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The real cost of owning a home

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Re: The real cost of owning a home

#351

Post by irishcoffee »

throw0101c wrote: post #135
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…

> It is suggested to set aside 1%-3% of your home's overall value for repairs every year. Rob Carrick, a now (semi-)retired personanl finance writer in Canada, observed that owning a home tends to not be a forced saving plan but rather a forced spending plan: * https://www.instagram.com/reel/DWG223bPjvf/ * https://thewealthybarber.com/video/owning-a-home-is-so-expen... Full interview on The Wealthy Barber podcast: *…

My parents sure figured out how to not participate in the spending plan, and in the 20 years they’ve owned the home it’s almost tripled in value.

I wouldn’t buy it, but it’s super easy to not take care of a home, live in it, and have it appreciate in value.

Re: The real cost of owning a home

#352

Post by nyanmatt »

SirMaster wrote: post #277
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 have been renting the same unit for 15 years now. It was 400/mo when I moved in 15 years ago, and it's 650/mo now, 15 years later. I have paid about 90K in rent now over the last 15 years and this also includes water and heat. My friends with houses in my area pay about that much in property taxes plus heat that I pay for rent... I pay this small amount and make 6 figures and I put the majority of my income into in…

Again, you are truly blessed. I've lived in multiple places (California) where the rent increases by the maximum allowed amount every year ($100-$200). None of your friends refer to their houses as "units", do they? You can't compare your situation with theirs lol

Re: The real cost of owning a home

#353

Post by ragall »

dividefuel wrote: post #315

Beyond financial costs, I was caught off guard at how much time home ownership took up. House maintenance and projects have taken up most of every single weekend of mine for the past few years. Part of it is simply that I bought a house with more space than the places I usually rented. More to clean, more to maintain, more things that can go wrong, etc. But the biggest thing is that I'm the only one in charge of main…

What maintenance is there to do exactly ?

Re: The real cost of owning a home

#354

Post by strongpigeon »

defen wrote: post #323
jandrewrogers wrote: post #316

Earlier quoted context omitted.

The problem with leveraged investments is that they can put you deep underwater. Many people in Seattle that bought $1M leveraged with $100k now own a $800k asset. They've lost twice as much as they invested. They would have been much better off investing that in stocks without leverage.

Multiple people in this thread have mentioned the Seattle real estate market going to shit (for sellers) - is that related to tech layoffs or is something else going on? San Francisco's market is just as crazy as ever.

I think some of it is due to the lay off, some of it due to the supply situation not being as bad as SF (though construction has slowed recently), and a lot of it due to interest rates making "effective prices" much higher.

Re: The real cost of owning a home

#355

Post by havblue »

For my twenties, the biggest cost would have been opportunity. I was able to switch jobs multiple times in different states before meeting my fiancee. Renting allowed me to be far more adventurous than I would have been.

Re: The real cost of owning a home

#356

Post by thfuran »

DanielHB wrote: post #234
jedberg wrote: post #164

The benefit of owning a home is almost always psychological, not financial. If you take the money you'd use for a down payment and mortgage and invest it instead (after paying rent) you end up in about the same place. But the psychological benefits can be huge. You have much greater control over the place you spend most of your time. You can change it to your liking. You don't have to worry about rent increases or ow…

This isn't really true in many HCOL areas, a mortgage payment + amortization can be cheaper than renting an equivalent property. On top of that the amortization of your loan doesn't incur capital gains tax. Even if your property doesn't appreciate more than inflation you can still profit massively from owning just through the loan amortization. Only being forced to sell during a market crash could realistically cause…

In the US, there's a pretty significant capital gains tax exclusion on the sale of primary residence too.

Re: The real cost of owning a home

#357

Post by atoav »

darknavi wrote: post #330
dividefuel wrote: post #315

Beyond financial costs, I was caught off guard at how much time home ownership took up. House maintenance and projects have taken up most of every single weekend of mine for the past few years. Part of it is simply that I bought a house with more space than the places I usually rented. More to clean, more to maintain, more things that can go wrong, etc. But the biggest thing is that I'm the only one in charge of main…

> House maintenance and projects have taken up most of every single weekend of mine for the past few years. Mine come and go but it's no where near every weekend since I've purchased in 2019. What sort of things occupy this much time?

