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Show HN: Should I Get a House? a better rent vs. buy calculator

203 points by alach11 5y ago

alach11 5y ago
My wife wants to buy a house, but I'm unable to make life decisions without trying to minmax them. I wasn't satisfied with existing rent vs. buy calculators, so I decided to build my own! I'm not a developer, so I apologize if it's a little rough looking... Some things it takes into account: - The actual rate of return on your down payment and extra costs of a house - Inflation - Itemized deductions on your taxes - The impact of state taxes - Mortgage interest deduction limit and SALT tax deduction limit Let me know what you think or what improvements you would like to see!
- reggiepret 5y ago
  this is great!! The final cashflow amount of the house graph (in the example) ends in the negative, s this accurate?
  - alach11 5y ago
    It is accurate! While the house cashflow is negative in the example, it's at least less negative than the apartment cash flow. Maybe the moral of the story is living with your parents for free is better than either option!
    - jolmg 5y ago
      If this calculator is rent vs buy, why does the graph compare house vs apartment? For both houses and apartments, they can be bought or rented. Are you someplace where one type of home can only be bought and the other can only be rented?
      - alach11 5y ago
        Nah this is just bad terminology on the site. I’ll fix it. In my personal situation I’m deciding between continuing to rent my apartment vs. buying a house.
    - mikepurvis 5y ago
      Depending on your circumstances, it may not be possible to seriously consider it, but another alternative to rent-vs-buy might include various van/camper/coach options, which can be parked for months at a time at "seasonal" campsites, often for $500-1000/month. Obviously equipment like this isn't going to appreciate either, and you'll be subject to all the same maintenance costs of owning, so in some ways it's the worst of both worlds— but it may still be cheaper than trying to rent if you can't or won't enter the market right now and mooching from family isn't an option.
- Finnucane 5y ago
  Probably want to allow for the possibility of rent rises over time. One thing that I think this actually shows pretty well is the notion that part of the answer depends on how long you intend to stay in a place. If you expect to move in two or three years, it's probably not worth the hassle/expense of buying. If you intend to stay 5+ years in one place, it makes more sense to buy.
  - kylestlb 5y ago
    This all depends on geography though. Buying in the bay area and only staying for 2.01 years could get you a pretty hefty ROR assuming you don't remodel anything, considering the supply constraints. Maybe covid & remote work will change that.
    - Finnucane 5y ago
      Maybe. Flipping is a risky business. Returns are not guaranteed. If you're just looking for a place to live, you should really evaluate it on that basis.
      - plank_time 5y ago
        I know something who went bankrupt and got a divorce after flipping condos in chicsgo just before the housing bust. It works until it doesn’t and it’s usually catastrophic.
  - HideousKojima 5y ago
    >Probably want to allow for the possibility of rent rises over time. Most definitely, my apartment before buying a home was ~$100/month less than my current mortgage, now (3 years later) the rent for the exact same apartment is ~$300/month more than my mortgage.
  - pessimizer 5y ago
    > Probably want to allow for the possibility of rent rises over time. Isn't that counting inflation twice?
- madcaptenor 5y ago
  This is nice. I definitely played around with some calculators like this when I was deciding to buy a house a few years ago. Off the top of my head, some things I'd add to make this more useful to a wide audience: - I don't know what I pay in state income and sales taxes. But I do know my income and my state's tax rate; income tax could be derived from that. I'm not sure how you'd estimate sales tax, though - you'd have to know how much of my spending is taxable. - I've heard a rule of thumb that home maintenance costs are 1% of the home's value per year; maybe default to that, especially since a first-time home owner doesn't really know what those costs are. However, older houses will require more maintenance and that cost probably scales with square footage, not cost. - you're assuming a 30-year mortgage - I'd put in the ability to change mortgage length. (Also, maybe a link to somewhere where I can find out what mortgage rates are.)
  - hirsin 5y ago
    Maintenance cost likely scales with both size and cost. Size, for obvious reasons, and cost because the labor/materials cost of a repair is likely correlated with housing prices in the area. You then have to account for the portion of cost that's already correlated with size... +1 to mortgage length. We heavily pivoted our decision to buy on getting a 7 year ARM because my friend and I knew we wouldn't grow old together there (wanting to do things like get married and have our own families). A time bomb on the mortgage was a feature, for us, and a cost savings.
    - rory 5y ago
      In my experience as a small-time landlord, maintenance does scale somewhat with cost, but not linearly. A lot of big costs on the materials side (like say, a furnace) are more or less fixed. At least, repairs don't cost 4x as much in a 800k house as they do in a 200k house of the same size.
  - BeetleB 5y ago
    > I've heard a rule of thumb that home maintenance costs are 1% of the home's value per year It's a very poor rule of thumb. Contrary to the other comment, these costs don't increase linearly with value of the house. Sure, if I live in an expensive area, it may go up 30%, but not much more. Looking at how much my house has appreciated, I can assure you I pay not much more in maintenance than when I bought it. The 1% rule came about when the median house price was under $200K.
- shadowlight 5y ago
  Automated state tax generation. Historical house appreciation by state or even better, city. Option to account for income from money in sp500.
- phkahler 5y ago
  >> My wife wants to buy a house... A pilot once shared with me the rule of the three F's. If it floats, flies, or fornicates, it's cheaper to rent than to own. You may substitute a 4 letter word for that last one. Anyway, you got a wife already so thats one. House don't start with F, so buy.
  - camjohnson26 5y ago
    Seems like an oversimplification, usually it depends on other factors like how long you plan to live there.
- fennecfoxen 5y ago
  This is missing a rate of return on the money you would otherwise use for the down payment, information on whether that return would be taxable or is sheltered in a Roth or similar tax shelter, current and anticipated tax brackets if one sees that income taxed (at both time of sale and possibly retirement), current and anticipated capital gains rates that might apply to the gains from the home sale in the future (if you're over the threshhold)...
  - pessimizer 5y ago
    > rate of return the money you would otherwise use for the down payment Really the most important number, but all of these suggestions are crucial to the calculation. Money that doesn't get invested in a house gets invested in other things. Pretend it's in an index fund.
    - deleted 5y ago
      [deleted]
    - motioncuty 5y ago
      But when you take out a morgage you can leverage 800k of the banks money at negative real interrst rates, effectively paying you tens of thousands over the course of the loan and any appreciation of that asset gets multiplied by 5x on your initial down payment.
      - rashkov 5y ago
        Negative because the loan interest rate is below inflation?
        motioncuty 5y ago
        Yup, mortgages are around 3% and the fed rate is near 0 for the next year or 2. If inflation averages over 3% per year, you are getting paid the difference to borrow.
- anotherman554 5y ago
  The best/ most powerful rent vs buy calculator I am aware of is the one offered here: https://michaelbluejay.com/house/rentvsbuy.html https://michaelbluejay.com/house/rentvsbuy.html browsing it might give you some ideas of features you can add to your calculator. It's also a small thing but having the choice to select the downpayment based on percentage down might be nice. I don't know why your calculator tells me getting a house is not worth even if it thinks the transaction is profitable. It states my cumulative profit is $29,030 but I shouldn't get a house.
  - irrational 5y ago
    I wonder if it is purposefully biased towards renting so he can use it to convince his wife to rent when he says that she wants to buy.
  - alach11 5y ago
    The determination of whether to buy the house is based on the calculated rate of return. So even if you make a profit, if the time horizon is large you’d be better off investing that money in stocks. The UI doesn’t make that clear enough.
    - barrkel 5y ago
      Houses are both leveraged investments (in a non-productive depreciating asset, I know, I know) and a forced savings mechanism. Investment in stocks by average people is not leveraged, and nor is there a forcing function that makes you put money into the stocks every month or you end up homeless. These two functions have some value - especially the latter.
    - majormajor 5y ago
      > The determination of whether to buy the house is based on the calculated rate of return. So even if you make a profit, if the time horizon is large you’d be better off investing that money in stocks. Can you give a more detailed example? What time horizon are you picturing? After you pay off the house you lose the leverage advantage of returns on selling a house you bought with a mortgage vs selling stocks, but you also stop having to pay the mortgage at all while you'd still be renting, likely at a far higher market rate, so looking at the post-mortgage-payoff curves, it's hard for me to see where the invested down payment + (mortgage + tax + upkeep - minus - rent) returns would be expected to be high enough to make up for that. (The more rational counterargument, though, would likely be around diversification? Better to have land + stocks then just one...)
