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Is it better to buy or rent?

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Re: Is it better to buy or rent?

#51

Post by tinkerrr »

ocdtrekkie wrote: post #44
logicchains wrote: post #9

Does this take into account the risk of a housing market crash? For me, the biggest reason for renting rather than buying is to avoid putting all my bags in one basket; I wouldn't buy $500k worth of shares of one company, so spending $500k on a single house seems similarly risky.

But if buying is like putting $500k of shares in a company (this is a really expensive house, man), renting is throwing your cash out the window. I mean, your mileage is going to vary on location, and a generic thread like this isn't necessarily all that useful, but in my area, a mortgage payment is actually less than a rental payment for a similar place. So even if it's a "bad investment", I can reclaim at least som…

This is a very common fallacy and I am surprised people still think 'renting is throwing your cash out the window'. It isn't.

With a mortgage, you're essentially leveraging around 1:5, which means you put down your 20%ish and get 100% of an asset. If the asset moves down 20%, your net equity is worth exactly 0. If the asset moves up 20%, you've made a profit of 100% (simplified, not considering the fees and other costs).

The trick to understand this is, if you put your down-payment money somewhere else, like a long-term index fund, what kinds of profits would you have expected? What about the risk, considering you're highly leveraged in a mortgage?

Thus the calculator to do the math for you.

Re: Is it better to buy or rent?

#52

Post by pitt1980 »

eueueu wrote: post #28
saturdaysaint wrote: post #26

Earlier quoted context omitted.

Want to live somewhere else without making a life-altering financial transaction that could lower your net worth tens of thousands of dollars?

Property will always increase over the long term. Unless you're moving every 6 months this isn't a good reason. Of course selling your house and buying a new one will take a few months, so it does restrict your mobility in that way.

"Property will always increase over the long term"

what makes you think this is the case?

for all the singularity and robot economy talk on here, if give those things have even a small chance of occurring, over 30 years that adds significant risk to real estate values across the United States

that's essentially like the factory in town going out of business across most of the country

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Re: Is it better to buy or rent?

#53

Post by ido »

pkolaczk wrote: post #18
jessriedel wrote: post #8

Earlier quoted context omitted.

The idea is that you are contractually constrained to invest into a long-term asset (the house) on a monthly basis. In principle people who rent are paying less each month and should on average do just as well if they invest that money elsewhere, but in practice they tend to spent the extra money. Once they reach retirement, they have fewer assets.

Maybe in US it is cheap to rent, but at least in Poland, if you can get a mortgage, your mortgage monthly payment is often much lower than the rent payment for the same property. Renting here is only good if you don't plan to stay for long or if you actually can't get a good mortgage, because your income is low. The more you earn, typically the better interest rate you can get with mortgage (mine is currently 1.8% to…

In Berlin, Germany it's (at least at first) a lot cheaper to rent. The place we're renting for 500 euro/m would be about 200k euro if we wanted to buy it, which would mean something like 600-650 euro/m for 30 years (with maybe 40-50k euro down-payment).

Re: Is it better to buy or rent?

#56

Post by giulianob »

batou wrote: post #24
jbb555 wrote: post #14

The money is certainly important. But buying is better than renting in many ways. Want to rip out your kitchen and have a new one? Want to pave part of the garden? Want to move a wall? Want to paint it all, or fit blinds? If you own it you can do all that. If you rent you have to ask permission which you might not get. Plus why spend money on somewhere you don't own?

It's a trade off. I live in London, UK in a flat I rent for £950 pcm. This would cost me £379,000 to buy, at the very least as it's a relatively nice area. I could scrape the deposit and get a £379,000 mortgage but the insurance, maintenance and other costs on top would result in zero disposable income. Currently I have £1750 left over every month which is nothing but bags of freedom to do whatever I want. If I was t…

Not sure if it's a difference in location but where I live it would cost me more per month to rent a similar property than what I own. If I wanted to save, I'd have to rent a smaller place instead.

Re: Is it better to buy or rent?

