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Is It Better to Rent or Buy?

nytimes.com

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Re: Is It Better to Rent or Buy?

#141

Post by quesera »

gnoway wrote: post #120
hkmurakami wrote: post #33

Earlier quoted context omitted.

Some people say "oh you can always rent the house out!" but they often forget that once they move away and have to hire a property management firm, the fees that they'll have to pay will erode the rent revenue below breakeven with the mortgage payments (without such a manager, you can frequently break even or better vs mortgage)

In at least one US State, your property taxes are different if you're living in the home vs. renting it out. In my case, losing the homeowner's exemption would almost double my property taxes. I'm not sure if you get to deduct property taxes for non-homestead property on your federal return either. In my case, losing this deduction would force me to use the standard deduction instead of itemizing. So, a possible doub…

> I'm not sure if you get to deduct property taxes for non-homestead property on your federal return

You can. Property tax goes on Schedule E as a business expense, just like insurance, utilities, repairs, etc.

You can also deduct mortgage interest for rental properties.

Re: Is It Better to Rent or Buy?

#142

Post by quesera »

millstone wrote: post #116
blub wrote: post #79

Earlier quoted context omitted.

Which country was this in? I find it incredible...is it everywhere like this?

This was in the USA, where the law states that landlords and their hired contractors may enter during "reasonable hours" for "improvements." Probably rendering the apartment inhabitable for hours every day is not legal, and I could have sued for some compensation, but living there had gotten so miserable with the construction noise and random water shutoffs that I just wanted out.

The law varies by state. The states I'm familiar with have a tenants' right to "peaceable enjoyment" of their rented premises.

The new owners were trying to smoke you out. They might have been able to evict you on the basis of their desire to do significant work on the apartment (again, varies by state), but they probably figured it'd be cheaper to just make you miserable. Maybe that's legal in your state.

Re: Is It Better to Rent or Buy?

#143

Post by rahimnathwani »

refurb wrote: post #119
lazyant wrote: post #67

We need one like this but Canada; no tax breaks on mortgage interests or property taxes up here :-(

Canada also doesn't have 30-year mortgage terms. The loans are still amortized over 30 years, but you need to renew the mortgage every 5 years or so. If you lock in a super low interest rate, you only lock it in for 5 years (10 years are available as well, but you pay a premium in terms of interest rate).

This sounds similar to the mortgage market in the UK. Longer term fixed rates exist but the rate reflects the yield curve over the fixed period (not just current spot rates) and there is usually a large redemption penalty. For example, if you sign up for a 4-year fixed rate deal, there might be a redemption penalty of 4% if you close it out in year 1, 3% in year 2 etc.

Re: Is It Better to Rent or Buy?

#144

Post by eevilspock »

IgorPartola wrote: post #140
kenrikm wrote: post #135

Earlier quoted context omitted.

I used it to calculate if buying my house was a better deal than renting. Turns out over 30 years it was exactly the same.. down to the dollar.

Including the fact that you own the house after the 30 years?

The calculator of course takes this into account. Both contributions to principle and the appreciated value of the home.

Re: Is It Better to Rent or Buy?

#145

Post by [deleted] »

Spooky23 wrote: post #102
fspeech wrote: post #84

Earlier quoted context omitted.

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…

Unless you're somehow securing multi-year leases, that's a cost that is passing on to you as well. You also need to factor in the value of negative impacts of renting. When you have kids, school selection is driven by location -- and a lease is more ephemeral than a mortgage. You also always need to deal with landlords, who can be good or bad, and often cannot make changes to the property that you would like.

[deleted]

Re: Is It Better to Rent or Buy?

#147

Post by khuey »

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 break a lease whenever you want. Generally the most you can lose is the deposit plus rent until the unit can be filled. Compared to the transaction costs of selling a house it's negligible.

The concern about the place being damaged/destroyed by an earthquake is a big one in California. Unlike fires, earthquakes are not covered by standard home insurance. And standalone earthquake insurance is prohibitively expensive for many (less than 1/5th of CA homeowners have it). Add to that the fact that (again, unlike a fire) an earthquake is likely to damage many homes in the same area at the same time which will inflate the cost to rebuild in a timely manner and you start to see the large amount of risk many owners are exposed to here.

Re: Is It Better to Rent or Buy?

#148

Post by cstejerean »

Spooky23 wrote: post #102
fspeech wrote: post #84

Earlier quoted context omitted.

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…

Unless you're somehow securing multi-year leases, that's a cost that is passing on to you as well. You also need to factor in the value of negative impacts of renting. When you have kids, school selection is driven by location -- and a lease is more ephemeral than a mortgage. You also always need to deal with landlords, who can be good or bad, and often cannot make changes to the property that you would like.

You don't need multi year leases. If anything that would be bad. If I rent and the city I am in goes bankrupt and has to cut public services which in turn affect my quality of life and local property values, I can pick up and move and let the owner of the property deal with the double digit hit on his property value. Meanwhile I can move in to the town next door that doesn't have those problems. The costs are not passed down to me.

Re: Is It Better to Rent or Buy?

#149

Post by philfreo »

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…

Very well done!

I noticed that one of the biggest factors, unsurprisingly, is Home Price Growth Rate and rent price growth rates. Do you have any sources for the rates historically? Preferably by location.

Re: Is It Better to Rent or Buy?

#150

Post by usaar333 »

jbarham wrote: post #108

This calculator ignores the fact that the market for real estate buyers is increasingly global but the rental market is local. If you are in your 20's and grew up in a middle class family in Vancouver, Toronto, Sydney, Melbourne or Auckland, and have a middle class job, it is virtually impossible for you to be able to afford to buy a house in the city in which you grew up. E.g., here's a New Yorker article on the imp…

> This calculator ignores the fact that the market for real estate buyers is increasingly global but the rental market is local.

How is the calculator ignoring this fact? If you think that increasing globalness will cause home price growth to be higher than inflation/rent growth, you can modify that parameter.

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