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This CoL thing is a cool HR sales tactic, but breaks down quite fast when looking at saving rates and long term equity. The thing is, by having a mortgage, you

This CoL thing is a cool HR sales tactic, but breaks down quite fast when looking at saving rates and long term equity. The thing is, by having a mortgage, you are effectively building equity in a good you can resell later (a house). Cheap house means you can sell it for cheap and retire where it's cheap. Meanwhile, a property in a hot market where the mortgage is still the same fraction of your income can be resold for much more. Gives you freedom to retire where you want.

RobRivera 6y ago
This is the hot insight people forget to discuss, when it comes to numbers. HR hates it lul
deleted 6y ago
[deleted]
peferron 6y ago
Even without buying, you can spend a higher % of your income on rent and still end up saving more in absolute numbers; and the absolute number is what eventually matters unless you're dead set on picking a place and never moving again.
- refurb 6y ago
  Yup. If your rent doubles from $1,000 to $2,000, but your salary doubled from $75,000 to $150,000, you incurred $12,000 more in expenses for $50,000 more in after tax income.
  - wooger 6y ago
    But you have to live in a specific place, and what you get for your $2000 is considered cramp squalor by the rest of the country.
    - refurb 6y ago
      Sure, but if you're making $50,000 more post-tax, you could always bump it up to a nicer place and still be ahead.
tjr225 6y ago
Only really matters if your only concern is wealth. Some of us want to actually enjoy our lives; not just our retirements.
- peferron 6y ago
  > Only really matters if your only concern is wealth I don't get this knee-jerk reaction where, if you discuss money, then it immediately must be the only thing you care about. Why can't it just be one element of the equation, along with other usual stuff like weather, food, etc?
  - tjr225 6y ago
    That’s exactly what I’m saying. We should assume that most of the people that live in Portugal are not stupid or victims. They’re optimizing for something they prefer. The GP is the one that reduced the choice of living in Portugal to wealth, not me.
- Rapzid 6y ago
  For every extra dollar you make you can save 50 more cent and spend 50 more cent..
- rorykoehler 6y ago
  A fundamental truth in our society is that wealth buys you options. Options give you more ways to enjoy life.
  - tjr225 6y ago
    You only need options if you don't know what you want!
    - vecinu 6y ago
      I think what you want changes with age, circumstance and experiences. It's short sighted to be rigid in your thinking or "knowing what you want" as any change can destabilize you. The only constant is change, if you can adapt to anything, you're way better prepared than someone who know what they want today and can only have that.
ddri 6y ago
Good to consider. But also worth understanding the role that paying a bank interest has in defusing the "rent money is dead money" myth. Many property markets around the world are in a bubble, again, and inversely have competitive rentals, especially after the pandemic. Owning a home, with a mortgage, incurs often far more impact from the interest to the bank than if one simply rented. Let alone maintenance, rates, etc, let alone the illiquidity. I'd rather not have a house in Lisbon as a non-national when the nation hits another crisis. Not to challenge the great point you make about CoL, but there's so much cultural distortion around home ownership that it's almost a parody of fundamental economics.
- malandrew 6y ago
  > Many property markets around the world are in a bubble it's only a bubble if it pops. > there's so much cultural distortion around home ownership that it's almost a parody of fundamental economic Again, it's only a distortion if it doesn't persist for so long to become a persistent ground truth. A house is not a house is not a house because location, location, location. You can put the same exact dwelling structure in two different places and they can have two very different values because everything around the house matters too and if those things persist, they become as real as the house.
  - andresp 6y ago
    Ah so you expect housing prices to continue to grow above income forever? Maybe in the future a single house can cost more than the entire country's GDP or something like that right? House prices only go up!
    - rorykoehler 6y ago
      It's not impossible. If you live off your income then you've already been excluded from purchasing a house. This is what happens when wealth inequality becomes very extreme.
EGreg 6y ago
Mortgages are a sales tactic You can make a mathematical transformation to compare Renting with Owning. O - R + R vs R + X Own - Rent our your place + Rent somewhere else vs Renting and investing your principal some other way. So reducing you get: O - R vs X So owning and renting out a house vs all other investment opportunities, such as Bitcoin. Literally if you rented your house in the last two months and invested the principal into altcoins, you could then own 5 houses!
wooger 6y ago
In the wider view, where most of the population aren't FAANG engineers, it does make sense though, as most of the younger population can't afford a mortgage at all in a 'hot market', so the higher CoL is just lost. There's also nothing stopping you investing your excess income in other areas outside property.

