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Every now and then I see articles like these. It always seems to me that the author is simply trying to justify the fact that they rent. Renting vs. buying is a

by chime 17y ago

Every now and then I see articles like these. It always seems to me that the author is simply trying to justify the fact that they rent. Renting vs. buying is a very personal decision and has a lot more to do with lifestyle and personal choices than financial soundness. I bought my house in 2005 at almost the top of housing market in Florida. I paid $145k for my house and told everyone about how smart of a financial decision I was making. I've spent $15k in home improvements and my house is now worth $125k. Oops. However, my mortgage is still very low and I can easily afford it regardless of the current worth. Now the question is, if I could see the future back in 2005, would I still buy this house? If all I could see was the housing crash of 2008-2009, then of course not. But if I could see the great times I've had in this house which includes absolute peace and quiet, friendly neighbors who don't change every other month, and the feeling of a little place by the beach to call my own, I would indeed buy this house. Buying a house has a lot more to do with making it a home than just a shelter for cheap. Nobody knows the future. I could have rented this exact house and instead of benefiting in the long run, I could have ended up losing more money if rent prices skyrocketed. All I know is that for people who can afford to buy and afford to rent, money has very little to do with buying vs. renting.

timcederman 17y ago
I think renting does make more fiscal sense, but there are so many reasons to own your own place beyond finance.
Retric 17y ago
Renting vs. buying is a very personal decision and has a lot more to do with lifestyle and personal choices than financial soundness. Says someone that bought a home. I want to walk to work and there are no homes for sale in my area. So even if I make 500k / year home ownership would still bring significant negative for my lifestyle. When you consider commuting costs, home ownership is both risky and far more expensive for most young people.
- hugh3 17y ago
  Sounds like a peculiar area if it doesn't have any homes for sale. Still, there must be just as many areas which don't have any homes for rent, right?
  - Retric 17y ago
    I said walking to work that's not exactly a huge area. Now 2 miles from me there are homes for sale, but driving that distance and parking in a parking garage is far more time consuming than walking. Taking a bike could also be an option.
    - hugh3 17y ago
      Really? I walk three miles to work most days. (No, it's not uphill both ways).
      - Retric 17y ago
        It's a lifestyle thing, I can walk home for lunch watch something on Hulu / DVR and then go back to work all within my lunch hour. It might not seem like it but there really is a difference between a 3 minute commute and a 15 minute one. PS: Walking 2+ miles in my area is slower than than driving that far and all I really care about is the time.
vl 17y ago
Well, you are talking about $145k, in Bay Area or in Seattle, for example, you can't buy any house at all for this price. Would you still buy this house if it would cost you 600k?
- hugh3 17y ago
  Exactly. It seems to me that the only people who really need to worry about the economics of renting vs buying are those for whom houses are very expensive; either because they live in an expensive area or because they have low incomes. If you can buy all the house you need for $150K and you're earning at least, say, $50K then by all means go ahead and buy a house for the lifestyle reasons. But if the house you need costs ten times your annual salary then you need to think a lot more carefully.
- chime 17y ago
  Like I said: > All I know is that for people who can afford to buy and afford to rent, money has very little to do with buying vs. renting. If I could afford to buy a $600k house and afford to rent a similar house in the same location, whether I buy or not would depend on my personal choice (which is to buy, not rent). If I can't afford to buy, then why even get into a debate. Of course I will rent.
tpz 17y ago
Agreed. re: "It always seems to me that the author is simply trying to justify the fact that they rent." - this always seems to be the case. The few renters who seem to do well financially would also do well financially as homeowners but for some reason have convinced themselves that the numbers work out better for renting. Maybe it does for those people, maybe it doesn't. I'll come back to that point in the next paragraph. In the meantime, however, the vast majority of renters one might speak to are just pissing away money, are no further in terms of savings than those with mortgages, and have none of the equity built up that those with mortgages have, even those who are pretty new to their mortgages. Now, back to whether or not those "smart" renters are any better off. First off, I'll readily admit that my single data point is just that, but it bears consideration nonetheless. I bought property in 2005. In a neighbourhood with some growth potential, in an overall market with generally upward movement. Nothing bullish, just generally upward movement. In fact, that movement had been slowing a bit at that point, and continued to slow somewhat more afterwards. We all know what happened next. I sold early this year. I wonder how many smart renters could have done this _well_, even given the shitty few years I happened to own before selling: I paid $500 more per month than what I would have paid to rent the same space (in other words, put me up against a smart renter with $500 to invest each month), for a total of $30,000 "invested" progressively over those five years. I sold for a net profit of $125,000 after all fees, commissions, etc. In a hesitant market still recovering from the nasty troubles we all know too well. Find me a renter with that kind of ROI on their investments over the last 5 years and I'll congratulate them over a nice lunch which I'll be happy to buy for them. (crickets) Yeah, I thought so.
- earl 17y ago
  The fact that you got lucky and timed the market doesn't mean other people should attempt to do the same, or that they will have any success doing so.
  - tpz 17y ago
    If I were lucky or if I had made any effort whatsoever to time the market, you might be right. On the other hand, I know of lots of data points like mine, even with the crapfest of the last couple of years. (Sensationalist news articles and statistics about idiots lending too much money to other idiots really shouldn't hold much water to the HN audience, if you think about it.) Regardless, find me that renter and I'll buy them a nice lunch. If I could have made $125,000 during those years then by their own arguments all of these "smart" renters should have been able to do the same through some alternate portfolio of their choice. As an aside, am I the only person to notice that every time a renter posts these kinds of articles they always talk about how down the road they'll have enough money to buy a mortgage-payer's home but they never actually bother to mention how their investments have been doing for them in the meantime? I suspect there's an obvious reason for the omission.
sage_joch 17y ago
I've been debating whether to buy for about a year now, and you make an excellent point. For me, it boils down to the choice between a sense of freedom and a sense of home.
- prawn 17y ago
  (Speaking from the Australian market, so there might be a few things that make the situation different for you.) If you want to make major improvements or tweak your home, then home ownership beats renting. If you don't plan to live somewhere for more than five years (and transactional costs in buying and selling are harsh, as in South Australia), then renting could be your best option. If you lack financial discipline, then buying can beat a combination of renting and investing in shares. Of course, you can always buy one place, rent it out and then rent another place yourself.

by chime 17y ago

timcederman 17y ago

I think renting does make more fiscal sense, but there are so many reasons to own your own place beyond finance.

