8 ms·

> All else being equal, I would gladly earn $1 million per year and spend 75% of it on rent Ah, so you want to live in San Francisco

shados 8y ago
There IS a reason why rent in high cost areas are so, well, costly. If you go to NYC or SF and make 400k/year after tax, who cares if housing costs you 300k out of that. Especially if you're buying, in which case you can get part of your money back once you sell.
- pxeboot 8y ago
  And when the bubble pops, how long will you be able to make your 30k/month mortgage payments?
  - hshehehjdjdjd 8y ago
    You won’t, because you were smart and rented instead. :)
    - kevin_thibedeau 8y ago
      If you were smarter you'd have commuted in from the suburbs and banked the money for retirement.
      - ido 8y ago
        In SF the suburbs are called Silicon Valley and are also expensive.
        daveFNbuck 8y ago
        There are also suburbs across the bay that are cheaper.
        ben_w 8y ago
        Sufficiently expensive that when I consider Silicon Valley jobs in my future, I also consider getting a pilot license and commuting by plane from the central valley.
      - Swizec 8y ago
        That’s 2+ hours per day of your life that you’re never getting back. You can always make more money, but time lost is gone forever. How much is 2x5x52 = 520 hours worth to you? If you’re selling your time for even just $100/hour that’s $52,000/year right there. With a 300k salary your hour is worth way more than $100. For your family, it’s priceless.
        isostatic 8y ago
        300k a year post tax, 50 weeks a year, 50 hours a week, that's $120 an hour. If it takes an extra hour a day and $500 a month that's $3000 to save a month in housing costs
        Swizec 8y ago
        Don’t forget to take transportation cost out of your $3000 per month. I live across the street from the office and yes the rent is stupid, but my commute is a 5 minute walk. And rent is still stupid in a 30min radius (for a total of 1h/day). You really have to go 1h+ radius to make a significant dent in rent around here (SF).
        isostatic 8y ago
        I did - $500 a month. I have no idea what communitng costs, and little idea about rent. I have a 5 second commute from the bedroom to the office (3 minutes if I go downstairs and boil the kettle first), far easier. Monthly Mortgage is less than the weekly rent that one colleague pays in London, and he still has a 45 minute commute each way.
        kamaal 8y ago
        If you are working for somebody else, you can't exactly make any extra money by working extra hours. At least in a programmers case. The only real thing to gain in this case is convenience.
        jdavis703 8y ago
      - seattle_spring 8y ago
        Spending your day commuting and living in a car dependent hell hole is smarter, just because you can retire a bit sooner? What alternative universe has HN transformed into?
        kevin_thibedeau 8y ago
        For NYC it can be an easy 30-45 minute train ride where you are free to occupy your time with something productive.
        AstralStorm 8y ago
        Something productive that can be done in a car or train you mean. Not, say: - Being with your kids, spouse or helping them out to school or work - Housekeeping - Working out - Doing anything that requires undisturbed attention
        throwawaymath 8y ago
        To your last point: in NYC it's pretty easy to do things requiring "undisturbed attention" on a 45 minute express Metro North train into the city from the suburbs. It's a very different experience from the subway. As for the other three, I guess I could say that I'm not sure it's realistic to try and budget your time so efficiently that a 30-45 minute commute is intolerable. Many people have commutes for which that's a margin of error on how long it will take them - that sounds like a real problem. Aside from working from home full time, what kind of commute are you looking to have, and at what distance from work? It's not realistic for most people to achieve a 15 minute commute, so 30-45 in a train really isn't that bad. If it really matters then you could do things on the train that would normally keep you from your spouse or kids at home :)
        murph-almighty 8y ago
        I'm one of those 30-45 minute margin-of-error folks- I'd move into Hoboken or Brookyln for a 45 minute commute in two seconds!
      - shados 8y ago
        Maybe. Right now though, my 401k has been doing 15-18% for the last couple of years. My condo has been going up in value by about 13%/year, but I put 20% down and I think I'm at 30-35% equity, and my monthlies are cheaper than an equivalent rental. The rent + invest vs buy + bank on property value debate is age old, and I won't restart it here, but so far, I'm not doing terrible.
    - TeMPOraL 8y ago
      Woah, when did renting became the smart choice?
      - NegativeLatency 8y ago
        When it became the only choice
      - arcticbull 8y ago
        There's a great writeup on this -- I may have even seen it here [1]. On average house prices tend to keep up with inflation and trail the market across the US. In specific markets that may not be true, then there's all your expenses. Ultimately, it depends on your personal situation if you should buy or rent, and the New York Times has a great calculator [2]. tl;dr: It's not always the smart choice to buy. Or to rent. [1] https://affordanything.com/is-renting-better-than-buying-should-i-rent-or-buy/ https://affordanything.com/is-renting-better-than-buying-sho... [2] https://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html https://www.nytimes.com/interactive/2014/upshot/buy-rent-cal...
