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Renting is Throwing Money Away, Right? (2015)

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

#371

Post by ApolloFortyNine »

VLM wrote: post #316
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,…

Expected maintenance, LOL. Just saying as an older guy if you're not factoring in HVAC replacements, roof replacements, driveway replacements, appliance replacements, even the expenses of major yard work, you will miss thousands per year on average. I'll see these estimates online where people laughably expect to spend less than $1K/yr on home maint, LOL I spend that much on the roof averaged by year, and I spent mor…

Though 1k is a pretty naive estimate, 12k a year is just not right.

I'm having trouble coming up with any way to prove it wrong, besides common sense. Think of the price of appliances, and then think of how many you can get with 12k. Reshingling a roof tends to be around 5k, and lasts for 30 years.

I can't even imagine a scenario where you spend 12k a year.

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

#372

Post by gambiting »

Aaargh20318 wrote: post #269
ShadowFaxSam wrote: post #200

This same principal can be applied to buying or leasing a car. When I first graduated college and had my first "adult" job I wanted to purchase my first car. The general mantra I heard was "Leasing is throwing money away". I ended up financing my first car, (used) thinking I was making the correct financial decision. The problem with someone fresh out of college buying or financing a car is they really have no idea w…

If you're talking about leasing/financing, then I'm assuming you're getting a new car. Why does your first car out of college have to be a new car ? Why not just buy a cheap used car outright ? You can get something that'll last you a couple of years for €1000.

So I can tell you the rationale for why my sister is getting a brand new car straight after uni - she lives in a foreign country, with no family/friends around and zero car maintenance skills. So it's far easier to buy a new car on a very low monthly finance, where she knows that if anything happens she has warranty for 4 years + full assistance, no need to risk getting ripped off at some random garages. Plus the car is far far safer than some old beater you could buy for little money, which means the insurance at her young age is really cheap. I fully support that decision.

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

#373

Post by conanbatt »

bane wrote: post #317
conanbatt wrote: post #126

Earlier quoted context omitted.

> In other words, at the end of 30 years, the rent may have made more money in some scenario of a perfect investor, but then they still have to rent to have a place to live. The homeowner now owns their property free and clear and can do all kinds of things with it, and their now future income is entirely liquid. Not perfect investor, any investor that put their money in an index fund. Vanguard had a trillion and a h…

> Not perfect investor, any investor that put their money in an index fund. Vanguard had a trillion and a half assets in 2010~ and those assets tripled while houses doubled. You are still making the typical errors. Here, I'll put it in simple terms and maybe this will help the scales fall from your eyes about why real estate is a very popular investment strategy and real estate investors aren't all just a bunch of mo…

Hah, I'll give you another explanation.

You always have a a due to pay rent. There is no way too avoid that. When you buy a property you become the recipient of the rent you pay: if you pay rent to yourself, you still have to take it from your paycheck, and the landlord gets his profit. If you dont, then the landlord(yourself) is giving you a place for free.

This explanation is practical in the following sense: you are thinking of buying property, and on the same block you see 2 houses that are identical in every regard except one: one is offered at rent at below market price. Which is the best strategy?

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

#374

Post by VLM »

uxp100 wrote: post #331
VLM wrote: post #316

Earlier quoted context omitted.

Expected maintenance, LOL. Just saying as an older guy if you're not factoring in HVAC replacements, roof replacements, driveway replacements, appliance replacements, even the expenses of major yard work, you will miss thousands per year on average. I'll see these estimates online where people laughably expect to spend less than $1K/yr on home maint, LOL I spend that much on the roof averaged by year, and I spent mor…

I think this is a good post and a good perspective to take, but its worth pointing out you bought an expensive washing machine, though if its more reliable, then that's probably the better purchase. On good days I do like my house hobby. I mainly bought a house because I kept having to move every year, renting flats in houses where they decided they wanted to sell, or move in themselves, etc. So now only the bank and…

Not so, I bought the cheapest washing machine I could get. I dropped about $1200 cash on a speed queen that'll last me maybe 20 years. Joe 6 pack finances a new LG every three years at 29.99% credit card interest for $600 and thinks I'm getting ripped off.

Its just like the situation with hiking boots, I can only afford the $250 boots that last many years, I'm not rich enough to afford the $100 boots that only last one year before falling apart. I can't afford to spend $100, I have to spend $250. Richer people than I, can buy themselves the $100 boots.

Also at some big box stores I've seen some masterful post sale salesmanship. New washer hoses cost $19 on the shelf but as part of the installation package they'll prevent your basement from being flooded for only $50 installed by our professionals (usually lower quality hoses too). Installation "only" costs $99 but you need the new hoses for $50 and fuel prices went up a decade ago so we still have our temporary $19.99 fuel surcharge on our deliveries. Oh you want the old washer hauled away, thats only $50 and they totally take care of the problem for you. Technically according to google search you can buy a box containing a LG top loader thats normally $770 for a mere $650, but unless you have time, skills, and a large vehicle that box of machinery won't wash any clothes for $650, add something like $220 worth of installation... Oh and thats 18 months financing but it only has a one year guarantee for parts and labor, which is comical... for a mere $150 you can get a five year guarantee which is about a quarter the lifespan of my speed queen, if and only if you also purchase installation services. Suddenly that "cheap" $650 washer is going to hit the credit card for over a kilobuck and its only going to last five years at best while providing plenty of repair work headaches. So figure twenty years of clothes washing costs $1200 with a speed queen or over $4000 with LG products... I'm not wealthy enough to buy $650 washers I can only afford the $1200 washers.

