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> 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 you

> 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.
- tunap 10y ago
  The difference in costs are several factors between rent & mortgage+taxes+insurance+maintenance+appliances. I have better places for moneys(some investment, some wasteful) and I get to move whenever I please... although, I have had to move when it didn't please me, too.
- _9MOTHER9HORSE 10y ago
  You do incur a lot more costs as a property owner than as a renter, which you should bear in mind. Over the life of your average 20-25 year mortgage you should expect to have to replace numerous appliances, encounter a couple of catastrophic and unexpected issues (leaking roof, etc.), and after 10 years the decor will be outdated and shabby. To get optimum resale value you will have to sink a lot of time/money into remodelling (the money you will likely recover, but not the time/effort), then you have the stress of trying to sell the place. You are also bearing the risk of a downturn in the housing market, and could end up in negative equity. As a renter you have greater flexibility, much greater certainty over your outgoings, etc.
  - bane 10y ago
    All of those costs are simply amortized over the rental agreement. I'm not sure why people who rent seem to think landlords are appliance/maintenance charities.
    - _9MOTHER9HORSE 10y ago
      Not necessarily. When the capital gains from simply sitting on a property are so great, I'm sure a lot of landlords are actually making a net loss on a renting operation, and don't care all that much. Regardless, the point is that a lot of people see the mortgage repayments equalling the rent and don't think about the extra costs of ownership.
      - bane 10y ago
        Landlords don't have infinite cash reserves. They still need to cover costs or minimize losses if they're betting on capital gains from property sale at some later date. Most renters pay for the maintenance and taxes of the property they live in, it's just not itemized for them and the costs are generally amortized and distributed among multiple tenants. Landlords are generally not charities, if you got lucky enough to find one who is, be very thankful. You are correct that rent != mortgage and shouldn't be compared too close. Renting is a 100% loss, while mortgage is <100% depending on where you are in your repayment plan -- allowing the owner to recoup some of their housing costs after time. After the mortgage is paid off, the renter still continues to loose 100% of their housing costs while the owner has only care and maintenance (and taxes) of the property to account for.
HillaryBriss 10y ago
Yeah. It's market-specific, to be sure. Homes in the Western US markets, especially California, have risen at a quick pace, in part because of zoning laws which prevent cheap expansion of the overall housing inventory. Another important reason homeownership pays off well for many is that the investment is leveraged. Also, in the US, entities like Fannie Mae combined with tax deductions amount to a government subsidy for home buyers. You can borrow $400K to buy a house at a very attractive interest rate and, on top of that, claim a tax deduction for the interest payments. But what rate will you get if you want to borrow $400K to place a leveraged bet on the price of gold or oil or Apple stock?
tunap 10y ago
Do not forget maintenance, insurance & taxes that go along with that monthly nut. People used to always tell me I was throwing my money away on rent(until the "Great Recovery"), but I've never had to pony up thousands of $$$ for a new a/c unit or replacement appliances. As always, YMMV.
- bane 10y ago
  Why do you think your rent isn't simply amortizing those costs? The landlord isn't a utility/maintenance charity.
  - soyiuz 10y ago
    Many cities place artificial constraints on rent increases, for example which prevents full amortization.
    - bane 10y ago
      Doesn't matter. Landlords who are in the business of renting aren't a charity. Somebody will be paying for those expenses and it's the goal of the landlord to make it not them. Most of these kinds of arguments seen to stem from some kind of fantasy that renting is a smart choice because look at how we're pulling one over on landlords with all that free stuff they have to give me. But no rental market can survive when landlords are losing their shirt to paying for other people's expenses. And yet rental markets are full and robust everywhere which means landlords make money on the exchange, otherwise the entire rental market would be controlled by rapidly impoverished idiots, which is obviously not the case. Landlords make money in several ways simultaneously, but providing charity to renters is not one of them.
      - tunap 10y ago
        Strawman much? I never said nor intimated I was pulling anything over anyone. Property owners assume the burden of maintenance & costs of ownership. Those costs are reflected in the amount of money I give them for the privilege, not the "right", of residing on their property. When I leave, I have NOTHING to show for it.
stupidcar 10y ago
In European cities like London, Paris or Zurich, the supply of housing is so constrained that, barring something catastrophic like a war or a global financial crisis, prices will never drop that much for that long. In fact, it's quite a big economic problem — there's little reason for the majority of people to put their savings into anything other than property, because it tends to be so reliable. And somewhere like London, renting a whole property is often just as expensive or more expensive that paying the equivalent mortgage would be. So you wouldn't even save any money by renting.
- bane 10y ago
  In a great many places, the rental rates are set to be about the same as if somebody just purchased the property and were about to pay mortgage payments. In the short term, the renter makes out, because the owner has to assume taxes and maintenance, but over the long term, the existing mortgage doesn't increase while rent does and the property owner starts to cover those costs and then starts to make money off of the property. Once the mortgage is paid off, the rental money is pure profit.
  - sievebrain 10y ago
    I've lived in Switzerland for a decade. My rents have never gone up. They have gone down once though, because the law here mandates tying of rent to interest rates and when they are lowered, you can write to your landlord and demand a reduction. Unfortunately there are caveats. Last time I tried that, my landlord claimed that my rent was already lower than the market average for my area and thus I didn't qualify for the reduction.
bane 10y ago
It's very simple, even outside of equity earning and the ups and downs of the housing market, once you pay off your mortgage, you now have a place to live that's fairly close to free (other than maintenance, utilities and taxes). If your home is large enough, you can even turn it into a revenue generating asset by renting out portions or all of it. Rents also tend to go up with inflation, once you enter into a mortgage agreement, mortgages do not and thus you end up paying less over time (in real dollars) to live than if you rent. Since most people's income goes up, this means that renting tends to stay at about the same percent of income over a person's lifetime while it becomes less and less of a part of somebody's income who has purchased.
- soyiuz 10y ago
  See my post above. Once you pay off the mortgage it is equivalent to paying yourself out a percentage of cash investment. In NYC that number is approximately 4.5%. That is pretty good but not great considering the risks of ownership.
  - bane 10y ago
    Except I think you are assuming the renter is starting out with a large cash reserve they can invest and the owner doesn't have that at the start and must accrue that value over their mortgage period. To compare correctly you must assume both people are starting the same
  - barrkel 10y ago
    Home ownership via a mortgage is a leveraged investment. If you're renting, you usually don't have access to leverage for an investment like that. Further, when you're renting, you don't normally have much of an impetus to save extra and accrue interest; whereas a mortgage acts as a forced saving scheme. You must save (build up equity) or else the bank will foreclose on your property!
foobarian 10y ago
My big reason for giving up on renting is the control. I ended up being forced to move twice after landlords sold the building I happened to be living in. It was a frustrating experience. This is much less likely to happen with my own house (natural disasters, eminent domain, etc.).
brandonmenc 10y ago
> How is renting wasting money? My parents paid off a $200k mortgage in 15 years. When they sell the house and move, they will get $200k - breaking even. Meanwhile, I've been renting for 15 years and will never get that money back. It's just a loss.
collyw 10y ago
This sounds like my parents telling me how stupid I am for renting here in Barcelona for the last 8 years. Property prices have dropped by over a third, and I am spending less on rent than the prices are dropping by every year.

