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Owning a property is work - sudden repairs at an otherwise busy time in your life. Phone calls and customer service for tenants. New tenants. Paperwork. It's pa

Owning a property is work - sudden repairs at an otherwise busy time in your life. Phone calls and customer service for tenants. New tenants. Paperwork. It's partly the time actually worked, but also the unpredictability and out-of-hours nature of the work. Looking at the model I guess the nearest factor is Annual Costs (maintenance). But it doesn't feel properly measured. I note that for someone on Hacker News, it needs charging at the day rate for a programmer. Or even as an opportunity cost - charging with a risk-based possibility of the reward of starting a successful technology startup. Or of spending more time with family or in sunlight, amongst trees. At peace.

rwmj 7y ago
Exactly! Own shares instead, they're the same thing but require none of this ongoing work. Historically house prices have risen enormously and a whole lot of people have made money, so everyone believes this will continue forever despite a huge political movement behind building more houses and other (good) policies that will reduce prices. On the linked page I typed in "-20%" into the annual appreciation field and lost $717,000.
- benj111 7y ago
  "Historically..... so everyone believes this will continue forever" You know the same thing applies to stocks and shares. And in fact stocks and shares have risen more historically [1] Shares also have liquidity, you can easily sell them in part or whole. You can diversify. One incident could easily destroy a house, if it destroys your well diversified stock investments you've probably got other problems. So agreed the stock market is the better investment, but as we can't see the future, both are based on past performance. Yes there are headwinds, there always are, I can think of many many reasons why stocks could fall, that doesn't really change what has happened historically though. Of course the beauty of investing is that if you disagree you can put your money where your mouth is :) [1] https://www.investopedia.com/ask/answers/052015/which-has-performed-better-historically-stock-market-or-real-estate.asp https://www.investopedia.com/ask/answers/052015/which-has-pe...
  - z3t4 7y ago
    Just make sure you only invest using money you can spare. If you are saving use funds (many different stock to spread the risk) . If you invest in a single house , stock or boat, there's always a chance it will sink and you lose it all.
  - chii 7y ago
    > the stock market is the better investment buying a house to live is not an investment, and i should think that people ought not to treat it as such. Buying a house gives you stability and security for shelter. It's quite possible that renting is cheaper, but you also can't do certain things while renting - such as small renovations (some places don't even let you nail a painting on to the wall). Investments in real estate is a different ballgame to buying your home.
    - kgwgk 7y ago
      The discussion is on the question “Should you buy a house and rent it out?”
    - benj111 7y ago
      I thought we were talking about rental properties? That said, buying a house is basically buying an index linked annuity that covers your rent on a property you have to maintain. So it is an investment, albeit one tied up with a lot of other baggage.
    - lizknope 7y ago
      I bought my house for $263K in 2002. It is currently worth around $330K. In that time I have spent about $40K on repairs (not true upgrades) for 2 new HVAC units, new roof, carpet, water damage, broken appliances, wood rot, lawn seed/fertilizer. I'm happier living in a house than an apartment but my house is a place to live, and an item of value, but not an investment I expect to make profit from.
      - e12e 7y ago
        That sounds odd - a 10% increase in (invested) value over 16 years? Isn't that below inflation? (according to random site on the internet, it's a little below inflation: https://www.in2013dollars.com/2002-dollars-in-2018?amount=300000 https://www.in2013dollars.com/2002-dollars-in-2018?amount=30... )
- tonyedgecombe 7y ago
  The big difference (or it is in the UK) is rental properties are heavily leveraged, often on interest only loans. Many of these landlords don't have enough cash to invest in the stock market but they can borrow against a rental property.
  - retiredcoder 7y ago
    Can’t they borrow on margin in the UK? Maybe also risky (or riskier) than an interest only loan?
    - rwmj 7y ago
      I'm fairly sure that ordinary investors can't borrow for investment in the UK, or at least if they can it's not as easy as getting a mortgage. Getting a mortgage is a mountain of paperwork but for most people it isn't difficult even with the new rules. Interestingly though 30% of people buying houses now in the UK are not getting mortgages (in some areas much more than that [1]) and I assume most of these will be the types of investors who are looking to buy a second home to rent out. [1] https://www.thisismoney.co.uk/money/mortgageshome/article-6300061/Number-property-cash-purchases-slumps-lowest-proportion-decade.html https://www.thisismoney.co.uk/money/mortgageshome/article-63...
      - retiredcoder 7y ago
        That is something different than USA. There even my laundry guy was day trading with margin, believe me or not.
        repsilat 7y ago
        Mortgage rates are substantially lower than margin lending rates though. Borrowing to buy a house at 4.5% you might think, "Not much risk, will likely appreciate faster." Borrowing to buy stocks at 10% and you're almost certainly not going to come out ahead. (Maybe my broker has terrible rates, others could be more reasonable.)