- simonw 5y ago
  I'd love it to provide some mechanism for guestimating my taxes (maybe based on the state or city I live in) - I was too lazy to dig out a tax return to fill out those fields, which meant I couldn't easily use the calculator.
  - ghaff 5y ago
    Especially outside of major cities, there are about a gazillion towns that have different tax rates that go to paying the local schools, emergency services, and town administration. Maybe there are APIs for that sort of information but I don't know.
    - simonw 5y ago
      That's why I want a guesstimate - give me a rough idea of how the tool works and that will convince me to dig out a tax return and fill in the fields for the most accurate estimate possible.
- plank_time 5y ago
  Some decisions aren’t mathematical. Sometimes it’s better to make a decision based on whether or not it makes sense for the family as opposed to dollars and sense. If your wife wants to buy a place, I suggest finding a compromise to figure out how to make both parties happy.
  - seoaeu 5y ago
    At the same time, you should be highly skeptical of anyone encouraging you to make what might be the single largest purchase of your life without carefully working through the financials. Maybe your preferred option will cost you an extra $50,000 over the next decade and you decided to go with it anyway. That's totally fine as long as it is a conscious choice. If the difference is $500,000 then perhaps you should consider how strongly you actually care about renting vs. buying...
- codegeek 5y ago
  Nice project but if you are serious about buying a home, don't just look at numbers. Figure out what you and your wife want for yourself in next 2-5-7 years. If you see you guys staying in 1 place and build a family further, buying a home may not be a bad idea considering your finances are in shape (good credit, have 20% downpayment etc etc). I would say rule of thumb is 7 years in 1 place. If you are going to live in same place for 7+ years, buy with 20% down and total cost not >25-30% of monthly pay.
- someelephant 5y ago
  Life opportunity cost. When you buy a house you are making a big commitment. It will guide the path of your life. These days with remote work that's less and more of an issue. What if you would be happier living in the south of France?
- ransom1538 5y ago
  The home only expenses (down payment, home owners, etc) when you chose rent should be converted to a standard rate of return of VOO (index of SP 500) for the 15 years. THIS would be the greatest calculator ever built ever.
- sjg007 5y ago
  If your wife wants to buy a house… buy the house.
- deleted 5y ago
  [deleted]
gus_massa 5y ago
"Apartment" means rent and "House" means buying? I think that's confusing. It would be nice to auto update the graph every time something changes. It's nice that it has tips. Hi from Argentina! We have a somewhat different customs here so some fields are hard to guess. For example, I don't know if I can fill my taxes jointly. Another detail that confused me is that I didn't expect to sell the home after 14 years. It's not usual here, but I guess it changes in each country. Protip: Add a field that says "My S.O. want's to move anyway" :)
- pimlottc 5y ago
  Agree with the terminology being confusing. Houses can be rented and apartments (condominiums) can be purchased.
  - cpursley 5y ago
    In North American lingo, "apartment" exclusively means a multi-family unit that you rent and don't own. If you own a multi-family unit it is a Condo (condominium) and never refered to as an Apartment. I know, confusing.
    - seanmcdirmid 5y ago
      Also, duplexes are houses with two units in them vs. a two floor apartment.
      - yazanobeidi 5y ago
        That’s a stacked townhome.
        seanmcdirmid 5y ago
        On the 30th floor of an apartment building?
        5y ago
pestatije 5y ago
House prices are not included in inflation estimates, rental prices are. That's another thing that should be considered.
- alach11 5y ago
  There's a separate parameter to control the increase in house prices. My assumption is that houses have tended to increase faster than inflation in most markets.
  - pestatije 5y ago
    Yes, and here is the great fallacy of current times economics. Whilst house price increases leave younger people unable to afford one, inflation (official numbers) keeps at its lowest levels ever.
  - gruez 5y ago
    >My assumption is that houses have tended to increase faster than inflation in most markets. It does? Random chart I found: https://www.aei.org/wp-content/uploads/2020/01/cpi2020-875x1024.png https://www.aei.org/wp-content/uploads/2020/01/cpi2020-875x1.... It seems to be higher, but only slightly.
    - pestatije 5y ago
      That "Housing" in the chart is the housing component of inflation (rental, household furnishings, etc.)
      - gruez 5y ago
        Good point. The CPI increased 20.4% from june 2012[1] to june 2021 was 20.4%, but the "Rent of shelter" component increased 29.7% in the same time period. [1] that was the earliest year that was available at https://www.bls.gov/cpi/tables/supplemental-files/home.htm https://www.bls.gov/cpi/tables/supplemental-files/home.htm
  - 5y ago
mandeepj 5y ago
Buying is better, if you are thinking a bit long term like 4-5+ Years. Now, why I said that: Here’s my story - I had lived in an apartment for 5 years. It’s my longest stretch at one place so far. I paid about $100k in rent for all of those years. When I left that place, I got nothing out of it. If I had a house, then I would had built some equity. Edit: removed - ‘Buying is always better’ from the first sentence
- dharmab 5y ago
  If you are not willing to do at least some DIY repairs, homeownership can become significantly more expensive than renting.
- vmception 5y ago
  Its a question because “having equity” isnt always the better answer Its how much, what percent of what, how much does it cost you to maintain and service, how long you are looking at Anyway thats the point of the calculator
- jjice 5y ago
  Always is a strong word. I move around a lot, from 6 to 18 months at a time. The time it would take to search, purchase, and resell a home doesn't make sense in that scenario. Renting gives some flexibility in moving compared to buying. If you're staying in one spot though, then I agree with you more.
- MattGaiser 5y ago
  Depends on your transaction costs.
- reidjs 5y ago
  Buying doesn’t make sense if 1. You can’t afford to own a home near your work 2. There’s a chance you will not stay in your current job for more than a few years 3. You don’t like DIY or home maintenance 4. You’re single and want to live near other single people
  - tiborsaas 5y ago
csomar 5y ago
Why is the mortgage interest capped at 10%?
- gruez 5y ago
  Seems like a reasonable cap when the average rate for 30 year fixed rate is currently 2.88% https://fred.stlouisfed.org/series/MORTGAGE30US https://fred.stlouisfed.org/series/MORTGAGE30US
  - moqca 5y ago
    A good interest rate in Mexico is 9%, with the most common form of mortgage being around 12%
- BugsJustFindMe 5y ago
  10% is more than 3x the average rate in the US for a 30 year loan period, and rates go down further for shorter periods.
- seattle_spring 5y ago
  If your credit is so bad that you can't get a loan better than 10%, you should in no circumstances whatsoever be buying a home.
  - thebean11 5y ago
    In the US yes, because inflation is 2.4%. Some countries have higher inflation.
bechap 5y ago
This looks great! For those going through the process, I also found this tool helpful in determining whether to rent vs. buy: https://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html https://www.nytimes.com/interactive/2014/upshot/buy-rent-cal...
kylestlb 5y ago
If data exists on historical growth between single-family homes vs townhouse vs condo, it would be quite interesting to show here. Since SFH are not being built in certain metro areas anymore their prices seem to rise dramatically faster than space-efficient property.
cmpolis 5y ago
Thanks for posting - this is really helpful (reminds me of this similar NYT tool: https://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html https://www.nytimes.com/interactive/2014/upshot/buy-rent-cal...) A few notes: - "Final Cumulative Profit" is a bit confusing since this is not necessarily profit - this is how much less of a cost a house is over an apartment? - Is there a way to factor in opportunity cost of down payment being in the market instead of tied up in the house?
- alach11 5y ago
  Would it make more sense to invert it and plot cumulative cost? Rate of return in the results is basically the opportunity cost of your increased spend on the house. That can be compared to other possible investments.
epic9x 5y ago
You might want to include rental income as an option here, lots of folks may have a place that includes an attached unit.
- secabeen 5y ago
  The Deluxe calculator here is the one I used 10 years ago, it's quite good, but it doesn't have the best SEO, so it hide on the second page of the Google results, after a swarm of advertisement pages from mortgage companies: https://michaelbluejay.com/house/rentvsbuy.html https://michaelbluejay.com/house/rentvsbuy.html
bachmeier 5y ago
There's no way to put this into a calculator, but this decision isn't purely monetary. Do you enjoy having to maintain a home and property? If not, maybe buying a house isn't for you. Even if you hire someone, that can be a massive hassle, you have to worry about being ripped off, ... If you're not settled in your career to where you can comfortably take off long stretches of time during the day, you probably shouldn't buy a house. It's generally a bad idea for someone at the beginning of a career. There's so much to learn and it never ends - that's valuable time that could go to refreshing your mind or building up career capital. There's also the matter of risk. Are you willing and able to handle replacing your air conditioner, furnace, and roof in the same year? If you rent, you call the landlord and have them replace those things. You'll be okay if you have a big savings account or you don't mind putting it on a credit card with a high credit limit. If you've been in your house for two years and you spent everything on the down payment and furniture, you might have trouble sleeping at night.