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.

tunap 10y ago
The difference in costs are several factors between rent & mortgage+taxes+insurance+maintenance+appliances. I have better places for moneys(some investment, some wasteful) and I get to move whenever I please... although, I have had to move when it didn't please me, too.
_9MOTHER9HORSE 10y ago
You do incur a lot more costs as a property owner than as a renter, which you should bear in mind. Over the life of your average 20-25 year mortgage you should expect to have to replace numerous appliances, encounter a couple of catastrophic and unexpected issues (leaking roof, etc.), and after 10 years the decor will be outdated and shabby. To get optimum resale value you will have to sink a lot of time/money into remodelling (the money you will likely recover, but not the time/effort), then you have the stress of trying to sell the place. You are also bearing the risk of a downturn in the housing market, and could end up in negative equity. As a renter you have greater flexibility, much greater certainty over your outgoings, etc.
- bane 10y ago
  All of those costs are simply amortized over the rental agreement. I'm not sure why people who rent seem to think landlords are appliance/maintenance charities.
  - _9MOTHER9HORSE 10y ago
    Not necessarily. When the capital gains from simply sitting on a property are so great, I'm sure a lot of landlords are actually making a net loss on a renting operation, and don't care all that much. Regardless, the point is that a lot of people see the mortgage repayments equalling the rent and don't think about the extra costs of ownership.
    - bane 10y ago
      Landlords don't have infinite cash reserves. They still need to cover costs or minimize losses if they're betting on capital gains from property sale at some later date. Most renters pay for the maintenance and taxes of the property they live in, it's just not itemized for them and the costs are generally amortized and distributed among multiple tenants. Landlords are generally not charities, if you got lucky enough to find one who is, be very thankful. You are correct that rent != mortgage and shouldn't be compared too close. Renting is a 100% loss, while mortgage is <100% depending on where you are in your repayment plan -- allowing the owner to recoup some of their housing costs after time. After the mortgage is paid off, the renter still continues to loose 100% of their housing costs while the owner has only care and maintenance (and taxes) of the property to account for.

