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The real cost of owning a home

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Re: The real cost of owning a home

#181

Post by rustystump »

zeroonetwothree wrote: post #110
mholm wrote: post #6

Beyond the financials, the psychological impact of both being able to make greater-than-superficial changes, and having extremely predictable payments for years without worrying about substantial rent increases, is substantial. I redid/improved the bathroom to exactly what I wanted. I renovated the kitchen. I added paneling to the walls. I added a few outlets to rooms that needed more. I wouldn't do these things in a…

There’s also a psychological benefit of not having to worry about most problems. Sink broke? Call landlord to fix. Roof leaking? Call landlord to fix. And so on. You never have an unexpected $20k repair show up. And while I agree that it’s nice to customize things to your preferences, this has a downside in that it’s easy to get carried away and overspend. Might as well get the nicer finishes when you are remodeling,…

I have lived/rented in many states and still rent. The overwhelming majority of landlords are cheap af. I had the ceiling collapse in an office due to clogged ac drain only to have it happen again because the land lord was too cheap to hire a professional contractor. The pro had the ac clog fixed in 15 minutes.

The current place has this stupid thing where the dishwasher is attached to a circuit that has ac on it so if you run both it flips. I have to flip the breaker everytime i use the dishwasher.

Re: The real cost of owning a home

#182

Post by rwmj »

globular-toast wrote: post #106
elicash wrote: post #25

Earlier quoted context omitted.

> I redid/improved... We are extending the fence in our backyard. However, getting rid of the parking means the project will likely detract from the value of the home. But since we don't have a car, let alone two, it makes sense for us to do the project anyway. Despite the warning of our realtor when we purchased the home. I've noticed a lot of folks are afraid to personalize their homes because of concern about the…

There was quite a funny reddit thread where the OP was afraid to put up shelves because of property value.

Everyone has a landlord inside them apparently!

Re: The real cost of owning a home

#183

Post by zeroonetwothree »

Glyptodon wrote: post #40

While this is true, I think the bar should be lower - the real question should be "and how does it compare to renting" - there is very possibly a universe where owning is cheaper than renting even if your home depreciates. Because paying some amount for years to be left with a fraction of what you put in is better than getting none of what you put in. However many of us knowingly exceed that point. For example we pay…

We would expect them to be equal on the margin if the market is even somewhat efficient (not always true with rent control, but still pretty close in most places).

That doesn’t mean it’s equal for any given individual of course. So it’s important to do your own calculations and make your own decisions. But I think the fact that it is debated so much shows that it is probably roughly equal on the margin.

Re: The real cost of owning a home

#184

Post by JuniperMesos »

zeroonetwothree wrote: post #110
mholm wrote: post #6

Beyond the financials, the psychological impact of both being able to make greater-than-superficial changes, and having extremely predictable payments for years without worrying about substantial rent increases, is substantial. I redid/improved the bathroom to exactly what I wanted. I renovated the kitchen. I added paneling to the walls. I added a few outlets to rooms that needed more. I wouldn't do these things in a…

There’s also a psychological benefit of not having to worry about most problems. Sink broke? Call landlord to fix. Roof leaking? Call landlord to fix. And so on. You never have an unexpected $20k repair show up. And while I agree that it’s nice to customize things to your preferences, this has a downside in that it’s easy to get carried away and overspend. Might as well get the nicer finishes when you are remodeling,…

> There’s also a psychological benefit of not having to worry about most problems. Sink broke? Call landlord to fix. Roof leaking? Call landlord to fix. And so on. You never have an unexpected $20k repair show up.

I've never understood why people argue that the model of appealing to a landlord to perform house work is psychologically superior to doing that same work yourself. As a tenant, you have an inherently somewhat adversarial relationship with your landlord - they want to minimize costs, and they aren't the ones directly living with the household problem. You are living in their property and are bound to what they replace or repair, and how, and to some degree on what schedule.

Not being able to make my own decisions about what constitutes a household problem and what should be done about it is the single biggest annoyance of renting for me. It's the main reason I would like to live in an owned home; and this intangible facet of living is more important to me than any financial argument about the costs of renting vs owning.

Re: The real cost of owning a home

#185

Post by zeroonetwothree »

cmiles8 wrote: post #62

Over short term windows it’s very possible for renting to make more sense. Over the long term it’s very difficult for renting to come out ahead. If you’re talking about the same town over say 20 years then the chances of renting coming out ahead is near zero. In the US at least the tax system is also heavily setup to favor home ownership. Mortgage interest and real estate taxes (which are baked into rent) are tax ded…

I bought my house about 10 years ago and it has appreciated around 50% since then. That might sound good but the market is up massively and meanwhile all the price increase on paper means is that I pay more property tax. Since I have no plans to sell there is no actual benefit to me from the price increasing.