- jbb67 5y ago
  but also the reverse applies. If you want to make alterations or improvements to your house, better not rent
  - seanc 5y ago
    Yes, exactly. Or maybe you want a guarantee of being able to stay in one place for a long period of time, say to send your children to a particular school, or be close to neighbors or family.
    - bachmeier 5y ago
      The part about neighbors or family might be true, depending on whether they're going to stay put, but the part about the school is one of the biggest risks to buying a house. School boundaries get changed all the time. This is something I'm dealing with right now, and it could shave tens of thousands off the value of my house if it turns out wrong.
  - bachmeier 5y ago
c4m 5y ago
This is a neat tool! There’s one more feature I’d want before using it seriously, which is a field for stock market return rate. If my down payment is 50,000, then in the rental (apartment) case I want to estimate how much I would be earning with 50,000 in the stock market.
silicon2401 5y ago
Based on checking a 500k house with a 50k down payment, this tells me PMI will be about 2k/year for the first 3 years. Is it really that cheap? Is there any reason to not go for a <20% down payment if it allows me to accelerate my house planning by several years, if it only ends up costing around 6k extra?
- vel0city 5y ago
  Yeah, my home was ~$320k, ~10% down, my PMI is $140/mo. The mortgage is written so if the house appraises higher that speeds up the point where PMI is taken off. Personally I think some people overly freak out about PMI. When you're talking the size of numbers involved in the mortgage and escrow accounts, $140/mo for a few years really isn't that crazy especially if it means you can get into the market sooner in a home you really want. I probably wouldn't have bought the house I'm in now looking at comps in my neighborhood. In a bit over a year comparable houses in my neighborhood are $60k+ more than what we bought at, and Zillow's estimate for my house (take it with a massive grain of salt) puts it a hair over $400k. If we would have waited a year for 15-20% we wouldn't be where we are now.
  - silicon2401 5y ago
    Great point. In a way, the PMI becomes like an added aspect to the investment side of buying a house, in that you can either pay more money up front (the PMI, I mean) but get a better return on investment by having gotten in the market earlier. Whereas if you wait to save up for a down payment, the rising house prices may outpace your savings.
mattgibson 5y ago
These calculators seem to miss the point for me. If I spend less overall by renting, I don't care because I can't pass the property as an inheritance to my kids. If I buy, they get a house for free when I pass on. Also, if I rent, I have to continue to pay the same (high) rents through retirement where my income will likely drop drastically once I stop full time work. The aim of buying is to be mortgage-free when you retire so your pension gives you a decent quality of life.
- ska 5y ago
  You aren't looking at the calculations correctly, where the rent is a "win" it's because your overall net worth is higher than if you had bought. You might not have the house to pass to your kids, but you would have more cash than the value of the house. As to your second point, think of it this way: the tipping point on these two means you could just buy the house cash when you retire, and end up with more money in the bank also.
- anotherman554 5y ago
  The more sophisticated calculators allow you to compare buying and spending more on housing per month vs renting at a cheaper price and investing the extra money you have in the stock market. (Although many people may not have such discipline, and renting costs verse purchase costs are going to vary from market to market.) There's no advantage to passing on a house to kids verse passing on stocks. Also, similarly, there's no advantage to going mortgage free in retirement verse being rich on stocks and selling the stocks to buy a house 30 years from now, or paying rent by selling stocks.
  - TomVDB 5y ago
    > There's no advantage to passing on a house to kids passing on stocks. Except for Proposition 13 in California, which allows you to pass on your real estate tax to your inheritors once. In the case of my neighbors, that means their son will pay ~$1200 in taxes per year vs ~$30k for us who own an identical house.
    - 5y ago
runako 5y ago
This looks great! A couple of comments: - some (large?) portion of mortgages will not allow PMI to be removed until you either a) inject cash to get to 20% equity or b) get to the time in the amortization schedule when you are scheduled to get to 20% equity. That is, if your home increases in notional value by 20%, you still have to pay PMI. So the PMI line item should probably not terminate after 3 years. - It would be awesome to include a rent growth factor. When I bought my first house, my annual mortgage was > the amount my next-door neighbor paid to buy his (similar) house. (Which would be driven in part by rents at that time.) Part of the benefit of home ownership is insulation from rising rents, and adding a rent factor would capture that.
- monkeybutton 5y ago
  +1 to including some kind of rent-growth factor. Where I live the amount a landlord can increase rent every year is capped fairly low (like 3%?) and I stayed in the same apartment for 7 years. In the beginning my rent was market rate and by the end it was way below. By not bouncing around apartments every couple of years I saved a ton of money which I ended up using for a down deposit on a house. On paper the decision looks crazy because the mortgage payments are higher than the rent I was paying but it doesn't take into account that moving wasn't an option, I'd have to stay in the same place forever (or at least until I got "renovicted").
- jrs235 5y ago
  If your home value has increased you can usually ask/tell the lender you believe the value has increased enough that PMI should fall off and that you'd like/are willing to pay for an appraisal (typically a few hundred dollars). Or, if your loan is owned by Fannie/Freddie, you may not even need an appraisal if the new value/increase is within certain percent range. I know this because I spoke toy lender (a credit union) about getting an appraisal to remove PMI. Knowing the outstay loan amount was X I said of it appraises at X/.8 thenwe should be able to drop PMI. Lender called me back and said that X falls within Fannie/Freddie allowed range that an appraisal wasn't needed. This only works in a market where prices are increasing. Your mileage will vary depending on your lender.
  - 5y ago
waylandsmithers 5y ago
One piece of millenial defeatism I hear a lot is "Ugh, I'll never be able to afford a 20% down payment, home ownership is impossible" I'm not sure where this myth came from, but as a millenial who went through the buying process in 2012 and again in 2016, I remember both times the lender just asked how much we wanted to put down. We could have gone as low as 3%, or maybe even lower. Yes, you have to pay PMI (private mortgage insurance) for probably a couple hundred bucks extra a month if you don't have 20% equity in the house- but you can stop paying it as soon as you get to 20, and you can count increases in the home value towards that (through renovations or just market conditions). You can even have the interest rate increased very slightly instead of a separate PMI payment if you want to spread out the cost over the entire loan. The point is, you'll likely need to have 3 months rent for first, last, and security deposit when you start an apartment rental anyway, so the initial costs might be closer than you think.
- ozarkerD 5y ago
  Very true. FHA loans let you put as little down as 3.5% for first time buyers. I wouldn’t recommend it but the opportunity is there.
  - seattle_spring 5y ago
    FHA loans in a competitive market put the buyer at an extreme disadvantage versus conventional or cash.
    - asdff 5y ago
      You still hear of people in these markets snagging homes for like 5% down even with the competition. Maybe I misunderstand, but you don't pay any realtor any money until you buy the home. Seems that there isn't any pain being 'in the market' continually getting out offered 99 times out of 100, if it means you get an offer that one time and are going to be renting anyway until then. Plus the whole time you are presumably saving more money and coming up with a stronger down payment.
dynm 5y ago
This would be better if it included a slider for what yearly investment return you would expect for assets not in a house. If I don't spend my down-payment on a house, I'll put it in the stock-market or something. Those gains are typically a huge part of the calculation when considering to rent vs. buy. I might be mistaken, but as far as I can tell that isn't reflected here.
- alach11 5y ago
  I tried to account for that with the rate of return number in the results. You can compare rate of return to your expected returns in the stock market.
  - dynm 5y ago
    Oh, great, I misinterpreted that! (I thought it was the return on investment in the house, not your non-house portfolio.) A slider would still be nice. I've attempted calculations like this in the past, and I was surprised how much the choice ended up depending on the difference between the assumed investment rate vs. house rate.
drfuchs 5y ago
Where do I enter the intangible value of owning: "Don't have to worry about getting priced out if the neighborhood becomes popular; can do any improvements I want, when I want, how I want, and they become an asset; don't have to worry about not getting lease renewed at an inconvenient time (perhaps in the middle of a school year) when the owner's nephew gets divorced and needs a place; on the other hand, don't have to worry if I do want/need to move unexpectedly, but I'm in the middle of a lease." Versus, of course, for renting: "don't have to worry that the roof will need replacement, etc." Finally, you can do all the calculating you want, but retrospectively the biggest effect on financial outcome is liable to be whether you bought in what turns out to be the Detroit vs. Silicon Valley of say 40 years ago. Who knew back then? Who knows now? You pay your money and you take your chances.