- xixixao 7y ago
  One thing that keeps me confident (even worried) about house prices: We have now got used to not demolishing old houses. This is a BIG problem. Look at London. Yes it has a mud base layer, but we can manage nowadays. Yet the whole city is still mostly 2 storied houses. And it's growing out like crazy. I don't see how this trend will revert, in any "beautiful" European city. The only way prices would go down is if we had a popultion decrease. Immigration will not let that happen.
wtvanhest 7y ago
Yes. Additionally you need to factor in commute time. Buy a 2nd house in oakland, live in SF? Add 4 hours a month in unpredictable commute time.
YokoZar 7y ago
Or you could hire a property manager. What's the typical rate they charge?
- taurath 7y ago
  Usually it puts you under breaking even, esp if you just bought the place. Usually 8-12% according to google. Good for a property with a below market mortgage you don’t want to worry about but don’t want to sell.
  - m-i-l 7y ago
    Nearer 10-15% in the UK. If you manage to find a good one they're definitely worth it, but the problem is, at least in my experience, the majority aren't.
    - retiredcoder 7y ago
      Classical agent-principal problem.
  - lukevdp 7y ago
    In Australia it’s 6-8%
    - verbify 7y ago
      There are two kinds of contracts with property managers - one kind that only find tenants, and another that manages everything (e.g. if the boiler breaks they get a plumber). Which kind are you talking about? I'd be surprised if the discrepancy between countries was as large as 6% to 15% for the same contract.
      - lukevdp 7y ago
        The 6-8% is for the ongoing maintenance and routine inspections. Usually leasing the property is 1 week's rent, however sometimes that is included in the management fee as well.
skdotdan 7y ago
The middle class people I know who invested in real estate (say, buying one flat to rent it out) would counter your argument with the following two points (not implying that I'm in favor of investing in real estate): 1 - It does not imply that much work. Not even close. For instance, my uncle and aunt rented a flat for 6 years to the same family, and in that time my uncle had to go there about 1-2 times for minor problems, and I don't think it's an exception. There is a bit of work at the time of finding new tenants, but in the case of the people I know, it's like an average of 4 hours of work a year at the very, very most. 2 - (and most importantly): middle class people who invest in real estate are keen on having a rent. Stocks don't necessarily give you that. They see buying a house and renting it out as a way of having a monthly recurrent source of income.
- DanBC 7y ago
  In the UK the average tenancy is about 20 months. This is possibly because English law gives much stronger protection to people in the first 6 or 12 months of the tenancy, or maybe because of the student market. Tenancies are getting a bit longer, and this is possibly because moving home can be one route from the legacy benefits onto Universal Credit (which is usually catestrophic for the claimant.)
  - skdotdan 7y ago
    I see, probably the decision on investing in real estate should depend on the legislation of your country of living.
  - tonyedgecombe 7y ago
    I suspect renting to tenants on benefits is a whole different world to renting to a middle class family.
  - dd36 7y ago
    Tenancy lengths are rising in US because rents are sky rocketing due to low inventory.
    - 7y ago
apathy 7y ago
This 1000x. I reflexively said (out loud) “god no!” in answer to the title question. The only people who ask this question are people who haven’t been landlords. Every single one of my friends who has, can commiserate with me as a former landlord. Maybe buy a vacation home to rent, or an apartment complex. And of course being a part- or full-time landlord is a perfectly reasonable job. But if you think that being a landlord just means having someone else pay your mortgage, I guarantee you will think differently after a year with even exemplary tenants. And most tenants are far from exemplary. (still shaking head)
- bufferoverflow 7y ago
  It really depends on where you are. In many european countries it's traditional for the tenant to fix the problems. Washing machine broke? Get a replacement yourself. Pipes clogged? Call a plumber.
  - ncphillips 7y ago
    Why would you rent then?
    - bufferoverflow 7y ago
      Most people can't afford to buy. Buying a house/apartment generally requires a 20% down payment, inspections, lawyer fees, realtor fees, and a shit ton of paperwork, and that's assuming a bank will even loan you money at a reasonable rate.
      - Frost1x 7y ago
        Plus, home ownership also reduces your mobility. With rent I have a lease I can typically sublet or end. If not, I'm at most liable for the remainder of the lease. If you ever want or need to move, you have the liability of selling your home, managing a mortgage plus rent, etc. on-top of finding a new position, moving, and everything surrounding the act. The obvious downside is you'll never get any ROI beyond having a place to live like you may with property ownership. Homes are great when you have financial stability and freedom but can become a big shackle if you don't.
jefftk 7y ago
A better way to estimate annual costs that includes the value of your time would be to look at the cost of hiring property managers. This gets you an apples to apples comparison with stocks/bonds.
bionsystem 7y ago
You can also buy REITs on the stock market. More diversification, obligations for them to pay you dividend of 90% of net income, and 0 maintenance cost for you.

