10 ms·

And on the opposite, I never understood how people can not own a house and waste money on renting for decades. Where market for houses in western countries is

by akerro 10y ago

And on the opposite, I never understood how people can not own a house and waste money on renting for decades. Where market for houses in western countries is very limited due to stupid regulations and every year a few millions of people move to that country causing renting prices to increase by XX% each year. It decreases my financial stability. Losing a job for less than a month is a financial disaster, I still to have to pay for car-fuel, insurance, life insurance, pay bills. On the other hand, having a house without mortgage, yes, keeps me in one place, but value of my house due to the same reasons is increasing for my benefit, not for my landlords benefits.

ajkjk 10y ago
If losing a job for less than a month is a financial disaster, you're probably not in the market for a house anyway. It's perfectly possible to rent for decades and have years of runway in savings. Also, the burden of being rooted, and of having to maintain a house, could be such a significant detraction to quality of life that it totally makes up the difference. Also, at least in my case as a relatively young American, living in a house is pretty much to opposite of the lifestyle I see myself wanting for at least the next decade.
- akerro 10y ago
  >Also, the burden of being rooted, and of having to maintain a house, could be such a significant detraction to quality of life that it totally makes up the difference. Yea, so I'm renting a house where my agreement states that I am not allowed to fix or improve the flat myself. All changes must be agreed and made by agency. Current faults in the flat include: leaking water from toilet flush since seal is broken, reported 2 weeks ago, reminded 3 times. Water bill is on me. I would be happy if I could fix it myself, I would save money on water, calls made to the agency and not have the noise of leaking water, it's annoying. Aver salary in my city is ~£22k, and average rent just hit £720 per month, if we add bills and council tax, it's ~£850 which is more than halt of average salary. Hopefully I work in IT-financial sector and my salary is higher. I would be much happier to buy a house and be rooted to this city than to depend on renting agencies and increasing population which pushes renting prices a lot. I'm making savings now to save for a house, if I get a mortgage for 20 years, my average cost of it will be £440 which is 2/3 of my rent...
  - ajkjk 10y ago
    Sure, but you shouldn't be surprised to hear that many rental experiences are much more positive than that, or that many people's situations lead them to totally difference conclusions. I've listed a bunch of reasons. You wrote "I never understood how people can not own a house and waste money on renting for decades" above, and my response is "It's easy to understand. Take my perspective as one of the millions of examples."
    - okc 10y ago
      My experience (UK) is that landlords screw people over where they can - they want to make money but actually have a social responsibility for housing conditions. Most people I know live in horrible conditions for a little less rent or increasingly so more precarious and even less stable house shares. Maybe that's an English problem though. The interesting question being posed in these threads is a lifestyle choice: ownership or flexibility, lay your roots down or remain agile. If you have enough money to pick and choose that's great. Otherwise home ownership may be the only route out of a precarious and unstable existence.
  - enraged_camel 10y ago
    >>Yea, so I'm renting a house where my agreement states that I am not allowed to fix or improve the flat myself. That's the beauty of renting: if you don't like your current agreement, you can find another place with more preferable terms. Plenty of landlords allow tenants to change/improve the property. Whereas when you buy a house, you are stuck with the same neighbors (and sometimes the same HOA) for a much longer period of time.
    - bane 10y ago
      Why not just rent out your property to somebody else so you no longer have to pay the mortgage on it, then move somewhere else? As an owner you get whatever agreement you wish to make with yourself. However, you are right, it's slightly harder to move from owned property to owned property, so in many jurisdictions, property owners have significantly more rights about neighboring land usage than do renters. For example, I once had a neighbor who was running an illegal business out of their house and causing all kinds of chaos. I presented evidence to the courts that their business was causing real estate market depreciation and was "damaging" the value of my property. The judge ordered them to cease immediately or pay me $50k in assessed depreciation. They shut down their business, put their