      - a008t 8y ago
        As a thought experiment, imagine that you could rent a million dollar house for 1$/year. Then renting is obviously the smart thing to do. So rental yields are an important factor, as are your expectations of house price growth, opportunity costs etc. But if rental yields are low (as they are now) and you do not expect house prices to rise at a fast rate in the future, renting can easily be the smart choice. Regarding future house price increases. It seems to me that house prices can be approximated as a function of rents, interest rates (determining required return on owning a house), and anticipated growth in house prices (which again can be decomposed into growth in rents, reduction in interest rates and 'irrational' growth). Using London as an example. Rental yields appear to be around 3.5% in London at the moment, which suggests to me that a good deal of anticipated growth is priced in. But where can that growth come from? Rents are a function of incomes and are unlikely to outpace inflation. Interest rates seem to be more likely to go up than down. So it seems that house prices are unlikely to rise, and once that is realized by the market, prices may even come down as participants stop anticipating growth just because "London house prices always go up". House prices going up faster than rents in recent decades can probably be explained by interest rates being in a downward trend over the same decades. Now we seem to be in at least somewhat of a bubble due to irrational future growth expectations.
    - mylons 8y ago
      haha, but what if it doesn't pop and we see something like Japan's economy from the early 90's on? High prices that never come down, combined with wage stagnation? We're kind of already seeing it now.
      - vkou 8y ago
        You can then move to a flyover state in the mid-west, and buy a palace for the $100,000/year you were stashing away.
        gnarbarian 8y ago
        This is the future. Silicon valley rent problems are a network optimization problem best solved by pushing resources to the edge of the graph.
        Clubber 8y ago
        Ya it has to be. We have so many square miles of underutilized cheap land between the costs it's crazy. The federal government owns around 60-90% of the land in the western states too. If only there was a way to communicate without being face to face.
        0x445442 8y ago
        Especially with the type of technical work that's so predominate on the west coast. A lot of that work could be moved to cheaper interior parts of the country.
        vkou 8y ago
        Yet for some reason tech giants insist on building more opulent, centralized megaoffices in unaffordable areas. Perhaps it is because they do not bear the brunt of these costs.
        nradov 8y ago
        One reason is that the executives who make the decisions on office locations can easily afford to live nearby. And most of them prefer to live in fashionable areas.
- wil421 8y ago
  Yea and the majority of people don’t make anywhere near 400k. You still need a huge low paid workforce to get things running. Firemen, police, teacher, retail and grocery workers, cleaners, bus drivers, plumbers and the like.
  - gm-conspiracy 8y ago
    I do not consider plumbers low-paid.
    - wil421 8y ago
      I would agree with you and I actually looked up some numbers. 56k was an average for an experienced plumber on his own. Not to mention they have to invest in tools.
  - mkirklions 8y ago
    None of those positions are low paid outside of teenage retail/grocery workers. Fire/police/teacher/plumbers are very well paid. Cleaning is hit and miss, specialty cleaning is borderline extortion. Still, I know that most cleaning people get paid min 15$/hr. At 15$/hr, 30k/yr is plenty to live.
    - mistrial9 8y ago
      please show specific details on your claim that teachers are well-paid
    - deleted 8y ago
      [deleted]
    - mitchdoogle 8y ago
      fire, police, teacher, and plumbers are all in the $40k - $60k range, at least in the US. I wouldn't call that well paid.
  - Hydraulix989 8y ago
    I remember an article showing up a while back about a unionized BART janitor raking in nearly 300k.
- eli_gottlieb 8y ago
  >There IS a reason why rent in high cost areas are so, well, costly. Yeah, it's the ratio of population to number of housing units.
  - harambaebae69 8y ago
    Exactly, I'm glad someone else realizes this. I live in Boston. It's the 4th most expensive city in the USA [0]. It's most decidedly not the 4th best city to live in the USA. The fact that enough NIMBY attitudes and construction unions have jacked up the cost of housing doesn't suddenly make it paradise. [0] https://www.investopedia.com/articles/personal-finance/080916/top-10-most-expensive-cities-us.asp https://www.investopedia.com/articles/personal-finance/08091...
    - eli_gottlieb 8y ago
      Wouldn't you know it! I live in Boston too. I think we're a good prototype case since, well, we're such a shithole in so many ways. Every year the Globe runs a story on Massachusetts losing its young and poor population to the Sun Belt, but if you bring up building more apartment buildings, people yell that you should Go Back Where You Come From.