- nick0garvey 5y ago
  This is the whole point of doing the calculation. If you determine that you're going to have $10,000 less in pocket per year, then you can make the call whether the freedom of owning a house is worth it for you for that price or not.
- hardtke 5y ago
  A hidden intangible that cannot be measured is that owners are much more likely to know and socialize with their neighbors. Even in a mostly homeowner neighborhoods, "the renters" often don't develop social ties the same way that owners do. There is something about knowing you are stuck there quasi-permanently with the same people.
  - forz877 5y ago
    A hidden major problem too can also be your neighbors, who can be incredibly annoying and won't go anywhere anytime soon. If you rent, oh well, go somewhere else. Not so easy with a house, also excluding neighbors who do legal things that devalue your home.
- kube-system 5y ago
  > Versus, of course, for renting: "don't have to worry that the roof will need replacement, etc." This is kind of a tangent, but worrying about maintenance is exactly why I own a house. When I rented, poor maintenance issues were my problem whether or not they were my responsibility. I'd much rather be empowered to do preventive maintenance or fix things immediately, than be forced to wait until something fails plus a few days for someone to show up to fix it.
jwally 5y ago
I'll throw in my $0.02; maybe add in a way to pay off the mortgage early; make extra payments or whatever.
sly010 5y ago
Maybe I am just missing it, but I don't see how this factors in the fact that you could invest the same money in the market.
- coptun 5y ago
  Yep this calc is practically useless. No one is renting and stuffing hundreds of thousands of dollars in cash under their mattress.
ruined 5y ago
add a rent-increase rate. most landlords bump rent every signing.
sys_64738 5y ago
When ones rents then are they not already paying somebody else's mortgage?
- BrissyCoder 5y ago
  I think you are missing the point.
WarOnPrivacy 5y ago
In 2021, the buy vs rent decision is a little like Should I buy a whale ranch on Mars or Venus? I suggest that the decision whether to rent a house might want to take into account that each rental ad is getting hundreds of applicants, each day - with few new ads showing up. ref: https://www.militarytimes.com/pay-benefits/mil-money/2021/07/01/military-families-caught-in-a-housing-crunch-suffer-deeply-this-pcs-season/ https://www.militarytimes.com/pay-benefits/mil-money/2021/07... ref: https://www.amisun.com/2021/06/27/once-in-a-generation-housing-shortage/ https://www.amisun.com/2021/06/27/once-in-a-generation-housi... ref: https://www.thedenverchannel.com/news/national-politics/the-race/nowhere-to-go-the-pandemic-pushes-the-housing-crisis-to-a-tipping-point https://www.thedenverchannel.com/news/national-politics/the-... ref: https://www.cbc.ca/news/bidding-wars-to-rent-a-house-in-ontario-tenants-and-agents-say-it-s-a-new-reality-1.6094412 https://www.cbc.ca/news/bidding-wars-to-rent-a-house-in-onta... Buying isn't any better with sales going to all-cash buyers who are paying way above and beyond market.
- 293984j29384 5y ago
  Why would you assume it's to rent a house? It's a great time to be an apartment renter in big markets like NYC. I just got 2 months free on my lease renewal and I've seen even better deals out there but I didn't want to move.
  - jaqalopes 5y ago
    Same here in Somerville outside Boston. There was a giant exodus last year due to COVID and landlords are desperate for any warm body even at a steep discount from the former rent.
    - seanmcdirmid 5y ago
      Completely the opposite here in Seattle. The rental market is bonkers right now, with very little inventory in places where people want to live. That is very different to how it was just a few months ago.
  - pricecomstock 5y ago
yboris 5y ago
Mega-Classic from The New York Times: https://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html https://www.nytimes.com/interactive/2014/upshot/buy-rent-cal... A beautiful, in-depth calculator to answer "Is it better to rent or buy?"
- theptip 5y ago
  This is the one to use, the OP is overly simplistic. The NYT model is great, if only to realize that only two variables drive the output; what do you forecast the stock market to do, and what do you forecast the housing market to do. The compound interest from allocating your resources to the faster growing of the two vastly overwhelms small compounding or even large fixed costs. The real question is therefore - how long do you believe housing prices will keep increasing in your chosen area? A secondary concern that is harder to price and seldom included in these models is that buying housing is a good hedge against being priced out of the area you work & want to live. Of course it’s not a purely financial decision but I think it’s important to be aware of what you’re leaving on the table whichever option you choose.
yboris 5y ago
Everyone should consider a manufactured home (mobile home) as an option. I lived in New Jersey where house prices were very high ($200,000 minimum for anything on the market). I bought a mobile home (1st house for me) for $50,000 and lived there for 6 years. Thanks to the crazy prices recently, I was able to sell it for more (this is not typical). But during the time, I paid significantly less in per-month costs than I would have, had I been renting.
- BeetleB 5y ago
  Be wary of mobile home parks, though. The owners of the parks are increasingly selling them to two types of folks: 1. Those who are looking to jack up rates and price people out. 2. Those who are looking to replace the park with, say, an office building or a mall. Particularly in the 2nd case, you are being evicted. And despite the name, mobile homes are not mobile in most cases. You will lose everything. Some states are passing regulations to protect the homeowners, so check your local laws.
- dragontamer 5y ago
  I have some friends in Texas who had their first home as a manufactured home in a trailer park. But note that the validity of mobile homes / manufactured homes depends strongly on your local culture... culture that's quite different from state-to-state, or city-to-city even. There are plenty of locations where mobile homes were driven out by NIMBY laws, and are simply not an option.
- rascul 5y ago
  I do a lot of work on houses, many of which are mobile homes. Many of them are made as cheap as possible and don't last well. The newer ones tend to be much better, as standards have improved. I would highly recommend having someone who has experience with mobile homes give it a thorough inspection before buying a used one. They can be great, though. I have an 1800 sq ft double wide built in 1993 that is in pretty good condition, but it had been fairly well maintained and I've had to do only minor repairs.
asdff 5y ago
It would be cool if this took in zip code to automate things like property tax rate or wherever else that data is relevant. It would be interesting to have some check mark too if you are a first time home buyer to apply those benefits.
- dasil003 5y ago
  Judging by how hard it was to get a concrete answer on what my property tax would be after actually buying a house a couple months ago, I suspect this might be a big lift.
mauvehaus 5y ago
You get old enough, and you get tired of somebody else making decisions from afar that affect your day to day life with no real consequences to them. Little things like the kitchen layout being moronic and having zero drawers get old when it isn't your choice to remodel or live with it. And while it's nice to say "just move", let's not forget that moving costs a couple months rent and a massive time investment to find a place to move to that's actually better. And then your current landlord gets some shitheel realtor to rent the place who repeatedly tries to schedule showings on an hour's notice. I'm pretty convinced most people buy because they're either tired of the bullshit that comes with renting or want to buy into a specific school district, not because they're worried about making a return on their investment.
- hatchnyc 5y ago
  Yeah, I wish we had German-style "unfurnished" apartments available in the US where you can rent an apartment that's literally concrete subfloor and unpainted walls, no kitchen appliances or cabinets, etc. I guess Americans move too frequently to make this viable.
  - dougmwne 5y ago
    Would your landlord pay you for the improvements you make? Is seems a full interior build out could cost tens of thousands of euros. Why not just buy if you have that much free cash sitting around for a down payment? And what happens if your landlord tries to push you out?
    - hatchnyc 5y ago
      I think this is not going to make sense if your only point of reference is residential rentals in a typical American city, but this is how it is done in at least some places in Europe. People tend to stay in one place for much longer than Americans. If you're on a budget you can go to Ikea and buy a kitchen...based on my friends' places I'd say that's the norm.
      - 5y ago
XnoiVeX 5y ago
This calculator needs to adjust for inflation/deflation.
actusual 5y ago
There is an edge case I see. When I set downpayment == to purchase price, it assumes I'll still be making payments, when there actually wouldn't be a loan. Not sure this matters.
BrissyCoder 5y ago
For me the quality of life, security and mental health that comes from owning trumps whatever the results a calculator like this is going to say. It doesn't factor in the anguish from having a family and seeing 30 other groups inspecting every single decent rental open home. Has been like that the last 3 years or so in Brisbane.
cheese_van 5y ago
How you weight the various factors involved with choosing a location varies by your stage in life. But a key consideration should be, "Do I want to live here? Does it accommodate my interests? Will living here bore me?" If you don't ask these questions the ROI will be less meaningful. And to an extreme, as I purchased after retirement, "Is this the house and community I'm won't terribly mind dying in?" It's a damned odd thing to ask yourself, if like me, it's your final house, but you'd better do it, the devil with ROI.