Houses are very different. I grew up in a guest house (so: three floors, a cellar, 14 flats/rooms) that has various layers from various ages. The foundations are hundreds of years old, most of the rest 50s, 60s, 70s, 90s.

If you're living in a new house you may have peace for a few decades, but at the cost of everything piling up the longer you wait. Exchanging corroded drain pipes someone thought was a good idea to bury in concrete is especially fun. At some time door hinges break, window mechanisms break. Water pipes clog, electrical is outdated (e.g. landlines are out, ethernet or fiber is in). The intercom breaks, wasp nests are under every second roof tile, there is a water intrusion in the cellar, a storm knocks down the fence, the washing machine breaks, the garage door motor dies, the asphalt on the runway cracks and needs a tar pour, the attic needs to be insulated, a portion of the roof needs to be retiled, the wooden parts of the facade need to be repainted, a drainage needs to be dig to avoid water piling up into a garage, a doorway has to be added to a repurposed storage space.

And mind, I was the son of the house, this is only some of the stuff I worked on before I moved out with 18.

There was constantly something to be done. What and how much is mostly a function of (1) the age and build quality of the house and (2) your own standards when it comes to maintenance.

Re: The real cost of owning a home

#358

Post by pryelluw »

I grew up in Puerto Rico where houses are made of concrete or concrete blocks. Maintenance was lower because there were not much issues with termites, water damage, shingles, etc. My house made it through a category 5 hurricane with minor damage to the windows and some flooding. Now I live in a house made of wood in Georgia. I’m exhausted from all the maintenance and the extreme nickel and dime-ing from everyone. I bought new five years ago and the house now needs to be fully painted, a new A/C evaporator, and some other minor stuff. So, about $20K worth of “maintenance”. This plus the stress of having to live with the hopes that a hail storm does not hit and ruins my shingle roof. I’m hoping to sell it and rent until I move back to the island and live in a proper solid home. I would build a house here with concrete but code does not allow it.

Re: The real cost of owning a home

#359

Post by materielle »

vikingerik wrote: post #197
jedberg wrote: post #164

The benefit of owning a home is almost always psychological, not financial. If you take the money you'd use for a down payment and mortgage and invest it instead (after paying rent) you end up in about the same place. But the psychological benefits can be huge. You have much greater control over the place you spend most of your time. You can change it to your liking. You don't have to worry about rent increases or ow…

Yes, this is broadly correct. The free market will (roughly) arbitrage out any differences between owning and renting. The hidden factor is that whatever money you have in house equity represents opportunity cost that it isn't in investments. If you have 400k in a house and the stock market returns 6% over inflation, then the opportunity cost is 2k per month in interest, which is comparable to what you'd pay in rent.…

I get what you’re saying, but the housing market is actually a really subtle issue in my opinion.

Just one example, owning a home protects you against price shocks. As others have pointed out, this can sometimes be a bad thing, because when prices decrease you are also leveraged.

But it’s pretty important to a lot of middle class people that they are protected against forced relocation due to 5x housing price increases.

Of course, there’s other reasons to not own a home.

My point is that localized housing markets have all sorts of factors that are perfectly explainable by economic theory but aren’t just “Econ 101, run the supply and demand” curve.

Re: The real cost of owning a home

#360

Post by znpy »

> "renting is just throwing your money away".

yep, it is.

i bought my home and went from paying 650 euros/month for a single room and sharing the rest of the flat with a roommate (in his own room) to paying 430 euros/month for my whole flat (in the same city, btw).

fast forward a few years and:

- the same room now goes for around 700-900 euros/month (post covid inflation)

- my mortgage price would have stayed the same (fixed interest rate)...

- ... except i paid it in full before time (and saved a ton on interest)

- my flat is now worth a lot more than i paid id (again: post-covid inflation)

nowadays i'll be kinda braggy, i'm leaving the dream: i work in tech, i have a very good salary and all of my fat paycheck stays in my pockets.

having a mortgage with a fixed interest rate meant i could plan around the payments i had to make.

and don't get me wrong: i'm 34, i'm not a boomer.

they say that renting gives you optionality. well... i can still easily sell my flat and move elsewhere OR, hear me out... i can rent it.

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