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

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

#441

Post by misja111 » Mon, Apr 23, 2018, 6:08 PM UTC

nojvek wrote: post #438

misja111 wrote: post #158

Earlier quoted context omitted.

You are forgetting that you don't only get the leverage of the $1M, you also have to pay the loan for the full sum of $1M. There is a section in the article about 'opportunity cost' which covers this.

You don’t have to pay full. When you’re done, you can sell. Buy for $500k, put down 100k as downpayment. Suppose it’s an interest only loan and you pay $1500 a month for all house costs. In 5 years you’ve paid 90k. If the house price doubles, you’re walking away with 410k. Renting you’d be putting at least 2k a month, so total 120k. 190-120=70k. For 70k in stock market to become 410k , that’s a 5.8X growth. Really ha…

Yes that would be a nice profit, but to hope that your house price wil double in 5 years is pure speculation. True, you'll have a nice leverage, but when speculating the leverage goes both ways; if your house price drops 50% you'll see the other side of the leverage.

The article is not about short term speculation, it is about long term expected returns. Which tend to follow the inflation and the interest rate.

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

#442

Post by widforss » Mon, Apr 23, 2018, 6:33 PM 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.…

They're currently closing down one and moving one town respectively in my county. It doesn't matter if you own or rent here, not when there's ore in the ground.

Some propaganda from LKAB for the interested: https://samhallsomvandling.lkab.com/en/

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

#443

Post by BeetleB » Mon, Apr 23, 2018, 6:36 PM UTC

ghaff wrote: post #421

BeetleB wrote: post #405

Earlier quoted context omitted.

Sorry: $1K/month is ridiculous. I've owned a non-new home for a few years now. I have all the records of repairs/maintenance. So far the average is less than $130/mo (that includes buying two microwaves and a washer) My roof needs to be reshingled. That'll cost about $6K (got a bunch of estimates from roofers). Maybe $12K 20-30 years down the road for a full replacement. That'll likely be my biggest expense, which is…

Plumbing work, electrical work, trees that need trimming, kitchen or bathroom remodels (which may not be absolutely necessary but are part of a house not getting more and more rundown), painting, replacing windows and doors, furnace work including annual cleaning, etc. In a newer house in good condition, it may be less than $1K/month but it does add up over time. A lot of maintenance can be deferred but over 10+ year…

>Plumbing work

Done some of that.

>electrical work

How often is this needed? Unless your house is so old and not up to code...? To give you an idea, I lived in a place for 2 decades and it never needed electrical work.

>trees that need trimming

It's your property - you control how many trees and how big. If it's too costly just get rid of them. Having said that, I just trimmed two trees on my property over a month ago. An hour or two of work and the right tool. Of course, if my trees were much bigger I'd have to pay someone.

BTW, I did not assume yard work as part of the amount per month. Of course, everything (including HOA, yard, etc) needs to be factored in, but I thought you were talking only about maintenance of the house.

>kitchen or bathroom remodels

How often? My house is almost 20 years old and I can see it going at least another 20 years before any such work is needed.

>painting

I assume you mean exterior? I guess - how much you need depends on the type of house. Mine uses vinyl sidings - no paint needed. But yes, you need to paint a few other parts. For my house, this is once every so many years - and the estimate I got was under $1000.

>replacing windows and doors

20 years old and look like new - I think mine will last another decade or two.

>furnace work including annual cleaning

I get my furnace tuned every year - costs $85. I included that in my estimate of less than $130/mo. Don't forget water heater maintenance too!

As I said, I'm not pulling numbers out of nowhere. I actually did this analysis some months ago. I have all the numbers on how much I've spent repairing stuff and maintenance in my software. I added it all up and calculated the number I gave you. It was actually $100/mo, but since then I think I've replaced two appliances so I bumped it up to $130 (total cost of the appliances + install is under $1000 - divide it up by 48 months I've lived there).

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

#444

Post by ghaff » Mon, Apr 23, 2018, 6:40 PM UTC

BeetleB wrote: post #443

ghaff wrote: post #421

Earlier quoted context omitted.

Plumbing work, electrical work, trees that need trimming, kitchen or bathroom remodels (which may not be absolutely necessary but are part of a house not getting more and more rundown), painting, replacing windows and doors, furnace work including annual cleaning, etc. In a newer house in good condition, it may be less than $1K/month but it does add up over time. A lot of maintenance can be deferred but over 10+ year…

>Plumbing work Done some of that. >electrical work How often is this needed? Unless your house is so old and not up to code...? To give you an idea, I lived in a place for 2 decades and it never needed electrical work. >trees that need trimming It's your property - you control how many trees and how big. If it's too costly just get rid of them. Having said that, I just trimmed two trees on my property over a month ag…

I’m giving you my numbers as well. I haven’t kept close track but with big projects—which have included improvements—it’s been something more than $1k per month. But then it’s 200 years old and was in serious maintenance debt when I bought it.

