8 ms·

What all professionals do, and what all potential home buyers should do, is run the actual numbers of expenses that is purely property taxes, interest, fees, ex

What all professionals do, and what all potential home buyers should do, is run the actual numbers of expenses that is purely property taxes, interest, fees, expected maintenance, bills such as heating and electricity, and other related expenses not specifically reducing the amount of debt. That is the price of living in the house - compare that to renting a place. The difference between owning and renting expenses, is what you should compare to the risk/reward analysis of the property value.

chatmasta 9y ago
But with renting there is no reward. EDIT: In addition to mobility cited by a reply to this comment, another advantage is the saved opportunity cost of investment in real estate vs other markets.
- scarface74 9y ago
  There is mobility.
  - k__ 9y ago
    Also, rents go up all the time, especially while moving into a new flat. If you rent a flat for 20-40 years, the rent won't change as much as when you move around every few years. So you might end up with super low rent compared to the rest of the city after 10 years or so.
    - scarface74 9y ago
      Rent control is only a thing in a few areas of the country. In most of the country, rent can increase at the end of a lease as much as the market will handle.
      - k__ 9y ago
        Ah okay. I'm from Germany, where we have rent control everywhere. But I also know a guy from NY who rented a flat for a few hundred bucks decades ago and now subrents it to other people for thousands.
        code4tee 9y ago
        What he is doing is probably illegal then (if he’s rent controlled). You can’t profit like that.
        bogomipz 9y ago
        If its NYC it is indeed illegal and without a doubt unethical. You are only allowed to pass rent-controlled apartments to family members and those family members must liver there two years prior to transitioning the lease to them.
        conanbatt 9y ago
        Gotta say I always found this incredible. Rent control is so stupid that even it has to put rules on not being used. Who is being harmed by a rent-controllee sub-leasing? Literally no one. Because the harm to the owner is already made in the form of rent control.
        kcanini 9y ago
        > Who is being harmed by a rent-controllee sub-leasing? Literally no one. The owner is harmed, because otherwise they could have gotten a new tenant and raised the rent back up to market rate.
        conanbatt 9y ago
        Only if the tenant leaved. If leaving loses the rent-control, the tenant will stay. The price is well below market rate, then they wouldnt even get roomates, harming the entire rental market on both ends: by removing profits from the owner and decreasing supply. If rent-control didn't have the restriction, then it wouldnt make a dent into rent prices, but it would clearly show that it is a mere transfer from the owner to the rent-controllee.
- hvidgaard 9y ago
  That is true, but that is covered in the very last sentence. Renting is significantly less volatile, assuming the contract is reasonable for both sides. Buying a house is a risk/reward analysis of the value compared to the price difference, positive or negative, to renting. That is not to say this is the only thing to consider. Often people know where they want to live and what size of property/house they need, and for many people that is only achievable by buying.
- jayess 9y ago
  Having been burned badly in the real estate meltdown, there is a lot more freedom in renting than buying. I'm just now getting slightly inclined to consider buying again, but it would have to be a whopping deal. I've enjoyed renting since at least 2010. I especially like the ability to call the landlord and tell them that the sink is leaking and they need to get it fixed. Or the water heater stopped working, come out and fix it... Nothing out of pocket for me.
  - scarface74 9y ago
    When it comes to making a trade off for convenience vs. cost, I usually choose cost within reason and I also got burned by the real estate meltdown. I was in no hurry to buy. But the rent where we were staying went from $1300 to $1800 within 3 years for a 3 bedroom, 1650 square foot apartment. We were able to buy a house, a brand new build 3000 square feet 5 bed/3.5 bath for $2000/month with only 3.5% down in a neighborhood zoned to top rated schools. As far as convenience, we pay a lawn service $140/month to cut our grass and now that the home warranty is up (paid for by the builder), we pay about $700/year for a "home warranty" when anything breaks you just call them and pay a deductible. Is The warranty a good deal financially? Probably not, but it is convenient.
    - jronsomers 9y ago
      That is awesome and you are able to buy a house like that, especially a brand new build (to your liking). However, I want to mention it seems you are in the right place at the right time. Your case is an outlier in my opinion and I'm happy you are taking advantage of it. Especially considering that it is in a great school zone. I just felt that this isn't normal, even for the Midwest (which is where i can only imagine you are). That is a neat 'home warranty' thing you have though. I've never seen that before. Whenever I own a home, that sounds enticing to have.
      - scarface74 9y ago