shados 8y ago

There IS a reason why rent in high cost areas are so, well, costly. If you go to NYC or SF and make 400k/year after tax, who cares if housing costs you 300k out of that. Especially if you're buying, in which case you can get part of your money back once you sell.

pxeboot 8y ago
And when the bubble pops, how long will you be able to make your 30k/month mortgage payments?
- hshehehjdjdjd 8y ago
  You won’t, because you were smart and rented instead. :)
  - kevin_thibedeau 8y ago
    If you were smarter you'd have commuted in from the suburbs and banked the money for retirement.
    - ido 8y ago
      In SF the suburbs are called Silicon Valley and are also expensive.
      - daveFNbuck 8y ago
        There are also suburbs across the bay that are cheaper.
      - ben_w 8y ago
        Sufficiently expensive that when I consider Silicon Valley jobs in my future, I also consider getting a pilot license and commuting by plane from the central valley.
    - Swizec 8y ago
      That’s 2+ hours per day of your life that you’re never getting back. You can always make more money, but time lost is gone forever. How much is 2x5x52 = 520 hours worth to you? If you’re selling your time for even just $100/hour that’s $52,000/year right there. With a 300k salary your hour is worth way more than $100. For your family, it’s priceless.
      - isostatic 8y ago
        300k a year post tax, 50 weeks a year, 50 hours a week, that's $120 an hour. If it takes an extra hour a day and $500 a month that's $3000 to save a month in housing costs
        Swizec 8y ago
        Don’t forget to take transportation cost out of your $3000 per month. I live across the street from the office and yes the rent is stupid, but my commute is a 5 minute walk. And rent is still stupid in a 30min radius (for a total of 1h/day). You really have to go 1h+ radius to make a significant dent in rent around here (SF).
        isostatic 8y ago
        I did - $500 a month. I have no idea what communitng costs, and little idea about rent. I have a 5 second commute from the bedroom to the office (3 minutes if I go downstairs and boil the kettle first), far easier. Monthly Mortgage is less than the weekly rent that one colleague pays in London, and he still has a 45 minute commute each way.
        kamaal 8y ago
        If you are working for somebody else, you can't exactly make any extra money by working extra hours. At least in a programmers case. The only real thing to gain in this case is convenience.
        jdavis703 8y ago
    - seattle_spring 8y ago
      Spending your day commuting and living in a car dependent hell hole is smarter, just because you can retire a bit sooner? What alternative universe has HN transformed into?
      - kevin_thibedeau 8y ago
        For NYC it can be an easy 30-45 minute train ride where you are free to occupy your time with something productive.
        AstralStorm 8y ago
        Something productive that can be done in a car or train you mean. Not, say: - Being with your kids, spouse or helping them out to school or work - Housekeeping - Working out - Doing anything that requires undisturbed attention
        throwawaymath 8y ago
        To your last point: in NYC it's pretty easy to do things requiring "undisturbed attention" on a 45 minute express Metro North train into the city from the suburbs. It's a very different experience from the subway. As for the other three, I guess I could say that I'm not sure it's realistic to try and budget your time so efficiently that a 30-45 minute commute is intolerable. Many people have commutes for which that's a margin of error on how long it will take them - that sounds like a real problem. Aside from working from home full time, what kind of commute are you looking to have, and at what distance from work? It's not realistic for most people to achieve a 15 minute commute, so 30-45 in a train really isn't that bad. If it really matters then you could do things on the train that would normally keep you from your spouse or kids at home :)
        murph-almighty 8y ago
        I'm one of those 30-45 minute margin-of-error folks- I'd move into Hoboken or Brookyln for a 45 minute commute in two seconds!
    - shados 8y ago
      Maybe. Right now though, my 401k has been doing 15-18% for the last couple of years. My condo has been going up in value by about 13%/year, but I put 20% down and I think I'm at 30-35% equity, and my monthlies are cheaper than an equivalent rental. The rent + invest vs buy + bank on property value debate is age old, and I won't restart it here, but so far, I'm not doing terrible.
  - TeMPOraL 8y ago
    Woah, when did renting became the smart choice?
    - NegativeLatency 8y ago
      When it became the only choice
    - arcticbull 8y ago
      There's a great writeup on this -- I may have even seen it here [1]. On average house prices tend to keep up with inflation and trail the market across the US. In specific markets that may not be true, then there's all your expenses. Ultimately, it depends on your personal situation if you should buy or rent, and the New York Times has a great calculator [2]. tl;dr: It's not always the smart choice to buy. Or to rent. [1] https://affordanything.com/is-renting-better-than-buying-should-i-rent-or-buy/ https://affordanything.com/is-renting-better-than-buying-sho... [2] https://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html https://www.nytimes.com/interactive/2014/upshot/buy-rent-cal...
