131–140 of 497 posts
These articles always ignore leverage. Generally, with 20% down you are leveraged 5:1. So even if your home is just keeping pace with inflation of 3%, you actually experience 15% growth on your investment. To use the example in the article, if your investment doubled between 2009 and now, your $200k in a $1M home just became 1.2M. 6x growth beats out 3x growth in stocks in the same period. Sure, you can be leveraged…
When the goal is to have a roof over your head, between renting or buying, the better option is to buy. If the goal is to invest wisely, of course buying a house is worse than say something like an index fund. But the problem is: I can't sleep in an index fund. A house isn't a depreciating asset. Renting is not an asset at all. Mortgages are fixed. Rent tends to frequently increase, skyrocketing at worse. This articl…
> owning is cheaper than renting This is the key thing! Obviously owning is cheaper than renting, as renters have to cover the costs of their landlord owning, and then some profit for them on top of that.
A house built ten years ago, or twenty years ago, or thirty years ago, can often be rented much more cheaply than a house built today can be purchased.
An apartment of the same size as that hypothetical house might be higher or lower, since the economics of apartment buildings tend to be different.
A 1-bedroom or 2-bedroom apartment can quite often be rented more cheaply than a 3-bedroom house.
"owning is cheaper than renting" is exactly the sort of generalization that gets people into trouble. Every situation is slightly different.
Earlier quoted context omitted.
This is very country-specific. I sold a flat in Scotland at the end of last year. I think I paid a flat-fee of about £2000 for a solicator to create the home-report/brochure, handle the necessary paperwork, post advert(s) online & arrange viewings, etc. I'm sure the fee was probably calculated based on the sale price, but the idea of paying 6% of the sale-price is very alien to the UK at least, and I suspect Europe t…
The costs of buying a house in Belgium is ridiculous. It's 10% tax, lawyers cost about 5x more. If you put an offer down you're on the hook for 10% of the price if you pull out.
I do recall that in the two Finnish places I bought my offer also had a penalty clause - if I pulled out for any reason other than "failure to find financing" I had to pay €6,000 or so.
(I wouldn't have made an offer had I not intended to follow-through, but it was still a little scary to imagine having to pay out!)
These articles always ignore leverage. Generally, with 20% down you are leveraged 5:1. So even if your home is just keeping pace with inflation of 3%, you actually experience 15% growth on your investment. To use the example in the article, if your investment doubled between 2009 and now, your $200k in a $1M home just became 1.2M. 6x growth beats out 3x growth in stocks in the same period. Sure, you can be leveraged…
Was that a typo? Average market returns are much higher than that.
1) The options for renting and owning are not the same. We have a ~1300ft apartment that is just a bit too big for us; it is on the 4th floor and has an expansive view and southern exposure, which is rather important for me. There's transit access and groceries/coffee/etc. walking distance. Condos in Seattle are few, esp. in new buildings. Most of the houses are far from stuff, are by definition on street level so even under ideal conditions few have lots of air and view, and vast majority are too big... So, I'm going to be paying extra for sqft we won't use (we already have unused, unfurnished corners in 1300sqft), the yard that for me is a net negative (maintenance), and loss of quality in other dimensions (relatively worse view and light). If my apartment was a condo, I'd seriously consider buying it. As is, it's hard to find a house that is not much more expensive than rent while ALSO being worse.
2) I haven't done the math for this, but in the end, you die. I don't care how much I'm worth when I die as long as it's >= 0. So, leaving aside the case of getting lucky with well-above-inflation appreciation (still, did houses in Bay Area appreciate that much faster than stock market since 2000 or 2009?)... one could sell the house in Seattle and retire to Vegas if he were living in Seattle for job market access only. However, in that case one can probably retire early and move to Vegas without caring for job market access, on the difference from the house prices. If one were rooted in the community, selling the house and downsizing is not an option (in fact I've heard older people in Seattle complain about this - the value and property taxes go up and up but they never want to sell out of the community so the appreciation is a negative for them). There are various scenarios possible, and it's not clear that the net worth in 30 years is well, worth it - liquid; you may have little time left to use it, or not even want to sell.
Home buyers often overlook the cost of selling their home when considering if renting is cheaper. That is 6% in realtors fees and another 2-3% in closing costs. Renting is a great deal if you are not going to live somewhere for 5+ years before moving
Here in the UK, it’s about 1.5%. That can often be haggled down to 1% if you have an expensive house that’s desirable enough to sell itself. And even that is getting majorly distributed by online agents, who are offering a flat fee service rather than % of property, which can be an enormous saving.
At 6% it seems a market with a huge amount of fat, just asking for a new player to come and disrupt
I recently did the math on this myself, I just sold my Condo and right now I am renting while looking for a house. I have all cash so I can ignore interest rates which makes it easier, I also have a pretty good wealth manager so I have a pretty good idea of what my return will be if I invest the money in stocks and bonds and rent rather than buying a house. For me, renting comes out ahead strictly looking at the doll…
I know the numbers make it a good idea for me to buy, but I'm renting an apartment anyway, and enjoying the flexibility. If I still owned a 1500 sq ft house with three bedrooms for my kids, I'd be "stuck" with that house and the associated costs now that they've grown up and moved out. Instead I get to downsize as easily as signing a different lease, and I still have no maintenance responsibilities. To me, that is more important than the money!
When the goal is to have a roof over your head, between renting or buying, the better option is to buy. If the goal is to invest wisely, of course buying a house is worse than say something like an index fund. But the problem is: I can't sleep in an index fund. A house isn't a depreciating asset. Renting is not an asset at all. Mortgages are fixed. Rent tends to frequently increase, skyrocketing at worse. This articl…
Earlier quoted context omitted.
I own my home in a relatively cheap COL area... I would rather rent. Houses nickel and dime you to death. The expenses pile up at both the front and back of the transaction... that is, when you buy and finally sell. Please show me how the small increases in property value multiplies my initial investment. The problem is most people don't move sideways or down... they move up, thus negating any windfall in investment…
My renter pays for my mortgage which includes principal and interest, landlord insurance, and taxes. Not to mention an additional $380 a month and profit that I put towards the principal and my 401(k).
You still had to put a downpayment that didn't go somewhere else for the whole length of your mortgage.
Also, if your rent covers your mortgage, I will assume that you were simply lucky enough that in your particular area the housing market rose more rapidly than in others (for example the bay area). But you didn't know this in advance and it could very well have gone the other way around.
Earlier quoted context omitted.
> owning is cheaper than renting This is the key thing! Obviously owning is cheaper than renting, as renters have to cover the costs of their landlord owning, and then some profit for them on top of that.
A house built today of a certain size can be purchased with a lower monthly payment than it can be rented, yes, for exactly the reason you describe. A house built ten years ago, or twenty years ago, or thirty years ago, can often be rented much more cheaply than a house built today can be purchased. An apartment of the same size as that hypothetical house might be higher or lower, since the economics of apartment bui…