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The largest monthly expense for anyone making $60,000 a year is most likely going to be rent, unless you are living in a car or a tent and showering at the gym

The largest monthly expense for anyone making $60,000 a year is most likely going to be rent, unless you are living in a car or a tent and showering at the gym like I was. For that reason, $60,000 could either be a ton of money ($4,000 a month in post tax wealth accumulation is really good), or very little at all. There are still some Europeans and plenty of Asians and Africans making less than $250 a month. If you are spending all of your income, you aren't terribly different from them in the end.

ianai 8y ago
It blows my mind how expensive real estate is. Rent shouldn’t be anywhere near the cost of a mortgage and yet it is, and it always goes up almost completely without recourse.
- anoncoward111 8y ago
  There are countless millions of people who are qualified and even have the capital required to finance/build a basic, durable shelter that is nice enough to have guests spend the night in. The materials, when purchased from Home Depot, would cost $20,000 and require maybe $7,000 worth of labor to construct. When you consider that most suburban land about 1hr outside city by car can go for even just $20,000, it seems pretty ludicrous to pay $400,000 for something that can be had for $50,000. The ONE thing stopping this from being a reality is the town government/mortgage lender junta. They've basically made it illegal in most metropolitan areas to purchase anything other than a big, rotting house.
  - gizmo686 8y ago
    >When you consider that most suburban land about 1hr outside city by car can go for even just $20,000 Isn't this the point. Most people don't want to live 1hr away, so are forced into more expensive land.
    - anoncoward111 8y ago
      1hr is "close" by NY standards now.
      - perl4ever 8y ago
        1 hour is 50 miles in my part of NY.
        scarejunba 8y ago
        It's 7 miles from the Outer Sunset to the Embarcadero in SF.
        mmt 8y ago
        This corresponds, IIUC, to a 45-minute minimum ride on public transit, not counting waiting and walking times. I'm not sure if driving is any faster, but maybe not, when parking and walking (if in-building parking is unavailable or prohibitively expensive). That means it could still be a full hour away. That intra-SF travel by transit motor vehicle could be slower than coming from outside the city could be a quirk specific to SF, something I mentioned in another thread [1]. [1] https://news.ycombinator.com/item?id=17839636 https://news.ycombinator.com/item?id=17839636
  - ianai 8y ago
    And those rentals are largely rotting as well. I’ve got a sheet metal “patio” with sheet metal stair cases. I have to climb up and downstairs regardless of whether I’m coming or going. Oh and I signed off on asbestos and lead paint in the agreement. So glad the free market regulates itself so well.
    - wmil 8y ago
      > So glad the free market regulates itself so well. It's nimby rules passed by the municipal government causing the problem. The free market would be a huge step up. Whatever other problems it has, it's good a building new stuff.
  - tejohnso 8y ago
    I think your estimate is too low [1], but I share the sentiment. I'd love to see suburbs with fewer mcmansions and more reasonable housing. 700sqft with a small accessory unit on a quarter acre lot would be a huge step up for many families and should be considerably cheaper than the typical over-sized homes we see all over the place. There aren't enough options. [1] For a durable shelter nice enough for guests...assuming this means an actual house, modestly outfitted... There's site prep, foundation materials and labor, plumbing/elec work, hookup fees, development fees, permit fees, lawyer, real estate fees, appliances, furnishings, all in addition to the actual structure and land materials and labor cost.
    - paulddraper 8y ago
      > 700sqft with a small accessory unit on a quarter acre lot Most people think that houses are expensive. They are, but in developed areas the land itself plays are large role. (That's why the top three important factors in real estate are location, location, and location. It's not that much more expensive to build a structure in San Francisco than Bakersville.) So it's unlikely that in most suburban areas it will make economic sense to build a only 700 sq ft house on a entire quarter acre. At that point, a duplex/quadplex makes far more market sense. And a duplex/quadplex is cheaper to build per resident.
  - hellisothers 8y ago
    $27,000 / 270sqft is $100 per sqft for “new construction” which is really low and 270sqft is really tiny, bit too tiny to have guests stay over. I agree $400,000 is too much but there are plenty of sub $100,000 properties in the Midwest suburbs (I’ve looked). And no, you shouldn’t be allowed to just buy a 400sqft patch of land to build a shed for yourself in the suburbs :)
