Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Is It Better to Rent or Buy?

nytimes.com

Post reply on HN
Print view View original

81–90 of 256 posts

Re: Is It Better to Rent or Buy?

#81

Post by mbostock »

kpommerenke wrote: post #56
mbostock wrote: post #18

Author here. Thought I’d highlight my favorite, perhaps non-obvious feature: the slope of the charts tells you whether the variable is positively or negatively correlated with the cost of buying. And depending on the settings, that slope can change from positive to negative. For example with the defaults, the down payment chart is flat. This means the total cost of buying is relatively unaffected by the size of your…

According to the Modigliani–Miller theorem, the mix of debt (size of mortgage) and equity (down payment) is only irrelevant in a world without taxes. However, mortgage interest is tax deductible, while rent is not, so their result doesn't apply here. The flat down payment chart is a coincidence, based on the default values for interest and inflation rates, growth rates and expected returns.

I don’t think it’s a coincidence — those default values reflect the current market, and it’s a reflection of the market being fairly efficient. For example, if investment return rates were consistently higher, you could expect mortgage rates to rise as well. Taxes introduce some inefficiency, but I think the broader point still holds.

Re: Is It Better to Rent or Buy?

#82

Post by sbov »

dgabriel wrote: post #11
marknutter wrote: post #9

If you buy, you can do whatever the heck you want to with the house or your yard. That's true freedom and to some people - myself included - worth every penny.

Not true in many, many cases. HOAs, condo boards, zoning laws, and historical societies can control homeowners pretty well.

Yeah, this. I recently moved to the Los Angeles area. Even many houses have HOAs. One of the HOAs we looked at had the rule that your garage door was not allowed to be open unless your car was entering or exiting the garage.

Ultimately we found a place without one. But all newer construction (1990 or later) we looked at had an HOA.

Re: Is It Better to Rent or Buy?

#83

Post by woobar »

mbostock wrote: post #18

Author here. Thought I’d highlight my favorite, perhaps non-obvious feature: the slope of the charts tells you whether the variable is positively or negatively correlated with the cost of buying. And depending on the settings, that slope can change from positive to negative. For example with the defaults, the down payment chart is flat. This means the total cost of buying is relatively unaffected by the size of your…

Why are Utilities listed under the category labeled as "surprising variety of expenses that renters do not directly pay"?

Edit: I see it is just a poor labeling, explanation mentions just the portion of utilities that not covered by landlord.

Re: Is It Better to Rent or Buy?

#84

Post by fspeech »

mbostock wrote: post #18

Author here. Thought I’d highlight my favorite, perhaps non-obvious feature: the slope of the charts tells you whether the variable is positively or negatively correlated with the cost of buying. And depending on the settings, that slope can change from positive to negative. For example with the defaults, the down payment chart is flat. This means the total cost of buying is relatively unaffected by the size of your…

One risk associated with owning that doesn't often get mentioned but that is more relevant these days is your exposure to misgovernance of your local governments. There were a few scares in the municipal bonds markets in recent years but home buyers should recognize that they are exposed to similar risks. After all it is the taxes they pay that will be needed to pay back the municipal debt. If a city were to get into fiscal troubles police and other public services would get cut first potentially impacting property values, maybe greatly in which case there could be a downward spiral.

Re: Is It Better to Rent or Buy?

#85

Post by webwright »

larrys wrote: post #48
tolmasky wrote: post #37

Earlier quoted context omitted.

If you rent, you can leave whenever the heck you want and then go live wherever the heck you want. That's true freedom and to some people - myself included - worth every penny. Its really interesting the different things people value. I value not fundamentally worrying if there were to be an earthquake and this place would be destroyed. I value one day waking up and deciding, hey, I think I want to go try living in P…

"If you rent, you can leave whenever the heck you want and then go live wherever the heck you want. " You can do that when you own as well. You have to sell your house. After all you can't just get out of a lease whenever you want it goes according to a fixed time period. You have constraints as far as lease renewal, term and things like that. If you own you can decide at any point to sell (although certain times of…

"You can do that when you own as well. You have to sell your house. "

This is so incredibly wrong. Selling a house can be a massive and expensive undertaking. Assuming agents are involved, you can expect to pay 6-9% of the value of the house in costs (agent fees, closing costs, etc), assuming the buyer doesn't find something that is against code or something that is starting to fail (furnace, roof, etc).

You buy a house tomorrow for $200k and want to sell it in 18 months because of a job opportunity or family emergency? You better hope the house value went up... Otherwise you're taking a $12,000-18,000 hit when you sell it. Sometimes, house values go DOWN-- and then you are under water.

Re: Is It Better to Rent or Buy?