I calculated it recently and in retrospect I would have been vastly better off renting and buying VOO with my equity stake. It doesn’t help that taxes + maintenance have cost almost the same as rent even if you don’t count the actual purchase price.

Re: The real cost of owning a home

#186

Post by hunterpayne »

01100011 wrote: post #111
nayuki wrote: post #107

Earlier quoted context omitted.

You somehow missed the second part of that sentence: "No, the statement is completely true: 100% of your rent money goes to someone else, and you also don't get any asset to sell later on." The oft-repeated statement that "renting is throwing your money" is an implicit contrast to owning a home, where the mortgage payment "builds equity" in your asset that can be sold later. "Throwing money away" means you don't get…

No, I read that part of the sentence. I don't know why you'd assume I didn't. Should I claim you didn't even read my entire response? I've never heard someone claim I am throwing away money when I buy something consumable except rent. It's a stupid statement that doesn't convey any useful information.

OMG...the phrase probably comes from some real estate agent. Truth is, 50 years ago investing in US real estate was such a good investment that if you could own you did. Today, so much "value" has been squeezed out of the housing market that owning is very very difficult. Most people under 40 who own, are now all in on an investment in both the housing and interest rate markets that could either crush them or be their best lifetime investment. Its very hard to argue at this point that making such bets is a good idea for most people. The worst part is that this was all unnecessarily engineered by people who believed Disney movies accurately portrayed public policy.

Re: The real cost of owning a home

#187

Post by hylaride »

horsawlarway wrote: post #36

> I bought this house new, and didn't live there very long End of story. That's the entire conversation right there. Note how much money he made on the house he lived in for a decent amount of time... (~330k, minus minor investments on repairs) Renting is better than buying if you're not going to live in the house for any real duration (real meaning 5+ years). Otherwise... at least in the US... the financials around…

> Otherwise... at least in the US... the financials around 30 year mortgages and a target inflation rate mean buying is going to work in your favor.

Yeah, subsidized mortgages (via government insurance and mortgage interest deductibility) tilt the market towards home ownership in most of the USA.

Most of the rest of the world doesn't intervene in its housing market as much and the ROI on owning vs renting can shift. Switzerland will tax your home on the potential rental income of your home, whether you rent it out or not (I think this recently changed, though). The home ownership rate is historically between 30-40%. Basically farmers and the upper quartile of income earners are the majority of owners. The result is that most Swiss have their wealth in more liquid assets and are also highly mobile for work.

> Will this blow up at some point? Meh, maybe?

Owning is also turning into a problem for many Americans. Some people are trapped in their homes because moving means resetting locked in low interest rates. Insurance has made home ownership extremely expensive in much of the states that were fastest growing over the past decade. I'm sure solutions (good and bad) will come, but sometimes it's nice to just be able to hand in notice and walk away.

Re: The real cost of owning a home

#188

Post by rustystump »

01100011 wrote: post #108
com2kid wrote: post #9

It is suggested to set aside 1%-3% of your home's overall value for repairs every year. Most people do not do this, and many homes thus slowly degrade in value. It is a fast track way to destroy potential generational wealth. Home repair issues also tend to be bursty (rule of three...). You'll have a few years of nothing that'll lull you into a false sense of security, then suddenly three major issues will come up. S…

> and many homes thus slowly degrade in value Except in my experience the lack of upkeep doesn't actually affect the value all that much. In many places the vast majority of the price is the land and people seem less interested in valuing based on the condition of the structure. It may affect time to sell, but that seems about it. Sure some credits might be offered during escrow for some repairs, but again often the…

This. Most value is location location location. It does not cost that much relative to price to reno when you want to sell. Space is the premium, not trendy open concepts.

Re: The real cost of owning a home

#190

Post by bluefirebrand »

akudha wrote: post #139
mholm wrote: post #6

Beyond the financials, the psychological impact of both being able to make greater-than-superficial changes, and having extremely predictable payments for years without worrying about substantial rent increases, is substantial. I redid/improved the bathroom to exactly what I wanted. I renovated the kitchen. I added paneling to the walls. I added a few outlets to rooms that needed more. I wouldn't do these things in a…

“Extremely predictable payments” - I don’t own a home, so I don’t know about this - I have heard mostly horror stories about HOA. Can they hike maintenance fees arbitrarily? Also, what about insurance? Last I read, at least in FL, insurance cost is out of control, is that still true?

I dunno about the USA, but for much of the world the answer is really simple: don't buy in places that have HOAs
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