- tryptophan 8y ago
  Blame the government for empowering rent-seeking(in the economic sense) homeowners. Countless deductions for homes pushing the prices up, countless subsidies, countless regulations dealing with zoning to prevent expanding supply. America's obsession with single family homes is doing incalculable amounts of damage. It prevents people from moving to better opportunity and sucks up wage gains.
  - ianai 8y ago
    Throw in a lack of infrastructure to make living and working in the rural areas comparable to the city.
- spacehome 8y ago
  That doesn't make any sense. For like-properties, rent has to cover maintenance and vacancy and compensate the landlord for the risk they're putting their capital at. On the other hand, at the end of the mortgage period, the landlord does own the property outright, so some landlords may come out ahead even if rent is less than the mortgage for a time, but you can't count on that.
- dec0dedab0de 8y ago
  Rent shouldn’t be anywhere near the cost of a mortgage If that were true then the landlord wouldnt be able to pay the mortgage. I think rent is mortgage + taxes + insurance + potential repairs + profit
  - derekp7 8y ago
    I feel it should include mortgage interest, excluding principal. The principal is going straight to the landlord's net assets, which should one day return a profit on it's own.
    - cirgue 8y ago
      That's not how prices work. The landlord is absorbing a huge liability by owning the home in the first place. You're a renter, your risk exposure is 0. That's why rent will almost always be higher than a mortgage.
      - ianai 8y ago
        I’m not at all talking about renting a home vs owning a home. That’s going to be a significantly minor portion of a rental market. The nearest comparison is like sqft for like sqft apartment vs condo/townhome. That gets you closest to ceteris paribus without the actual total market data.
    - ianai 8y ago
      I did some calculating on a local market at various points. Basically, it seems to me the sweet spot is around 50k/rental for a building in the 100s of units. So your marginal, per unit mortgage should be around 50k or 500/mo (10 year mortgage) plus overhead. I know it’s possible to run such a complex with around 5-10 staff of various functions (possibly less). Those same units wind up being rented for over 1k/month - as that’s the trade off point for a similarly equipped condo. That’s a market operating inefficiently.
    - ars 8y ago
      > I feel it should include mortgage interest, excluding principal. It does. When you start a mortgage, interest is around 90% of the payment. So by definition mortgage is virtually all interest. True, later the amount of interest goes down, but that's just a detail - the amount of money tied up in the house is what matters, not the accounting in your bank.
- loco5niner 8y ago
  > Rent shouldn’t be anywhere near the cost of a mortgage Rent (for the same property) should be MORE than the cost of a mortgage (for the same property). The owner is taking on both risk and maintenance costs. Now, if you're saying "monthly rent on a 2 bedroom apartment should be cheaper than a monthly mortgage payment on a 5 bedroom house", that's different...
bradleyjg 8y ago
> The largest monthly expense for anyone making $60,000 a year is most likely going to be rent, unless you are living in a car or a tent and showering at the gym like I was. Even the most expensive markets there are a huge range of options. Today in NYC you'd be hard pressed to find your own private place for $1000/month. That wasn't true as recently as 5-6 years ago, but it is now. On the other hand you can find a very decent place for $1500/month. You won't be in Manhattan or the cool parts of Brooklyn, but you will be safe and comfortable. $1500/month is still only 30% of gross on $60,000/year which leaves plenty of disposable income even in high tax NYC. Maybe SF is worse, but if so that's the only place in the whole rest of the country that's worse. The issue becomes when you "need" more bedrooms. Or insist on certain neighborhoods.
- anoncoward111 8y ago
  I'll take your analogy a step further. You can have a room in my apartment 1hr east of Penn Station for $650 if I can trust you. $650 is about a week's pay for me, so I make less than $60,000 for sure. But food and transport are things, and so is the occasional medical care or movie. I live pretty frugally and can typically save $1,000 per month. But in this area, inflation and rising cost of living will virtually guarantee it's a meaningless amount 30 years from now.
gammateam 8y ago
my favorite part about finance and wealth accumulation is that the most sophisticated thing an enlightened person in the general public is going to say is something about relative standard of living and maybe inflation. so it reaffirms an actual holistic challenge to the financial ecosystem is a long ways off and basically never going to happen.

