6 ms·

This. I did the math when I rented an apartment in downtown Toronto and the rent was less than mortgage interest + condo fees + property tax + maintenance.

by aianus 10y ago

ec109685 10y ago
Except if the value of the real estate goes up.
- aianus 10y ago
  Ah but my equities-heavy roboadvisor portfolio has gone up way more than the landlord's apartment...
  - tehlike 10y ago
    is it so? Is that still the case when your landlord leverages 20/80?
- nostrademons 10y ago
  Usually when mortgage interest + etc. > rent, it indicates that the property is overvalued and the value (over the long term) is more likely to fall than rise. Every other buyer - or almost every other buyer, except the ones that need to launder money - is making the same economic calculation, and if the cost of money to buy the property is more expensive than the rent you can earn from the property, they're not going to buy the property.
prklmn 10y ago
So let's say you save 10¢ on every dollar by renting in your scenario. You'd have to have a hell of a return on that 10¢ you saved to beat the 90¢ you would have invested in the property but instead flushed down the drain in the form of rent....
- sanswork 10y ago
  You seem to think that 90c is going straight to equity when for many years it will be going straight to interest payments. So for the first 5-10 years your $1 is going down the drain vs the renters 10c going into investments.
  - prklmn 10y ago
    At any point over those 5-10 you can turn around and sell the property and collect the full gain - it's entirely irrelevant to the mortgage payments being dedicated to interest. My $1 gets my name on the title, your 90¢ gets your name on the lease. Think about what your net investment is. So maybe my maintainance/tax/interest costs equate to 50¢. I'm still investing 50¢ compared to your 10¢. Also, I get incredible leverage. Let'say my property costs $1 million. I'm controlling a $1 million investment vehicle with a $4k/month mortgage payment + tax/maintenance. That's incredible. My return on the property is driven from the $1 million basis, and I get to keep all of it despite not having much of an equity stake in the property.
    - sanswork 10y ago
      It sounds like nothing I will say will sway your beliefs so good luck with your investment.
    - tehlike 10y ago
      it's how long term wealth is built best. until the bubble pops up, like it did in 2008, but it comes back up so it's a rather temporary set back. Also, rents rarely come down, so most often the property value decline is temporary, or it is another opportunity to buy when things are in water - when there is blood in the streets, there is money to be made.
    - deleted 10y ago
      [deleted]
    - forgetsusername 10y ago
      >My return on the property is driven from the $1 million basis, and I get to keep all of it despite not having much of an equity stake in the property And if that property falls to $900,000? Now you owe $1 million on a home worth less; literally throwing away $100,000.
wiz21c 10y ago
But once you have completely bought your house/apartment, you have that warm comforting feeling that it's yours. Nobody will get you out to puts in his children, nobody will raise the rent because, you know, he has no choice, etc. But in the case of a house, you'll have to repair it as times goes by and that can be quite expensive. But the one who rents it to you would have to do it as well, so, buying a house just makes sure you don't pay the little profit margin of the landlord (just the one of the bank :))
- forgetsusername 10y ago
  >so, buying a house just makes sure you don't pay the little profit margin of the landlord Buying is not universally better than renting, period. There is no such thing as a free lunch; any profit received by owning the capital asset is compensation for the risk of holding that asset.
  - wiz21c 10y ago
    Yep you're right. I just wanted to explain that there is also a psychological argument at play. That warm comforting feeling...
    - aianus 10y ago
      I would feel like there was a noose around my neck if I couldn't move without paying $30k in realtors fees (and possibly incurring capital loss depending on timing).
- angry_octet 10y ago
  In Australia you are often treated poorly as a tenant. Rent increases every 6 months, 60 day eviction notice if the landlord wants to do anything (sell, paint the walls, let their cousin stay there, consider selling it...). You can't do any modifications or get longer than a 12 month lease. Also, there is a collective paranoia about missing out, of tumbling off the 'property ladder' and neither you or your children ever escaping wage slave poverty.

