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Simple, you don't buy a house. At least, not unless you can afford to pay cash. For most people, buying a house on a mortgage is financial suicide. It only make
by thescriptkiddie 9y ago
Simple, you don't buy a house. At least, not unless you can afford to pay cash. For most people, buying a house on a mortgage is financial suicide. It only makes sense to buy a house on a mortgage if the price-to-rent ratio is under 25. Anything over that and you could rent the same house and invest the money you save and come out ahead. The price-to-rent ratio in San Francisco is 45.88, meaning that a house that rents for $1000/month costs $550,560 to buy. Your monthly payment on a $550,560 mortgage would be $2,603. Conservatively investing $1603/month in an index fund for 30 years would yield $1,122,003 after inflation.
https://smartasset.com/mortgage/price-to-rent-ratio-in-us-cities https://smartasset.com/mortgage/price-to-rent-ratio-in-us-ci...
- vonmoltke 9y agoSomething seems way off on those SmartAsset numbers. There is no way you are renting a $600k place in Manhattan or a $195k place in Dallas for only $1000/month. Ante for renting a standalone place in Manhattan right now is around $2500/month, but I can buy places for as little as $500k (if I don't care about space). Some condos in Manhattan don't even allow rentals. We just sold our house in Dallas for $220k, and I guarantee we would have been renting it out for a hell of a lot more than $1100/month if it came to that.
- thescriptkiddie 9y agoI believe that their number is an mean of all properties weighted equally. So if you're only looking at single-family homes you could be paying much more, and if you're only looking at apartments you could be paying a lot less. They're also not considering factors like brokerage fees, property taxes, insurance, maintenance, or depreciation.