Renting vs. buying a home • Hacker News Board

Re: Renting vs. buying a home

#131

Post by jrs235 » Sun, Jan 19, 2014, 8:49 PM UTC

Mister_Snuggles wrote: post #51

This seems to really depend on where you live and what the house/rental prices are. Where I live, you can get a variable rate mortgage that's advertised at 3%. More than likely, the bank will look at your credit rating and offer something lower. Even if they don't, that's half of what the video is showing. Likewise, a 4% return on investments seems unreasonable. The same bank with the 3% mortgage is offering a non-ca…

Like you point out, how long you intend to live at a particular place has a huge impact on whether you should buy or rent. Along with that SPECIFIC [local] market conditions will also dictate whether holding short, long, or in between makes sense. You CAN make large amounts of money flipping houses (in certain markets), you CAN come out ahead in the long term, but you CAN also come out "worse" depending on how you go about things.

Re: Renting vs. buying a home

#132

Post by jrs235 » Sun, Jan 19, 2014, 8:56 PM UTC

systematical wrote: post #80

Renting costs just about as much as owning. Using my neighborhood as an example a co-worker rents a house of similar size one street over from the one I own. We both pay roughly $1,200 per month. The big difference is my interest is tax-deductible and I will always get at least something back from my investment. From a finance/economics perspective: Owning home > renting. Obviously.

Unless Congress doesn't keep the mortgage interest deduction and you renting friend doesn't have to pay if the furnace, water heater, or AC breaks. He also doesn't have to think about and set up a sinking fund/account for replacing the roof.

Re: Renting vs. buying a home

#133

Post by jrs235 » Sun, Jan 19, 2014, 8:59 PM UTC

yetanotherphd wrote: post #86

I always thought the main difference between buying and renting was tax, since mortgage payments are tax deductible.

Mortgage payments are not tax deductible. Currently the interest is. Congress could change that. But as it stands now it is something one needs to consider in the cost comparison. (You might be paying $1000 to save $250)

Re: Renting vs. buying a home

#134

Post by iaskwhy » Sun, Jan 19, 2014, 9:05 PM UTC

pmorici wrote: post #27

iaskwhy wrote: post #20

Earlier quoted context omitted.

Any idea why it does not allow me to set more than 30 years?

Because 30 years is typically the longest term you can get. True there are "40 year" mortgages but generally they are a worse deal than a 30 year and targeted to people who are bad at math. http://www.bankrate.com/finance/mortgages/is-the-40-year-mor...

Thanks, this is interesting.

Re: Renting vs. buying a home

#135

Post by brianmcconnell » Sun, Jan 19, 2014, 10:14 PM UTC

Buying property is a long term decision. People in my family tend to buy a home and then get dragged out feet first 50 odd years later.

I bought my place 15 years ago in San Francisco. It seemed like an unreasonable shitpile of money at the time.

My mortgage on a three story single family home plus land on top of Twin Peaks is three grand and change. I rent a couple rooms out and that covers a good part of the mortgage. A one bedroom apartment next door just rented out for more.

Granted SF is an unusual market, but California's population is forecast to nearly double, so the housing supply/demand imbalance is likely to only get worse, and if you don't live in a rent controlled unit, your rent is only going to increase in spades.

Plus I have the added advantage of being able to paint my house anyway I like, put pink flamingos and garden gnomes out front, and yell, "Get off my lawn!" when the mood suits me.

Re: Renting vs. buying a home

#136

Post by QuantumGood » Sun, Jan 19, 2014, 10:26 PM UTC

As everyone points out in different ways, this is a terrible example. Leaves out a lot, and many ways to reslice the pie, for example, by taking on renters. Not to mention factors like easier job mobility from renting (easier to move to where a better job is).

Re: Renting vs. buying a home

#137

Post by hhw » Sun, Jan 19, 2014, 11:43 PM UTC

bane wrote: post #116

hhw wrote: post #106

Earlier quoted context omitted.