        As far as being an outlier, it's not that our case is just an outlier, so is our house. We had to move further out into the suburbs to get that price. It's not a bad commute. I'm not endorsing this particular provider. It's just the first one that comes up when you Google "Home Warranty" https://www.ahs.com/home-warranty/ https://www.ahs.com/home-warranty/ Average price is around $850. https://www.homeadvisor.com/cost/inspectors-and-appraisers/purchase-a-home-warranty/ https://www.homeadvisor.com/cost/inspectors-and-appraisers/p... When I was a landlord and owned three rental properties they were worth every penny. Let me emphasize that buying one is statistically not a good deal and it usually makes more sense just to "self insure" and save for repairs. But it is more of a convenience thing.
- notyourday 9y ago
  Except, say, you want to stay in NYC. Rent are ridiculous and continue not only to be ridiculous but become more and more ridiculous and unless you just happened to be in a rent controlled apartment, you are at a mercy of your landlord. You may as well do 7/1 ARM or 7 year IOM and treat it as rent.
- chaosbutters314 9y ago
  I get to live closely with a bunch of cool people and not isolated in some house in a suburb. I think renting has a nice social benefit. Plus, the mobility aspect to just pick up and leave gives me a ton of reassurance. There is also the bonus that someone else has to fix the appliances and do maintanance than me.
  - verylittlemeat 9y ago
    I think your point often gets missed in these conversations about rent vs buy. You have two choices that masquerade as purely economic ones while ignoring the enormous lifestyle differences. I rent a tiny room in the heart of NYC for the cost of probably a monthly mortgage payment on a nice house in upstate NY. For me there is really no alternative because my entire life revolves around my immediate walkable neighborhood. The economics of rent vs buy matter but lifestyle and future expectations are too often downplayed in comparison.
  - OtterCoder 9y ago
    That's exactly why, as a family man, I hate renting. You end up changing neighborhoods every few years, and none of your friends are permanent.
VLM 9y ago
Expected maintenance, LOL. Just saying as an older guy if you're not factoring in HVAC replacements, roof replacements, driveway replacements, appliance replacements, even the expenses of major yard work, you will miss thousands per year on average. I'll see these estimates online where people laughably expect to spend less than $1K/yr on home maint, LOL I spend that much on the roof averaged by year, and I spent more than that on one clothes washer this month, and the average appliance is now carefully value engineered not to last more than a couple years. Try like $1K/month on average as an absolute minimum not the online typical $1K/yr which wouldn't even maintain the level of a crackhouse. Also do not forget time. I only have 168 hours per week minus zillions of things, to enjoy life, and after all the subtractions often there isn't that much time left to enjoy. Yes if I need to replace the tiles in my bathroom I can save a little money doing it myself but even contracting out will be hours of work to design, decide, and coordinate, and who stays home to let the craftsmen into the house and its just a circus. When I rented a bachelor pad, ALL repair work consisted of verbally mentioning it to on site manager and magically things happened, I paid more rent than average for that privilege compared to people who have to sue their landlords for any little thing, but there is no escape from spending lots of time as a building superintendent if you own a house. Buying a house is getting a part time job as a landlord. Its not like the kitchen faucet magically knows its in a owned house so it'll never fail, vs a rental. I mean, we have to realize the groupthink on HN is that cooking food for yourself is an intolerable waste of time compared to spending two hours in restaurants daily, so owning a house and having to dump many hours into the uncountable sufferings of home ownership must be completely unacceptable; rent a nice place and "invest" about five minutes a month into telling the manager what he needs to do. The second to last measure is many lifestyles require real estate. Not everyone wants to live life with no capital goods other than a mobile phone. I'd be pretty unsatisfied with life without my table saw and lathe and garden and ham radio antennas and a couple other things that simply require land to be realistically practical, aka go buy a house and do your hobbies in it. For all practical purposes in the market I live in you can not have a dog while renting, for example. A final measure not often mentioned is its just a fun experience to try; Its amusing to reread some of the complaints about home ownership rewritten to apply to having friends, or buying a pet, or having children, or traveling, or getting drunk. I didn't have kids because of an enormous amount of handwaving about how I'll be wealthy if they become child movie stars or historically kids in an agricultural setting were a net financial positive which should mean something in suburban 2010s or some equally ridiculous argument. Owning a house is a VERY expensive hobby, but if you have fun and can afford it and its not hurting anyone else, may as well try it...