ianai 8y ago

It blows my mind how expensive real estate is. Rent shouldn’t be anywhere near the cost of a mortgage and yet it is, and it always goes up almost completely without recourse.

anoncoward111 8y ago
There are countless millions of people who are qualified and even have the capital required to finance/build a basic, durable shelter that is nice enough to have guests spend the night in. The materials, when purchased from Home Depot, would cost $20,000 and require maybe $7,000 worth of labor to construct. When you consider that most suburban land about 1hr outside city by car can go for even just $20,000, it seems pretty ludicrous to pay $400,000 for something that can be had for $50,000. The ONE thing stopping this from being a reality is the town government/mortgage lender junta. They've basically made it illegal in most metropolitan areas to purchase anything other than a big, rotting house.
- gizmo686 8y ago
  >When you consider that most suburban land about 1hr outside city by car can go for even just $20,000 Isn't this the point. Most people don't want to live 1hr away, so are forced into more expensive land.
  - anoncoward111 8y ago
    1hr is "close" by NY standards now.
    - perl4ever 8y ago
      1 hour is 50 miles in my part of NY.
      - scarejunba 8y ago
        It's 7 miles from the Outer Sunset to the Embarcadero in SF.
        mmt 8y ago
        This corresponds, IIUC, to a 45-minute minimum ride on public transit, not counting waiting and walking times. I'm not sure if driving is any faster, but maybe not, when parking and walking (if in-building parking is unavailable or prohibitively expensive). That means it could still be a full hour away. That intra-SF travel by transit motor vehicle could be slower than coming from outside the city could be a quirk specific to SF, something I mentioned in another thread [1]. [1] https://news.ycombinator.com/item?id=17839636 https://news.ycombinator.com/item?id=17839636
- ianai 8y ago
  And those rentals are largely rotting as well. I’ve got a sheet metal “patio” with sheet metal stair cases. I have to climb up and downstairs regardless of whether I’m coming or going. Oh and I signed off on asbestos and lead paint in the agreement. So glad the free market regulates itself so well.
  - wmil 8y ago
    > So glad the free market regulates itself so well. It's nimby rules passed by the municipal government causing the problem. The free market would be a huge step up. Whatever other problems it has, it's good a building new stuff.
- tejohnso 8y ago
  I think your estimate is too low [1], but I share the sentiment. I'd love to see suburbs with fewer mcmansions and more reasonable housing. 700sqft with a small accessory unit on a quarter acre lot would be a huge step up for many families and should be considerably cheaper than the typical over-sized homes we see all over the place. There aren't enough options. [1] For a durable shelter nice enough for guests...assuming this means an actual house, modestly outfitted... There's site prep, foundation materials and labor, plumbing/elec work, hookup fees, development fees, permit fees, lawyer, real estate fees, appliances, furnishings, all in addition to the actual structure and land materials and labor cost.
  - paulddraper 8y ago
    > 700sqft with a small accessory unit on a quarter acre lot Most people think that houses are expensive. They are, but in developed areas the land itself plays are large role. (That's why the top three important factors in real estate are location, location, and location. It's not that much more expensive to build a structure in San Francisco than Bakersville.) So it's unlikely that in most suburban areas it will make economic sense to build a only 700 sq ft house on a entire quarter acre. At that point, a duplex/quadplex makes far more market sense. And a duplex/quadplex is cheaper to build per resident.
- hellisothers 8y ago
  $27,000 / 270sqft is $100 per sqft for “new construction” which is really low and 270sqft is really tiny, bit too tiny to have guests stay over. I agree $400,000 is too much but there are plenty of sub $100,000 properties in the Midwest suburbs (I’ve looked). And no, you shouldn’t be allowed to just buy a 400sqft patch of land to build a shed for yourself in the suburbs :)
tryptophan 8y ago
Blame the government for empowering rent-seeking(in the economic sense) homeowners. Countless deductions for homes pushing the prices up, countless subsidies, countless regulations dealing with zoning to prevent expanding supply. America's obsession with single family homes is doing incalculable amounts of damage. It prevents people from moving to better opportunity and sucks up wage gains.
- ianai 8y ago
  Throw in a lack of infrastructure to make living and working in the rural areas comparable to the city.
spacehome 8y ago
That doesn't make any sense. For like-properties, rent has to cover maintenance and vacancy and compensate the landlord for the risk they're putting their capital at. On the other hand, at the end of the mortgage period, the landlord does own the property outright, so some landlords may come out ahead even if rent is less than the mortgage for a time, but you can't count on that.
dec0dedab0de 8y ago
Rent shouldn’t be anywhere near the cost of a mortgage If that were true then the landlord wouldnt be able to pay the mortgage. I think rent is mortgage + taxes + insurance + potential repairs + profit
- derekp7 8y ago
  I feel it should include mortgage interest, excluding principal. The principal is going straight to the landlord's net assets, which should one day return a profit on it's own.
  - cirgue 8y ago
    That's not how prices work. The landlord is absorbing a huge liability by owning the home in the first place. You're a renter, your risk exposure is 0. That's why rent will almost always be higher than a mortgage.
    - ianai 8y ago
      I’m not at all talking about renting a home vs owning a home. That’s going to be a significantly minor portion of a rental market. The nearest comparison is like sqft for like sqft apartment vs condo/townhome. That gets you closest to ceteris paribus without the actual total market data.
  - ianai 8y ago
    I did some calculating on a local market at various points. Basically, it seems to me the sweet spot is around 50k/rental for a building in the 100s of units. So your marginal, per unit mortgage should be around 50k or 500/mo (10 year mortgage) plus overhead. I know it’s possible to run such a complex with around 5-10 staff of various functions (possibly less). Those same units wind up being rented for over 1k/month - as that’s the trade off point for a similarly equipped condo. That’s a market operating inefficiently.
  - ars 8y ago
    > I feel it should include mortgage interest, excluding principal. It does. When you start a mortgage, interest is around 90% of the payment. So by definition mortgage is virtually all interest. True, later the amount of interest goes down, but that's just a detail - the amount of money tied up in the house is what matters, not the accounting in your bank.
loco5niner 8y ago
> Rent shouldn’t be anywhere near the cost of a mortgage Rent (for the same property) should be MORE than the cost of a mortgage (for the same property). The owner is taking on both risk and maintenance costs. Now, if you're saying "monthly rent on a 2 bedroom apartment should be cheaper than a monthly mortgage payment on a 5 bedroom house", that's different...