See my follow-up comment, the difference is actually $1,635,215.78 - $999,083.727 = $636,132.053 Depending on the residual value of the building and the land value in 30 years, that may or may not be worth it. My point was just that the example was highly biased, not whether it's better to rent or to buy. Note also that if you sell, you will have to pay realtor commissions and a capital gains tax on the nominal value…

Can you provide any examples of homes that aren't worth at least the original purchase price in absolute dollars 30 years later? Most of the homes, at least in my area, that are 30 years old are worth multiples of the original price in absolute terms. In fact, my first home was about 40 years old when I purchased it and even after the housing crash was worth about 15x what the original owner payed in absolute dollar…

Many homes can end up being teardowns after 30 years. That means that not only is the house itself worth nothing, but there'd be significant expenses to demolish it as well, effectively making the value negative. So it's possible to just end up with land value less demolition costs. How much of the current value is based on building and how much is based on land, depends on the property. There's also many circumstances where a house can be sold below 'market' value or forced to sell under poor market conditions such as divorce, death etc. Many people greatly overestimate the liquidity of housing. The paper value of a house is meaningless until it's actually sold for that amount.

15x what the original owner paid in nominal dollars doesn't give nearly enough context as to the real return. How many and which years was that over? What was the rate of inflation over this period? How did the Dow, S&P, or do over that same period? And that's kind of beside the point.

Like I said earlier, I'm not arguing in favour of either owning or renting. I'm just making the same point as the submission, and that is to use full, accurate numbers to make informed decisions. If more people did (and everyone should), we probably wouldn't have such extreme bubbles and crashes.

Re: Renting vs. buying a home

#138

Post by victorhooi » Mon, Jan 20, 2014, 12:04 AM UTC

This is actually quite interesting,

I'm from Australia (Sydney - one of the major capital cities) - and house prices here have basically been rising continually for the past few decades.

House prices are predicted to rise 10% per annum in most capital cities (less in smaller cities):

http://www.smh.com.au/business/property/australian-capital-c... http://smh.domain.com.au/real-estate-news/boom-time-sydney-h...

Hence, investing in a house is seen as a solid investment - most people will tell you to get a mortgage, and put your money into a house - to do anything otherwise is seen as silly, since the prices only go one way, and interest rates are incredibly low.

Occasionally, you'll get one or two people talking about "bubbles", but they're regarded as a bit kooky by most - and there doesn't seem to be any fundamental reason prices would shift.

What are people's thoughts on this?

Re: Renting vs. buying a home

#139

Post by jnardiello » Mon, Jan 20, 2014, 12:37 AM UTC

giardini wrote: post #92

jnardiello wrote: post #46

I'm amazed to see how many scientists are in here. Lot of math, lot of graphs, lot of speculation but nobody even mentioned that we are, before technicians, people. We have desires, we have daily routines, we have habits and we have a psychological environment and background. Renting will effectively (as the video outlined) leave a surplus of money in your pockets. Which you will use to buy the latest gadgets, to pay…

jnardiello: "... i realize that if you buy a really crappy built house, my arguments might not be valid." Or if the neighborhood goes into recession for decades after your purchase. There's a study floating around claiming that homebuyers flock to a region during a period of growth, buy homes at high prices and, when the local economy slows, are stuck forever. jnardiello: "But where i live, houses are built to last c…

Confirmed, i'm in Italy (which btw was hit VERY hard by the economical crisis, YET we - as country - had a much better time than others PIGS countries mostly thanks for the fact the while the gov was kind of bankrupted, almost all the families owned a house and had consistent savings.

> - Stocks do better than real estate historically. Stocks are a bet. Slightly more scientific than going to casino, but still a bet. Ask lehman brothers investors, they might have an opinion on this.

Re: Renting vs. buying a home

#140

Post by espinchi » Mon, Jan 20, 2014, 12:39 AM UTC

m3mnoch wrote: post #125

bane wrote: post #61

The numbers here are weird at least in my area, so it's hard to compare. But in general, in most places, over a 30 year comparison, buying is better than renting unless you get very lucky with your alternative investment decisions. A couple things to add, house payments stay exactly the same over a very long time. They don't increase at all . The absolute dollar amount is fixed. So while rent in an area might triple…

tldr: like most things in life, there is no "one correct answer". basically, the cheaper the property, the better idea it is to buy. yes. this tool illustrates it perfectly. [ http://www.nytimes.com/interactive/business/buy-rent-calcula... ] it actually shows why the khan video is seriously flawed. if you plug in the values he uses in the video: (which are stupid and no money manager in the world would tell you to bu…

I agree that many of the numbers in the video are not very realistic.

For a $120000 house like yours, I expected a monthly rent of about half. Your area seems like a great place to own a property, so it looks to me that buying is definitely the way to go there.