chatmasta 9y ago

But with renting there is no reward. EDIT: In addition to mobility cited by a reply to this comment, another advantage is the saved opportunity cost of investment in real estate vs other markets.

scarface74 9y ago
There is mobility.
- k__ 9y ago
  Also, rents go up all the time, especially while moving into a new flat. If you rent a flat for 20-40 years, the rent won't change as much as when you move around every few years. So you might end up with super low rent compared to the rest of the city after 10 years or so.
  - scarface74 9y ago
    Rent control is only a thing in a few areas of the country. In most of the country, rent can increase at the end of a lease as much as the market will handle.
    - k__ 9y ago
      Ah okay. I'm from Germany, where we have rent control everywhere. But I also know a guy from NY who rented a flat for a few hundred bucks decades ago and now subrents it to other people for thousands.
      - code4tee 9y ago
        What he is doing is probably illegal then (if he’s rent controlled). You can’t profit like that.
        bogomipz 9y ago
        If its NYC it is indeed illegal and without a doubt unethical. You are only allowed to pass rent-controlled apartments to family members and those family members must liver there two years prior to transitioning the lease to them.
        conanbatt 9y ago
        Gotta say I always found this incredible. Rent control is so stupid that even it has to put rules on not being used. Who is being harmed by a rent-controllee sub-leasing? Literally no one. Because the harm to the owner is already made in the form of rent control.
        kcanini 9y ago
        > Who is being harmed by a rent-controllee sub-leasing? Literally no one. The owner is harmed, because otherwise they could have gotten a new tenant and raised the rent back up to market rate.
        conanbatt 9y ago
        Only if the tenant leaved. If leaving loses the rent-control, the tenant will stay. The price is well below market rate, then they wouldnt even get roomates, harming the entire rental market on both ends: by removing profits from the owner and decreasing supply. If rent-control didn't have the restriction, then it wouldnt make a dent into rent prices, but it would clearly show that it is a mere transfer from the owner to the rent-controllee.
hvidgaard 9y ago
That is true, but that is covered in the very last sentence. Renting is significantly less volatile, assuming the contract is reasonable for both sides. Buying a house is a risk/reward analysis of the value compared to the price difference, positive or negative, to renting. That is not to say this is the only thing to consider. Often people know where they want to live and what size of property/house they need, and for many people that is only achievable by buying.
jayess 9y ago
Having been burned badly in the real estate meltdown, there is a lot more freedom in renting than buying. I'm just now getting slightly inclined to consider buying again, but it would have to be a whopping deal. I've enjoyed renting since at least 2010. I especially like the ability to call the landlord and tell them that the sink is leaking and they need to get it fixed. Or the water heater stopped working, come out and fix it... Nothing out of pocket for me.
- scarface74 9y ago
  When it comes to making a trade off for convenience vs. cost, I usually choose cost within reason and I also got burned by the real estate meltdown. I was in no hurry to buy. But the rent where we were staying went from $1300 to $1800 within 3 years for a 3 bedroom, 1650 square foot apartment. We were able to buy a house, a brand new build 3000 square feet 5 bed/3.5 bath for $2000/month with only 3.5% down in a neighborhood zoned to top rated schools. As far as convenience, we pay a lawn service $140/month to cut our grass and now that the home warranty is up (paid for by the builder), we pay about $700/year for a "home warranty" when anything breaks you just call them and pay a deductible. Is The warranty a good deal financially? Probably not, but it is convenient.
  - jronsomers 9y ago
    That is awesome and you are able to buy a house like that, especially a brand new build (to your liking). However, I want to mention it seems you are in the right place at the right time. Your case is an outlier in my opinion and I'm happy you are taking advantage of it. Especially considering that it is in a great school zone. I just felt that this isn't normal, even for the Midwest (which is where i can only imagine you are). That is a neat 'home warranty' thing you have though. I've never seen that before. Whenever I own a home, that sounds enticing to have.
    - scarface74 9y ago
      As far as being an outlier, it's not that our case is just an outlier, so is our house. We had to move further out into the suburbs to get that price. It's not a bad commute. I'm not endorsing this particular provider. It's just the first one that comes up when you Google "Home Warranty" https://www.ahs.com/home-warranty/ https://www.ahs.com/home-warranty/ Average price is around $850. https://www.homeadvisor.com/cost/inspectors-and-appraisers/purchase-a-home-warranty/ https://www.homeadvisor.com/cost/inspectors-and-appraisers/p... When I was a landlord and owned three rental properties they were worth every penny. Let me emphasize that buying one is statistically not a good deal and it usually makes more sense just to "self insure" and save for repairs. But it is more of a convenience thing.
notyourday 9y ago
Except, say, you want to stay in NYC. Rent are ridiculous and continue not only to be ridiculous but become more and more ridiculous and unless you just happened to be in a rent controlled apartment, you are at a mercy of your landlord. You may as well do 7/1 ARM or 7 year IOM and treat it as rent.
chaosbutters314 9y ago
I get to live closely with a bunch of cool people and not isolated in some house in a suburb. I think renting has a nice social benefit. Plus, the mobility aspect to just pick up and leave gives me a ton of reassurance. There is also the bonus that someone else has to fix the appliances and do maintanance than me.
- verylittlemeat 9y ago
  I think your point often gets missed in these conversations about rent vs buy. You have two choices that masquerade as purely economic ones while ignoring the enormous lifestyle differences. I rent a tiny room in the heart of NYC for the cost of probably a monthly mortgage payment on a nice house in upstate NY. For me there is really no alternative because my entire life revolves around my immediate walkable neighborhood. The economics of rent vs buy matter but lifestyle and future expectations are too often downplayed in comparison.
- OtterCoder 9y ago
  That's exactly why, as a family man, I hate renting. You end up changing neighborhoods every few years, and none of your friends are permanent.

