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You also have to factor in the opportunity cost of what you could've done with that down payment (e.g. What would a $100k downpayment invested for 30 years in t
by sbenitoj 9y ago
You also have to factor in the opportunity cost of what you could've done with that down payment (e.g. What would a $100k downpayment invested for 30 years in the stock market be worth vs how much is that worth in your home in 30 years?)
The NYT has a buy vs rent calculator that helps make some of these decisions:
https://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html?_r=0 https://www.nytimes.com/interactive/2014/upshot/buy-rent-cal...
- rconti 9y agoAnd of course the NYTimes calculator also factors in home prices appreciation. This is not really academic; it's fairly important. In cheaper housing markets with limited growth, it might be cheaper to rent because the expected cost of a major repair (and return on that investment) are both so low. Of course, you can't ever recognize the value of your house unless you sell it and move somewhere cheaper (or buy a 2nd house and rent out the first one, but that's just another side of the same coin).
- shados 9y agoReverse mortgages are an option too, especially around retirement. I didn't do too much research and I'm sure on paper it's a scam, but with no kids and no one to really give the house to beyond charity when my wife and I kick the bucket, I am considering making my place part of my retirement plan. Or just sell it to pay rent for the rest of your life. Either way it's a pretty big boon.
- ianai 9y agoNot really. End of life care can drag on and is expensive. Even if you're really lucky and net $1 million from your house a single illness could wipe that out quickly. Retirement homes cost much more than comparable rent/mortgages.
- slg 9y agoThose things can be mitigated with some smart financial planning. You can take your lump sum and buy an annuity and use those annuity payments for health and long term care insurance. I would also add long term care insurance is doubly important for the grandparent commenter who doesn't have children who could help care or support them if something goes wrong.
- DesiLurker 9y agoAnnuities are mostly scams with so many knobs & levers that are designed to get unsavvy people on hook with weird mix of investment and insurance. best to keep them separate.
- tehlike 9y agoConsider moving to a cheaper country.
- mikeyouse 9y agoOld people have Medicare, they're almost completely insulated from healthcare costs.
- tunetine 9y agoSell it and rent. The bank won't even come close to the true value of the home for a reverse mortgage.
- shados 9y agoSelling it means I can't live in it anymore. Renting is the ideal option, but if I'm 85 years old, maintaining a rental property or dealing with property managers would be tricky at best. (My actual goal with my current property is to sell it once I'm having trouble going up the 3 flight of stairs leading to my unit and using the money to live in a much smaller place as people mentionned already)
- DesiLurker 9y agoIMO he meant sell the property and rent for Yourself. invest the proceeds.
- GFischer 9y agoThere's something called Bare Ownership sale that's popular among widows with no children here in Uruguay, that retain the right to use the property until death : bare-ownership is a right of virtual ownership. For example, the bare owner of a property has no right to occupy it or rent it out. On the other hand, when the usufruct holder dies, full ownership of the property is carried over to the bare owner without any liability for inheritance tax. He can then dispose of it (by sale, gift, bequest, etc.) as he wishes. The maximum duration of usufruct generally corresponds to the usufruct holder’s lifetime – in that case, it is called usufruit viager, or life usufruct. But it is possible to set a predefined term (10 years, for example), which is called temporary usufruct. http://www.french-riviera-property.com/en/news-detail/4301-the-benefits-of-splitting-ownership-into-usufruct-and-bare-ownership.cfm http://www.french-riviera-property.com/en/news-detail/4301-t... http://bareownership.com/wp-content/uploads/2012/02/Property-Wire-Confidential-March-11.-expert-view.pdf http://bareownership.com/wp-content/uploads/2012/02/Property...
- lathiat 9y agohttp://www.nytimes.com/1995/12/29/world/a-120-year-lease-on-life-outlasts-apartment-heir.html http://www.nytimes.com/1995/12/29/world/a-120-year-lease-on-... PARIS, Dec. 28— Andre-Francois Raffray thought he had a great deal 30 years ago: He would pay a 90-year-old woman 2,500 francs (about $500) a month until she died, then move into her grand apartment in a town Vincent van Gogh once roamed. But this Christmas, Mr. Raffray died at age 77, having laid out the equivalent of more than $184,000 for an apartment he never got to live in.
- woodpanel 9y agoTo be fair: What were the chances, that this 90-year old women would become the Guinness Book of Records entry for "oldest person on the planet"?
- ianai 9y agoI think this highlights how expensive living is and how little income is. If we're going to have a "free economy" without an end of life safety net (i.e. Social security) then it has to be possible to work a lifetime and retire on savings made. But most indicators show little to no saving for most people. It sure seems something is deeply wrong.