HillaryBriss 10y ago

Yeah. It's market-specific, to be sure. Homes in the Western US markets, especially California, have risen at a quick pace, in part because of zoning laws which prevent cheap expansion of the overall housing inventory. Another important reason homeownership pays off well for many is that the investment is leveraged. Also, in the US, entities like Fannie Mae combined with tax deductions amount to a government subsidy for home buyers. You can borrow $400K to buy a house at a very attractive interest rate and, on top of that, claim a tax deduction for the interest payments. But what rate will you get if you want to borrow $400K to place a leveraged bet on the price of gold or oil or Apple stock?

tunap 10y ago

Do not forget maintenance, insurance & taxes that go along with that monthly nut. People used to always tell me I was throwing my money away on rent(until the "Great Recovery"), but I've never had to pony up thousands of $$$ for a new a/c unit or replacement appliances. As always, YMMV.

bane 10y ago
Why do you think your rent isn't simply amortizing those costs? The landlord isn't a utility/maintenance charity.
- soyiuz 10y ago
  Many cities place artificial constraints on rent increases, for example which prevents full amortization.
  - bane 10y ago
    Doesn't matter. Landlords who are in the business of renting aren't a charity. Somebody will be paying for those expenses and it's the goal of the landlord to make it not them. Most of these kinds of arguments seen to stem from some kind of fantasy that renting is a smart choice because look at how we're pulling one over on landlords with all that free stuff they have to give me. But no rental market can survive when landlords are losing their shirt to paying for other people's expenses. And yet rental markets are full and robust everywhere which means landlords make money on the exchange, otherwise the entire rental market would be controlled by rapidly impoverished idiots, which is obviously not the case. Landlords make money in several ways simultaneously, but providing charity to renters is not one of them.
    - tunap 10y ago
      Strawman much? I never said nor intimated I was pulling anything over anyone. Property owners assume the burden of maintenance & costs of ownership. Those costs are reflected in the amount of money I give them for the privilege, not the "right", of residing on their property. When I leave, I have NOTHING to show for it.

stupidcar 10y ago

In European cities like London, Paris or Zurich, the supply of housing is so constrained that, barring something catastrophic like a war or a global financial crisis, prices will never drop that much for that long. In fact, it's quite a big economic problem — there's little reason for the majority of people to put their savings into anything other than property, because it tends to be so reliable. And somewhere like London, renting a whole property is often just as expensive or more expensive that paying the equivalent mortgage would be. So you wouldn't even save any money by renting.

bane 10y ago
In a great many places, the rental rates are set to be about the same as if somebody just purchased the property and were about to pay mortgage payments. In the short term, the renter makes out, because the owner has to assume taxes and maintenance, but over the long term, the existing mortgage doesn't increase while rent does and the property owner starts to cover those costs and then starts to make money off of the property. Once the mortgage is paid off, the rental money is pure profit.
- sievebrain 10y ago
  I've lived in Switzerland for a decade. My rents have never gone up. They have gone down once though, because the law here mandates tying of rent to interest rates and when they are lowered, you can write to your landlord and demand a reduction. Unfortunately there are caveats. Last time I tried that, my landlord claimed that my rent was already lower than the market average for my area and thus I didn't qualify for the reduction.

bane 10y ago

It's very simple, even outside of equity earning and the ups and downs of the housing market, once you pay off your mortgage, you now have a place to live that's fairly close to free (other than maintenance, utilities and taxes). If your home is large enough, you can even turn it into a revenue generating asset by renting out portions or all of it. Rents also tend to go up with inflation, once you enter into a mortgage agreement, mortgages do not and thus you end up paying less over time (in real dollars) to live than if you rent. Since most people's income goes up, this means that renting tends to stay at about the same percent of income over a person's lifetime while it becomes less and less of a part of somebody's income who has purchased.

soyiuz 10y ago
See my post above. Once you pay off the mortgage it is equivalent to paying yourself out a percentage of cash investment. In NYC that number is approximately 4.5%. That is pretty good but not great considering the risks of ownership.
- bane 10y ago
  Except I think you are assuming the renter is starting out with a large cash reserve they can invest and the owner doesn't have that at the start and must accrue that value over their mortgage period. To compare correctly you must assume both people are starting the same
- barrkel 10y ago
  Home ownership via a mortgage is a leveraged investment. If you're renting, you usually don't have access to leverage for an investment like that. Further, when you're renting, you don't normally have much of an impetus to save extra and accrue interest; whereas a mortgage acts as a forced saving scheme. You must save (build up equity) or else the bank will foreclose on your property!

foobarian 10y ago

My big reason for giving up on renting is the control. I ended up being forced to move twice after landlords sold the building I happened to be living in. It was a frustrating experience. This is much less likely to happen with my own house (natural disasters, eminent domain, etc.).

brandonmenc 10y ago

> How is renting wasting money? My parents paid off a $200k mortgage in 15 years. When they sell the house and move, they will get $200k - breaking even. Meanwhile, I've been renting for 15 years and will never get that money back. It's just a loss.

collyw 10y ago

This sounds like my parents telling me how stupid I am for renting here in Barcelona for the last 8 years. Property prices have dropped by over a third, and I am spending less on rent than the prices are dropping by every year.