#86

Post by veemjeem »

greedo wrote: post #73
refurb wrote: post #47

The calculator is surprisingly accurate based on some math I did late last year when thinking about buying a house. A small (1300 sq ft) house in SF can be bought for $750K in some neighborhoods in the south of the city. The ones in between the fancy ones and the crappy ones. I did a pretty detailed analysis of what everything would cost. Loss of investment income on the down payment, insurance, property taxes, etc.…

I might be missing something, but if house prices rise just 1% annually, your differential would shrink dramatically in favor of ownership.

So I live in rent controlled area in the bay area where I pay around $1500 for a 2 bedroom. Using this calculator, it seems like buying almost any kind of home in the bay area would be a very bad decision.

Re: Is It Better to Rent or Buy?

#87

Post by NoMoreNicksLeft »

fspeech wrote: post #77
NoMoreNicksLeft wrote: post #24

Earlier quoted context omitted.

> Of course, there’s still a big intangible difference between having debt and not having debt, Both renters and owners need a place to live in the future, assuming they're not dead. If we exclude those who live with mommy and daddy or mooch off of other people... Well, then whether the debt is formal with a mortgage or not makes little difference. Even renters are on the hook to come up with $1000 for the month of O…

The main problem with owning is illiquidity and associated immobility. If you rent you can quickly down shift if you run into trouble. If you own the transaction cost is much higher if you need to move. The main advantage of owning one's own residence is tax and stability (the flip side of the illiquidity problem). Owner's equivalent rent is not a taxable income. Capital appreciation works in your favor rather than a…

> The main problem with owning is illiquidity and associated immobility. If you rent you can quickly down shift if you run into trouble.

Where are you getting these lease-free rental units?

True, you're less on the hook with a 12 month lease, and the liability is lower than a 30 year mortgage...

But this is a very mild difference. That job's not going to wait for you to sell your house or for your lease to end.

> If you own the transaction cost is much higher if you need to move.

If you own, then eventually you're not paying anything at all for a place to live. And don't bother to mention property tax... you're paying that if you rent, too, it's just hidden.

This is a manufactured debate, it's meant to appeal to twentysomethings' bohemian aspirations. Someone wants them mobile so they can herd them around like migrant workers.

Re: Is It Better to Rent or Buy?

#88

Post by base698 »

marknutter wrote: post #9

If you buy, you can do whatever the heck you want to with the house or your yard. That's true freedom and to some people - myself included - worth every penny.

Except: take an extended vacation between employment, move to a hotter job market on a whim, move again on a whim, shield yourself to economic downturns.

Disclaimer: own a house in a place people rent, so I got out of that steaming pile of poo unscathed.

Re: Is It Better to Rent or Buy?

#89

Post by sheepmullet »

NoMoreNicksLeft wrote: post #87
fspeech wrote: post #77

Earlier quoted context omitted.

The main problem with owning is illiquidity and associated immobility. If you rent you can quickly down shift if you run into trouble. If you own the transaction cost is much higher if you need to move. The main advantage of owning one's own residence is tax and stability (the flip side of the illiquidity problem). Owner's equivalent rent is not a taxable income. Capital appreciation works in your favor rather than a…

> The main problem with owning is illiquidity and associated immobility. If you rent you can quickly down shift if you run into trouble. Where are you getting these lease-free rental units? True, you're less on the hook with a 12 month lease, and the liability is lower than a 30 year mortgage... But this is a very mild difference. That job's not going to wait for you to sell your house or for your lease to end. > If…

Breaking lease is far simpler and cheaper than selling. It's never taken me more than 2-3 weeks to find someone to take over the lease whereas it can take months to sell a house.

Because of this ease whenever I move jobs I always move house to be closer to work (after passing probation) because in my area changing jobs can easily add an hour a day to your commute.

Re: Is It Better to Rent or Buy?

#90

Post by swalkergibson »

NoMoreNicksLeft wrote: post #87
fspeech wrote: post #77

Earlier quoted context omitted.

The main problem with owning is illiquidity and associated immobility. If you rent you can quickly down shift if you run into trouble. If you own the transaction cost is much higher if you need to move. The main advantage of owning one's own residence is tax and stability (the flip side of the illiquidity problem). Owner's equivalent rent is not a taxable income. Capital appreciation works in your favor rather than a…

> The main problem with owning is illiquidity and associated immobility. If you rent you can quickly down shift if you run into trouble. Where are you getting these lease-free rental units? True, you're less on the hook with a 12 month lease, and the liability is lower than a 30 year mortgage... But this is a very mild difference. That job's not going to wait for you to sell your house or for your lease to end. > If…

This is unequivocally accurate. I own three investment properties plus my own home. Each one is profitable, including the house that I live in.

It seems to me that the majority of this argument is that rents will not increase. That is a fallacy. All else being equal, each time you move from a place, you will likely be paying more rent because of the inevitable march of time.

Post reply on HN