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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?

#161

Post by jvm »

millstone wrote: post #57

My wife and I found a great apartment to rent. It was spacious, quiet location, reasonable rent. We were happy for a few years. Then the owners sold the complex, and the new owners set out to remodel everything, very much against our wishes. Construction crews started entering our apartment. They came in while we were out, laying down plastic sheets and moving our furniture around. They sometimes came in while I was…

Is the argument here that there is never inconvenience or downside to home ownership? That sounds rather naïve and one-sided. The flip side of all this is that as an owner, any sort of problem is YOUR problem. And there are a lot of potential problems with a building.

Re: Is It Better to Rent or Buy?

#162

Post by bane »

Frozenlock wrote: post #20
dgabriel wrote: post #11

Earlier quoted context omitted.

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

And you still need to pay taxes (rent) to your municipality (landlord). So if I summarize, you can't do what you want with it and you need to pay your landlord. Why are people calling this 'owning' a house?

You seem to think that the landlord in a regular rental situation is making you pay their taxes as well.

Re: Is It Better to Rent or Buy?

#163

Post by usaar333 »

jbarham wrote: post #152
usaar333 wrote: post #150

Earlier quoted context omitted.

> 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.

My point is that for young people who grew up in cities like London or Vancouver, the choice is not buy or rent, the choice is rent or move away from the city they grew up in if they want to be able to buy a house on a middle class salary.

Are you restricting rent to "living with roommates"? And not allowing for owning to be "rent out to others"?

In San Francisco, owning is incredibly expensive. But so is renting an equivalent piece of property. So I'm not grasping why the options are limited to rent or "move away". (aside from exceptions such as renting under rent control)

Re: Is It Better to Rent or Buy?

#164

Post by bane »

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.

Rents tend to increase in normal markets at about the rate of inflation, in crazy NYC/SV markets they increase faster while mortgages will stay the same (or can be reduced or offset). In the long run, $4100/mo in 2014 dollars will still be $4100/mo in 2014 dollars 29 years later. Meaning they'll be a fraction of of 2043 dollars via inflation. The mortgage then de facto goes down while rent will continue to increase at least with inflation (or at least it does historically).

Re: Is It Better to Rent or Buy?

#165

Post by bane »

re_todd wrote: post #131

My uncle bought his house and pays $300/month in a neighbourhood where rent is $1,500/month on a similar home. He is near the end of a 30-year loan, and will retire soon, paying just property taxes and upkeep. Keeping the long-term in mind, it seems better to buy.

We're 7 years in on a home. Originally we had a 30 year mortgage, a couple of no cost refinances later we're on a 15 year mortgage with a 5000 sq ft.) which will completely cover our mortgage while it's still required or will bring in income after the house is payed off. Every one of these scenarios would be impossible if we were renting, all of the money we would have payed in rent would have disappeared into smoke and we would have been helping somebody else make their mortgage payments or making them money.

And oh yeah, our downpayment on this house was covered with what we made in appreciation on our previous house, plus we payed off two cars with it.

We've already made some money on this house as well despite the housing crash. It's recovered the original value and is in the black now.

Re: Is It Better to Rent or Buy?

#166

Post by lnanek2 »

NoMoreNicksLeft wrote: post #24
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…

> 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…

I've never seen a landlord go after a tenant for breaking a lease, honestly. The few I've talked to generally say they are beyond happy if the tenant is just out, and indeed, that's exactly what they say in eviction courts. They say they don't care about trying to get money out of the poor person being evicted, but that they just want the unit available to rent to someone who can pay. I think any landlord would be happier with a tenant breaking lease than doing AirBnb, for example.

Re: Is It Better to Rent or Buy?

#167

Post by lnanek2 »

millstone wrote: post #57

My wife and I found a great apartment to rent. It was spacious, quiet location, reasonable rent. We were happy for a few years. Then the owners sold the complex, and the new owners set out to remodel everything, very much against our wishes. Construction crews started entering our apartment. They came in while we were out, laying down plastic sheets and moving our furniture around. They sometimes came in while I was…

Kind of prefer that landlords take care of all that, personally. As a renter, if something is broken I'm calling the landlord and going to work. Sure ain't my job. Couldn't really care less if someone else is inside.

Re: Is It Better to Rent or Buy?

