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If you can afford a 20% or so downpayment (big if, I know), the two options might work out to fairly comparable (after-tax) monthly payments right now. In the l

If you can afford a 20% or so downpayment (big if, I know), the two options might work out to fairly comparable (after-tax) monthly payments right now. In the longer run, buying will leave you potentially with equity and with a fixed rate mortgage will assure fixed payments. Even in a mildly inflationary economy, making fixed nominal payments on a salary rising more in line with inflation for an asset valued more in line line with inflation can be a fairly attractive deal. But none of the above is meant to be investment advice. Homeownership has its risks and certainly loses flexibility.

pedrosorio 6y ago
Just checked Redfin, a condo in SF for $1M with a 30 year mortgage at a nice 3% interest rate and 20% downpayment would be: - $3300 in principal + interest - $1000 property tax - $500+ HOA - $200 homeowners insurance That is $5000+ monthly and requires $200k upfront (and significant upfront cost as the brokers are paid off). How is that comparable in after-tax payments to renting a $3000 apartment?
- munk-a 6y ago
  The math might be a bit different for SF - there are a lot of local factors to keep in mind (like that 500 HOA + Homeowners seems steep to me for a property that isn't near EOL) - but the biggest different at the end of the day is that the 3300 you're paying into principal + interest is still your money (well minus the interest) when you rent all 3000 you're paying is essentially throwing money into the void.
  - o-__-o 6y ago
    5-10 years later you have equity, a portion of value of the home not tied up by a mortgage. You can refinance or sell and extract this money. You can then use this money to move into the $2M house you had your eye on.
  - refurb 6y ago
    The difference is appreciation. Otherwise owning is probably 150% the cost of renting in SF. And with rent control you don’t have the issue of rent going up.
- microtherion 6y ago
  I've never owned a house in the US, but my understanding is that the interest portion is tax deductible (whereas rent is not), which at the kind of salaries necessary for this housing is likely to make a sizable dent in this payment. I must admit that I had forgotten how high property taxes in the US can be, though. HOA surely depends a lot on what exactly you'd be buying.
  - blaser-waffle 6y ago
    IIRC that was changed -- the interest payments being deductible -- as part of the Trump tax cut. The standard deduction was increased for everyone to compensate for it.
- refurb 6y ago
  Not only that, a 5% return on that down payment is a $833/month opportunity cost. Owning in SF is generally more expensive than renting. Why? Because house prices have appreciation assumptions already priced in. Plenty of people lose money every month versus rent but appreciation more than covers it.

pedrosorio 6y ago

Just checked Redfin, a condo in SF for $1M with a 30 year mortgage at a nice 3% interest rate and 20% downpayment would be: - $3300 in principal + interest - $1000 property tax - $500+ HOA - $200 homeowners insurance That is $5000+ monthly and requires $200k upfront (and significant upfront cost as the brokers are paid off). How is that comparable in after-tax payments to renting a $3000 apartment?

munk-a 6y ago
The math might be a bit different for SF - there are a lot of local factors to keep in mind (like that 500 HOA + Homeowners seems steep to me for a property that isn't near EOL) - but the biggest different at the end of the day is that the 3300 you're paying into principal + interest is still your money (well minus the interest) when you rent all 3000 you're paying is essentially throwing money into the void.
- o-__-o 6y ago
  5-10 years later you have equity, a portion of value of the home not tied up by a mortgage. You can refinance or sell and extract this money. You can then use this money to move into the $2M house you had your eye on.
- refurb 6y ago
  The difference is appreciation. Otherwise owning is probably 150% the cost of renting in SF. And with rent control you don’t have the issue of rent going up.
microtherion 6y ago
I've never owned a house in the US, but my understanding is that the interest portion is tax deductible (whereas rent is not), which at the kind of salaries necessary for this housing is likely to make a sizable dent in this payment. I must admit that I had forgotten how high property taxes in the US can be, though. HOA surely depends a lot on what exactly you'd be buying.
- blaser-waffle 6y ago
  IIRC that was changed -- the interest payments being deductible -- as part of the Trump tax cut. The standard deduction was increased for everyone to compensate for it.
refurb 6y ago
Not only that, a 5% return on that down payment is a $833/month opportunity cost. Owning in SF is generally more expensive than renting. Why? Because house prices have appreciation assumptions already priced in. Plenty of people lose money every month versus rent but appreciation more than covers it.