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

Is it better to buy or rent?

nytimes.com

Post reply on HN
Print view View original

11–20 of 105 posts

Re: Is it better to buy or rent?

#11

Post by refurb »

logicchains wrote: post #9

Does this take into account the risk of a housing market crash? For me, the biggest reason for renting rather than buying is to avoid putting all my bags in one basket; I wouldn't buy $500k worth of shares of one company, so spending $500k on a single house seems similarly risky.

You're looking at it the exact right way. Risk is a two sided-coin. If the local housing market does well, you can make out like a bandit. If it doesn't, you can lose a lot of money.

No different than owning $500K worth of share in a public company.

Nothing wrong with buying a house, but people should be careful not to have their net worth all tied up in a single asset (house or not). The one rule I've heard is 90 minus your age. When you're young is OK to have a high percentage of your net worth in a house, but not when you're getting close to retirement. Too risky.

Re: Is it better to buy or rent?

#12

Post by nkozyra »

jessriedel wrote: post #8
nkozyra wrote: post #5

Earlier quoted context omitted.

> Buying instead of renting forces you to live more frugal As a home owner, I'm going to ask someone to elucidate on this sentiment.

The idea is that you are contractually constrained to invest into a long-term asset (the house) on a monthly basis. In principle people who rent are paying less each month and should on average do just as well if they invest that money elsewhere, but in practice they tend to spent the extra money. Once they reach retirement, they have fewer assets.

That's probably true for most periods in history, but we're still within a much-receded housing economy. When I bought my house, my rent was a couple hundred bucks more and with insurance + taxes I ended up paying ~ $30 more a month for more than double the space and, of course, actual assets.

There are places where this doesn't make sense, and there are times where it absolutely doesn't make sense, but present day is a lot different. My anecdote of paying less (or slightly more) in mortgage + associated versus rent is not all that uncommon these days.

The real hidden cost, if you ask me, is the way it changes your sense of mobility.

Re: Is it better to buy or rent?

#13

Post by thechao »

logicchains wrote: post #9

Does this take into account the risk of a housing market crash? For me, the biggest reason for renting rather than buying is to avoid putting all my bags in one basket; I wouldn't buy $500k worth of shares of one company, so spending $500k on a single house seems similarly risky.

I know this isn't true everywhere, but the last time I did a similar calculation, based on the historic rate of rents increase in my area, buying the house, then just walking away at the end of 30 years was cheaper than rent.

Re: Is it better to buy or rent?

#14

Post by jbb555 »

The money is certainly important. But buying is better than renting in many ways. Want to rip out your kitchen and have a new one? Want to pave part of the garden? Want to move a wall? Want to paint it all, or fit blinds?

If you own it you can do all that. If you rent you have to ask permission which you might not get. Plus why spend money on somewhere you don't own?

Re: Is it better to buy or rent?

#15

Post by jbb555 »

ekianjo wrote: post #7
swingbridge wrote: post #6

It's good to get people thinking about all the things included in the calculator. Most people are totally clueless when it comes to the real cost/value of owning. They only see what someone bought a property for and what it sold for some time later. A home you live in is almost always a net cost. It's not really an investment so much as its a cost avoidance (vs renting). Buying more house than you need "because this…

> A home you live in is almost always a net cost. Plus it "prevents" you from moving somewhere else. Or let's say, it increases the friction of moving somewhere else. Most home owners stay at the same place for the rest of their lives.

On the plus side, once you've found somewhere you like you can stay there as long as you want. If you rent it's up to the owner how long you can live there

Re: Is it better to buy or rent?

#16

Post by m0llusk »

These calculations are interesting, but there are many more factors involved. For example, I am roughly 50 years old, have chronic health problems, and live in an area where both the median and average housing unit prices are around a million dollars. Even with very low interest rates or even cash up front the costs of renting over even better than expected lifespans are very competitive.

Re: Is it better to buy or rent?

#17

Post by wazoox »

jbb555 wrote: post #14

The money is certainly important. But buying is better than renting in many ways. Want to rip out your kitchen and have a new one? Want to pave part of the garden? Want to move a wall? Want to paint it all, or fit blinds? If you own it you can do all that. If you rent you have to ask permission which you might not get. Plus why spend money on somewhere you don't own?

And when the factory employing most of the people in the town closes down, you're stuck with a virtually worthless property forever. Buying may have real downsides when you need to work for a living...

Re: Is it better to buy or rent?

#18

Post by pkolaczk »

jessriedel wrote: post #8
nkozyra wrote: post #5

Earlier quoted context omitted.

> Buying instead of renting forces you to live more frugal As a home owner, I'm going to ask someone to elucidate on this sentiment.

The idea is that you are contractually constrained to invest into a long-term asset (the house) on a monthly basis. In principle people who rent are paying less each month and should on average do just as well if they invest that money elsewhere, but in practice they tend to spent the extra money. Once they reach retirement, they have fewer assets.

Maybe in US it is cheap to rent, but at least in Poland, if you can get a mortgage, your mortgage monthly payment is often much lower than the rent payment for the same property. Renting here is only good if you don't plan to stay for long or if you actually can't get a good mortgage, because your income is low. The more you earn, typically the better interest rate you can get with mortgage (mine is currently 1.8% total), and with decreasing rate you're paying less and less with every year, contrary to more and more when renting.

Re: Is it better to buy or rent?

#19

Post by Happydayz »

nkozyra wrote: post #12
jessriedel wrote: post #8

Earlier quoted context omitted.

The idea is that you are contractually constrained to invest into a long-term asset (the house) on a monthly basis. In principle people who rent are paying less each month and should on average do just as well if they invest that money elsewhere, but in practice they tend to spent the extra money. Once they reach retirement, they have fewer assets.

That's probably true for most periods in history, but we're still within a much-receded housing economy. When I bought my house, my rent was a couple hundred bucks more and with insurance + taxes I ended up paying ~ $30 more a month for more than double the space and, of course, actual assets. There are places where this doesn't make sense, and there are times where it absolutely doesn't make sense, but present day i…

Yes, but there is also the opportunity cost of your downpayment, the transaction costs of getting into and out of a house, and maintenance. Oh man, maintenance.

Ref - transaction costs. You have to figure it will cost you around ~8% of the value of a property to both get into and out of it. This does not include the cost of movers. With a rental your transaction costs might be $50 for the apartment application fee.

Re: Is it better to buy or rent?

#20

Post by rm999 »

jbb555 wrote: post #14

The money is certainly important. But buying is better than renting in many ways. Want to rip out your kitchen and have a new one? Want to pave part of the garden? Want to move a wall? Want to paint it all, or fit blinds? If you own it you can do all that. If you rent you have to ask permission which you might not get. Plus why spend money on somewhere you don't own?

Renting is the best option for flexibility. Want to add a bedroom? Want to change neighborhoods? Just lost your job and want to downgrade? Want to move closer to your new job, or an entirely new state? These are all good, common use-cases for renting. BTW, a lot of landlords will let you modify your place - some will even chip in for the costs or pay it all.

>Plus why spend money on somewhere you don't own?

People have this mentality that renting is throwing out money. It's not - it turns your housing into another explicit cost like food and travel. I like this, I think too many people make the biggest investment decision of their lives (often by orders of magnitude) so lightly. And anyway, when you own, the costs that would go to renting are priced in, like: taxes, upkeep, opportunity costs, and interest payments. There is no free lunch - even the home ownership tax benefits get priced into housing costs.

Post reply on HN