Renting is Throwing Money Away, Right? (2015) • Hacker News Board

Re: Renting is Throwing Money Away, Right? (2015)

#231

Post by stephen_g » Mon, Apr 23, 2018, 9:46 AM UTC

icc97 wrote: post #116

stevekemp wrote: post #102

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.

That's crazy, in Australia conveyancing is pretty competitive, there are fixed price packages for something like $800 to $1200...

Most contracts here do have a 10% deposit, but they're usually conditional on finance, building inspections etc. so you have two weeks or so to pull out before it goes unconditional.

Re: Renting is Throwing Money Away, Right? (2015)

#232

Post by chatmasta » Mon, Apr 23, 2018, 9:49 AM UTC

hvidgaard wrote: post #148

klipt wrote: post #63

Earlier quoted context omitted.

> 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. But if inflation is 3%, you're probably paying 3% (or more) interest on your loan. So suppose your home costs X. You pay 0.2X downpayment and borrow 0.8X through your mortgage. The first year your home appreciates to 1.03X but you also pay around 3% o…

What all professionals do, and what all potential home buyers should do, is run the actual numbers of expenses that is purely property taxes, interest, fees, expected maintenance, bills such as heating and electricity, and other related expenses not specifically reducing the amount of debt. That is the price of living in the house - compare that to renting a place. The difference between owning and renting expenses,…

But with renting there is no reward.

EDIT: In addition to mobility cited by a reply to this comment, another advantage is the saved opportunity cost of investment in real estate vs other markets.

Re: Renting is Throwing Money Away, Right? (2015)

#233

Post by [deleted] » Mon, Apr 23, 2018, 9:50 AM UTC

cperciva wrote: post #59

Johnny555 wrote: post #46

There's another intangible benefit to owning if you know you're going to stay in the area long term -- you can't be forced out of your home. I was forced out of one home I rented due to owner move-in, which led to a stressful 30 days of trying to find a new apartment in a tight housing market. We managed to find a place outside of the city, but close enough to transit for a manageable commute. And rent was about the…

There's another intangible benefit to owning if you know you're going to stay in the area long term -- you can't be forced out of your home. Well, you can. The city decides to put in a new subway line and your house is where they want to build a station. Or (depending on your local laws) the other members of your strata corporation vote to sell the building to a developer who wants to tear it down and build a tower.…

[deleted]

Re: Renting is Throwing Money Away, Right? (2015)

#234

Post by scarface74 » Mon, Apr 23, 2018, 9:52 AM UTC

chii wrote: post #225

neuxenian wrote: post #208

Earlier quoted context omitted.

Leverage cuts both ways, though. As someone who just sold their house, the costs are a percent of the sale. You don't get taxed on the sales (generally) but you will probably have to pay real estate sales costs. So yes, if your home increases by 3%, you've gained 15% growth on your investment, but if the sale cost is 5% of the the sale price, then things aren't so clear anymore. The real calculation is the total mont…

> This in turn is relevant because your mobility becomes relevant. you don't need to sell, just rent out the apartment when you move. With the rental income, you can pay for a similarly priced location in the new place. Then, when the market fits, make the sale, and you've lost very little (if anything), except upkeep costs due to rental damage, etc.

You say just rent it out like renting doesn't have its own downsides like finding decent tenants, dealing with repairs, having to carry the mortgage when you have vacancies, dealing with evictions when they don't pay.

Even in a landlord friendly state it can take 2-3 months to evict someone for non payment. In some states I've heard that it can take a year.

I've been a landlord, never again.

Re: Renting is Throwing Money Away, Right? (2015)

#235

Post by hueving » Mon, Apr 23, 2018, 9:53 AM UTC

dash2 wrote: post #153

phamilton wrote: post #104

Earlier quoted context omitted.