RobRivera 6y ago

This is the hot insight people forget to discuss, when it comes to numbers. HR hates it lul

deleted 6y ago

[deleted]

peferron 6y ago

Even without buying, you can spend a higher % of your income on rent and still end up saving more in absolute numbers; and the absolute number is what eventually matters unless you're dead set on picking a place and never moving again.

refurb 6y ago
Yup. If your rent doubles from $1,000 to $2,000, but your salary doubled from $75,000 to $150,000, you incurred $12,000 more in expenses for $50,000 more in after tax income.
- wooger 6y ago
  But you have to live in a specific place, and what you get for your $2000 is considered cramp squalor by the rest of the country.
  - refurb 6y ago
    Sure, but if you're making $50,000 more post-tax, you could always bump it up to a nicer place and still be ahead.

tjr225 6y ago

Only really matters if your only concern is wealth. Some of us want to actually enjoy our lives; not just our retirements.

peferron 6y ago
> Only really matters if your only concern is wealth I don't get this knee-jerk reaction where, if you discuss money, then it immediately must be the only thing you care about. Why can't it just be one element of the equation, along with other usual stuff like weather, food, etc?
- tjr225 6y ago
  That’s exactly what I’m saying. We should assume that most of the people that live in Portugal are not stupid or victims. They’re optimizing for something they prefer. The GP is the one that reduced the choice of living in Portugal to wealth, not me.
Rapzid 6y ago
For every extra dollar you make you can save 50 more cent and spend 50 more cent..
rorykoehler 6y ago
A fundamental truth in our society is that wealth buys you options. Options give you more ways to enjoy life.
- tjr225 6y ago
  You only need options if you don't know what you want!
  - vecinu 6y ago
    I think what you want changes with age, circumstance and experiences. It's short sighted to be rigid in your thinking or "knowing what you want" as any change can destabilize you. The only constant is change, if you can adapt to anything, you're way better prepared than someone who know what they want today and can only have that.

ddri 6y ago

Good to consider. But also worth understanding the role that paying a bank interest has in defusing the "rent money is dead money" myth. Many property markets around the world are in a bubble, again, and inversely have competitive rentals, especially after the pandemic. Owning a home, with a mortgage, incurs often far more impact from the interest to the bank than if one simply rented. Let alone maintenance, rates, etc, let alone the illiquidity. I'd rather not have a house in Lisbon as a non-national when the nation hits another crisis. Not to challenge the great point you make about CoL, but there's so much cultural distortion around home ownership that it's almost a parody of fundamental economics.

malandrew 6y ago
> Many property markets around the world are in a bubble it's only a bubble if it pops. > there's so much cultural distortion around home ownership that it's almost a parody of fundamental economic Again, it's only a distortion if it doesn't persist for so long to become a persistent ground truth. A house is not a house is not a house because location, location, location. You can put the same exact dwelling structure in two different places and they can have two very different values because everything around the house matters too and if those things persist, they become as real as the house.
- andresp 6y ago
  Ah so you expect housing prices to continue to grow above income forever? Maybe in the future a single house can cost more than the entire country's GDP or something like that right? House prices only go up!
  - rorykoehler 6y ago
    It's not impossible. If you live off your income then you've already been excluded from purchasing a house. This is what happens when wealth inequality becomes very extreme.

EGreg 6y ago

Mortgages are a sales tactic You can make a mathematical transformation to compare Renting with Owning. O - R + R vs R + X Own - Rent our your place + Rent somewhere else vs Renting and investing your principal some other way. So reducing you get: O - R vs X So owning and renting out a house vs all other investment opportunities, such as Bitcoin. Literally if you rented your house in the last two months and invested the principal into altcoins, you could then own 5 houses!

wooger 6y ago

In the wider view, where most of the population aren't FAANG engineers, it does make sense though, as most of the younger population can't afford a mortgage at all in a 'hot market', so the higher CoL is just lost. There's also nothing stopping you investing your excess income in other areas outside property.