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

#445

Post by tempuser24 » Mon, Apr 23, 2018, 6:43 PM UTC

cVwEq wrote: post #20

Reminds me of a Harvard Daily Stat from 2012, inspired by Zillow data, which comes to a different conclusion. The Zillow data was based on a larger sample size as compared to the article above, which I felt was too qualitative. The Daily Stat: After Just a Few Years, Home Ownership Beats Renting[1] In three-quarters of American towns and cities, it takes 3 years or less for a homebuyer to begin seeing savings over th…

I think the article did touch on that, and honestly it was a whole big deal just to say "it depends on your situation" and in the associated costs section included break even costs, which I don't think is a good measure.

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

#446

Post by tempuser24 » Mon, Apr 23, 2018, 7:05 PM UTC

erispoe wrote: post #165

Some of the countries with the lowest homeownership rates [1] are also amongst the most financially secure on the planet. In Switzerland only 43% of households own their home and swiss households are, on average, way more secure than their american counterparts. [1]: https://en.wikipedia.org/wiki/List_of_countries_by_home_owne...

I agree with freddie_mecury I am not sure I see the argument or what you mean by "financially secure". But if I can guess at your point I would say that if "financially secure" means having cash then it would make sense that higher percentage renter countries would be that.

Another point I'd like to add is the US isn't far from Switzerland on that list. Also Singapore being in the #2 spot with 90% home ownership, but in my opinion Singapore is considered a wealthy country[1] with a GDP close to the US.

And lastly I will say that the sample size on is limited to about 25% of countries in the world, though there are most of the developed ones.

[1]https://tradingeconomics.com/singapore/gdp-per-capita

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

#447

Post by justherefortart » Mon, Apr 23, 2018, 7:15 PM UTC

Bartweiss wrote: post #376

justherefortart wrote: post #320

Earlier quoted context omitted.

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.

Most all of them bought houses leveraged and with inflation and 10-20% down, being paid off by renters, they have millions in property.

My neighbor lives in Europe most the year, just comes back a few times to check on houses. Has 2 homes in Europe too. That money was built by judiciously buying and maintaining the properties over ~4 decades while trying to minimize costs. This was as a self funded real estate agent. Not someone born with money.

There's a healthy mix of people I've known that have built almost all their net worth in real estate. In fact, most my programming friends that bought after the .com bust in SF and the great recession in 2008-2010 have more than doubled their single home investments.

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

#448

Post by justherefortart » Mon, Apr 23, 2018, 7:16 PM UTC

usaar333 wrote: post #363

justherefortart wrote: post #320

Earlier quoted context omitted.

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.

What's your threshold for wealthy? I know plenty of younger millionaires (via tech) who don't have real estate other than perhaps REITs.

Depends on the area. Wealthy in SF/LA/NYC is very different than wealthy in KC/OKC/DFW. Mostly it's how far your dollar goes (can you live off your investments alone).

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

#449

Post by ghaff » Mon, Apr 23, 2018, 7:31 PM UTC

antisthenes wrote: post #439

ghaff wrote: post #354

Earlier quoted context omitted.

Very large and unexpected things do happen. About 10 years ago, I ended up with about a $60K bill to correct a chimney that was basically collapsing and pulling the house down with it. But I agree with your general point. In the case of my paid-off house, I figure it's about [EDITED] $1K per month (counting some big projects) for upkeep (depending on how you count things that are nice-to-dos rather than strictly nece…

That should be covered by homeowners insurance, at least in part. That your old crumbling house was under-insured is no argument against homeownership in any way shape or form, just an unfortunate anecdote.

Homeowners insurance mostly covers catastrophic events not deterioration that takes place over time.

I’m not arguing against home ownership at all. Just that you need to save for maintenance and that you can get large unexpected bills.

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

#450

Post by BeetleB » Mon, Apr 23, 2018, 7:41 PM UTC

ghaff wrote: post #444

BeetleB wrote: post #443

Earlier quoted context omitted.

>Plumbing work Done some of that. >electrical work How often is this needed? Unless your house is so old and not up to code...? To give you an idea, I lived in a place for 2 decades and it never needed electrical work. >trees that need trimming It's your property - you control how many trees and how big. If it's too costly just get rid of them. Having said that, I just trimmed two trees on my property over a month ag…

I’m giving you my numbers as well. I haven’t kept close track but with big projects—which have included improvements—it’s been something more than $1k per month. But then it’s 200 years old and was in serious maintenance debt when I bought it.

>But then it’s 200 years old and was in serious maintenance debt when I bought it.

That's a pretty big disclaimer that you probably should have mentioned up front. Your choice of house is far from typical, and they make the costs some standard deviations from typical.