> leverage angle is ignoring the fact that your equity can be wiped as well in a downturn I call that out when talking about "no recourse". If you leverage 5X in the stock market and invest $1M in index funds and the market drops by 30%, you are on the hook for the $100k beyond your $200k you lost. If you leverage 5X in a personal residence and the market drops by 30% (and you live in a no-recourse state), then you m…

> If you leverage 5X in a personal residence and the market drops by 30% (and you live in a no-recourse state), then you mail the keys to the bank and walk away. Very unique situation. But that seems dishonest.

It's called a put option in the stock market.

In this case its priced into the risk of your loan and you bought it by being in the state and taking a loan there.

Re: Renting is Throwing Money Away, Right? (2015)

#236

Post by scarface74 » Mon, Apr 23, 2018, 9:54 AM UTC

chatmasta wrote: post #232

hvidgaard wrote: post #148

Earlier quoted context omitted.

What all professionals do, and what all potential home buyers should do, is run the actual numbers of expenses that is purely property taxes, interest, fees, expected maintenance, bills such as heating and electricity, and other related expenses not specifically reducing the amount of debt. That is the price of living in the house - compare that to renting a place. The difference between owning and renting expenses,…

But with renting there is no reward. EDIT: In addition to mobility cited by a reply to this comment, another advantage is the saved opportunity cost of investment in real estate vs other markets.

There is mobility.

Re: Renting is Throwing Money Away, Right? (2015)

#237

Post by lotsofpulp » Mon, Apr 23, 2018, 9:54 AM UTC

chii wrote: post #225

neuxenian wrote: post #208

Earlier quoted context omitted.

Leverage cuts both ways, though. As someone who just sold their house, the costs are a percent of the sale. You don't get taxed on the sales (generally) but you will probably have to pay real estate sales costs. So yes, if your home increases by 3%, you've gained 15% growth on your investment, but if the sale cost is 5% of the the sale price, then things aren't so clear anymore. The real calculation is the total mont…

> This in turn is relevant because your mobility becomes relevant. you don't need to sell, just rent out the apartment when you move. With the rental income, you can pay for a similarly priced location in the new place. Then, when the market fits, make the sale, and you've lost very little (if anything), except upkeep costs due to rental damage, etc.

The risks of renting property are not to be understated. Unless you have significant time, cash, and drive to deal with the myriad issues tenants can have and possibly lawyers, it can easily be a net loss especially with the stress involved.

Re: Renting is Throwing Money Away, Right? (2015)

#238

Post by jacquesm » Mon, Apr 23, 2018, 9:56 AM UTC

neuxenian wrote: post #208

phamilton wrote: post #41

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…

Leverage cuts both ways, though. As someone who just sold their house, the costs are a percent of the sale. You don't get taxed on the sales (generally) but you will probably have to pay real estate sales costs. So yes, if your home increases by 3%, you've gained 15% growth on your investment, but if the sale cost is 5% of the the sale price, then things aren't so clear anymore. The real calculation is the total mont…

5% is the norm in the United States, elsewhere it is a fraction of that. US consumers have become accustomed to being ripped off by realtors.

Re: Renting is Throwing Money Away, Right? (2015)

#239

Post by digianarchist » Mon, Apr 23, 2018, 9:56 AM UTC

What I really want as a renter is not to buy a house but to protect myself from rises in the residential housing market in whatever area I'm living. I want to invest a portion of my income that will grow when the housing market grows.

That way I can continue renting but hedge against big swings should I want to buy in the future.

Re: Renting is Throwing Money Away, Right? (2015)

#240

Post by loxs » Mon, Apr 23, 2018, 9:58 AM UTC

digianarchist wrote: post #239

What I really want as a renter is not to buy a house but to protect myself from rises in the residential housing market in whatever area I'm living. I want to invest a portion of my income that will grow when the housing market grows. That way I can continue renting but hedge against big swings should I want to buy in the future.

How do you protect yourself from drops in the local housing market? Especially if you have a mortgage?