Retric 17y ago

Renting vs. buying is a very personal decision and has a lot more to do with lifestyle and personal choices than financial soundness. Says someone that bought a home. I want to walk to work and there are no homes for sale in my area. So even if I make 500k / year home ownership would still bring significant negative for my lifestyle. When you consider commuting costs, home ownership is both risky and far more expensive for most young people.

hugh3 17y ago
Sounds like a peculiar area if it doesn't have any homes for sale. Still, there must be just as many areas which don't have any homes for rent, right?
- Retric 17y ago
  I said walking to work that's not exactly a huge area. Now 2 miles from me there are homes for sale, but driving that distance and parking in a parking garage is far more time consuming than walking. Taking a bike could also be an option.
  - hugh3 17y ago
    Really? I walk three miles to work most days. (No, it's not uphill both ways).
    - Retric 17y ago
      It's a lifestyle thing, I can walk home for lunch watch something on Hulu / DVR and then go back to work all within my lunch hour. It might not seem like it but there really is a difference between a 3 minute commute and a 15 minute one. PS: Walking 2+ miles in my area is slower than than driving that far and all I really care about is the time.

vl 17y ago

Well, you are talking about $145k, in Bay Area or in Seattle, for example, you can't buy any house at all for this price. Would you still buy this house if it would cost you 600k?

hugh3 17y ago
Exactly. It seems to me that the only people who really need to worry about the economics of renting vs buying are those for whom houses are very expensive; either because they live in an expensive area or because they have low incomes. If you can buy all the house you need for $150K and you're earning at least, say, $50K then by all means go ahead and buy a house for the lifestyle reasons. But if the house you need costs ten times your annual salary then you need to think a lot more carefully.
chime 17y ago
Like I said: > All I know is that for people who can afford to buy and afford to rent, money has very little to do with buying vs. renting. If I could afford to buy a $600k house and afford to rent a similar house in the same location, whether I buy or not would depend on my personal choice (which is to buy, not rent). If I can't afford to buy, then why even get into a debate. Of course I will rent.

tpz 17y ago

Agreed. re: "It always seems to me that the author is simply trying to justify the fact that they rent." - this always seems to be the case. The few renters who seem to do well financially would also do well financially as homeowners but for some reason have convinced themselves that the numbers work out better for renting. Maybe it does for those people, maybe it doesn't. I'll come back to that point in the next paragraph. In the meantime, however, the vast majority of renters one might speak to are just pissing away money, are no further in terms of savings than those with mortgages, and have none of the equity built up that those with mortgages have, even those who are pretty new to their mortgages. Now, back to whether or not those "smart" renters are any better off. First off, I'll readily admit that my single data point is just that, but it bears consideration nonetheless. I bought property in 2005. In a neighbourhood with some growth potential, in an overall market with generally upward movement. Nothing bullish, just generally upward movement. In fact, that movement had been slowing a bit at that point, and continued to slow somewhat more afterwards. We all know what happened next. I sold early this year. I wonder how many smart renters could have done this _well_, even given the shitty few years I happened to own before selling: I paid $500 more per month than what I would have paid to rent the same space (in other words, put me up against a smart renter with $500 to invest each month), for a total of $30,000 "invested" progressively over those five years. I sold for a net profit of $125,000 after all fees, commissions, etc. In a hesitant market still recovering from the nasty troubles we all know too well. Find me a renter with that kind of ROI on their investments over the last 5 years and I'll congratulate them over a nice lunch which I'll be happy to buy for them. (crickets) Yeah, I thought so.

earl 17y ago
The fact that you got lucky and timed the market doesn't mean other people should attempt to do the same, or that they will have any success doing so.
- tpz 17y ago
  If I were lucky or if I had made any effort whatsoever to time the market, you might be right. On the other hand, I know of lots of data points like mine, even with the crapfest of the last couple of years. (Sensationalist news articles and statistics about idiots lending too much money to other idiots really shouldn't hold much water to the HN audience, if you think about it.) Regardless, find me that renter and I'll buy them a nice lunch. If I could have made $125,000 during those years then by their own arguments all of these "smart" renters should have been able to do the same through some alternate portfolio of their choice. As an aside, am I the only person to notice that every time a renter posts these kinds of articles they always talk about how down the road they'll have enough money to buy a mortgage-payer's home but they never actually bother to mention how their investments have been doing for them in the meantime? I suspect there's an obvious reason for the omission.

sage_joch 17y ago

I've been debating whether to buy for about a year now, and you make an excellent point. For me, it boils down to the choice between a sense of freedom and a sense of home.

prawn 17y ago
(Speaking from the Australian market, so there might be a few things that make the situation different for you.) If you want to make major improvements or tweak your home, then home ownership beats renting. If you don't plan to live somewhere for more than five years (and transactional costs in buying and selling are harsh, as in South Australia), then renting could be your best option. If you lack financial discipline, then buying can beat a combination of renting and investing in shares. Of course, you can always buy one place, rent it out and then rent another place yourself.