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The real cost of owning a home

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Re: The real cost of owning a home

#371

Post by danesparza »

hunterpayne wrote: post #228
01100011 wrote: post #123

Earlier quoted context omitted.

Rent control changes the math on this. Obviously location dependent but it can have a significant effect.

The markets with rent control have astronomical increases in rent when compared to markets without rent control. Also, you lose supply when there is a unit that it doesn't make sense to renovate because the future rent won't be high enough to cover it. So it remains unrented instead.

I mean, I would argue that's why rent control exists in the first place: Because there is a market with astronomical increases in rent (not the other way around, like you are suggesting)

Re: The real cost of owning a home

#372

Post by SirMaster »

nyanmatt wrote: post #352
SirMaster wrote: post #277

Earlier quoted context omitted.

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

Why shouldn't I compare though? I have looked at buying a house multiple times and I can't make it make sense personally. It's so much more expensive and more work. I just need a place to cook and sleep and keep my things.

Re: The real cost of owning a home

#373

Post by bluesummers5651 »

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…

100%. We bought a house because we wanted to be able to adjust our home to our family and lifestyle and we both like futzing around with homeowner stuff like repairing things and having a big garden to grow stuff right outside our door. I don't envy the people who get into homeownership and learn that they actually hate being their own general contractor (or don't have the money to pay someone else to be their general contractor because they hate being one).

Re: The real cost of owning a home

#374

Post by vardalab »

wwweston wrote: post #365
Galanwe wrote: post #303

Earlier quoted context omitted.

> 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. That is not the right way to see it. If you have the cash to buy upfront, then yes, real estate is not that good an investment, unless you have a loaded portfolio already and want to diversify a bit, get some high inflation hedge, etc. The real value of buying a home is lever…

Love that the two most solid pro-homebuying points I've ever encountered (jedberg's about the psychological benefits, yours about leverage) immediately surface in an HN discussion. It's probably worth making a closer comparison though: * Buying a House on Loan: commit to paying off a $450k loan over 30 years at 5% interest, with an immediate $50k down payment and the home itself as collateral. So ~$2500/mo payments,…

You forgot to include the actual living costs if you invest. You're not gonna be able to contribute $2,500 a month. You would be able to contribute not that much , around here rents are $2,500 a month.

Re: The real cost of owning a home

#375

Post by alistairSH »

wwweston wrote: post #365
Galanwe wrote: post #303

Earlier quoted context omitted.

> 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. That is not the right way to see it. If you have the cash to buy upfront, then yes, real estate is not that good an investment, unless you have a loaded portfolio already and want to diversify a bit, get some high inflation hedge, etc. The real value of buying a home is lever…

Love that the two most solid pro-homebuying points I've ever encountered (jedberg's about the psychological benefits, yours about leverage) immediately surface in an HN discussion. It's probably worth making a closer comparison though: * Buying a House on Loan: commit to paying off a $450k loan over 30 years at 5% interest, with an immediate $50k down payment and the home itself as collateral. So ~$2500/mo payments,…

The one thing missing from that calculation... the rent goes up over the 30 year period while the mortgage is fixed (subject to changes in tax rate and insurance as value hopefully increases).

9 years into my current home and my 20 year mortgage is substantially less than renting a similar house in the same subdivision. And because it's 20 year, the interest rate is lower, and when I retire, I'll only have to cover tax and insurance at a fraction of the future rent.

Re: The real cost of owning a home

#376

Post by lbrito »

These own-vs-buy comparisons always compare an idealized rental situation vs a concrete ownership situation. Its never realistic (although this article does acknowledge it: "My 1983 home had been used as a rental for years, so much of the maintenance had been neglected".

Specifically: people think about maintenance costs as a "con" in owenership, but its not like in the alternative (renting) you'll get all of those things for free. The owner just won't do any maintenance beside the bare minimum required by law.

Re: The real cost of owning a home

#377

Post by smallerfish »

It depends on a lot on your timing with the market. This guy (from TFA) sold in 2007; I bought my first house as a (fairly dire) fixer-upper in 2008. I sold it in 2016, after it had more than doubled in value (partly due to improvements we'd made, partly due to market improvements). I bought the next house as a (cosmetic) fixer-upper in 2016, and sold it in 2020, after the pandemic had multiplied its value by 1.5x. Now I own outright, pay no mortgage, and my property tax is less than 1% where I live. Yes I got lucky on timing on both ends of the 12 years, but not selling into a down market (if you can help it, of course), buying with an eye to potential increase in value, and being willing to take advantage of market conditions are all things that can work in your favor.

Re: The real cost of owning a home

#378

Post by ricardobeat »

mawadev wrote: post #363

I really like this analysis. Considering this is written for america, a lot of these points somewhat apply to germany. Over here homeownership is pretty difficult. I put that decision away until I'm 35 or 40 and absolutely have to stay in one place because of kids and so on. I feel like I have more psychological safety when I rent and can move away whenever I want to, have a pile of cash and investments that pay the…

Is Germany more like the US? In the Netherlands, before 2020, the cost of getting the loan was negligible. For a while earlier, it was zero - all transaction and notary costs could be included in the mortage. You could literally buy a house with €0 in your bank account, as long as you had the necessary income.

These days it's not so easy, prices have risen by 50%+, but you still pay less on a mortage than the equivalent rent, by a large margin. Renting (if you can buy) is pretty much throwing your money away.

Re: The real cost of owning a home

#379

Post by jameslk »

For me personally, I used an LLM to build out a financial model with different macro and financial input variables (e.g. mortgage rates, if I rented rooms, HOA, home appreciation rate, etc). These factors changed my projected return differently on a 10, 30, 50 year time horizon for renting vs owning

I recommend everyone who's making this decision to do something similar as an additional perspective. So many variables will be dependent on location, personal finances, and goals

Re: The real cost of owning a home

#380

Post by iteria »

wwweston wrote: post #365
Galanwe wrote: post #303

Earlier quoted context omitted.

> 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. That is not the right way to see it. If you have the cash to buy upfront, then yes, real estate is not that good an investment, unless you have a loaded portfolio already and want to diversify a bit, get some high inflation hedge, etc. The real value of buying a home is lever…

Love that the two most solid pro-homebuying points I've ever encountered (jedberg's about the psychological benefits, yours about leverage) immediately surface in an HN discussion. It's probably worth making a closer comparison though: * Buying a House on Loan: commit to paying off a $450k loan over 30 years at 5% interest, with an immediate $50k down payment and the home itself as collateral. So ~$2500/mo payments,…

A house is an inflation hedge. Any calculation about investing the difference has to subtract the rent you are paying and rent goes up every year. There is no where where you can pay a rent anywhere close to what I'm paying for my mortgage in my area and I'm only 5 years into this. Of course I lucked out by locking in that sweet sub-3% rate, but still, I find it hard to believe that over time if you took the money you'd put into a house and subtracted out rent, you'd end up winning in the long term.

A house in a long term play. I didn't buy until I know where I wanted to anchor. That's the deal. I didn't want to be in a situation where late age destitution came because I couldn't afford where I wanted to live anymore. I got to see that play out with older relatives who did go the rent only route. Course I have to pay property taxes, but as it stands it's less than $200/mo and I don't imagine it'll rise above that taking inflation into account. That is something I can afford in retirement even on social security.

There is maintenance, but living in a neighborhood full of elders, a lot of it is truly optional. And honestly I think the only maintenance I've paid thus fair is the yard only because I don't want to do it myself. For me financially this is a hell of a deal with the only trade off that I must stay here. And... I'm settled enough that I'm willing to do that. I moved all over in my early career to find where I wanted to be.

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