rwmj 7y ago

Exactly! Own shares instead, they're the same thing but require none of this ongoing work. Historically house prices have risen enormously and a whole lot of people have made money, so everyone believes this will continue forever despite a huge political movement behind building more houses and other (good) policies that will reduce prices. On the linked page I typed in "-20%" into the annual appreciation field and lost $717,000.

benj111 7y ago
"Historically..... so everyone believes this will continue forever" You know the same thing applies to stocks and shares. And in fact stocks and shares have risen more historically [1] Shares also have liquidity, you can easily sell them in part or whole. You can diversify. One incident could easily destroy a house, if it destroys your well diversified stock investments you've probably got other problems. So agreed the stock market is the better investment, but as we can't see the future, both are based on past performance. Yes there are headwinds, there always are, I can think of many many reasons why stocks could fall, that doesn't really change what has happened historically though. Of course the beauty of investing is that if you disagree you can put your money where your mouth is :) [1] https://www.investopedia.com/ask/answers/052015/which-has-performed-better-historically-stock-market-or-real-estate.asp https://www.investopedia.com/ask/answers/052015/which-has-pe...
- z3t4 7y ago
  Just make sure you only invest using money you can spare. If you are saving use funds (many different stock to spread the risk) . If you invest in a single house , stock or boat, there's always a chance it will sink and you lose it all.
- chii 7y ago
  > the stock market is the better investment buying a house to live is not an investment, and i should think that people ought not to treat it as such. Buying a house gives you stability and security for shelter. It's quite possible that renting is cheaper, but you also can't do certain things while renting - such as small renovations (some places don't even let you nail a painting on to the wall). Investments in real estate is a different ballgame to buying your home.
  - kgwgk 7y ago
    The discussion is on the question “Should you buy a house and rent it out?”
  - benj111 7y ago
    I thought we were talking about rental properties? That said, buying a house is basically buying an index linked annuity that covers your rent on a property you have to maintain. So it is an investment, albeit one tied up with a lot of other baggage.
  - lizknope 7y ago
    I bought my house for $263K in 2002. It is currently worth around $330K. In that time I have spent about $40K on repairs (not true upgrades) for 2 new HVAC units, new roof, carpet, water damage, broken appliances, wood rot, lawn seed/fertilizer. I'm happier living in a house than an apartment but my house is a place to live, and an item of value, but not an investment I expect to make profit from.
    - e12e 7y ago
      That sounds odd - a 10% increase in (invested) value over 16 years? Isn't that below inflation? (according to random site on the internet, it's a little below inflation: https://www.in2013dollars.com/2002-dollars-in-2018?amount=300000 https://www.in2013dollars.com/2002-dollars-in-2018?amount=30... )
tonyedgecombe 7y ago
The big difference (or it is in the UK) is rental properties are heavily leveraged, often on interest only loans. Many of these landlords don't have enough cash to invest in the stock market but they can borrow against a rental property.
- retiredcoder 7y ago
  Can’t they borrow on margin in the UK? Maybe also risky (or riskier) than an interest only loan?
  - rwmj 7y ago
    I'm fairly sure that ordinary investors can't borrow for investment in the UK, or at least if they can it's not as easy as getting a mortgage. Getting a mortgage is a mountain of paperwork but for most people it isn't difficult even with the new rules. Interestingly though 30% of people buying houses now in the UK are not getting mortgages (in some areas much more than that [1]) and I assume most of these will be the types of investors who are looking to buy a second home to rent out. [1] https://www.thisismoney.co.uk/money/mortgageshome/article-6300061/Number-property-cash-purchases-slumps-lowest-proportion-decade.html https://www.thisismoney.co.uk/money/mortgageshome/article-63...
    - retiredcoder 7y ago
      That is something different than USA. There even my laundry guy was day trading with margin, believe me or not.
      - repsilat 7y ago
        Mortgage rates are substantially lower than margin lending rates though. Borrowing to buy a house at 4.5% you might think, "Not much risk, will likely appreciate faster." Borrowing to buy stocks at 10% and you're almost certainly not going to come out ahead. (Maybe my broker has terrible rates, others could be more reasonable.)
xixixao 7y ago
One thing that keeps me confident (even worried) about house prices: We have now got used to not demolishing old houses. This is a BIG problem. Look at London. Yes it has a mud base layer, but we can manage nowadays. Yet the whole city is still mostly 2 storied houses. And it's growing out like crazy. I don't see how this trend will revert, in any "beautiful" European city. The only way prices would go down is if we had a popultion decrease. Immigration will not let that happen.

wtvanhest 7y ago

Yes. Additionally you need to factor in commute time. Buy a 2nd house in oakland, live in SF? Add 4 hours a month in unpredictable commute time.

