Is it better to buy or rent? • Hacker News Board

Re: Is it better to buy or rent?

#71

Post by batou » Fri, Jun 19, 2015, 3:22 PM UTC

giulianob wrote: post #56

batou wrote: post #24

Earlier quoted context omitted.

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.

You're probably right but will it in 5 years is the question you need to ask?

You always pay over the odds to rent initially but due to inflation and relative property prices it becomes good value rather quickly.

Re: Is it better to buy or rent?

#72

Post by andymitchell » Fri, Jun 19, 2015, 3:25 PM UTC

to3m wrote: post #64

cowls wrote: post #22

Earlier quoted context omitted.

I disagree, this view is too simplistic. It's very different to owning shares in a company. You have to either buy a house or rent. You cant opt out entirely, whereas you can with shares. By choosing to rent, you are betting on the housing market being stagnant or falling, if house prices shoot up and you opted to rent, you will need to now pay higher rents or a bigger mortgage. So there is risk in renting too If you…

Why will rents go up, when they could have gone up already?

If house prices cross a threshold where first time buyers can't afford to get onto the property ladder, they're forced to rent - driving up competition for stock & thus rental prices. (This appears to be affecting more & more people in the UK).

Re: Is it better to buy or rent?

#73

Post by batou » Fri, Jun 19, 2015, 3:26 PM UTC

knodi123 wrote: post #48

batou wrote: post #24

Earlier quoted context omitted.

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…

it's definitely a balancing act, where the balance point depends on your own personality and proclivities. However, I think we can all agree that a formula involving London home prices is not going to be very representative of the rest of the world! ;-)

Actually in the tech sector the price vs salary ratio is pretty consistent all over the UK. The prices are high in London but you earn a pile of cash. The inverse is also true elsewhere.

London is one of those crazy places where a job jump can actually get a salary boost larger than the national average salary in its entirety which is where the short term advantage is if you know how to play the market.

Re: Is it better to buy or rent?

#74

Post by gambiting » Fri, Jun 19, 2015, 3:28 PM UTC

Happydayz wrote: post #19

nkozyra wrote: post #12

Earlier quoted context omitted.

That's probably true for most periods in history, but we're still within a much-receded housing economy. When I bought my house, my rent was a couple hundred bucks more and with insurance + taxes I ended up paying ~ $30 more a month for more than double the space and, of course, actual assets. There are places where this doesn't make sense, and there are times where it absolutely doesn't make sense, but present day i…

Yes, but there is also the opportunity cost of your downpayment, the transaction costs of getting into and out of a house, and maintenance. Oh man, maintenance. Ref - transaction costs. You have to figure it will cost you around ~8% of the value of a property to both get into and out of it. This does not include the cost of movers. With a rental your transaction costs might be $50 for the apartment application fee.

I wish - I'm currently renting a house for 1200 pounds/month(so...1900 USD per month) and the agency took $1000 just to take the property off the market("admin fee" - non-returnable, doesn't go towards the deposit, it's just money down the drain really), then 1 month rent as deposit, and 1 month rent in advance. So really, I spent nearly $6k just to start renting a place.

I'm really considering a mortgage, but don't have money for the downpayment. Our mortgage payments would be actually less than what we pay for rent now.

Re: Is it better to buy or rent?

#75

Post by frobozz » Fri, Jun 19, 2015, 3:31 PM UTC

MrBuddyCasino wrote: post #4

saurik wrote: post #3

16 hours ago: https://news.ycombinator.com/item?id=9741374 20 hours ago: https://news.ycombinator.com/item?id=9739544 393 days ago: https://news.ycombinator.com/item?id=7783201 1775 days ago: https://news.ycombinator.com/item?id=1586757 1884 days ago: https://news.ycombinator.com/item?id=1283190

Important comment from an earlier thread: don't ignore the human factor. Buying instead of renting forces you to live more frugal, which is a reason why people who buy are often better off financially when they retire.

I was no more frugal having bought a house, than when I was putting all my money away towards a deposit on a house, probably even less so.

I would have thought that the biggest reasons were (roughly) freezing your shelter expense against inflation, and putting an upper limit on how long you pay for shelter.

i.e. If I rent a £1000PCM flat for the rest of my life, my bill for shelter will continue to be roughly £1000PCM in today's money for the rest of my life.