property up for sale and were gone within a month, they paid my court costs as well. I had on my side, the HOA, local Sheriffs, county zoning inspectors, county ordinances, state ordinances and the agency responsible for handling business registrations. The actual time in court was less than 1 hour. My property value rebounded the full amount and my new neighbors were great. On the other hand, when I was renting, I once had a neighbor with a serious drug addiction problem, who was stabbed once by a homeless man he let into his apartment so they could do heroin together. Even though he presented a clear danger to the entire community, it took 90 days to have a community hearing to evict him from the property. I could have left sooner, but would have had to pay a penalty to break the lease early and by this point local rents had gone up about 10%. So I would end up paying more to live, and be out the penalty of two months rent. I had on my side approximately nobody. When he was finally evicted, he was replaced by another recovering drug addict who occasionally lapsed and we'd find high in the stairwell. This was in a very nice area I might add -- and the county had selected our building as a pilot "integration program" for people coming out of non-violent criminal and drug rehabilitation programs. They had hoped that being around a nice environment might help them out.
- ryandrake 10y ago
  Surprisingly, I seem to be in the minority here: I consider the lack of freedom and NOT being rooted that comes with renting to be much more of a burden. To me a huge advantage of buying a house is that I know where I'll be living next year and 5 years from now. I don't have to worry about my scummy landlord raising rents by 30% every year "because they can". I don't want to burden my kid with having to find a new set of friends every year because we have to move to a different school district again. If I want to build a deck or knock down a wall or install surround sound in the living room, I can do so tomorrow without having to ask permission.
havetocharge 10y ago
Then keep on doing what you are doing. You are the one who started this discussion on buying land and building houses. We were talking about Switzerland.
taneq 10y ago
It's only a waste if you don't put the difference to work in some way. Owning a house outright is great (I'm 1/3 of the way there) but for most, a 30-year mortgage is no more of a wise decision than a rental. You're just swapping landlord for bank.
- rs999gti 10y ago
  > You're just swapping landlord for bank. And even if you pay off your mortgage you still don't technically own it due to yearly property taxes.
  - Dagwoodie 10y ago
    One thing I really hated about living in an apartment was that the landlord would show up twice a year with very little warning to inspect the fire alarms etc. As a security person, having all the keys to my home and neighbors homes sitting in a nearby office wasn't very reassuring of my safety or privacy. The bank on the other hand doesn't care what you do with your alarms or anything else as long as their payments keep showing up.
  - cplease 10y ago
    Not only do taxes pass through to renters, very often they are substantially higher. In New York, for instance, there is a substantial school tax credit for homeowners not available to rental properties. In addition, some cities have a homestead property tax rate that is substantially lower than the commercial tax rate applicable to rental properties.
- vasilipupkin 10y ago
  Exactly. You are either renting the money or the house. You might as well put your equity into a diversified mutual fund. However, there are massive nonfinancial benefits of owning a home, don't forget
  - taneq 10y ago
    I can drill holes in the walls wherever I want! Seriously though, renting sucks compared with owning, for all those nonfinancial reasons you mention.
rs999gti 10y ago
> waste money on renting How is renting wasting money? Are you not living in the unit? You're gaining 100% benefit by paying rent and receiving a roof over your head. You must mean a waste by losing out on building equity? That's a crap shoot in itself. A hot housing market and equity can go into the toilet at anytime due to very irrational market conditions. Look at the housing markets of Las Vegas or Miami for examples.
- geggam 10y ago
  If you look at a place to live as an investment vehicle you are simply looking at it wrong. A home which is paid for is a place you can live without fear of not being able to make the next rent payment. A mortgage is a bit of a jail sentence. Saving money and purchasing a place to live is the right way to do it. No one will tell you that because they dont make money from you putting your money in the market.
  - soyiuz 10y ago
    But the same could be said about money in the bank: it is insurance against not being able to make the next rent payment. Saving money is the right thing to do---putting all of your savings into immovable property may not be.