- njarboe 9y agoThere are most certainly many things deeply wrong. Most people have negative savings every year. They have more debt. If one has bought a house, then it is very easy to go into more debt every year, when house prices are rising. Then they fall. Since the beginning of written history (the first written records are records of debts) there are stories and parables about the evil of debt and the need for debt jubilees. Also the idea that lending with interest is immoral is found through out time. Having such easy access to debt/credit from strangers seems not to work well over the long term for human societies. I mean, is it a good thing that one can get a "Rocket Mortgage" where you can "Get Approved Fast. Get an approval to buy a home or refinance your mortgage in minutes."? [1] [1] https://rocket.quickenloans.com/ https://rocket.quickenloans.com/
- JumpCrisscross 9y ago> Since the beginning of written history (the first written records are records of debts) there are stories and parables about the evil of debt and the need for debt jubilees. Also the idea that lending with interest is immoral is found through out time. Having such easy access to debt/credit from strangers seems not to work well over the long term for human societies. I suppose shrimp and pork and beef are also unquestionably evil... Debt didn't historically work because property rights were poorly recorded. This meant enforcing one's debt involved mafia tactics. Modern debt is cleaner and subject to bankruptcy, a process that occurs on a case-by-case basis when it's needed, a far better solution than randomly cancelling debt every so many years.
- meric 9y agoWell, the trend is now removing bankruptcy on certain forms of debt as an option, replacing it with cancelling it after X years. This is student debt.
- deleted 9y ago[deleted]
- Retric 9y agoThe real opportunity cost is not living somewhere else. Run the math and SF is best avoided.
- surfmike 9y agoDepends of course. Despite the high cost, many live here because their salary is multiple times higher than they could get elsewhere.
- chaostheory 9y agoIt's not just the salary. It's also the opportunities to do things as in for the SF Bay Area we can go to wine country one weekend, go snow boarding another, sail, surf, hike; there's a lot of stuff to do here. I'm sure people can say the same for the NY metro and other similar places. I've lived in cheaper but boring places. The financial tradeoff is fair.
- seanp2k2 9y agoVs NYC there's also Tahoe, the ocean is surfable, there are beaches, it doesn't smell like trash everywhere, the climate is less extreme (less hot humid in the summer no snow), more access to fresh local produce more of the year, etc etc. It's not like rent in Manhattan is cheap, and you'd likely make less in NYC vs SF unless you work in finance.
- chaostheory 9y agoI probably should have been more specific. People like NYC for different reasons, like the nightlife / club scene where the SF Bay Area doesn't compare at all. There's also culture that you wouldn't find outside NYC like the fashion industry and even art. That said NYC isn't for me either but it is for a lot of people, which is why people endure finance to stay there. Since we're on the subject, LA is another comparable place but not similar place. My point is that you can't these qualities in the boonies and that's why it's expensive to live in these places.
- c22 9y agoEveryone I know in my age group with a house got help with their down payment from parents. Either in the form of low/no interest casual loans or just substantial gifts. It's possible this money wouldn't have been available to them for speculation in the stock market.
- CoryG89 9y agoSome of us don't have parents who have more money than we do.
- c22 9y agoNeither do all of my friends. All that's required is having parents that want to help you get a house. For instance my girlfriend makes twice the money her parents ever did. She still couldn't have afforded the full down payment on her house without a 4% loan from her mother as they were entering retirement. This arrangement ends up being beneficial to all parties.
- bryondowd 9y agoI wonder how common even that much help is. That would be completely unthinkable to anyone in my circle. I personally send about $400 per month on average to help my mother make ends meet. I'm certainly not going to be getting a several thousand dollar loan from anyone in my family. For reference, this is in southern New Jersey and I'm on the older end of the millennials.
- wbl 9y agoSpeculation or saving for retirement.
- Lillian656 9y agoMarcus answered I am inspired that anyone can earn $7391 in 4 weeks on the internet . http://www.bosscyber.com http://www.bosscyber.com
- 9y ago
- scottLobster 9y agoAnother factor would be the opportunity cost of moving. With an apartment you're free as soon as the lease is up. With a house, even if you get a job across the country the mortgage must be paid. The time investment alone in preparing a house for sale/selling it is nothing to scoff at.
- dlwdlw 9y agoThere's also leverage. Banks are willing to loan you a million dollars to buy a house but not for investing in the stock market. (Barring catastrophe, over 30 years, there are usually gains.)