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The real cost of owning a home

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Re: The real cost of owning a home

#841

Post by Mezzie »

arjie wrote: post #729
Mezzie wrote: post #348

Earlier quoted context omitted.

Also, if you're a marginal renter, e.g. can't make 3x the rent from a W2 and don't have a co-signer, credit issues, etc. then the randos are more likely to work with you. My sister was a sex worker for a while when she was younger, and trying to do things like rent was difficult because her income fluctuated a lot (always enough to cover rent, but she'd save during good months for poor ones) and she was technically s…

That's interesting. I suppose you can't run that kind of thing in an S-corp and pay yourself the regular salary. It's what I do. You have a W-2 and everything. But I'm doing the other kind of SW: software.

You probably could, but a 22 year old bipolar sex worker isn't going to.

If you have that level of acumen, you likely don't have to be a sex worker.

Re: The real cost of owning a home

#842

Post by Mezzie »

aidenn0 wrote: post #553
Mezzie wrote: post #348

Earlier quoted context omitted.

Also, if you're a marginal renter, e.g. can't make 3x the rent from a W2 and don't have a co-signer, credit issues, etc. then the randos are more likely to work with you. My sister was a sex worker for a while when she was younger, and trying to do things like rent was difficult because her income fluctuated a lot (always enough to cover rent, but she'd save during good months for poor ones) and she was technically s…

Helped my daughter find housing recently and we ran into lots of these issues (also, nobody we talked to was willing to allow a co-signer). We ended up finding a friend-of-a-friend who had a bedroom to rent, but she will not (at least in the near-term) be able to rent an apartment.

I'm only in my place because when I moved in, it was owned by a friend of my aunt's.

At the time, I was legally limited in the amount of money I could make because I was relying on Medicaid and subject to income limits. I have MS and not having access to MS drugs is very, very bad and risks permanent consequences. The drugs also are ridiculously expensive (I think my monthly medication is about $30k/dose).

I had money, it was just all earned under the table on the grey market. Not a situation a corporate landlord is going to deal with, but I never missed a rent payment and I'm a very good tenant (clean, report issues promptly, read and adhere to the lease, etc).

I'm no longer subject to those income limits and I have a W2 job now and could qualify for an apartment based on that, but for a long time that wasn't true. On the margins, you end up having to look for the small time landlords, employers, etc. because if you're decent and you can talk to them, you can get a shot.

Re: The real cost of owning a home

#843

Post by sdellis »

Paracompact wrote: post #494
jstanley wrote: post #298

Earlier quoted context omitted.

You're missing that most people are able to buy houses on borrowed money, so their housing investment is effectively levered up 10x or more, at least at the beginning. It's not a choice between $1m in housing appreciating at 3% and $1m in stocks appreciating at 9%. It's a choice between $1m in housing appreciating at 3% or $100k in stocks appreciating at 9%.

The borrowed money isn't free from interest. There's no numerical sense in borrowing money at 5%+ interest to fund an investment appreciating at 3%. Some schemes might advantage it further (such as leveraging your mortgage with your retirement funds) but then we might as well also discuss further disadvantages compared to renting, such as upkeep and property taxes. Back around 2020 when mortgage rates very briefly di…

I agree with your points. You have to take risks in either case, but some risks are easier to do the math on. And yes, fewer home investment opportunities exist as the interest rates go higher. There may be opportunities for higher gain with stocks, but there are also greater risks for loss. At least if you lose some value in a home, it's practical -- you still have a roof over your head or make money by renting it.

Re: The real cost of owning a home

#844

Post by barchar »

hdndjsbbs wrote: post #312

OP seems to disregard the fact that equity in the house is basically a pile of cash you can live inside of. If you're renting you're paying some premium for the landlord to pay their mortgage interest and pay down their own principal. The cash flow is lumpier for ownership (fewer, bigger expenses) and your risk concentration is greater (you're committed to a single asset). But ultimately that stuff is all priced into…

It seems like public (REIT) landlords haven't really been making an above market return. Admittedly they have constraints that private landlords don't, but they also own a metric shitload of rentals.

Re: The real cost of owning a home

#845

Post by csomar »

Sohcahtoa82 wrote: post #825
csomar wrote: post #771

Earlier quoted context omitted.

Are you saying that during the 11 years you never had an electrical issue, window/door breaking, a paint job, a clogged pipe, mold growing somewhere, a tree that needed handling, etc... You either have very high quality materials, don't care or were just lucky. Usually something (small/medium) breaks every 2-3 months or so and something (medium/big) breaks every 3-4 years or so. Depends on usage too (1 person is very…

> electrical issue, window/door breaking, a paint job, a clogged pipe, mold growing somewhere, a tree that needed handling, etc I did forget about two of those. I did need to get some trees handled a few years ago. Was about $3,000 to get like 5 trees (A couple over 150 feet) removed. And we did get the house repainted, but that wasn't completely necessary, but was a nice to have. Wasn't that expensive, surprisingly.…

Rent is determined by supply/demand. In the USA, rents are higher (than buy) because rental businesses are dominated by companies who can do the math. In many parts of the world, rental businesses are small/micro by someone/family who want to own property.