conductr 5y ago
Anyone have luck with that default $2500 maintenance budget? My lawn guy is basically that whole budget. Any service call is $500 minimum. I’ve replaced roofs, siding, HVAC systems, water hearers, etc. Trimming my mature trees costs over $3000! I know it’s just a placeholder but I always see an insanely low placeholder on these calculators and can’t help but think they are not properly setting expectations for prospective home buyers
- hasbot 5y ago
  I don't spend anywhere near $2500 a year on my '53 house. I did just get a new $10k roof, though, but annualizing everything my maintenance budget is maybe $1500.
- dataminer 5y ago
  Yes, depending on the condition of the house, and how temperamental it is. I was lucky with my last house, in 5 years of ownership only spent $6000, I took care of the lawn on my own. Roof was changed a year before I bought it so never gave me an issue and was under warranty. Water heater was a rental and was taken care by the company I was paying $20/month. After I sold the house, furnace gave up a week before the closing date so I got it fixed for $500. There was a water issue in the basement which cost $5000 to fix, but it still didn't blow the budget. Just a datapoint, but sometimes $2500/year is a reasonable budget.
- jurassic 5y ago
  I interpret the typical advice to cover DIY materials, required service calls (e.g. plumbing issue), and occasional high-ticket items (roofs, water heaters) but not relative luxuries like paid lawn care. I guess it depends how fancy your neighborhood is, but professional lawn care is not the norm at all where I grew up.
- throwaway0a5e 5y ago
  Nobody is subbing out literally everything. Most people in-house half or more of their tasks for substantial savings.
hasbot 5y ago
Need the ability to add pet fees and deposits when renting.
LouisSayers 5y ago
Another factor people miss is that the place you buy might be much worse than a place you could rent. Atm I share a rented place with others, but it's in a great location - walkable distance to Melbourne's CBD. I pay $250 per week for a good size room and the house is worth at least $1.5M. If I were to go buy a place in the current market I could only afford a place perhaps around $850k at most. I'd have to move away from the city and wouldn't be close to all the trendy bars and restaurants. I'd also be stuck having to work to pay my mortgage. Instead, I've taken up part time work, quit my job and work on building my own business full time. For my situation it makes zero sense to own a home.
- ceejayoz 5y ago
  Australia’s real estate market is particularly bad in this regard.
- chucknthem 5y ago
  The market around me is the opposite. The single family home I bought was just remodeled with modern amenities and the house is in a nice walkable neighborhood. The rentals around me costs less than my mortgage but they're not nearly as nice. I'd be willing to rent a place like mine, but there simply isn't any rental inventory like it. Maybe above a certain price people would rather spend that on a mortgage than rent.
hnhousingthrow 5y ago
These calculators don't reflect the reality/absurdity of the current economy. Anecdotal, but I bought a house in eastern California last year for $600k, now Zillow says it's worth $835k. Also, I'll unlikely ever be able to afford a house in the Bay Area, even though I make $220k/year at a company there. Still don't know what I'll do if my employer makes us return to the SF office in a few months. Relatedly, a ~70 year old woman bagged my groceries today and I doubt she's doing it for fun. Seems the accelerating wealth inequality is destroying our society/communities if it hasn't already.
- anonAndOn 5y ago
  I submit the housing market of Phoenix, Arizona as an example of peak bubble. There are numerous houses on the market today that were previously sold... ~30 days ago. This feels more ludicrous than the speculative housing bubble of '07.
  - throwaway0a5e 5y ago
    Yeah, pretty much anywhere California money is cashing out and fleeing too is way more insane than California itself.
    - sidlls 5y ago
      Meanwhile for half the sale price of one 1200 sq. ft. 3/2 townhome on the Peninsula I could purchase 3 4-unit multifamilies on mortgage, each grossing about $50k/year in rents. Will the appreciation of these properties be the same as that townhome? Almost certainly not. But money has time value, and the ancillary costs of ownership in CA are far greater.
    - NegativeLatency 5y ago
      Traveled though Missoula this summer and the housing market is absolutely wild.
  - jb775 5y ago
    The fact that you and everyone else claim we're in a peak bubble is evidence to me that we're not in a peak bubble.
rhacker 5y ago
I think the largest issue for me with renting is dealing with someone that pretends to be following the law. All I see is a bunch of management companies that are collecting $40 here and $40 there. If it truly wasn't about the background check fee, those prices would be pass through and automated on a website - not a $40 check made out to the management company. It's an industry rife with a ton of illegal and evil practices. We don't have a dog and someone tried to charge us $300 cleaning fee for a giant dog piss area in a closet. I loathe renting with a passion.
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onecommentman 5y ago
1. Do you have strong positive family ties to the area? Including in-laws. 2. Is your area where you’re currently living your querencia, your place of the heart? As contrasted against just the first place you landed after university. 3. Do you have or expect to have kids in the near future, or does your ideal potential mate want kids? If the answer is yes to any of these three questions, lean towards house. Overheated markets? Not your querencia? Want your family raised in a detached house in a decent area but priced out for the foreseeable future? You have a relocation decision, not a rent/buy decision. Bonus question: Can you support two mortgages, or rent+mortgage? There are a lot of paradises where you can build a house pretty cheaply. Rent for work, and build/buy for life. There’s a Buddhist calm that comes over your life when you own your own house free and clear in a place you love.
throwaway803453 5y ago
One of the reasons I planed to put most of my money in an expensive home and paying cash is to protect against liability. I had always thought your entire home is protected against lawsuits, but according to the link below it is only between $300k-$600k in CA. Meaning if someone 100% owns their $1M primary residence in CA, a lawsuit could force them out of their home. Please tell me I am misunderstanding this. https://www.jdsupra.com/legalnews/2021-say-hello-to-california-s-new-13281/ https://www.jdsupra.com/legalnews/2021-say-hello-to-californ...
throwitaway1235 5y ago
Assuming you live in a city, don't buy yet. We're in another historic bubble. The pop is on its way. Many homeowners have taken advantage of Covid related forbearance on their mortgages. Expect a lot of foreclosures once they expire (begining now).
- vineyardmike 5y ago
  > Many homeowners have taken advantage of Covid related forbearance on their mortgages. Expect a lot of foreclosures once they expire (begining now) I've seen no evidence that this is true. Do you have a source?
  - throwitaway1235 5y ago
    One of many sources regarding forbearance related to Covid. https://www.nasdaq.com/articles/3-moves-you-need-to-make-if-your-mortgage-is-about-to-come-out-of-forbearance-2021-07-19 https://www.nasdaq.com/articles/3-moves-you-need-to-make-if-... I don't have a source for increased foreclosures due to soon to be expiration. That's my speculation only.
kkotak 5y ago
In the US, the only way to generate passive wealth is through homeownership for most people. Others know how to invest and manage their portfolio actively.
joshfee 5y ago
This is a pretty good attempt, but I've yet to find a calculator that is as comprehensive as this gem. https://michaelbluejay.com/house/rentvsbuy.html https://michaelbluejay.com/house/rentvsbuy.html The site may not be flashy but the content is by far the best out there.
gwbas1c 5y ago
FYI: Historically home values keep place with inflation. Homes will depreciate in many markets if they aren't maintained; or sometimes just because the value doesn't go up as fast as inflation. Inflation is really around 4%. (I figured this all out when I built a house a few years ago.)
hamburgerwah 5y ago
These always fail to take into account enormous legal and tax advantages of purchasing a home. First time home buyer tax credits, IRA tax credit, mortgage interest tax credit, capital gain tax exclusion rollover, one time capital gain exclusion, and on and on. It is almost always better to a buy somewhere you can afford to given your salary and savings. If you want to pay for a certain lifestyle at the exclusion of owning a home that's just fine but don't pretend it's a better deal. If you are looking for a good up and coming place I think it is all but guaranteed at this point that homes in and near cameron county texas will 10X if not 100X within a couple of years due to spacex.
tsujp 5y ago
This doesn't consider the opportunity cost of having more money now for other investments. Say an index fund or what have you. That's fine but I don't think the rent vs. buy scenario exists within it's own vacuum sealed container.
speedgoose 5y ago
It's a much simpler answer in Norway : Yes you definitely should buy unless you can't afford it yet or plan to move in a very short time.
EVa5I7bHFq9mnYK 5y ago
This fails to take into account the average salary increase associated with moving to another location. For me, it was like 20% every few years. I think, over the years, the faster career advancement for a more mobile person dwarfs all the other costs in that table.
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j-sizz 5y ago
Ignores opportunity cost of having invested cashflow difference in assets of comparable risk

