6 ms·

The money you spend on your mortgage (minus interest) is still yours, in the form of equity. If/when you sell, you get that money back, modulo market fluctuatio

The money you spend on your mortgage (minus interest) is still yours, in the form of equity. If/when you sell, you get that money back, modulo market fluctuations. Or your kids get it via inheritance. When you rent, you might as well be lighting that money on fire. There are a few other terms in the equation (property taxes in particular) but that's it in a nutshell.

Swizec 11y ago
I've heard that argument a lot. Then I calculate how much a mortgage costs for an apartment in a place I'd like to live in. And the mortgage payments are literally more than for rent. Take SF for example. I'd need $1mil to buy an apartment. At 30 years, that gives me a mortgage payment of $4700. Rent for a similar apartment is $3400. And I don't have to pay for upkeep. So if my rent stays the same, I will have saved almost $40,000 in the next 30 years. I can do a lot with an extra $1300 per month. Not to mention I can maintain my desired lifestyle of moving every 2 years or so.
- cobalt 11y ago
  what about the money you get when you sell? Like he said, there's no money you get back when you rent
  - niccaluim 11y ago
    She. ;)
- ghaff 11y ago
  If mobility is your priority then you shouldn't buy. Buying may have financial benefits although that's not a given. IMO, buying because of the financial calculations is not a good idea--especially in an expensive area. What it does buy you is that you can customize your place to a significant degree and you can't be forced to move if you don't want to. If you're not at least planning to stay put, it probably makes no sense for you to buy.
  - Swizec 11y ago
    > you can customize your place to a significant degree Good point. There's definitely benefit in that for a lot of people. > you can't be forced to move if you don't want to If you buy cash, yes. If you are practically leasing from your bank, no. You don't really own it until it's paid off.
    - ghaff 11y ago
      >You don't really own it until it's paid off. You do but obviously you can be foreclosed on if you stop making your payments. (And, of course, even after your mortgage is paid off you still need to pay taxes, insurance, upkeep, etc.--although those will usually be a lot less. My basic point though was that you can easily lose the lease on a rental property even if you've religiously made your lease payments every month. Or the lease can be increased significantly if you live in an area where real estate prices are rapidly increasing. It's ultimately about predictability/control vs. mobility. IMO, some variant of that tradeoff is what potential buyers should really focus on.
- niccaluim 11y ago
  You can't compare mortgage payments and rent that way. Rent payments are money you will never see again. Mortgage payments are equity purchases.
- taurath 11y ago
  You realize at the end of those 30 years, you're happy to have $40,000 over $1,000,000 (in the form of a property you can now sell) right?
  - Swizec 11y ago
    I don't. My grandparents have a "property they can now sell". They never will. They've been investing in it and adding to it for so long that it has become useless to any potential buyer, and parts of it are now so old they really really need repairs. They cannot afford to sell because the investment to make it sellable for a good price is too high. Nobody would want to buy because the investment to turn it into a useable large house, is too high. So instead they turned a tiny part of the house into an apartment for themselves because the costs of living in the whole thing are too high. They turn on the heating in the rest of the house just enough during winter to keep the pipes from freezing. None of the kids want to inherit the property. None of the grandkids want it either. The location isn't that great either because the economic activity the location was great for (wine) is now in tatters and the government is paying people to please for the love of god stop making wine and cut down their vineyards. My mum has a nice flat in a downtown area. She recently had to go into debt to afford to fix it up. She could potentially sell, but then she'd have nowhere to live. She's too young to buy a rural house (same price) because she still goes to work. She's too entrenched to deal with finding a new apartment somewhere else. And she'd have to pay more for a new apartment than she'd get for her current flat. At 50-ish, she also doesn't really want to go into another 10+ year mortgage. So ... no, I don't see the value in owning. Basically: Having all your wealth tied up in an illiquid asset is twoplus not good.