    - a008t 8y ago
      As a thought experiment, imagine that you could rent a million dollar house for 1$/year. Then renting is obviously the smart thing to do. So rental yields are an important factor, as are your expectations of house price growth, opportunity costs etc. But if rental yields are low (as they are now) and you do not expect house prices to rise at a fast rate in the future, renting can easily be the smart choice. Regarding future house price increases. It seems to me that house prices can be approximated as a function of rents, interest rates (determining required return on owning a house), and anticipated growth in house prices (which again can be decomposed into growth in rents, reduction in interest rates and 'irrational' growth). Using London as an example. Rental yields appear to be around 3.5% in London at the moment, which suggests to me that a good deal of anticipated growth is priced in. But where can that growth come from? Rents are a function of incomes and are unlikely to outpace inflation. Interest rates seem to be more likely to go up than down. So it seems that house prices are unlikely to rise, and once that is realized by the market, prices may even come down as participants stop anticipating growth just because "London house prices always go up". House prices going up faster than rents in recent decades can probably be explained by interest rates being in a downward trend over the same decades. Now we seem to be in at least somewhat of a bubble due to irrational future growth expectations.
  - mylons 8y ago
    haha, but what if it doesn't pop and we see something like Japan's economy from the early 90's on? High prices that never come down, combined with wage stagnation? We're kind of already seeing it now.
    - vkou 8y ago
      You can then move to a flyover state in the mid-west, and buy a palace for the $100,000/year you were stashing away.
      - gnarbarian 8y ago
        This is the future. Silicon valley rent problems are a network optimization problem best solved by pushing resources to the edge of the graph.
        Clubber 8y ago
        Ya it has to be. We have so many square miles of underutilized cheap land between the costs it's crazy. The federal government owns around 60-90% of the land in the western states too. If only there was a way to communicate without being face to face.
        0x445442 8y ago
        Especially with the type of technical work that's so predominate on the west coast. A lot of that work could be moved to cheaper interior parts of the country.
        vkou 8y ago
        Yet for some reason tech giants insist on building more opulent, centralized megaoffices in unaffordable areas. Perhaps it is because they do not bear the brunt of these costs.
        nradov 8y ago
        One reason is that the executives who make the decisions on office locations can easily afford to live nearby. And most of them prefer to live in fashionable areas.
wil421 8y ago
Yea and the majority of people don’t make anywhere near 400k. You still need a huge low paid workforce to get things running. Firemen, police, teacher, retail and grocery workers, cleaners, bus drivers, plumbers and the like.
- gm-conspiracy 8y ago
  I do not consider plumbers low-paid.
  - wil421 8y ago
    I would agree with you and I actually looked up some numbers. 56k was an average for an experienced plumber on his own. Not to mention they have to invest in tools.
- mkirklions 8y ago
  None of those positions are low paid outside of teenage retail/grocery workers. Fire/police/teacher/plumbers are very well paid. Cleaning is hit and miss, specialty cleaning is borderline extortion. Still, I know that most cleaning people get paid min 15$/hr. At 15$/hr, 30k/yr is plenty to live.
  - mistrial9 8y ago
    please show specific details on your claim that teachers are well-paid
  - deleted 8y ago
    [deleted]
  - mitchdoogle 8y ago
    fire, police, teacher, and plumbers are all in the $40k - $60k range, at least in the US. I wouldn't call that well paid.
- Hydraulix989 8y ago
  I remember an article showing up a while back about a unionized BART janitor raking in nearly 300k.
eli_gottlieb 8y ago
>There IS a reason why rent in high cost areas are so, well, costly. Yeah, it's the ratio of population to number of housing units.
- harambaebae69 8y ago
  Exactly, I'm glad someone else realizes this. I live in Boston. It's the 4th most expensive city in the USA [0]. It's most decidedly not the 4th best city to live in the USA. The fact that enough NIMBY attitudes and construction unions have jacked up the cost of housing doesn't suddenly make it paradise. [0] https://www.investopedia.com/articles/personal-finance/080916/top-10-most-expensive-cities-us.asp https://www.investopedia.com/articles/personal-finance/08091...
  - eli_gottlieb 8y ago
    Wouldn't you know it! I live in Boston too. I think we're a good prototype case since, well, we're such a shithole in so many ways. Every year the Globe runs a story on Massachusetts losing its young and poor population to the Sun Belt, but if you bring up building more apartment buildings, people yell that you should Go Back Where You Come From.