Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Why Your First House Is A Liability

medium.com

Post reply on HN
Print view View original

51–60 of 71 posts

Re: Why Your First House Is A Liability

#51

Post by vonmoltke »

fortran77 wrote: post #8

Forget pure financial calculation -- It also gives you less flexibility to move quickly! I certainly wouldn't buy a house before age 30. You want to be able to pick up and move and chase an opportunity. (I'm awfully glad I got on a plane and moved to Silicon Valley in 1989 on a whim.)

> You want to be able to pick up and move and chase an opportunity.

This is a very personal decision. I, for instance, hate moving. Doubly so moving long distance. I was never going to be the type who bounces from city to city. Thus, I bought my first property when I was 24.

Re: Why Your First House Is A Liability

#52

Post by rootlocus »

Barrin92 wrote: post #9
mellosouls wrote: post #2

Seems to be written from the perspective of somebody who cannot see the difference between an investment and a home . Even if you look at it in mostly financial terms there are positives and negatives; the essay here is far too black and white. Sure, by chasing every dollar you can sacrifice quality of life for a few years to maximise your bank account at a later date, but in the meantime some of us prefer to live a…

you can turn that argument on its head though. Caring about quality of life is why I rent rather than buy a home. No debt, no fixed costs (people typically say 1% of the value of the house per year, quite a lot of cash), no repairs I have to worry about, moving out is simple etc.. Here in Germany most people rent by the way, so I never understood the obsession with homeownership. Just look at the covid mess. If you'r…

My rent is 0.5% the price of an apartment per month (350 eur / mo). So, in 17 years, there are two outcomes:

1. I have no apartment, no money invested, and I have to keep paying rent.

2. I have a 60k euro apartment. Not only do I not have to pay rent ever, I also have the option of selling it and recovering most of my investment. Or I can rent it to generate money. Not to mention I have something to leave behind to my grandchildren so they don't have to spend money on rent.

> Just look at the covid mess. If you're in your 20s or 30s and bought a house and live on credit cards I'd be sweating right now

People who are renting are also sweating right now. Whether or not they bought a house or rent doesn't matter. What matters is that they "live on credit cards".

Or take another example: Silicon Valley. There were are two kinds of people in SV:

1. People who owned homes now rent them at exorbitant prices, or sold them for a huge profit.

2. People who rented were forced to move out or live on the streets.

Owning a home is an investment. Renting is a liability.

Re: Why Your First House Is A Liability

#53

Post by [deleted] »

Barrin92 wrote: post #9
mellosouls wrote: post #2

Seems to be written from the perspective of somebody who cannot see the difference between an investment and a home . Even if you look at it in mostly financial terms there are positives and negatives; the essay here is far too black and white. Sure, by chasing every dollar you can sacrifice quality of life for a few years to maximise your bank account at a later date, but in the meantime some of us prefer to live a…

you can turn that argument on its head though. Caring about quality of life is why I rent rather than buy a home. No debt, no fixed costs (people typically say 1% of the value of the house per year, quite a lot of cash), no repairs I have to worry about, moving out is simple etc.. Here in Germany most people rent by the way, so I never understood the obsession with homeownership. Just look at the covid mess. If you'r…

[deleted]

Re: Why Your First House Is A Liability

#54

Post by jeromegv »

bluedevil2k wrote: post #33
bluedevil2k wrote: post #4

Lots of bad financial advice here. “You can’t unlock a house’s appreciation” - wrong, they have home equity lines of credit, refinances with cash out. “You could do so many better things with the money” - you have to live somewhere, wouldn’t you rather live in a nice house with the potential for appreciation than rent with no chance at all? Also, there’s tax advantages to mortgages here in the US. Renting out a house…

I'll add a comment to my own comment. In the last 3 months we've seen a HUGE advantage to home ownership over renting. I recently refinanced, as lots of Americans have done with the historically low mortgage rates. I knocked hundreds of dollars a month off my mortgage payment. You think your landlord is going to knock hundreds off your rent when he refinances the building you're in? No, that extra profit is going rig…

Rent is based on supply and demand. Landlord is not going to charge less or more than the market can afford. So no the landlord won’t drop the price because of mortgage. But there’s a lot of people negotiating hundreds of dollars off their rent in toronto because the market is down and if they refuse, the renter can pick just any other place that is cheaper. And its very well possible that those landlords didn’t get a discount on their mortgage if they are locked in.

