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My thoughts on renting versus buying

milesbarr.me

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Re: My thoughts on renting versus buying

#111

Post by zeroq »

ghaff wrote: post #97
zeroq wrote: post #79

Counterpoint: buying is always better, people just can't afford it. Here where I live the minimum price for rent is monthly mortgage installement, meaning that you'll pay for rent at least as much as you'd pay for mortgage. But after you pay your mortgage you still have an asset in your hand. You can pass it on to your children or you can sell it when you're old, downsize (or even rent) and get some cash for your ret…

>Counterpoint: buying is always better, people just can't afford it. >Renting has it's charm for youngsters You're sort of contradicting yourself. So long as you think you're sort of settled in an area, buying is probably better. But, if it's your first job out of school, even if you have a nice bunch of money you could put towards a down payment, it's not clear that buying is a great idea except maybe if you're in a…

Not really. If it's viable for you then buy your first property as soon as possible and keep saving. When you want to move just buy another and rent the previous one.

In most cases people will need to get a half decent job and save for a few years first but they can keep saving and have enough for another property in few years.

And if you really have to move - then you can still sell that property. People are getting new cars every 2-3 years and it's not that different from swapping real estate.

Re: My thoughts on renting versus buying

#112

Post by ghaff »

ForHackernews wrote: post #69
eweise wrote: post #4

All I know is my mortgage is $1,800 a month and to rent my place now is at least $6K/month. I love knowing that my monthly payment can't go up.

Sounds like you're stuck there forever. Golden handcuffs, real estate edition.

The more positive spin is that you've bought into a huge bias to stay put in exchange for pros (and cons).

Re: My thoughts on renting versus buying

#113

Post by ndriscoll »

al_borland wrote: post #89
antonymoose wrote: post #77

Earlier quoted context omitted.

The $6k number is a touch high, but the answer is realistically 30-something DINKs and up. I make $150k a year, let’s say, and if I have a spouse with a corporate career let’s say it’s similar so maybe $250k-300k per year in income? Well that’s about $12,000 in income after taxes, medical, and a 10% retirement contribution. So, yes, $6k per month is house-poor numbers, but it’s workable for sure. If you’re even bette…

Making that much, I wouldn’t want to put anymore than 25% of my take-home toward rent. That would mean making $312k take-home… after taxes, retirement, etc. Maybe I’m conservative, but being house poor while making $300k is insane. I’m thinking someone would need to be pushing $400-500k for household income. That would put them in the top 3%. I don’t get the supply and demand curve on it. Making that much, and rentin…

I wouldn't want to purely out of the waste, but from a risk perspective, why not? Your other costs don't scale with housing or income, so if you're spending $70k on housing, you might be at $100k overall expenses. Add another $50k for income taxes and $50k for retirement savings and you're still at 50-100k left over for whatever you like (using 250-300 household income).

6k for a mortgage would be scary in case of job loss, but for rent, whatever, just move.

Re: My thoughts on renting versus buying

#114

Post by __turbobrew__ »

david-gpu wrote: post #98
__turbobrew__ wrote: post #83

Earlier quoted context omitted.

My condo owning friend got a special assessment of $40k to replace the siding. There are A LOT of costs which are not explicit when owning a condo.

Some condo corporations are poorly managed and lack sufficient emergency funds, or proper maintenance, and thus resort to special assessments that are not funded in advance. The same is true of many homeowners.

As a homeowner, that is 100% in your control whereas with a condo it isn’t. I have seen so many times in the local news about condos who are underwater because the board decided to not proactively save and fix things which was a democratic decision made by the board.

Honestly I have such low trust in the ability for humans to plan for the future over the now. It is like a bug in our psychology.

Re: My thoughts on renting versus buying

#115

Post by tomjakubowski »

cramsession wrote: post #110
wavemode wrote: post #92

Earlier quoted context omitted.

> If you rent you're left with nothing. Well, no. You're left with the cash you would've spent buying a house. Whether that's financially better or worse, depends entirely on the mortgage interest, taxes, and maintenance costs of the house, as well as the money you could have earned investing the cash elsewhere, compared to the rent you would have spent over the same time period.