    - geggam 10y ago
      A place to live where you can grow food without someone taking it away eliminates the homeless situation. There is no other investment offering that security. Ask Etrade if you can have a place to live and food to eat if all your trades go wrong :)
- etatoby 10y ago
  It's very simple actually. Consider, for brevity, a mortgage where the monthly or yearly payment, including taxes, is equal to the rent you would be paying for the same place. Then live in the place and go about your life for several years, until the mortgage is paid for. Option 1, you took the mortgage. Now you own a house and you are not due any more payments. You can keep living there and use the excess income for other purposes, or you can sell the house and upgrade, or whatever. Option 2, you kept renting. You are still under a landlord, you are still due monthly payments, and you still don't own anything more that what you started with, after all those years. In this very real sense, rent is wasted money.
soyiuz 10y ago
Re: renting is wasting money. Think of the math this way. A $1mil condo in New York generates approximately 45k/yr income, or 4.5% return on investment per year in rents. Subtract taxes and amortization and ask yourself, can you get similar returns elsewhere? You could for example purchase an index fund with the same $1mil and contribute the gains towards rent. Either way you are living "for free." It is however risky not to diversify. So if the $1mil is all you have and it is all in the house, you are in danger. Additionally, property is not very liquid. In the downturn it would be difficult to exit. For these reasons, I believe house ownership only makes sense as a portion of one's assets. Renting makes solid financial sense otherwise. In the conversation of rent vs. own people often forget to take the opportunity costs into account.
- bane 10y ago
  To make your plan work, you'd have to have around $1mil in investment dollars that you'd place into various investments to make the "free" rent money. Since you're relying on those investments to provide shelter, they're just as illiquid as owning property (except with property you can make money off of it). The best plan here is to keep $800k in investments, move to rural nowhere and buy a huge house for $200k cash and live off the investment income entirely and not bother working. You can then rent off portions of the property (a bedroom, a basement, airbnb etc.) to surge your income if you need it. If you don't have $1mil up front to start, like most people, building equity in the place you live makes far more financial sense over time than does renting because you both get to live there and because it doubles as an investment. Starting from the same lack of a million dollars, renting only covers cost of living and does not provide for any investment opportunity.
  - soyiuz 10y ago
    The amount is irrelevant, since you are making the same percentage on whatever sum investment. I think you are using a non-technical definition of liquidity: I can convert ETFs or stocks into cash almost immediately. So for example, it is easy to scale down or to move money from stocks to bonds. The house is immovable property in all senses of the word. It is difficult to convert to cash or to move (in case of political upheaval, for example). Your last point ignores the significant costs associated with 1. amortization and 2. the liquidity problem. First, given a neutral market, the house decays in value: appliances need fixing, floors, heaters, boilers etc. We are just used to rising prices due to speculation, but nothing guarantees the upward trend. Second, consider the cost of converting cash into house and the other way around: mortgage fees, interest, buying and selling fees, plus real estate taxes. The New York Times has an excellent calculator on buying vs. renting. The math just does not support your conclusions. Buying wins out after 10-15 years GIVEN an upward real estate market. With any downturns, renting wins out indefinitely. Include the risk of investing into a single instrument (all you money is in the house) plus the stresses of ownership (shit goes wrong all the time and costs you money) and the picture is not so clear at all.
bane 10y ago
Here's the classic blog post on this topic http://assayviaessay.blogspot.com/2014/04/rent-or-buy.html http://assayviaessay.blogspot.com/2014/04/rent-or-buy.html
jacalata 10y ago
Try the New York Times "rent vs buy calculator" if you really can't understand that it might be financially better to rent. Also try setting up a budget and some savings - losing your job for less than a month should never be a financial disaster (and if it is you can't afford to buy a house).
majewsky 10y ago
http://jlcollinsnh.com/2012/02/23/rent-v-owning-your-home-opportunity-cost-and-running-some-numbers/ http://jlcollinsnh.com/2012/02/23/rent-v-owning-your-home-op...