This. I did the math when I rented an apartment in downtown Toronto and the rent was less than mortgage interest + condo fees + property tax + maintenance.

by aianus 10y ago

This. I did the math when I rented an apartment in downtown Toronto and the rent was less than mortgage interest + condo fees + property tax + maintenance.

ec109685 10y ago

Except if the value of the real estate goes up.

aianus 10y ago
Ah but my equities-heavy roboadvisor portfolio has gone up way more than the landlord's apartment...
- tehlike 10y ago
  is it so? Is that still the case when your landlord leverages 20/80?
nostrademons 10y ago
Usually when mortgage interest + etc. > rent, it indicates that the property is overvalued and the value (over the long term) is more likely to fall than rise. Every other buyer - or almost every other buyer, except the ones that need to launder money - is making the same economic calculation, and if the cost of money to buy the property is more expensive than the rent you can earn from the property, they're not going to buy the property.

prklmn 10y ago

So let's say you save 10¢ on every dollar by renting in your scenario. You'd have to have a hell of a return on that 10¢ you saved to beat the 90¢ you would have invested in the property but instead flushed down the drain in the form of rent....

sanswork 10y ago
You seem to think that 90c is going straight to equity when for many years it will be going straight to interest payments. So for the first 5-10 years your $1 is going down the drain vs the renters 10c going into investments.
- prklmn 10y ago
  At any point over those 5-10 you can turn around and sell the property and collect the full gain - it's entirely irrelevant to the mortgage payments being dedicated to interest. My $1 gets my name on the title, your 90¢ gets your name on the lease. Think about what your net investment is. So maybe my maintainance/tax/interest costs equate to 50¢. I'm still investing 50¢ compared to your 10¢. Also, I get incredible leverage. Let'say my property costs $1 million. I'm controlling a $1 million investment vehicle with a $4k/month mortgage payment + tax/maintenance. That's incredible. My return on the property is driven from the $1 million basis, and I get to keep all of it despite not having much of an equity stake in the property.
  - sanswork 10y ago
    It sounds like nothing I will say will sway your beliefs so good luck with your investment.
  - tehlike 10y ago
    it's how long term wealth is built best. until the bubble pops up, like it did in 2008, but it comes back up so it's a rather temporary set back. Also, rents rarely come down, so most often the property value decline is temporary, or it is another opportunity to buy when things are in water - when there is blood in the streets, there is money to be made.
  - deleted 10y ago
    [deleted]
  - forgetsusername 10y ago
    >My return on the property is driven from the $1 million basis, and I get to keep all of it despite not having much of an equity stake in the property And if that property falls to $900,000? Now you owe $1 million on a home worth less; literally throwing away $100,000.

wiz21c 10y ago

But once you have completely bought your house/apartment, you have that warm comforting feeling that it's yours. Nobody will get you out to puts in his children, nobody will raise the rent because, you know, he has no choice, etc. But in the case of a house, you'll have to repair it as times goes by and that can be quite expensive. But the one who rents it to you would have to do it as well, so, buying a house just makes sure you don't pay the little profit margin of the landlord (just the one of the bank :))

forgetsusername 10y ago
>so, buying a house just makes sure you don't pay the little profit margin of the landlord Buying is not universally better than renting, period. There is no such thing as a free lunch; any profit received by owning the capital asset is compensation for the risk of holding that asset.
- wiz21c 10y ago
  Yep you're right. I just wanted to explain that there is also a psychological argument at play. That warm comforting feeling...
  - aianus 10y ago
    I would feel like there was a noose around my neck if I couldn't move without paying $30k in realtors fees (and possibly incurring capital loss depending on timing).
angry_octet 10y ago
In Australia you are often treated poorly as a tenant. Rent increases every 6 months, 60 day eviction notice if the landlord wants to do anything (sell, paint the walls, let their cousin stay there, consider selling it...). You can't do any modifications or get longer than a 12 month lease. Also, there is a collective paranoia about missing out, of tumbling off the 'property ladder' and neither you or your children ever escaping wage slave poverty.