If I buy a house with a £1000PCM mortgage payment, it will remain roughly £1000PCM for the rest the mortgage (though current low interest rates mean that it probably won't), which, in 25 years time could be worth just over half as much as it is now. And in 25 years time, I won't have to spend on shelter any more. I will have maintenance costs to pay for, but they are unlikely to equate more than £1000PCM in today's money over my lifetime.

So, where M is homeowner maintenance costs, someone with N+M living expenses is more likely to be better off than someone with £1000+N living expenses.

Re: Is it better to buy or rent?

#76

Post by fluidcruft » Fri, Jun 19, 2015, 3:32 PM UTC

Happydayz wrote: post #19

nkozyra wrote: post #12

Earlier quoted context omitted.

That's probably true for most periods in history, but we're still within a much-receded housing economy. When I bought my house, my rent was a couple hundred bucks more and with insurance + taxes I ended up paying ~ $30 more a month for more than double the space and, of course, actual assets. There are places where this doesn't make sense, and there are times where it absolutely doesn't make sense, but present day i…

Yes, but there is also the opportunity cost of your downpayment, the transaction costs of getting into and out of a house, and maintenance. Oh man, maintenance. Ref - transaction costs. You have to figure it will cost you around ~8% of the value of a property to both get into and out of it. This does not include the cost of movers. With a rental your transaction costs might be $50 for the apartment application fee.

Rent pays maintenance costs, too it's just forcibly amortized and externalized. Higher-density housing like apartments and condos do have scale efficiencies reduce per-unit/occupant maintenance costs. But the difference between renting and buying is somewhat apples to oranges if you're comparing renting an apartment to buying a house.

Re: Is it better to buy or rent?

#77

Post by ocdtrekkie » Fri, Jun 19, 2015, 3:35 PM UTC

tinkerrr wrote: post #51

ocdtrekkie wrote: post #44

Earlier quoted context omitted.

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 cos…

What money do you get back out of renting?

Re: Is it better to buy or rent?

#78

Post by xyzzyz » Fri, Jun 19, 2015, 3:38 PM UTC

pkolaczk wrote: post #68

ido wrote: post #53

Earlier quoted context omitted.

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).

Well, but after 30 years, when you retire the place is yours own and your monthly payment goes down. Even if you saved that 100-150 euro every month, you'd not afford buying it after 30 years, assuming it stayed at the same price-point. On the other hand, it is hard to believe you can rent a 200k€ place for 500€/m. In Warsaw, a 2-room 40-50 m² apartment in the city center costs about 400-500€/m to rent, but if you wa…

While Berlin is a bit special case with its housing supply, renting is actually crazy expensive in Poland. You should compare the prices to e.g. Lithuania or Estonia, the difference in affordability is mindblowing.

Re: Is it better to buy or rent?

#79

Post by edj » Fri, Jun 19, 2015, 3:39 PM UTC

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.

Providence, RI: interior paint.

Fairfield, IA: all maintenance as well as on-going renovations at $25/hr plus materials.

San Francisco, CA: interior paint, garden, chicken coop, converted garage into bedroom.

Portland, OR: extensive tear out and renovation, removed walls, renovated kitchen, new wiring and lighting, converted attic into bedroom, finished basement and added bedroom -- all on the owner's dime. Also, we built a kiln and a giant skate ramp in the backyard.

So it is possible. Although admittedly, I do have a knack for finding laid back landlords.

Re: Is it better to buy or rent?

#80

Post by ekianjo » Fri, Jun 19, 2015, 3:46 PM UTC

vonmoltke wrote: post #66

ekianjo wrote: post #7

Earlier quoted context omitted.

> A home you live in is almost always a net cost. Plus it "prevents" you from moving somewhere else. Or let's say, it increases the friction of moving somewhere else. Most home owners stay at the same place for the rest of their lives.

There are a whole lot of other factors that increase friction more than owning your domicile, and those factors tend to be stronger with people who are motivated to buy: - Deep networks of friends - Strong community ties - Strong local family ties - Children with their attendant social networks - General aversion to moving frequently Also, the idea that "most" homeowners never leave is antiquated. Nearly everyone I k…

> Also, the idea that "most" homeowners never leave is antiquated. Nearly everyone I know who has bought a property has bought more than one before 40.

I'm guessing you live in the US ? Outside people are way less mobile.