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Is It Better to Rent or Buy?

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Re: Is It Better to Rent or Buy?

#251

Post by mrgordon »

nilkn wrote: post #22
hashberry wrote: post #15

Two important adjustments when using this: "Investment return rate" -- Only 4%? An index fund will return higher than that. "Monthly common fees" -- Required if you are considering buying a condo. This changes the per month rent comparison dollar-for-dollar.

> Only 4%? An index fund will return higher than that. Just like homes will always go up?

No one said that index funds always go up but they do return more than 4% (nominal) as a long term average. I bet that the calculator uses 4% as the default because they assume a relatively conservative portfolio such as 50% bonds & 50% stocks. That portfolio may be appropriate for many people, but it is substantially less risky than tying up your entire net worth (plus more?) in a single house.

Re: Is It Better to Rent or Buy?

#252

Post by lmm »

Frozenlock wrote: post #250
lmm wrote: post #182

Earlier quoted context omitted.

Because there's no value in having a word for a situation that basically no-one is in? Because despite your sophist argument there are huge practical differences between what normal people call "renting" and what normal people call "owning"?

Don't you have clothes that you own? Don't you own your food before you eat it? If I buy a computer, I own it. Far from a 'situation that basically no-one is in' I would say. I suppose what you meant is that basically no one really own their house. Well if it's the case, why use the word anyway? Words have meaning. You can't just decide to apply a word to a situation where it doesn't apply and call it a day.

I own those things but that doesn't mean I have unlimited freedom to do whatever I want with them. I own my food but I couldn't sell it (I don't have the right licenses). I own my clothes but I still have to comply with the law when I do things with them. That laws/HOAs/etc. regulate what I can do with my flat does not feel substantially different.

Taxes too are orthogonal to ownership; where I live people treat the local government tax as another utility bill, like water or electricity (so when renting sometimes the landlord pays or sometimes the tenant does). If I owned a car I'd pay tax on it - but if I leased a car I'd also pay tax on it in the same way.

Words have meanings but are necessarily simplifications (just as a map cannot capture every detail of the territory). In legalese I lease my flat - but in English I own it, because how I use it and what I can and can't do with it has much more in common with something that I own than with something that I rent or lease.

Re: Is It Better to Rent or Buy?

#253

Post by hnnewguy »

NoMoreNicksLeft wrote: post #208
hnnewguy wrote: post #191

Earlier quoted context omitted.

> This is a manufactured debate, it's meant to appeal to twentysomethings' bohemian aspirations. The actual "manufactured debate" is the one manufactured by the massive housing complex that tries to tell people that rent is throwing away money and it's always better to buy. Buy now! If you don't like your home, you can always sell it for more, later! This tale has been empowered by the fact that we just went through…

And yet, right now as we speak, they're out there buying up these homes for chump change, paying cash for foreclosed homes gone to auction, and then renting them back to you for what you'd have paid in mortgage, plus extra on top of that to cover expenses. You'll always be a sharecropper, now that you've been taught to believe that anything else is foolish. Once I can afford enough to do it, I'll buy another home mys…

>I'll buy another home myself and rent it out to someone like you

Except I own my home...

I love people who have determined that they've found some trick to beat the market. "Oversized asset returns! All you need to do is buy real estate!". How many late-night TV seminars did you attend to to obtain this knowledge?

One day the cheap money will disappear, and the speculators (like you) will go bankrupt. Then they'll stiff their creditors, blame the banks, and the public will pick up the tab...again.

Re: Is It Better to Rent or Buy?

#254

Post by hnnewguy »

bane wrote: post #229
bane wrote: post #205

Earlier quoted context omitted.

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.

>Numbers don't lie.

You're right, the numbers don't lie. And the "numbers" say that buying and renting homes doesn't provide outsized capital returns in relation to other investments over the long-run. Period.

This isn't rocket science; the buy/rent decision must be based on many individual factors, most of which relate to the individual housing markets, individual countries (outside of the US, the rest of the world can't write-off their mortgage interest, nor do they have 30 year fixed terms at historically low rates), and the current and expected price of money.

A house sale is also a negotiation. Price matters. There is no "always better to buy", for in that case the "seller" would always be losing. Oh, unless house prices go up, always and forever.

Why are banks or other financiers lending to you at 3.5%, when they can just buy up property and rent it out for whatever returns you believe you are able to obtain? Blackstone and others are attempting to do this as we speak. The outcome is unknown. What is your competitive advantage?

Again, there is no free lunch. The world is filled with people who think they've found a way to "beat" the market. Maybe you have, but I doubt it. Some people can make a living buying properties and renting them out; others will lose their shirts. A catch-all "X is better than Y" does not exist. Putting 200k into a house should provide you with a risk-adjusted return similar to putting 200k into the S&P, including imputed rent.

Re: Is It Better to Rent or Buy?

#255

Post by IgorPartola »

mcdougle wrote: post #249
IgorPartola wrote: post #248

Earlier quoted context omitted.

I currently pay $55/month for someone to worry about collecting rent, finding someone to rent, negotiating, checking credit, etc. for my rental property. It is not very profitable in terms of cash flow, but I am building equity into the house.

Yep, finding a property manager is one great solution to the problem. Did you find a good one easily? I've heard it's really hard to find a good one that actually manages the property well and keeps it rented out consistently. I haven't really looked myself, though, so all I really know about it is from stories on BiggerPockets.

I went with the agent who sold me the house in the first place, and found me a rental before then. I don't know how much of it was luck and how much was by design but the rental is in a location where rent is higher than mortgage payments by quite a margin and I found a good company to manage it.

Re: Is It Better to Rent or Buy?

#256

Post by jrjarrett »

hnnewguy wrote: post #195
bane wrote: post #158

Earlier quoted context omitted.

Why would I sell my house when I can get somebody else to rent it and make my mortgage payments on that house for me? I'll just buy another house at my new location. In the end I'll now own two houses I do whatever I want with and my renter will own nothing.

> 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…

I don't understand here. It costs some amount of money each month for housing. Unless I hugely overbuy a house or underrent a small, undesirable apartment, that amount is the same (Say $1000/mo).

(And as an aside, from what I have seen, the lowest rent on the least viable living space does not save enough to be worth the other costs in comfort, location, etc. to be worth it.)

Renting not give me an extra $1000/mo to invest and compound for decades. That is THE amount a month I must pay to live, somewhere.

And from what I have seen in the high-cost areas like SF or NYC, one is still paying out a substantial amount of monthly income just to live, somewhere, with no room to invest a difference.

To my mind, if you can't afford to buy, you're screwed.

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