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The real cost of owning a home

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Re: The real cost of owning a home

#771

Post by csomar »

Sohcahtoa82 wrote: post #544
m463 wrote: post #467

Earlier quoted context omitted.

I don't think home ownership is an "every single weekend" thing unless you bought a fixer-upper. Honestly, it sounds like you enjoy it. If you are doing it with that frequency I think you just are "into" your house.

> I don't think home ownership is an "every single weekend" thing unless you bought a fixer-upper. It really isn't, and I don't know why so many homeowners act like it is. I bought my house in 2015. It was built in 1983. The only things I've had to do are a roof replacement, HVAC upgrade, and deal with a broken water main. Sure, none of those were cheap, but that's 3 events in 11 years, and the first two I expect to…

Are you saying that during the 11 years you never had an electrical issue, window/door breaking, a paint job, a clogged pipe, mold growing somewhere, a tree that needed handling, etc... You either have very high quality materials, don't care or were just lucky. Usually something (small/medium) breaks every 2-3 months or so and something (medium/big) breaks every 3-4 years or so. Depends on usage too (1 person is very different than a family of 5 where 3 are kids jumping around).

Re: The real cost of owning a home

#772

Post by DanielHB »

thfuran wrote: post #356
DanielHB wrote: post #234

Earlier quoted context omitted.

This isn't really true in many HCOL areas, a mortgage payment + amortization can be cheaper than renting an equivalent property. On top of that the amortization of your loan doesn't incur capital gains tax. Even if your property doesn't appreciate more than inflation you can still profit massively from owning just through the loan amortization. Only being forced to sell during a market crash could realistically cause…

In the US, there's a pretty significant capital gains tax exclusion on the sale of primary residence too.

In Sweden 30% of interest payments on mortgages is tax deductible.

When I sold my old flat and even though it only appreciated like 10% over 4 years (about the same as inflation) I still got a lot of money when I got the loan settled. 4 years of amortization at 2% per year is 8% of the original value of the apartment, tax free. And my mortgage+HOA fee was actually lower than my rent was before even before the interest tax deduction.

So after sales fees (also tax deductible), moving costs, capital gains, etc I think I saved around 15% after-tax of the total value of the apartment compared to renting over a span of 4 years. Given my downpayment was 15% I roughly doubled my downpayment money in 4 years.

That is a return of ~22.5% compounding per year _after tax_, which is much better than the average stock market returns. Of course I got there is some luck involved (my apartment didn't go down in value, I didn't need to do any renovations, etc), but I could potentially have profited even more if it had appreciated more. And that is on top of the real estate risk diversification benefits compared to stocks.

Re: The real cost of owning a home

#773

Post by pjc50 »

abalashov wrote: post #431
hawaiianbrah wrote: post #429

Earlier quoted context omitted.

> There's no one person I can call for every single problem. There absolutely can be if you want to pay for the service. Look up home concierge / residential management services, like Para Home Services.

True, but you still have to cough up. The benefit of renting is that it's an SEP (Someone Else's Problem).

This is also a hazard of renting, because the landlord will deal with it on their own schedule and as cheaply as possible.

Re: The real cost of owning a home

#774

Post by c-c-c-c-c »

cosmic_cheese wrote: post #12

On the other hand, renting comes with hidden (and some not so hidden) costs too. The main one for me is the inherent precariousness that comes with renting. You don’t know how much longer you’re going to be able to stay in your apartment, whether that be due to rent hikes or the landlord deciding that they want to give the apartment to their nephew or any number of other things. The constant low level stress of knowi…

This is not universally true, my lease is indefinite and we have stayed here through ownership changes. My neighbor has rented the same apartment for close to 50 years. Vote for a better government who cares about you and provides you with proper rights.

Re: The real cost of owning a home

#775

Post by kakacik »

ocdtrekkie wrote: post #468
fragmede wrote: post #427

Earlier quoted context omitted.

Yes it will - you can split stocks/financial portfolio way easier than you can real estate. If your heirs don't get along, leaving them to split the house, especially if they're not well off, is a recipe for giving money to lawyers. Forcing your kids to sell their childhood home in a time of grief just seems cruel. Passing down a financial portfolio with specific shares/dollar amounts is much more straightforwards.

Again the difference is though that if you are renting that money is not going into your net worth. The principal from your mortgage is . Concern about difficulty with handling it is resolved by having a good will that makes preferences on how it should be handled clear.