So it goes both ways.

Re: Why Your First House Is A Liability

#55

Post by bluedevil2k »

game_the0ry wrote: post #46
bluedevil2k wrote: post #4

Lots of bad financial advice here. “You can’t unlock a house’s appreciation” - wrong, they have home equity lines of credit, refinances with cash out. “You could do so many better things with the money” - you have to live somewhere, wouldn’t you rather live in a nice house with the potential for appreciation than rent with no chance at all? Also, there’s tax advantages to mortgages here in the US. Renting out a house…

Mostly agree, except: > house IS AN ASSET. Yes, if you own your house. No, if you have a mortgage, the bank owns it. When the market was 'normal,' this would have been less of a risky issue. Take out that 15-30 year loan with the confidence that the home's value would all but be guaranteed to appreciate. The market has been abnormal since early 2000's. Since, the housing market has become more of a speculative and vo…

Even if you have a mortgage, you have some equity in it. Most mortgages require 20% down payment in your home, you can still get a way with a 80/15/5 loan now where you only have to put 5% down.

Re: Why Your First House Is A Liability

#56

Post by konschubert »

buying a house is probably not a good investment, true. But so is buying a car.

And at some point people may get to the point where they want these things.

Sure, you can rent, but there at lots of things you can’t do in a rental. And in some regions the rental market for houses is very small.

Re: Why Your First House Is A Liability

#57

Post by paulryanrogers »

geerlingguy wrote: post #3

> I don’t want to reinvent the wheel, we’ll use the definition from one of the best personal finance book “Rich Dad Poor Dad” I was trying to understand the perspective of the article, and that gave me the major clue. RDPD is one of many books that basically says the key to financial success is real estate investment. For a few people, and at certain times, maybe, but it is better for most people to make it a (small)…

Agreed. RDPD influenced me a lot as a younger person. But now I'm convinced the house-as-investiment mantra is unsustainable. It also hasn't been true for most of history except select periods.

The book also seems based largely on anecdotes and the premise that one has money or lucrative opportunities to begin with.

Re: Why Your First House Is A Liability

#58

Post by sys_64738 »

Home ownership and apt renting are radically different markets. That house you bought, how much does it cost to rent the equivalent? Your end desire is the important issue here to decide to buy or rent. When you rent you don't control the surrounds you have and might have undesirable neighbors living on top of you. I know few people who bought a home regret it. But some people prefer the care free life of renting. I don't want to be renting or paying a mortgage in my later years.

Re: Why Your First House Is A Liability

#59

Post by sys_64738 »

thrwn_frthr_awy wrote: post #35
jlj wrote: post #22

Earlier quoted context omitted.

> A mortgage payment is always less than rent for an equivalent property, anyway. Not always, though they often track closely to reach other, they can also diverge. If rent is high and home prices are low that could be a good signal to buy. And you also have to consider what you equity would be doing if it was invested in something other than your house.

> > A mortgage payment is always less than rent for an equivalent property, anyway Yeah, I don’t understand these statements. It is clear that people making them do not have experience is real estate or only have experience in specific markets. There are absolutely many real estate markets where the rent is more than the mortgage, and anyone with enough real estate knowledge to give advice would know this.

It depends on what you're comparing. A crappy apt in a dodgy neighborhood or renting a house in a nice neighborhood. If you're renting that house you want to buy then you'll likely be paying the landlord's mortgage and then some. Generally it holds that mortgage is less for same type of property you're renting in equivalent neighborhoods of same geo.

Re: Why Your First House Is A Liability

#60

Post by fortran77 »

vonmoltke wrote: post #51
fortran77 wrote: post #8

Forget pure financial calculation -- It also gives you less flexibility to move quickly! I certainly wouldn't buy a house before age 30. You want to be able to pick up and move and chase an opportunity. (I'm awfully glad I got on a plane and moved to Silicon Valley in 1989 on a whim.)

> You want to be able to pick up and move and chase an opportunity. This is a very personal decision. I, for instance, hate moving. Doubly so moving long distance. I was never going to be the type who bounces from city to city. Thus, I bought my first property when I was 24.

> This is a very personal decision.

That's why I said "I certainly wouldn't buy a house before age 30." I was pointing out an advantage of renting that's not purely financial.

Post reply on HN