203 points by alach11 5y ago

My wife wants to buy a house, but I'm unable to make life decisions without trying to minmax them. I wasn't satisfied with existing rent vs. buy calculators, so I decided to build my own! I'm not a developer, so I apologize if it's a little rough looking... Some things it takes into account: - The actual rate of return on your down payment and extra costs of a house - Inflation - Itemized deductions on your taxes - The impact of state taxes - Mortgage interest deduction limit and SALT tax deduction limit Let me know what you think or what improvements you would like to see!

reggiepret 5y ago
this is great!! The final cashflow amount of the house graph (in the example) ends in the negative, s this accurate?
- alach11 5y ago
  It is accurate! While the house cashflow is negative in the example, it's at least less negative than the apartment cash flow. Maybe the moral of the story is living with your parents for free is better than either option!
  - jolmg 5y ago
    If this calculator is rent vs buy, why does the graph compare house vs apartment? For both houses and apartments, they can be bought or rented. Are you someplace where one type of home can only be bought and the other can only be rented?
    - alach11 5y ago
      Nah this is just bad terminology on the site. I’ll fix it. In my personal situation I’m deciding between continuing to rent my apartment vs. buying a house.
  - mikepurvis 5y ago
    Depending on your circumstances, it may not be possible to seriously consider it, but another alternative to rent-vs-buy might include various van/camper/coach options, which can be parked for months at a time at "seasonal" campsites, often for $500-1000/month. Obviously equipment like this isn't going to appreciate either, and you'll be subject to all the same maintenance costs of owning, so in some ways it's the worst of both worlds— but it may still be cheaper than trying to rent if you can't or won't enter the market right now and mooching from family isn't an option.
Finnucane 5y ago
Probably want to allow for the possibility of rent rises over time. One thing that I think this actually shows pretty well is the notion that part of the answer depends on how long you intend to stay in a place. If you expect to move in two or three years, it's probably not worth the hassle/expense of buying. If you intend to stay 5+ years in one place, it makes more sense to buy.
- kylestlb 5y ago
  This all depends on geography though. Buying in the bay area and only staying for 2.01 years could get you a pretty hefty ROR assuming you don't remodel anything, considering the supply constraints. Maybe covid & remote work will change that.
  - Finnucane 5y ago
    Maybe. Flipping is a risky business. Returns are not guaranteed. If you're just looking for a place to live, you should really evaluate it on that basis.
    - plank_time 5y ago
      I know something who went bankrupt and got a divorce after flipping condos in chicsgo just before the housing bust. It works until it doesn’t and it’s usually catastrophic.
- HideousKojima 5y ago
  >Probably want to allow for the possibility of rent rises over time. Most definitely, my apartment before buying a home was ~$100/month less than my current mortgage, now (3 years later) the rent for the exact same apartment is ~$300/month more than my mortgage.
- pessimizer 5y ago
  > Probably want to allow for the possibility of rent rises over time. Isn't that counting inflation twice?
madcaptenor 5y ago
This is nice. I definitely played around with some calculators like this when I was deciding to buy a house a few years ago. Off the top of my head, some things I'd add to make this more useful to a wide audience: - I don't know what I pay in state income and sales taxes. But I do know my income and my state's tax rate; income tax could be derived from that. I'm not sure how you'd estimate sales tax, though - you'd have to know how much of my spending is taxable. - I've heard a rule of thumb that home maintenance costs are 1% of the home's value per year; maybe default to that, especially since a first-time home owner doesn't really know what those costs are. However, older houses will require more maintenance and that cost probably scales with square footage, not cost. - you're assuming a 30-year mortgage - I'd put in the ability to change mortgage length. (Also, maybe a link to somewhere where I can find out what mortgage rates are.)
- hirsin 5y ago
  Maintenance cost likely scales with both size and cost. Size, for obvious reasons, and cost because the labor/materials cost of a repair is likely correlated with housing prices in the area. You then have to account for the portion of cost that's already correlated with size... +1 to mortgage length. We heavily pivoted our decision to buy on getting a 7 year ARM because my friend and I knew we wouldn't grow old together there (wanting to do things like get married and have our own families). A time bomb on the mortgage was a feature, for us, and a cost savings.
  - rory 5y ago
    In my experience as a small-time landlord, maintenance does scale somewhat with cost, but not linearly. A lot of big costs on the materials side (like say, a furnace) are more or less fixed. At least, repairs don't cost 4x as much in a 800k house as they do in a 200k house of the same size.
- BeetleB 5y ago
  > I've heard a rule of thumb that home maintenance costs are 1% of the home's value per year It's a very poor rule of thumb. Contrary to the other comment, these costs don't increase linearly with value of the house. Sure, if I live in an expensive area, it may go up 30%, but not much more. Looking at how much my house has appreciated, I can assure you I pay not much more in maintenance than when I bought it. The 1% rule came about when the median house price was under $200K.
shadowlight 5y ago
Automated state tax generation. Historical house appreciation by state or even better, city. Option to account for income from money in sp500.
phkahler 5y ago
>> My wife wants to buy a house... A pilot once shared with me the rule of the three F's. If it floats, flies, or fornicates, it's cheaper to rent than to own. You may substitute a 4 letter word for that last one. Anyway, you got a wife already so thats one. House don't start with F, so buy.
- camjohnson26 5y ago
  Seems like an oversimplification, usually it depends on other factors like how long you plan to live there.
fennecfoxen 5y ago
This is missing a rate of return on the money you would otherwise use for the down payment, information on whether that return would be taxable or is sheltered in a Roth or similar tax shelter, current and anticipated tax brackets if one sees that income taxed (at both time of sale and possibly retirement), current and anticipated capital gains rates that might apply to the gains from the home sale in the future (if you're over the threshhold)...
- pessimizer 5y ago
  > rate of return the money you would otherwise use for the down payment Really the most important number, but all of these suggestions are crucial to the calculation. Money that doesn't get invested in a house gets invested in other things. Pretend it's in an index fund.
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  - motioncuty 5y ago
    But when you take out a morgage you can leverage 800k of the banks money at negative real interrst rates, effectively paying you tens of thousands over the course of the loan and any appreciation of that asset gets multiplied by 5x on your initial down payment.
    - rashkov 5y ago
      Negative because the loan interest rate is below inflation?
      - motioncuty 5y ago
        Yup, mortgages are around 3% and the fed rate is near 0 for the next year or 2. If inflation averages over 3% per year, you are getting paid the difference to borrow.
anotherman554 5y ago
The best/ most powerful rent vs buy calculator I am aware of is the one offered here: https://michaelbluejay.com/house/rentvsbuy.html https://michaelbluejay.com/house/rentvsbuy.html browsing it might give you some ideas of features you can add to your calculator. It's also a small thing but having the choice to select the downpayment based on percentage down might be nice. I don't know why your calculator tells me getting a house is not worth even if it thinks the transaction is profitable. It states my cumulative profit is $29,030 but I shouldn't get a house.
- irrational 5y ago
  I wonder if it is purposefully biased towards renting so he can use it to convince his wife to rent when he says that she wants to buy.
- alach11 5y ago
  The determination of whether to buy the house is based on the calculated rate of return. So even if you make a profit, if the time horizon is large you’d be better off investing that money in stocks. The UI doesn’t make that clear enough.
  - barrkel 5y ago
    Houses are both leveraged investments (in a non-productive depreciating asset, I know, I know) and a forced savings mechanism. Investment in stocks by average people is not leveraged, and nor is there a forcing function that makes you put money into the stocks every month or you end up homeless. These two functions have some value - especially the latter.
  - majormajor 5y ago
    > The determination of whether to buy the house is based on the calculated rate of return. So even if you make a profit, if the time horizon is large you’d be better off investing that money in stocks. Can you give a more detailed example? What time horizon are you picturing? After you pay off the house you lose the leverage advantage of returns on selling a house you bought with a mortgage vs selling stocks, but you also stop having to pay the mortgage at all while you'd still be renting, likely at a far higher market rate, so looking at the post-mortgage-payoff curves, it's hard for me to see where the invested down payment + (mortgage + tax + upkeep - minus - rent) returns would be expected to be high enough to make up for that. (The more rational counterargument, though, would likely be around diversification? Better to have land + stocks then just one...)
simonw 5y ago
I'd love it to provide some mechanism for guestimating my taxes (maybe based on the state or city I live in) - I was too lazy to dig out a tax return to fill out those fields, which meant I couldn't easily use the calculator.
- ghaff 5y ago
  Especially outside of major cities, there are about a gazillion towns that have different tax rates that go to paying the local schools, emergency services, and town administration. Maybe there are APIs for that sort of information but I don't know.
  - simonw 5y ago
    That's why I want a guesstimate - give me a rough idea of how the tool works and that will convince me to dig out a tax return and fill in the fields for the most accurate estimate possible.
plank_time 5y ago
Some decisions aren’t mathematical. Sometimes it’s better to make a decision based on whether or not it makes sense for the family as opposed to dollars and sense. If your wife wants to buy a place, I suggest finding a compromise to figure out how to make both parties happy.
- seoaeu 5y ago
  At the same time, you should be highly skeptical of anyone encouraging you to make what might be the single largest purchase of your life without carefully working through the financials. Maybe your preferred option will cost you an extra $50,000 over the next decade and you decided to go with it anyway. That's totally fine as long as it is a conscious choice. If the difference is $500,000 then perhaps you should consider how strongly you actually care about renting vs. buying...
codegeek 5y ago
Nice project but if you are serious about buying a home, don't just look at numbers. Figure out what you and your wife want for yourself in next 2-5-7 years. If you see you guys staying in 1 place and build a family further, buying a home may not be a bad idea considering your finances are in shape (good credit, have 20% downpayment etc etc). I would say rule of thumb is 7 years in 1 place. If you are going to live in same place for 7+ years, buy with 20% down and total cost not >25-30% of monthly pay.
someelephant 5y ago
Life opportunity cost. When you buy a house you are making a big commitment. It will guide the path of your life. These days with remote work that's less and more of an issue. What if you would be happier living in the south of France?
ransom1538 5y ago
The home only expenses (down payment, home owners, etc) when you chose rent should be converted to a standard rate of return of VOO (index of SP 500) for the 15 years. THIS would be the greatest calculator ever built ever.
sjg007 5y ago
If your wife wants to buy a house… buy the house.
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gus_massa 5y ago