Instructions in the will: 1) sell the house via real estate agency and let them handle the optimal price with view on selling within 6 months (so no surface for arguments when one of heirs want to maximize gain even if it takes 10 years to sell); 2) split what comes back proportionally

It doesn't have to be that hard

Re: The real cost of owning a home

#776

Post by abalashov »

pjc50 wrote: post #773
abalashov wrote: post #431

Earlier quoted context omitted.

True, but you still have to cough up. The benefit of renting is that it's an SEP (Someone Else's Problem).

This is also a hazard of renting, because the landlord will deal with it on their own schedule and as cheaply as possible.

This is true. But I've had some really great landlords, too.

And some terrible ones.

Re: The real cost of owning a home

#777

Post by abalashov »

bobanrocky wrote: post #562
abalashov wrote: post #412

Earlier quoted context omitted.

Indeed. This is why I'm a preferential life-long renter, although I think the primary reason is that I can't stand living anywhere for more than 2-5 years. So much friction to move, unwinding this risky position very expensively, with loads of transaction fees stacked--I can't understand the appeal. Even owning a condo was enough for me to realise I don't want to own my own bare metal, and that I look at housing as a…

Wow, moving every 2-5 years? I suppose it works with no kids, or spouse ..

I have both and it's still doable, as long as your spouse is as into it as you are.

Mine isn't going to stay put for more than a few years either. We enable each other's moving fetish.

Re: The real cost of owning a home

#778

Post by abalashov »

donflamenco wrote: post #549
abalashov wrote: post #412

Earlier quoted context omitted.

Indeed. This is why I'm a preferential life-long renter, although I think the primary reason is that I can't stand living anywhere for more than 2-5 years. So much friction to move, unwinding this risky position very expensively, with loads of transaction fees stacked--I can't understand the appeal. Even owning a condo was enough for me to realise I don't want to own my own bare metal, and that I look at housing as a…

At least with me (married filing jointly), when Trump raised the standard deduction so high, the mortgage interest deduction doesn't come into play. It hasn't seemed to change my total tax liability, it just made my tax return easier to do. I haven't had to itemize for years now.

It is true that the interest deduction is not nearly as valuable as it was in my ownership days (late 2000s/early 2010s). My total annual interest of those days wouldn't even meet the individual standard deduction now, and that was a 6.65%/8.25% 80/20 loan (30-year fixed) with essentially 99% financing, back when that was a thing.

However, my assumption, given the cumulative inflation since then, is that my payments would be twice as large today and easily clear the individual deduction, as long as it wasn't one of those lower-interest loans people like. I hate those.

Re: The real cost of owning a home

#779

Post by prmph »

carlosjobim wrote: post #247
bloomca wrote: post #223

Earlier quoted context omitted.

The biggest advantage of buying a house is that it forces people to actually put money into a giant savings account which is not easily accessible. Otherwise people just spend the vast majority of the money they have. As an investment, houses are historically mediocre outside of some hot areas.

Why is that good? That is horrible for economic development and employment. It is worse for a country than being nuked.

But it is good for the individual.

You do have a point that in the long run, the health and growth of the overall economy impacts the quality of life of individuals, but the interests of individuals must be balanced against the interests of a country as as a whole.

Consider that people immediately spending all their salary at the beginning of every month and being broke and hungry for the rest of the month is good for the economy, but is obviously not what we want if we care about human well-being.

Re: The real cost of owning a home

#780

Post by abalashov »

laughing_man wrote: post #637
abalashov wrote: post #431

Earlier quoted context omitted.

True, but you still have to cough up. The benefit of renting is that it's an SEP (Someone Else's Problem).

Sort of. If it's not something that's damaging the building, landlords tend to not be in a huge hurry to fix things. So it's your problem until he gets around to fixing it. I've had good landlords and I've had landlords that took two weeks to fix the sink.

I've had worse, and experienced the full range from literal slumlord--I say that advisedly and not frivolously--to excellent landlord. One does have to choose one's landlords somewhat carefully. However, on the higher end of housing, I've had very good experiences with this, in the median.

It has been my experience with nearly all of them that you need to limit their exposure to big, capital items, and might need to fix smaller items yourself, at own expense. To run the latter through the landlord is just more trouble than it's worth.

That's okay with me. Very small price to pay for the convenience of not having to own the thing, and moving out essentially whenever I please (no, a 12 mo lease isn't "whenever you please", but compared to a mortgage, it is).

Living in a college town, there's a lot of this "prelease for $((YEAR + 1)) in August of $YEAR" crap going on, which really, really grinds my gears, since it undermines the most cherished aspect of why I rent -- the freedom to move, move often, move quickly.

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