#168

Post by lnanek2 »

blue11 wrote: post #122

Buying a home is not an investment, it's a quality of life improvement. Something that I usually don't see mentioned in rent-vs-buy arguments is that the housing stock that's available for sale can be very different from what's available on the rental market. The two markets are similar only at the low end. If you want something nicer, the chance that you are going to find exactly what you want is very slim. Even "lu…

Depends on what you consider quality of life. Mine mostly depends on short commute time and I don't really care about interior decor beyond there being WiFi, a shower, and a bed. End result is that renting is a much higher quality of life because you have more choice of where to rent and can rent the minimum travel distance to work.

Re: Is It Better to Rent or Buy?

#169

Post by techsupporter »

bane wrote: post #157

Doesn't have the fancy d3 visualization, but here's a better analysis over the long run (30 years). It even stacks the deck against owning at the start by assuming 100% financing. There's a few missing components (mortgage insurance etc.) but even if you add those numbers into this rather detailed analysis, the conclusion doesn't change. It's actually a good enough analysis that you can just added or subtract a few o…

That only works if a few things are true, primarily that you can rent your properties for more than their carrying costs. If you bought and then the bottom drops out--which, potentially, causes you to need to move for work so you have to sell low--then this isn't as feasible. Second, you also take on the risk of being a landlord, so you're now responsible for the maintenance and upkeep on two or more properties and you get the cost of vacancies.

True that your housing costs will eventually drop to near-zero (upkeep and property taxes always exist), but renting out your place won't always help you with that. Besides, more and more people are winding up in blasted Homeowners' Associations with deed restrictions that prevent renting entirely or more than a certain, small, percentage of rentals.

Ultimately, as you said, the decision is an individual one, but the conclusion is usually far from easy.

(Even more bonus fun: Try accidentally being the landlord of someone who decides to cook meth in one of your rentals. Does your investment risk profile consider this? Remember that rentals are, fundamentally, investments, unlike your primary residence which is, first and foremost, your shelter.)

Re: Is It Better to Rent or Buy?

#170

Post by bane »

techsupporter wrote: post #169
bane wrote: post #157

Doesn't have the fancy d3 visualization, but here's a better analysis over the long run (30 years). It even stacks the deck against owning at the start by assuming 100% financing. There's a few missing components (mortgage insurance etc.) but even if you add those numbers into this rather detailed analysis, the conclusion doesn't change. It's actually a good enough analysis that you can just added or subtract a few o…

That only works if a few things are true, primarily that you can rent your properties for more than their carrying costs. If you bought and then the bottom drops out--which, potentially, causes you to need to move for work so you have to sell low--then this isn't as feasible. Second, you also take on the risk of being a landlord, so you're now responsible for the maintenance and upkeep on two or more properties and y…

Rent will almost always go up. If I rented my house the moment I bought it, I would be running a nice deficit and have nowhere to live. Today I can rent it out and the market rate will make me enough money I can then go rent a 2 bed room apartment and still have a surplus. This is because my mortgage costs either stay the same or drop...in dollars priced at the year I borrowed the money originally. While the rental rate increases have matched or exceeded inflation every year since then.

If I bought a home in my neighborhood and rented it out tomorrow, I'd take a hit on it for maybe 4 or 5 years, about $100-200/mo. But trends show I'd match my outlays after that and within 10 years have made all my losses back plus a monthly profit plus whatever property appreciation the market has decided to give me.

TBH, being a landlord is a huge PIA for the reasons you hint at, which is why lots of people don't do it, but financially it can make easy sense if you can stomach a few years of losses till rents rise enough to exceed your outlay. Ideally you'd rent at market rates, when your mortgage and other expenses were far below market rate. That's the situation I'm in now, my monthly expenses are about 50-60% of the market rate rental price for a house like the one I live in. My wife and I have already decided that when we move, we're just going to rent this property out and use it to make money. Even with the overhead of a property management company, we'll come out in the black every month. If we stay here, we're on track to pay off the entire mortgage in 2-3 years anyway and then we'll be living for close to free (minus HOA and property taxes). We could both live comfortably on part time jobs at Target at that point.

One of the problems I see in many of the Rent vs Buy comparisons is that people who favor renting seem to think landlords are a charity of some kind who magically make all the extra costs of owning a property disappear. But nobody is in the landlord business to lose money like this, as much as the market will bear, your goal as a landlord is to pass along as many possible costs to your renter as you can and not just rely on property value appreciation to dig you out of your financial hole in 20 years this includes, but is not limited to: HOA fees, utilities, taxes, appliances, repairs and maintenance, common area service, everything.

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