VLM 9y ago

Expected maintenance, LOL. Just saying as an older guy if you're not factoring in HVAC replacements, roof replacements, driveway replacements, appliance replacements, even the expenses of major yard work, you will miss thousands per year on average. I'll see these estimates online where people laughably expect to spend less than $1K/yr on home maint, LOL I spend that much on the roof averaged by year, and I spent more than that on one clothes washer this month, and the average appliance is now carefully value engineered not to last more than a couple years. Try like $1K/month on average as an absolute minimum not the online typical $1K/yr which wouldn't even maintain the level of a crackhouse. Also do not forget time. I only have 168 hours per week minus zillions of things, to enjoy life, and after all the subtractions often there isn't that much time left to enjoy. Yes if I need to replace the tiles in my bathroom I can save a little money doing it myself but even contracting out will be hours of work to design, decide, and coordinate, and who stays home to let the craftsmen into the house and its just a circus. When I rented a bachelor pad, ALL repair work consisted of verbally mentioning it to on site manager and magically things happened, I paid more rent than average for that privilege compared to people who have to sue their landlords for any little thing, but there is no escape from spending lots of time as a building superintendent if you own a house. Buying a house is getting a part time job as a landlord. Its not like the kitchen faucet magically knows its in a owned house so it'll never fail, vs a rental. I mean, we have to realize the groupthink on HN is that cooking food for yourself is an intolerable waste of time compared to spending two hours in restaurants daily, so owning a house and having to dump many hours into the uncountable sufferings of home ownership must be completely unacceptable; rent a nice place and "invest" about five minutes a month into telling the manager what he needs to do. The second to last measure is many lifestyles require real estate. Not everyone wants to live life with no capital goods other than a mobile phone. I'd be pretty unsatisfied with life without my table saw and lathe and garden and ham radio antennas and a couple other things that simply require land to be realistically practical, aka go buy a house and do your hobbies in it. For all practical purposes in the market I live in you can not have a dog while renting, for example. A final measure not often mentioned is its just a fun experience to try; Its amusing to reread some of the complaints about home ownership rewritten to apply to having friends, or buying a pet, or having children, or traveling, or getting drunk. I didn't have kids because of an enormous amount of handwaving about how I'll be wealthy if they become child movie stars or historically kids in an agricultural setting were a net financial positive which should mean something in suburban 2010s or some equally ridiculous argument. Owning a house is a VERY expensive hobby, but if you have fun and can afford it and its not hurting anyone else, may as well try it...