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

221–230 of 256 posts

Re: Is It Better to Rent or Buy?

#221

Post by pilom »

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…

The format of the old version [1] is so much better. The independent variable is how long I need to live in my house to break even, not how cheap do I need to find a place to rent.

[1] http://www.nytimes.com/interactive/business/buy-rent-calcula...

Re: Is It Better to Rent or Buy?

#222

Post by marknutter »

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.

I spent 30 years of my life living in a Townhouse with an HOA, so I understand the restrictions they can apply. I now own a single family home and trust me, freedom is a relative term - I'm drunk with the notion I can do nearly anything I want to do to or around my house within the limit of the law.

Re: Is It Better to Rent or Buy?

#223

Post by dragonwriter »

ebbv wrote: post #212
dragonwriter wrote: post #201

Earlier quoted context omitted.

> In reality, people don't usually save up a down payment until they've already decided to buy. So it's a false comparison. Even given the first sentence is true, its not a false comparison, given the assumption the reason that people don't save up the money (or just invest it gradually, same thing) is that they have something more valuable than investing to do with the money (i.e., that the decision not to do so unl…

You're choosing one part of my comment in isolation and arguing against it without context. My point was that there's more to the decision than the simple "Will I make more money by investing in stocks than in real estate?" equation that pro-renting people usually point to. Of course stocks are a better return on your investment than real estate from a pure investment perspective. There's more to choosing to buy than…

> You're choosing one part of my comment in isolation and arguing against it without context.

No, I'm not, I'm just excerpting the part that's most clear in explaining the focus of the response; we're in a medium where the whole context is preserved and directly accessible, so there is no reason to include the whole thing -- its already right here and available the reader.

> There's more to choosing to buy than simply the pure financial motivation.

That's true, and not a part of your comment that I have an issue with; its quite correct that looking only at the financials -- and even within the financials only the expected returns and not, e.g., the particular risks involved, since the disutility associated with risk is not consistent among individuals -- potentially understates the value of buying (but, that's true of renting, too). But that's irrelevant to the question of whether comparison to investing as an alternative is a false comparison based on the observation that people who aren't purchasing wouldn't often have the downpayment available immediately to invest.

Re: Is It Better to Rent or Buy?

#224

Post by smrtinsert »

pilom wrote: post #221
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…

The format of the old version [1] is so much better. The independent variable is how long I need to live in my house to break even, not how cheap do I need to find a place to rent. [1] http://www.nytimes.com/interactive/business/buy-rent-calcula...

This actually was more helpful, thank you.

Re: Is It Better to Rent or Buy?

#225

Post by mncolinlee »

pessimizer wrote: post #76
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…

Your mentioning of this made me check out the graphs again - and I noticed that the graph depicting the size of a down payment was flat. That could only mean one thing: the cost of mortgage insurance (that you will be forced to get if your down payment is lower than 20%) hasn't been included. That's a major cost on low down-payment house purchases. Intentional or oversight? https://en.wikipedia.org/wiki/Mortgage_insu…

I never paid a penny of mortgage insurance. Let's be clear. Mortgage insurance does not protect you. It protects the bank that owns the mortgage.

You ONLY need mortgage insurance if you invest less than 20% down. Even then, you can often take a second, higher interest mortgage loan instead of paying for mortgage insurance.

A second mortgage is better for your tax return and equity and also offers better returns for the bank, which only sees a benefit from mortgage insurance if you default. Do you really want to give your bank any incentive to help you default?

The entire point of mortgage insurance is to protect the bank in the case you foreclose. It ensures the bank receives 20% of your property value so they can afford to take their time fixing and selling your house to its next owner. They don't need this risk mitigation if they have your downpayment.

Re: Is It Better to Rent or Buy?

#226

Post by smrtinsert »

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…

I know a multiple property owners. Here's some of the few more common cases as to why people don't strike it rich immediately when renting out properties.

  1. abandonment, they just leave without paying
  2. they incessantly ask for features
  3. they hoard
  4. they ruin beyond the security deposit and then dont pay (pets etc)
  5. they consistently pay late
  6. long time unoccupied eats away at profit due to special assessments, condo fees, hoa fees, whatever costs there are in the community
  7. natural disasters (california/florida yikes)
  8. simple non-payment.  try renting in a renter protected area like dc (here's a hint, dont).
It's not the road to riches that you hear whispered occasionally. The people who actually seem to make a profit from it are tied to housing in some way - either realtors or contractors/property managers and this is because they get the non-public deals and fix houses themselves. But even they dont make that much income from until much later and you can be sure they had to work long for it.

Re: Is It Better to Rent or Buy?

#228

Post by DrPhish »

sbd wrote: post #217
DrPhish wrote: post #198

Earlier quoted context omitted.

Suggestion: When the down-payment slider goes over 50% suggest that, depending on income level and interest rates, it may make sense to buy the house on a line of credit _backed by the house itself_. I did this, and it saved me a ludicrous amount of money vs. a mortgage

How are you then able to get a mortgage if the house is already collateral on another loan?

You don't need a mortgage in this scenario, that's the beauty. You leverage the value of the house itself to purchase the house, all made possible by the size of the down payment. This way, you just deposit all your available funds and income into the line of credit. It's also more flexible than a mortgage in that your can both pay off as much as you want, with the ability to borrow back against it again with no penalties. This allows you to put all liquid assets against the loan with the ability to get them back out again in an emergency. I was also able to negotiate prime on mine, so the interest was very low. I did this twice, and was able to pay off the debt within 3 years each time, single income, making less than $60k/year. By starting with a modest house, you can leapfrog up to a high-value property in a short timeframe and a minimum of interest payments

Re: Is It Better to Rent or Buy?

#229

Post by bane »

bane wrote: post #205
hnnewguy wrote: post #195

Earlier quoted context omitted.

> In the end I'll now own two houses I do whatever I want with and my renter will own nothing. " Uh, you realize that when you buy a house, you end up paying tens, sometimes hundreds of thousands of dollars in interest beyond the value of the home? That's what the renter owns: money, in his pocket, compounding interest for decades. This is the reason why there's an economic calculation to be made. If you're paying th…

No, my renter is paying that for me. He's within a few percent of my mortgage in most markets (near the beginning of the loan, then as time goes on gets even more advantageous for the owner) so he's not working with some huge nest egg of capital that's making him loads of money. Especially if I just keeping financing at 100%. I can keep buyinbg properties and keep finding renters to pay them off for me as long as I f…

Keep downvoting. Numbers don't lie. Do the math yourself and show your alternate calculations where you don't own a house at the end of the loan period if you buy and getting somebody to pay your mortgage as their rent makes you own it even cheaper.

Re: Is It Better to Rent or Buy?

#230

Post by leishulang »

mahyarm wrote: post #62
hkmurakami wrote: post #28

Earlier quoted context omitted.

Huge props for including things like the Marginal Tax rate for tax deduction and closing costs, which most of my peers that I've spoken to are unaware of or fail to take into consideration properly. I just recently had a conversation with a friend about renting vs buying, and I raced through many of the factors in this calculator to demonstrate that it's not such a simple question and that there are many factors that…

Wow, the marginal tax rate pretty much cut the rental limit in half, the difference is that big.

why higher marginal tax rate makes buying better? I don't get it.
Post reply on HN