See this: https://www.numbeo.com/property-investment/gmaps.jsp?indexTo...

So for many people around the world, it's more economical to rent. You are basically being subsidized by the people who are obsessed with the idea of owning a property.

Re: The real cost of owning a home

#846

Post by barchar »

fsckboy wrote: post #611

> You've probably heard someone say something to the effect of "renting is just throwing your money away". Don't believe it. It's a glib statement that simply isn't true. There are so many hidden costs to home ownership that most people who have never owned a home don't know about. I appreciate your saying all you said. I just want to add on, the ownership picture is even uglier. (what I'm about to say will break you…

If you have public REITs active nearby you can do this comparison for real: if you buy ~1 unit's value in shares of that landlord you will probably own about 1/ of the company and receive someplace around the rent of that unit in dividends and capital gains.

The government subsidies for investing in the stock market are also pretty nuts, and the TCJA hosed owner-occupants by limiting the interest deduction, the gains exclusion, and raising the standard deduction.

If you invest you get to deduct any interest against investment gains (even better: you can just not pay any interest), you pay ZERO capital gains taxes on up to ~$80,000 of (real!) contributions each year (with no maximum excluded gains), you can defer $22,000 of (real!) income to literally whenever, AND you can take the standard deduction every year (including in retirement when you wouldn't have had any income to deduct had you paid off a house).

Re: The real cost of owning a home

#847

Post by tmnvix »

brabel wrote: post #386
funksta wrote: post #325

Earlier quoted context omitted.

Leverage is great when prices are increasing, but not when prices are moving in the opposite direction. The recent 40-year trend of decreasing interest rates lulled a lot of people into the belief that real estate leverage is an unalloyed good.

> I bought my current home in 2011 for $420k, and the Zillow currently estimates its value at $757k. Well yeah, in the last 20 to 30 years in most countries the story has been the same. My parents bought a house in Brazil in the early 90's for 30k and we're now selling it for 400k. My relatives in Australia bought a house in Adelaide for 400k around 5 years ago. Prices exploded there and it's now around 700k. They go…

> I would continue to bet on it going up in most markets since the conditions which made prices increase have not changed.

I think they have. As mentioned above, the past 40 year trend of declining interest rates appears to be at an end. It was the most significant factor in rising prices in my opinion.

Re: The real cost of owning a home

#848

Post by barchar »

the_sleaze_ wrote: post #162

Something I've been eyeing is the All In One Loan or FirstPosition HELOC where you take a HELOC on the entirety of the homes value, then use that credit account as your daily spending account. It's a higher interest rate, but then you only get charged on the amount you have actually borrowed which ideally would be get lower and lower. If anyone has any feedback on it I'd love to hear it

The annual price-appreciation of a home is usually lower than the risk-free rate (and thus the HELOC rate). If you "pay yourself" rent and use that to pay the HELOC down then it can make sense I suppose.

It's just leverage and it depends on the returns you're getting on the loan. Renting is also a kind of leverage though so if you own a home outright it might make sense to lever up. If you want that kind of leverage while still having the position in the house then an I/O loan is probably the easiest way to do it.

Re: The real cost of owning a home

#849

Post by antisthenes »

bottlepalm wrote: post #723
tim-tday wrote: post #170

Earlier quoted context omitted.

Mortgage is locked in for 30years

Taxes goes up, insurance goes up, repair costs goes up, and with a 30 year mortgage you lose like 50% the value of the home in interest payments.

> with a 30 year mortgage you lose like 50% the value of the home in interest payments.

You don't lose anything. The interest is the price you pay for the time value of the loan given to you.

You also get a tax break on at least 200k in "profit" (really more like inflation) when you sell the home.

Re: The real cost of owning a home

#850

Post by em-bee »

bigstrat2003 wrote: post #752
em-bee wrote: post #471

Earlier quoted context omitted.

in germany by law every lease for private homes is always in perpetuity. the concept of renewal does not even exist. it is always month to month until the tenant decides to move out. you can't not renew a lease. you can raise the rent, but only in small steps. exceptions are if the tenant fails to pay for a few months, damages the property or misbehaves in other ways.

That sounds like a really awful law, TBH. I would never rent to someone if it meant that I was powerless to decide to end the relationship. I'm all for protecting tenants to some extent, but that law strikes me as abusive of the landowner.

see my other comment: https://news.ycombinator.com/item?id=48286641

i don't agree that it is abuse of the landowner, but you also have to consider that in germany private landowners renting out are extremely rare. always have been. maintaining rental properties was always a business.

as an individual home owner i would also not want to rent out either unless there are exceptional circumstances. but german cities do not have suburbs like in the US, and any popular area will build up multi tenant apartment blocks. people owning their own house are out in the countryside where noone wants to rent anyways. and any multitenant building is by definition a business. and that's the majority of all rental properties in germany.

you have to keep in mind that germany has the highest ratio of people renting vs owning. renting has become our culture. with so many people renting, laws have to be strict, otherwise we would have chaos. austria is similar. my mother in vienna lives in an apartment that has been rented by someone in our family since 150 years ago.

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