Rents are pretty much always going to be higher than a mortgage for the equivalent housing. It's why people are landlords. He dances around that in the article by saying that people buy "nicer" places than they rent, but that doesn't have to be true.

Rent only has to exceed the property's operating costs -- things like mortgage interest, property tax, paying a manager, insurance, repairs and maintenance -- for the landlord to come out ahead. Paying off the principal is a capital expense.

Re: My thoughts on renting versus buying

#116

Post by Justsignedup »

Counter thought:

Rent is going up A LOT every year. My parent's house in a similar area is not, even with extra taxes, it is far lower than what I pay.

They fix up something, its fixed. We have a problem -- it will be fixed in the cheapest possible terribly looking way.

And rent keeps going up. All the time. By so much.

There's flexibility in it when you're in your 20s. But in 30s and 40s its terrible.

Re: My thoughts on renting versus buying

#117

Post by whymarrh »

wavemode wrote: post #92
zeroq wrote: post #79

Counterpoint: buying is always better, people just can't afford it. Here where I live the minimum price for rent is monthly mortgage installement, meaning that you'll pay for rent at least as much as you'd pay for mortgage. But after you pay your mortgage you still have an asset in your hand. You can pass it on to your children or you can sell it when you're old, downsize (or even rent) and get some cash for your ret…

> If you rent you're left with nothing. Well, no. You're left with the cash you would've spent buying a house. Whether that's financially better or worse, depends entirely on the mortgage interest, taxes, and maintenance costs of the house, as well as the money you could have earned investing the cash elsewhere, compared to the rent you would have spent over the same time period.

You’re right, the math is slightly more complicated than rent v. mortgage payment.

Ben Felix, a popular financial YouTuber, made many a video about the math:

https://youtube.com/watch?v=j4H9LL7A-nQ https://youtube.com/watch?v=lBG-g1CKfgs

Re: My thoughts on renting versus buying

#118

Post by Esophagus4 »

cramsession wrote: post #110
wavemode wrote: post #92

Earlier quoted context omitted.

> If you rent you're left with nothing. Well, no. You're left with the cash you would've spent buying a house. Whether that's financially better or worse, depends entirely on the mortgage interest, taxes, and maintenance costs of the house, as well as the money you could have earned investing the cash elsewhere, compared to the rent you would have spent over the same time period.

Rents are pretty much always going to be higher than a mortgage for the equivalent housing. It's why people are landlords. He dances around that in the article by saying that people buy "nicer" places than they rent, but that doesn't have to be true.

But a mortgage isn’t the cost of owning a house. Rent payments are the cost of renting.

If you want to compare the costs of renting and buying, you need to compare renting=(rent payments + renter’s insurance) vs. owning=(mortgage payments + property taxes + insurance + maintenance and repairs + equity appreciation / depreciation)

Re: My thoughts on renting versus buying

#119

Post by wavemode »

cramsession wrote: post #110
wavemode wrote: post #92

Earlier quoted context omitted.

> If you rent you're left with nothing. Well, no. You're left with the cash you would've spent buying a house. Whether that's financially better or worse, depends entirely on the mortgage interest, taxes, and maintenance costs of the house, as well as the money you could have earned investing the cash elsewhere, compared to the rent you would have spent over the same time period.

Rents are pretty much always going to be higher than a mortgage for the equivalent housing. It's why people are landlords. He dances around that in the article by saying that people buy "nicer" places than they rent, but that doesn't have to be true.

No, this really is not always the case when controlling for location. (That is, if you're comparing apartments in the middle of the city to houses in the outskirts, you're obviously comparing apples and oranges.)

Re: My thoughts on renting versus buying

#120

Post by cramsession »

Esophagus4 wrote: post #118
cramsession wrote: post #110

Earlier quoted context omitted.

Rents are pretty much always going to be higher than a mortgage for the equivalent housing. It's why people are landlords. He dances around that in the article by saying that people buy "nicer" places than they rent, but that doesn't have to be true.

But a mortgage isn’t the cost of owning a house. Rent payments are the cost of renting. If you want to compare the costs of renting and buying, you need to compare renting=(rent payments + renter’s insurance) vs. owning=(mortgage payments + property taxes + insurance + maintenance and repairs + equity appreciation / depreciation)

Landlords bake those costs into the rent price.
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