bradleyjg 8y ago

> The largest monthly expense for anyone making $60,000 a year is most likely going to be rent, unless you are living in a car or a tent and showering at the gym like I was. Even the most expensive markets there are a huge range of options. Today in NYC you'd be hard pressed to find your own private place for $1000/month. That wasn't true as recently as 5-6 years ago, but it is now. On the other hand you can find a very decent place for $1500/month. You won't be in Manhattan or the cool parts of Brooklyn, but you will be safe and comfortable. $1500/month is still only 30% of gross on $60,000/year which leaves plenty of disposable income even in high tax NYC. Maybe SF is worse, but if so that's the only place in the whole rest of the country that's worse. The issue becomes when you "need" more bedrooms. Or insist on certain neighborhoods.

anoncoward111 8y ago
I'll take your analogy a step further. You can have a room in my apartment 1hr east of Penn Station for $650 if I can trust you. $650 is about a week's pay for me, so I make less than $60,000 for sure. But food and transport are things, and so is the occasional medical care or movie. I live pretty frugally and can typically save $1,000 per month. But in this area, inflation and rising cost of living will virtually guarantee it's a meaningless amount 30 years from now.

gammateam 8y ago

my favorite part about finance and wealth accumulation is that the most sophisticated thing an enlightened person in the general public is going to say is something about relative standard of living and maybe inflation. so it reaffirms an actual holistic challenge to the financial ecosystem is a long ways off and basically never going to happen.