"Apartment" means rent and "House" means buying? I think that's confusing. It would be nice to auto update the graph every time something changes. It's nice that it has tips. Hi from Argentina! We have a somewhat different customs here so some fields are hard to guess. For example, I don't know if I can fill my taxes jointly. Another detail that confused me is that I didn't expect to sell the home after 14 years. It's not usual here, but I guess it changes in each country. Protip: Add a field that says "My S.O. want's to move anyway" :)

pimlottc 5y ago
Agree with the terminology being confusing. Houses can be rented and apartments (condominiums) can be purchased.
- cpursley 5y ago
  In North American lingo, "apartment" exclusively means a multi-family unit that you rent and don't own. If you own a multi-family unit it is a Condo (condominium) and never refered to as an Apartment. I know, confusing.
  - seanmcdirmid 5y ago
    Also, duplexes are houses with two units in them vs. a two floor apartment.
    - yazanobeidi 5y ago
      That’s a stacked townhome.
      - seanmcdirmid 5y ago
        On the 30th floor of an apartment building?
        5y ago

pestatije 5y ago

House prices are not included in inflation estimates, rental prices are. That's another thing that should be considered.

alach11 5y ago
There's a separate parameter to control the increase in house prices. My assumption is that houses have tended to increase faster than inflation in most markets.
- pestatije 5y ago
  Yes, and here is the great fallacy of current times economics. Whilst house price increases leave younger people unable to afford one, inflation (official numbers) keeps at its lowest levels ever.
- gruez 5y ago
  >My assumption is that houses have tended to increase faster than inflation in most markets. It does? Random chart I found: https://www.aei.org/wp-content/uploads/2020/01/cpi2020-875x1024.png https://www.aei.org/wp-content/uploads/2020/01/cpi2020-875x1.... It seems to be higher, but only slightly.
  - pestatije 5y ago
    That "Housing" in the chart is the housing component of inflation (rental, household furnishings, etc.)
    - gruez 5y ago
      Good point. The CPI increased 20.4% from june 2012[1] to june 2021 was 20.4%, but the "Rent of shelter" component increased 29.7% in the same time period. [1] that was the earliest year that was available at https://www.bls.gov/cpi/tables/supplemental-files/home.htm https://www.bls.gov/cpi/tables/supplemental-files/home.htm
- 5y ago

mandeepj 5y ago

Buying is better, if you are thinking a bit long term like 4-5+ Years. Now, why I said that: Here’s my story - I had lived in an apartment for 5 years. It’s my longest stretch at one place so far. I paid about $100k in rent for all of those years. When I left that place, I got nothing out of it. If I had a house, then I would had built some equity. Edit: removed - ‘Buying is always better’ from the first sentence

dharmab 5y ago
If you are not willing to do at least some DIY repairs, homeownership can become significantly more expensive than renting.
vmception 5y ago
Its a question because “having equity” isnt always the better answer Its how much, what percent of what, how much does it cost you to maintain and service, how long you are looking at Anyway thats the point of the calculator
jjice 5y ago
Always is a strong word. I move around a lot, from 6 to 18 months at a time. The time it would take to search, purchase, and resell a home doesn't make sense in that scenario. Renting gives some flexibility in moving compared to buying. If you're staying in one spot though, then I agree with you more.
MattGaiser 5y ago
Depends on your transaction costs.
reidjs 5y ago
Buying doesn’t make sense if 1. You can’t afford to own a home near your work 2. There’s a chance you will not stay in your current job for more than a few years 3. You don’t like DIY or home maintenance 4. You’re single and want to live near other single people
- tiborsaas 5y ago

csomar 5y ago

Why is the mortgage interest capped at 10%?

