of "Here's why you crunching the numbers doesn't matter" popular content.

Also, just to call out one of the many gaps in this particular post: buying a home is a double hedge against inflation.

Given that (1) your debt is denominated in buy-date currency, while your real property value will be inflation-adjusted & (2) in the US at least, buying a home is the easiest way to borrow to invest with, given low mortgage rates (compared to other loans) + <100% down + fixed-rate 30 year mortgages with refinance at buyer's discretion.

Re: My thoughts on renting versus buying

#277

Post by const_cast »

pedalpete wrote: post #56
kibwen wrote: post #15

> The Flexibility of Renting Is Undervalued And the stability of buying is undervalued. It's telling that this article frames housing as an investment vehicle rather than as a basic necessity. And it's not just a necessity because it shelters you from the elements and gives you storage for your stuff; it anchors you in a neighborhood and allows you to begin forming a local community. The flexibility of renting that t…

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…

Homes are not low-risk or stable at all - you transfer the risk to your job.

If you lose your employment and you have a home, that's a much riskier situation than if you're renting. Because, if you cant find a job in time or in a very small location radius, you must sell.

The mobility of renting lowers the risk associated with extraordinary life events which requires relocation.

Re: My thoughts on renting versus buying

#278

Post by const_cast »

cramsession wrote: post #274
dbish wrote: post #269

Earlier quoted context omitted.

Not in New York.

Rents in New York are notoriously high.

That's because real estate is notoriously high.

Also, if you're buying in NYC you WILL get recurring and increasing monthly costs.

That $800/month HOA? Yeah, it's not gonna be $800 in 5 years.

Buying is not the same everywhere.

Re: My thoughts on renting versus buying

#279

Post by const_cast »

carlosjobim wrote: post #270
foxglacier wrote: post #226

Earlier quoted context omitted.

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…

The main difference is that you can invest the difference in renting vs owning, and you might come out on top in the long run. It depends on the housing market, the stock market, and where you are.

Re: My thoughts on renting versus buying

#280

Post by Anonyneko »

I really need some advice because I feel like I'm missing something, but here in Finland after some basic calculation I just don't see how a mortgage makes sense, especially for someone ineligible for ASP (local savings scheme for first home buyers, but it has many restrictions).

Home prices are not appreciating (which I otherwise consider a good thing for society), tax breaks for mortgages were abolished a few years ago, rates are at about 3%, down payment and collateral guarantees (when you don't have local collateral as an immigrant) make for a pretty hefty lump sum. Throwing the numbers into a calculator and pitting them against a 6% annual ETF over 20+ years seems to be too much in favor of the ETF, even with potentially higher rent down the line.

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