#57

Post by vonmoltke »

rm999 wrote: post #20
jbb555 wrote: post #14

The money is certainly important. But buying is better than renting in many ways. Want to rip out your kitchen and have a new one? Want to pave part of the garden? Want to move a wall? Want to paint it all, or fit blinds? If you own it you can do all that. If you rent you have to ask permission which you might not get. Plus why spend money on somewhere you don't own?

Renting is the best option for flexibility. Want to add a bedroom? Want to change neighborhoods? Just lost your job and want to downgrade? Want to move closer to your new job, or an entirely new state? These are all good, common use-cases for renting. BTW, a lot of landlords will let you modify your place - some will even chip in for the costs or pay it all. >Plus why spend money on somewhere you don't own? People ha…

> BTW, a lot of landlords will let you modify your place - some will even chip in for the costs or pay it all.

Where are all these landlords, because the ones I have experience with in Florida, Texas, and Virginia get pissed if you so much as nail a picture to the wall.

Re: Is it better to buy or rent?

#58

Post by saiya-jin »

batou wrote: post #24
jbb555 wrote: post #14

The money is certainly important. But buying is better than renting in many ways. Want to rip out your kitchen and have a new one? Want to pave part of the garden? Want to move a wall? Want to paint it all, or fit blinds? If you own it you can do all that. If you rent you have to ask permission which you might not get. Plus why spend money on somewhere you don't own?

It's a trade off. I live in London, UK in a flat I rent for £950 pcm. This would cost me £379,000 to buy, at the very least as it's a relatively nice area. I could scrape the deposit and get a £379,000 mortgage but the insurance, maintenance and other costs on top would result in zero disposable income. Currently I have £1750 left over every month which is nothing but bags of freedom to do whatever I want. If I was t…

you know, some of us DO hangout around lake geneva (or any other pretty place), have most of weekends done like there's no tomorrow (mountains, adventures, traveling etc. practically every weekend) and still manage to invest into whatever they prefer (right now selling flat in Prague, and considering one in Chamonix). That's my sweet spot in life right now. We'll see how long life will keep me in it, before throwing into something wild, as usual :)

It's not irresponsible to spend money on traveling and adventures. You get back much more than nice time there and couple of photos and souvenirs - you are exposed to new environment, people, culture etc. and you'll grow inside in a subtle, yet steady way. On the other hand, usual "buying stuff you don't need to impress people you don't care about" is useless, and won't even bring any long term happiness.

Re: Is it better to buy or rent?

#59

Post by ams6110 »

logicchains wrote: post #9

Does this take into account the risk of a housing market crash? For me, the biggest reason for renting rather than buying is to avoid putting all my bags in one basket; I wouldn't buy $500k worth of shares of one company, so spending $500k on a single house seems similarly risky.

Most of the houses that are really high-risk are at the top end of the market. Don't buy those. Buy mid-market houses, those values are much more stable. And never pay much more than the average house in that neighborhood is selling for, and don't over-improve. The last thing you want to own is the most expensive house on the block, as you'll never be able to sell it.

Re: Is it better to buy or rent?

#60

Post by aroch »

vonmoltke wrote: post #57
rm999 wrote: post #20

Earlier quoted context omitted.

Renting is the best option for flexibility. Want to add a bedroom? Want to change neighborhoods? Just lost your job and want to downgrade? Want to move closer to your new job, or an entirely new state? These are all good, common use-cases for renting. BTW, a lot of landlords will let you modify your place - some will even chip in for the costs or pay it all. >Plus why spend money on somewhere you don't own? People ha…

> BTW, a lot of landlords will let you modify your place - some will even chip in for the costs or pay it all. Where are all these landlords, because the ones I have experience with in Florida, Texas, and Virginia get pissed if you so much as nail a picture to the wall.

Hanging paintings with nails is typically considered part of legally defined normal wear-and-tear. If your landlord is getting angry at you using the place you're renting in a reasonable manner, than perhaps you're renting from the wrong people.
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