YokoZar 7y ago

Or you could hire a property manager. What's the typical rate they charge?

taurath 7y ago
Usually it puts you under breaking even, esp if you just bought the place. Usually 8-12% according to google. Good for a property with a below market mortgage you don’t want to worry about but don’t want to sell.
- m-i-l 7y ago
  Nearer 10-15% in the UK. If you manage to find a good one they're definitely worth it, but the problem is, at least in my experience, the majority aren't.
  - retiredcoder 7y ago
    Classical agent-principal problem.
- lukevdp 7y ago
  In Australia it’s 6-8%
  - verbify 7y ago
    There are two kinds of contracts with property managers - one kind that only find tenants, and another that manages everything (e.g. if the boiler breaks they get a plumber). Which kind are you talking about? I'd be surprised if the discrepancy between countries was as large as 6% to 15% for the same contract.
    - lukevdp 7y ago
      The 6-8% is for the ongoing maintenance and routine inspections. Usually leasing the property is 1 week's rent, however sometimes that is included in the management fee as well.

skdotdan 7y ago

The middle class people I know who invested in real estate (say, buying one flat to rent it out) would counter your argument with the following two points (not implying that I'm in favor of investing in real estate): 1 - It does not imply that much work. Not even close. For instance, my uncle and aunt rented a flat for 6 years to the same family, and in that time my uncle had to go there about 1-2 times for minor problems, and I don't think it's an exception. There is a bit of work at the time of finding new tenants, but in the case of the people I know, it's like an average of 4 hours of work a year at the very, very most. 2 - (and most importantly): middle class people who invest in real estate are keen on having a rent. Stocks don't necessarily give you that. They see buying a house and renting it out as a way of having a monthly recurrent source of income.

DanBC 7y ago
In the UK the average tenancy is about 20 months. This is possibly because English law gives much stronger protection to people in the first 6 or 12 months of the tenancy, or maybe because of the student market. Tenancies are getting a bit longer, and this is possibly because moving home can be one route from the legacy benefits onto Universal Credit (which is usually catestrophic for the claimant.)
- skdotdan 7y ago
  I see, probably the decision on investing in real estate should depend on the legislation of your country of living.
- tonyedgecombe 7y ago
  I suspect renting to tenants on benefits is a whole different world to renting to a middle class family.
- dd36 7y ago
  Tenancy lengths are rising in US because rents are sky rocketing due to low inventory.
  - 7y ago

apathy 7y ago

This 1000x. I reflexively said (out loud) “god no!” in answer to the title question. The only people who ask this question are people who haven’t been landlords. Every single one of my friends who has, can commiserate with me as a former landlord. Maybe buy a vacation home to rent, or an apartment complex. And of course being a part- or full-time landlord is a perfectly reasonable job. But if you think that being a landlord just means having someone else pay your mortgage, I guarantee you will think differently after a year with even exemplary tenants. And most tenants are far from exemplary. (still shaking head)

bufferoverflow 7y ago
It really depends on where you are. In many european countries it's traditional for the tenant to fix the problems. Washing machine broke? Get a replacement yourself. Pipes clogged? Call a plumber.
- ncphillips 7y ago
  Why would you rent then?
  - bufferoverflow 7y ago
    Most people can't afford to buy. Buying a house/apartment generally requires a 20% down payment, inspections, lawyer fees, realtor fees, and a shit ton of paperwork, and that's assuming a bank will even loan you money at a reasonable rate.
    - Frost1x 7y ago
      Plus, home ownership also reduces your mobility. With rent I have a lease I can typically sublet or end. If not, I'm at most liable for the remainder of the lease. If you ever want or need to move, you have the liability of selling your home, managing a mortgage plus rent, etc. on-top of finding a new position, moving, and everything surrounding the act. The obvious downside is you'll never get any ROI beyond having a place to live like you may with property ownership. Homes are great when you have financial stability and freedom but can become a big shackle if you don't.

jefftk 7y ago

A better way to estimate annual costs that includes the value of your time would be to look at the cost of hiring property managers. This gets you an apples to apples comparison with stocks/bonds.

bionsystem 7y ago

You can also buy REITs on the stock market. More diversification, obligations for them to pay you dividend of 90% of net income, and 0 maintenance cost for you.