by akerro 10y ago

ajkjk 10y ago

If losing a job for less than a month is a financial disaster, you're probably not in the market for a house anyway. It's perfectly possible to rent for decades and have years of runway in savings. Also, the burden of being rooted, and of having to maintain a house, could be such a significant detraction to quality of life that it totally makes up the difference. Also, at least in my case as a relatively young American, living in a house is pretty much to opposite of the lifestyle I see myself wanting for at least the next decade.

akerro 10y ago
>Also, the burden of being rooted, and of having to maintain a house, could be such a significant detraction to quality of life that it totally makes up the difference. Yea, so I'm renting a house where my agreement states that I am not allowed to fix or improve the flat myself. All changes must be agreed and made by agency. Current faults in the flat include: leaking water from toilet flush since seal is broken, reported 2 weeks ago, reminded 3 times. Water bill is on me. I would be happy if I could fix it myself, I would save money on water, calls made to the agency and not have the noise of leaking water, it's annoying. Aver salary in my city is ~£22k, and average rent just hit £720 per month, if we add bills and council tax, it's ~£850 which is more than halt of average salary. Hopefully I work in IT-financial sector and my salary is higher. I would be much happier to buy a house and be rooted to this city than to depend on renting agencies and increasing population which pushes renting prices a lot. I'm making savings now to save for a house, if I get a mortgage for 20 years, my average cost of it will be £440 which is 2/3 of my rent...
- ajkjk 10y ago
  Sure, but you shouldn't be surprised to hear that many rental experiences are much more positive than that, or that many people's situations lead them to totally difference conclusions. I've listed a bunch of reasons. You wrote "I never understood how people can not own a house and waste money on renting for decades" above, and my response is "It's easy to understand. Take my perspective as one of the millions of examples."
  - okc 10y ago
    My experience (UK) is that landlords screw people over where they can - they want to make money but actually have a social responsibility for housing conditions. Most people I know live in horrible conditions for a little less rent or increasingly so more precarious and even less stable house shares. Maybe that's an English problem though. The interesting question being posed in these threads is a lifestyle choice: ownership or flexibility, lay your roots down or remain agile. If you have enough money to pick and choose that's great. Otherwise home ownership may be the only route out of a precarious and unstable existence.
- enraged_camel 10y ago
  >>Yea, so I'm renting a house where my agreement states that I am not allowed to fix or improve the flat myself. That's the beauty of renting: if you don't like your current agreement, you can find another place with more preferable terms. Plenty of landlords allow tenants to change/improve the property. Whereas when you buy a house, you are stuck with the same neighbors (and sometimes the same HOA) for a much longer period of time.
  - bane 10y ago
    Why not just rent out your property to somebody else so you no longer have to pay the mortgage on it, then move somewhere else? As an owner you get whatever agreement you wish to make with yourself. However, you are right, it's slightly harder to move from owned property to owned property, so in many jurisdictions, property owners have significantly more rights about neighboring land usage than do renters. For example, I once had a neighbor who was running an illegal business out of their house and causing all kinds of chaos. I presented evidence to the courts that their business was causing real estate market depreciation and was "damaging" the value of my property. The judge ordered them to cease immediately or pay me $50k in assessed depreciation. They shut down their business, put their property up for sale and were gone within a month, they paid my court costs as well. I had on my side, the HOA, local Sheriffs, county zoning inspectors, county ordinances, state ordinances and the agency responsible for handling business registrations. The actual time in court was less than 1 hour. My property value rebounded the full amount and my new neighbors were great. On the other hand, when I was renting, I once had a neighbor with a serious drug addiction problem, who was stabbed once by a homeless man he let into his apartment so they could do heroin together. Even though he presented a clear danger to the entire community, it took 90 days to have a community hearing to evict him from the property. I could have left sooner, but would have had to pay a penalty to break the lease early and by this point local rents had gone up about 10%. So I would end up paying more to live, and be out the penalty of two months rent. I had on my side approximately nobody. When he was finally evicted, he was replaced by another recovering drug addict who occasionally lapsed and we'd find high in the stairwell. This was in a very nice area I might add -- and the county had selected our building as a pilot "integration program" for people coming out of non-violent criminal and drug rehabilitation programs. They had hoped that being around a nice environment might help them out.
ryandrake 10y ago
Surprisingly, I seem to be in the minority here: I consider the lack of freedom and NOT being rooted that comes with renting to be much more of a burden. To me a huge advantage of buying a house is that I know where I'll be living next year and 5 years from now. I don't have to worry about my scummy landlord raising rents by 30% every year "because they can". I don't want to burden my kid with having to find a new set of friends every year because we have to move to a different school district again. If I want to build a deck or knock down a wall or install surround sound in the living room, I can do so tomorrow without having to ask permission.

havetocharge 10y ago

Then keep on doing what you are doing. You are the one who started this discussion on buying land and building houses. We were talking about Switzerland.

taneq 10y ago

It's only a waste if you don't put the difference to work in some way. Owning a house outright is great (I'm 1/3 of the way there) but for most, a 30-year mortgage is no more of a wise decision than a rental. You're just swapping landlord for bank.

rs999gti 10y ago
> You're just swapping landlord for bank. And even if you pay off your mortgage you still don't technically own it due to yearly property taxes.
- Dagwoodie 10y ago
  One thing I really hated about living in an apartment was that the landlord would show up twice a year with very little warning to inspect the fire alarms etc. As a security person, having all the keys to my home and neighbors homes sitting in a nearby office wasn't very reassuring of my safety or privacy. The bank on the other hand doesn't care what you do with your alarms or anything else as long as their payments keep showing up.
- cplease 10y ago
  Not only do taxes pass through to renters, very often they are substantially higher. In New York, for instance, there is a substantial school tax credit for homeowners not available to rental properties. In addition, some cities have a homestead property tax rate that is substantially lower than the commercial tax rate applicable to rental properties.
vasilipupkin 10y ago
Exactly. You are either renting the money or the house. You might as well put your equity into a diversified mutual fund. However, there are massive nonfinancial benefits of owning a home, don't forget
- taneq 10y ago
  I can drill holes in the walls wherever I want! Seriously though, renting sucks compared with owning, for all those nonfinancial reasons you mention.

rs999gti 10y ago

> waste money on renting How is renting wasting money? Are you not living in the unit? You're gaining 100% benefit by paying rent and receiving a roof over your head. You must mean a waste by losing out on building equity? That's a crap shoot in itself. A hot housing market and equity can go into the toilet at anytime due to very irrational market conditions. Look at the housing markets of Las Vegas or Miami for examples.