    - taurath 11y ago
      If the land and property aren't worth anything, thats an awful investment I'll grant you. Regarding your mum - I assume there are rent controls in her area - in mine (Western US) there aren't necessarily those. If she rented she'd have been priced out of her flat years ago as the landlord ups the rent to market rates or "renovate".
    - Tempest1981 11y ago
cobalt 11y ago
also esp in California, you wont get mortgage hikes unlike rents. And, you are much more free to do as you please with your own property, like maintenance and upgrades.
massysett 11y ago
> When you rent, you might as well be lighting that money on fire. OK, try lighting that money on fire. Then go live under a bridge because your rent money is ashes. Rent gets you a roof over your head and it's completely ridiculous when people claim it's "lighting money on fire" or "throwing money out the window". Obviously it's not because if it were "lighting money on fire" people wouldn't do it. Ownership also comes with expenses--maintenance, insurance--and with the substantial risk that your property will decrease in value or that you will need to move and take a loss on the sale. Also, the transaction costs when buying and selling are considerable--agent commissions and taxes are thousands of dollars. That doesn't necessarily make buying a bad idea but renting is certainly nothing remotely close to "lighting money on fire".
- JoeAltmaier 11y ago
  A good portion of what you pay for in mortgage, you retain in equity. Zero of rent does. Insofar as you pay more in rent, than the non-equity part of your mortgage, the difference is 'money set on fire'.
  - massysett 11y ago
    Even if you ignore the fact that your capital is at risk (or do you think house prices never drop?) you also forget the opportunity cost of all that money sunk into the down payment. I own property and only a fraction of what I pay each month goes to reduce loan principal. By this logic everything else I pay is "lit on fire". This is ridiculous logic. It buys me a place to live. It also turns out that when I buy and eat a pizza, I built no equity either. Did I just light money on fire?
    - pcthrowaway 11y ago
      > It also turns out that when I buy and eat a pizza, I built no equity either. Did I just light money on fire? Obviously. If you would just buy a pizza restaurant instead, your payments would go towards your pizza equity. You'd get pizza, but you would also get returns from your mortgage payments on the pizza restaurant. /s
goldbrick 11y ago
Ugh, everyone who totes the "equity equity equity" argument about robotically. Probably the same suckers who think they are going to get rich off of their startup options. Once you factor in the risk offset (what happens when that once-in-a-century flood ruins the house? if you're renting, you just fuck off scot-free) and the ability to pick up and move to another city (which is what this whole article is about) if you still can't see the value prop you deserve your property taxes and underwater mortgages that you will never see a return on, because your house is not really an investment vehicle.
deleted 11y ago
[deleted]
zurn 11y ago
> The money you spend on your mortgage (minus interest) is still yours, in the form of equity. If/when you sell, you get that money back, modulo market fluctuations A house degrades with use and has a limited lifetime. You take a hit due to wear and tear, or you have taken a hit due to having made remodelling. So you are paying for that wear either way. You can get some idea if you tally up the cost of full renovation (including pipes, roofs etc) and divide that over the expected age of those, for example 25 years. Plus a fuzz factor for the smaller stuff. (If comparing to renting, there are other significant fixed costs that come on top of the mortgage payments which are included in the rent.)
- kbart 11y ago
  In many places land is much more valuable than the building itself and it doesn't degrade nearly that fast.