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

#375

Post by phamilton »

rsync wrote: post #357
rlpb wrote: post #207

Earlier quoted context omitted.

> But that seems dishonest. It's not. The bank has calculated and accepted the risk and factored it into your interest rate and other charges. Considering it to be dishonest is financially equivalent to considering a (not fraudulent) insurance payout to be dishonest. Think about it this way. The bank has effectively bought an insurance policy to protect itself against this event and is paying the premium out of your…

"It's not. The bank has calculated and accepted the risk and factored it into your interest rate and other charges. Considering it to be dishonest is financially equivalent to considering a (not fraudulent) insurance payout to be dishonest." That's not a true equivalency. Unless your loan has language or provisions for "mailing back the keys", doing so is an act of default and regardless of how well (or poorly) the l…

> A real equivalency is stealing from walmart "because they can afford it"

That's not a real equivalent at all. Walmart could press charges and recoup their loss through legal action. Stealing from Walmart is illegal.

Defaulting on a contract is not illegal. That's precisely why we have contracts in the first place. It spells out what would happen in a default, and both parties voluntarily enter into the agreement. If one party is not happy with the terms of default then they shouldn't sign the contract.

In a no recourse default, it is literally spelled out in the contract: "If you default, the lender will not be come after your other assets".

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

#376

Post by Bartweiss »

justherefortart wrote: post #320
code4tee wrote: post #54

The “pro renting” crowd has a lot of consistent falacies in arguments: - Financial calculations ignore the leveraged nature of buying a home. Small increases in property value are multipled relative to your initial investment. - Calculations also often assume someone just pays the minimum mortgage payment for the full term of the loan. Even small additional principal payments (which most mortgages allow without penal…

Everyone I know that's wealthy owns lots of real estate. That's the difference between stocks and properties, at least property is real . Why do drug dealers, foreign nationals, and the ultra wealthy park their money in big city properties? Tangible value.

The article does mention this as a special case, though. Owning property is a perfectly good way to store value, because property crashes don't always track market crashes and because property values recover even from heavy declines.

Notably, all the people you're listing got wealthy, then bought property to diversity their investments. It's a very different situation than buying property in hopes of gaining wealth.

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

#377

Post by moorhosj »

scarface74 wrote: post #286
jayess wrote: post #277

Earlier quoted context omitted.

Having been burned badly in the real estate meltdown, there is a lot more freedom in renting than buying. I'm just now getting slightly inclined to consider buying again, but it would have to be a whopping deal. I've enjoyed renting since at least 2010. I especially like the ability to call the landlord and tell them that the sink is leaking and they need to get it fixed. Or the water heater stopped working, come out…

When it comes to making a trade off for convenience vs. cost, I usually choose cost within reason and I also got burned by the real estate meltdown. I was in no hurry to buy. But the rent where we were staying went from $1300 to $1800 within 3 years for a 3 bedroom, 1650 square foot apartment. We were able to buy a house, a brand new build 3000 square feet 5 bed/3.5 bath for $2000/month with only 3.5% down in a neigh…

$2000 mortgage $140 lawn care $58 warranty

Instead of paying the $1,800/month, you are now paying $2,200/month.

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

#378

Post by jartelt »

Ajedi32 wrote: post #118
Simulacra wrote: post #81

Earlier quoted context omitted.

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).

This is perhaps the biggest argument in favor of ownership. Unless your landlord is _losing_ money on the deal, the price of rent takes _all_ other costs of ownership into account and then adds more on top of that. If you're renting, you most certainly _are_ losing money on the deal vs. what you'd pay if you owned _exactly_ the same property.

Sure, but the landlord can also lose his/her shirt if the market is in a valley at the time they need to sell. Your comment ignores the fact that there is market risk for property owners.

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

#379

Post by gambiting »

vageli wrote: post #300
elvirs wrote: post #262

Earlier quoted context omitted.

they get approved for a new mortgage every time they move while the old one isnt even 10% paid off?

I don't know of many lenders that will give you a mortgage with 10% down.

Really? In UK it's not unusual to get approved with as little as 5%.

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

#380

Post by Rylinks »

Ajedi32 wrote: post #118
Simulacra wrote: post #81

Earlier quoted context omitted.

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).

This is perhaps the biggest argument in favor of ownership. Unless your landlord is _losing_ money on the deal, the price of rent takes _all_ other costs of ownership into account and then adds more on top of that. If you're renting, you most certainly _are_ losing money on the deal vs. what you'd pay if you owned _exactly_ the same property.

Prices are not set to guarantee profits for landlords. If it's a cold rental market, the owner of the property still would prefer to lose only a small amount, rather than having the unit sit empty and losing all of the fixed costs.
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