geggam 10y ago
If you look at a place to live as an investment vehicle you are simply looking at it wrong. A home which is paid for is a place you can live without fear of not being able to make the next rent payment. A mortgage is a bit of a jail sentence. Saving money and purchasing a place to live is the right way to do it. No one will tell you that because they dont make money from you putting your money in the market.
- soyiuz 10y ago
  But the same could be said about money in the bank: it is insurance against not being able to make the next rent payment. Saving money is the right thing to do---putting all of your savings into immovable property may not be.
  - geggam 10y ago
    A place to live where you can grow food without someone taking it away eliminates the homeless situation. There is no other investment offering that security. Ask Etrade if you can have a place to live and food to eat if all your trades go wrong :)
etatoby 10y ago
It's very simple actually. Consider, for brevity, a mortgage where the monthly or yearly payment, including taxes, is equal to the rent you would be paying for the same place. Then live in the place and go about your life for several years, until the mortgage is paid for. Option 1, you took the mortgage. Now you own a house and you are not due any more payments. You can keep living there and use the excess income for other purposes, or you can sell the house and upgrade, or whatever. Option 2, you kept renting. You are still under a landlord, you are still due monthly payments, and you still don't own anything more that what you started with, after all those years. In this very real sense, rent is wasted money.

soyiuz 10y ago

Re: renting is wasting money. Think of the math this way. A $1mil condo in New York generates approximately 45k/yr income, or 4.5% return on investment per year in rents. Subtract taxes and amortization and ask yourself, can you get similar returns elsewhere? You could for example purchase an index fund with the same $1mil and contribute the gains towards rent. Either way you are living "for free." It is however risky not to diversify. So if the $1mil is all you have and it is all in the house, you are in danger. Additionally, property is not very liquid. In the downturn it would be difficult to exit. For these reasons, I believe house ownership only makes sense as a portion of one's assets. Renting makes solid financial sense otherwise. In the conversation of rent vs. own people often forget to take the opportunity costs into account.

bane 10y ago
To make your plan work, you'd have to have around $1mil in investment dollars that you'd place into various investments to make the "free" rent money. Since you're relying on those investments to provide shelter, they're just as illiquid as owning property (except with property you can make money off of it). The best plan here is to keep $800k in investments, move to rural nowhere and buy a huge house for $200k cash and live off the investment income entirely and not bother working. You can then rent off portions of the property (a bedroom, a basement, airbnb etc.) to surge your income if you need it. If you don't have $1mil up front to start, like most people, building equity in the place you live makes far more financial sense over time than does renting because you both get to live there and because it doubles as an investment. Starting from the same lack of a million dollars, renting only covers cost of living and does not provide for any investment opportunity.
- soyiuz 10y ago
  The amount is irrelevant, since you are making the same percentage on whatever sum investment. I think you are using a non-technical definition of liquidity: I can convert ETFs or stocks into cash almost immediately. So for example, it is easy to scale down or to move money from stocks to bonds. The house is immovable property in all senses of the word. It is difficult to convert to cash or to move (in case of political upheaval, for example). Your last point ignores the significant costs associated with 1. amortization and 2. the liquidity problem. First, given a neutral market, the house decays in value: appliances need fixing, floors, heaters, boilers etc. We are just used to rising prices due to speculation, but nothing guarantees the upward trend. Second, consider the cost of converting cash into house and the other way around: mortgage fees, interest, buying and selling fees, plus real estate taxes. The New York Times has an excellent calculator on buying vs. renting. The math just does not support your conclusions. Buying wins out after 10-15 years GIVEN an upward real estate market. With any downturns, renting wins out indefinitely. Include the risk of investing into a single instrument (all you money is in the house) plus the stresses of ownership (shit goes wrong all the time and costs you money) and the picture is not so clear at all.

bane 10y ago

Here's the classic blog post on this topic http://assayviaessay.blogspot.com/2014/04/rent-or-buy.html http://assayviaessay.blogspot.com/2014/04/rent-or-buy.html

jacalata 10y ago

Try the New York Times "rent vs buy calculator" if you really can't understand that it might be financially better to rent. Also try setting up a budget and some savings - losing your job for less than a month should never be a financial disaster (and if it is you can't afford to buy a house).

majewsky 10y ago

http://jlcollinsnh.com/2012/02/23/rent-v-owning-your-home-opportunity-cost-and-running-some-numbers/ http://jlcollinsnh.com/2012/02/23/rent-v-owning-your-home-op...