Swizec 11y ago

I've heard that argument a lot. Then I calculate how much a mortgage costs for an apartment in a place I'd like to live in. And the mortgage payments are literally more than for rent. Take SF for example. I'd need $1mil to buy an apartment. At 30 years, that gives me a mortgage payment of $4700. Rent for a similar apartment is $3400. And I don't have to pay for upkeep. So if my rent stays the same, I will have saved almost $40,000 in the next 30 years. I can do a lot with an extra $1300 per month. Not to mention I can maintain my desired lifestyle of moving every 2 years or so.

cobalt 11y ago
what about the money you get when you sell? Like he said, there's no money you get back when you rent
- niccaluim 11y ago
  She. ;)
ghaff 11y ago
If mobility is your priority then you shouldn't buy. Buying may have financial benefits although that's not a given. IMO, buying because of the financial calculations is not a good idea--especially in an expensive area. What it does buy you is that you can customize your place to a significant degree and you can't be forced to move if you don't want to. If you're not at least planning to stay put, it probably makes no sense for you to buy.
- Swizec 11y ago
  > you can customize your place to a significant degree Good point. There's definitely benefit in that for a lot of people. > you can't be forced to move if you don't want to If you buy cash, yes. If you are practically leasing from your bank, no. You don't really own it until it's paid off.
  - ghaff 11y ago
    >You don't really own it until it's paid off. You do but obviously you can be foreclosed on if you stop making your payments. (And, of course, even after your mortgage is paid off you still need to pay taxes, insurance, upkeep, etc.--although those will usually be a lot less. My basic point though was that you can easily lose the lease on a rental property even if you've religiously made your lease payments every month. Or the lease can be increased significantly if you live in an area where real estate prices are rapidly increasing. It's ultimately about predictability/control vs. mobility. IMO, some variant of that tradeoff is what potential buyers should really focus on.
niccaluim 11y ago
You can't compare mortgage payments and rent that way. Rent payments are money you will never see again. Mortgage payments are equity purchases.
taurath 11y ago
You realize at the end of those 30 years, you're happy to have $40,000 over $1,000,000 (in the form of a property you can now sell) right?
- Swizec 11y ago
  I don't. My grandparents have a "property they can now sell". They never will. They've been investing in it and adding to it for so long that it has become useless to any potential buyer, and parts of it are now so old they really really need repairs. They cannot afford to sell because the investment to make it sellable for a good price is too high. Nobody would want to buy because the investment to turn it into a useable large house, is too high. So instead they turned a tiny part of the house into an apartment for themselves because the costs of living in the whole thing are too high. They turn on the heating in the rest of the house just enough during winter to keep the pipes from freezing. None of the kids want to inherit the property. None of the grandkids want it either. The location isn't that great either because the economic activity the location was great for (wine) is now in tatters and the government is paying people to please for the love of god stop making wine and cut down their vineyards. My mum has a nice flat in a downtown area. She recently had to go into debt to afford to fix it up. She could potentially sell, but then she'd have nowhere to live. She's too young to buy a rural house (same price) because she still goes to work. She's too entrenched to deal with finding a new apartment somewhere else. And she'd have to pay more for a new apartment than she'd get for her current flat. At 50-ish, she also doesn't really want to go into another 10+ year mortgage. So ... no, I don't see the value in owning. Basically: Having all your wealth tied up in an illiquid asset is twoplus not good.
  - taurath 11y ago
    If the land and property aren't worth anything, thats an awful investment I'll grant you. Regarding your mum - I assume there are rent controls in her area - in mine (Western US) there aren't necessarily those. If she rented she'd have been priced out of her flat years ago as the landlord ups the rent to market rates or "renovate".
  - Tempest1981 11y ago

cobalt 11y ago

also esp in California, you wont get mortgage hikes unlike rents. And, you are much more free to do as you please with your own property, like maintenance and upgrades.

massysett 11y ago

> When you rent, you might as well be lighting that money on fire. OK, try lighting that money on fire. Then go live under a bridge because your rent money is ashes. Rent gets you a roof over your head and it's completely ridiculous when people claim it's "lighting money on fire" or "throwing money out the window". Obviously it's not because if it were "lighting money on fire" people wouldn't do it. Ownership also comes with expenses--maintenance, insurance--and with the substantial risk that your property will decrease in value or that you will need to move and take a loss on the sale. Also, the transaction costs when buying and selling are considerable--agent commissions and taxes are thousands of dollars. That doesn't necessarily make buying a bad idea but renting is certainly nothing remotely close to "lighting money on fire".

JoeAltmaier 11y ago
A good portion of what you pay for in mortgage, you retain in equity. Zero of rent does. Insofar as you pay more in rent, than the non-equity part of your mortgage, the difference is 'money set on fire'.
- massysett 11y ago
  Even if you ignore the fact that your capital is at risk (or do you think house prices never drop?) you also forget the opportunity cost of all that money sunk into the down payment. I own property and only a fraction of what I pay each month goes to reduce loan principal. By this logic everything else I pay is "lit on fire". This is ridiculous logic. It buys me a place to live. It also turns out that when I buy and eat a pizza, I built no equity either. Did I just light money on fire?
  - pcthrowaway 11y ago
    > It also turns out that when I buy and eat a pizza, I built no equity either. Did I just light money on fire? Obviously. If you would just buy a pizza restaurant instead, your payments would go towards your pizza equity. You'd get pizza, but you would also get returns from your mortgage payments on the pizza restaurant. /s

goldbrick 11y ago

Ugh, everyone who totes the "equity equity equity" argument about robotically. Probably the same suckers who think they are going to get rich off of their startup options. Once you factor in the risk offset (what happens when that once-in-a-century flood ruins the house? if you're renting, you just fuck off scot-free) and the ability to pick up and move to another city (which is what this whole article is about) if you still can't see the value prop you deserve your property taxes and underwater mortgages that you will never see a return on, because your house is not really an investment vehicle.

deleted 11y ago

[deleted]

zurn 11y ago

> The money you spend on your mortgage (minus interest) is still yours, in the form of equity. If/when you sell, you get that money back, modulo market fluctuations A house degrades with use and has a limited lifetime. You take a hit due to wear and tear, or you have taken a hit due to having made remodelling. So you are paying for that wear either way. You can get some idea if you tally up the cost of full renovation (including pipes, roofs etc) and divide that over the expected age of those, for example 25 years. Plus a fuzz factor for the smaller stuff. (If comparing to renting, there are other significant fixed costs that come on top of the mortgage payments which are included in the rent.)

kbart 11y ago
In many places land is much more valuable than the building itself and it doesn't degrade nearly that fast.