gruez 5y ago
Seems like a reasonable cap when the average rate for 30 year fixed rate is currently 2.88% https://fred.stlouisfed.org/series/MORTGAGE30US https://fred.stlouisfed.org/series/MORTGAGE30US
- moqca 5y ago
  A good interest rate in Mexico is 9%, with the most common form of mortgage being around 12%
BugsJustFindMe 5y ago
10% is more than 3x the average rate in the US for a 30 year loan period, and rates go down further for shorter periods.
seattle_spring 5y ago
If your credit is so bad that you can't get a loan better than 10%, you should in no circumstances whatsoever be buying a home.
- thebean11 5y ago
  In the US yes, because inflation is 2.4%. Some countries have higher inflation.

bechap 5y ago

This looks great! For those going through the process, I also found this tool helpful in determining whether to rent vs. buy: https://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html https://www.nytimes.com/interactive/2014/upshot/buy-rent-cal...

kylestlb 5y ago

If data exists on historical growth between single-family homes vs townhouse vs condo, it would be quite interesting to show here. Since SFH are not being built in certain metro areas anymore their prices seem to rise dramatically faster than space-efficient property.

cmpolis 5y ago

Thanks for posting - this is really helpful (reminds me of this similar NYT tool: https://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html https://www.nytimes.com/interactive/2014/upshot/buy-rent-cal...) A few notes: - "Final Cumulative Profit" is a bit confusing since this is not necessarily profit - this is how much less of a cost a house is over an apartment? - Is there a way to factor in opportunity cost of down payment being in the market instead of tied up in the house?

alach11 5y ago
Would it make more sense to invert it and plot cumulative cost? Rate of return in the results is basically the opportunity cost of your increased spend on the house. That can be compared to other possible investments.

epic9x 5y ago

You might want to include rental income as an option here, lots of folks may have a place that includes an attached unit.

secabeen 5y ago
The Deluxe calculator here is the one I used 10 years ago, it's quite good, but it doesn't have the best SEO, so it hide on the second page of the Google results, after a swarm of advertisement pages from mortgage companies: https://michaelbluejay.com/house/rentvsbuy.html https://michaelbluejay.com/house/rentvsbuy.html

bachmeier 5y ago

There's no way to put this into a calculator, but this decision isn't purely monetary. Do you enjoy having to maintain a home and property? If not, maybe buying a house isn't for you. Even if you hire someone, that can be a massive hassle, you have to worry about being ripped off, ... If you're not settled in your career to where you can comfortably take off long stretches of time during the day, you probably shouldn't buy a house. It's generally a bad idea for someone at the beginning of a career. There's so much to learn and it never ends - that's valuable time that could go to refreshing your mind or building up career capital. There's also the matter of risk. Are you willing and able to handle replacing your air conditioner, furnace, and roof in the same year? If you rent, you call the landlord and have them replace those things. You'll be okay if you have a big savings account or you don't mind putting it on a credit card with a high credit limit. If you've been in your house for two years and you spent everything on the down payment and furniture, you might have trouble sleeping at night.

jbb67 5y ago
but also the reverse applies. If you want to make alterations or improvements to your house, better not rent
- seanc 5y ago
  Yes, exactly. Or maybe you want a guarantee of being able to stay in one place for a long period of time, say to send your children to a particular school, or be close to neighbors or family.
  - bachmeier 5y ago
    The part about neighbors or family might be true, depending on whether they're going to stay put, but the part about the school is one of the biggest risks to buying a house. School boundaries get changed all the time. This is something I'm dealing with right now, and it could shave tens of thousands off the value of my house if it turns out wrong.
- bachmeier 5y ago

c4m 5y ago

This is a neat tool! There’s one more feature I’d want before using it seriously, which is a field for stock market return rate. If my down payment is 50,000, then in the rental (apartment) case I want to estimate how much I would be earning with 50,000 in the stock market.

silicon2401 5y ago

Based on checking a 500k house with a 50k down payment, this tells me PMI will be about 2k/year for the first 3 years. Is it really that cheap? Is there any reason to not go for a <20% down payment if it allows me to accelerate my house planning by several years, if it only ends up costing around 6k extra?

vel0city 5y ago
Yeah, my home was ~$320k, ~10% down, my PMI is $140/mo. The mortgage is written so if the house appraises higher that speeds up the point where PMI is taken off. Personally I think some people overly freak out about PMI. When you're talking the size of numbers involved in the mortgage and escrow accounts, $140/mo for a few years really isn't that crazy especially if it means you can get into the market sooner in a home you really want. I probably wouldn't have bought the house I'm in now looking at comps in my neighborhood. In a bit over a year comparable houses in my neighborhood are $60k+ more than what we bought at, and Zillow's estimate for my house (take it with a massive grain of salt) puts it a hair over $400k. If we would have waited a year for 15-20% we wouldn't be where we are now.
- silicon2401 5y ago
  Great point. In a way, the PMI becomes like an added aspect to the investment side of buying a house, in that you can either pay more money up front (the PMI, I mean) but get a better return on investment by having gotten in the market earlier. Whereas if you wait to save up for a down payment, the rising house prices may outpace your savings.

mattgibson 5y ago

These calculators seem to miss the point for me. If I spend less overall by renting, I don't care because I can't pass the property as an inheritance to my kids. If I buy, they get a house for free when I pass on. Also, if I rent, I have to continue to pay the same (high) rents through retirement where my income will likely drop drastically once I stop full time work. The aim of buying is to be mortgage-free when you retire so your pension gives you a decent quality of life.

ska 5y ago
You aren't looking at the calculations correctly, where the rent is a "win" it's because your overall net worth is higher than if you had bought. You might not have the house to pass to your kids, but you would have more cash than the value of the house. As to your second point, think of it this way: the tipping point on these two means you could just buy the house cash when you retire, and end up with more money in the bank also.
anotherman554 5y ago
The more sophisticated calculators allow you to compare buying and spending more on housing per month vs renting at a cheaper price and investing the extra money you have in the stock market. (Although many people may not have such discipline, and renting costs verse purchase costs are going to vary from market to market.) There's no advantage to passing on a house to kids verse passing on stocks. Also, similarly, there's no advantage to going mortgage free in retirement verse being rich on stocks and selling the stocks to buy a house 30 years from now, or paying rent by selling stocks.
- TomVDB 5y ago
  > There's no advantage to passing on a house to kids passing on stocks. Except for Proposition 13 in California, which allows you to pass on your real estate tax to your inheritors once. In the case of my neighbors, that means their son will pay ~$1200 in taxes per year vs ~$30k for us who own an identical house.
  - 5y ago

runako 5y ago

This looks great! A couple of comments: - some (large?) portion of mortgages will not allow PMI to be removed until you either a) inject cash to get to 20% equity or b) get to the time in the amortization schedule when you are scheduled to get to 20% equity. That is, if your home increases in notional value by 20%, you still have to pay PMI. So the PMI line item should probably not terminate after 3 years. - It would be awesome to include a rent growth factor. When I bought my first house, my annual mortgage was > the amount my next-door neighbor paid to buy his (similar) house. (Which would be driven in part by rents at that time.) Part of the benefit of home ownership is insulation from rising rents, and adding a rent factor would capture that.

monkeybutton 5y ago
+1 to including some kind of rent-growth factor. Where I live the amount a landlord can increase rent every year is capped fairly low (like 3%?) and I stayed in the same apartment for 7 years. In the beginning my rent was market rate and by the end it was way below. By not bouncing around apartments every couple of years I saved a ton of money which I ended up using for a down deposit on a house. On paper the decision looks crazy because the mortgage payments are higher than the rent I was paying but it doesn't take into account that moving wasn't an option, I'd have to stay in the same place forever (or at least until I got "renovicted").
jrs235 5y ago
If your home value has increased you can usually ask/tell the lender you believe the value has increased enough that PMI should fall off and that you'd like/are willing to pay for an appraisal (typically a few hundred dollars). Or, if your loan is owned by Fannie/Freddie, you may not even need an appraisal if the new value/increase is within certain percent range. I know this because I spoke toy lender (a credit union) about getting an appraisal to remove PMI. Knowing the outstay loan amount was X I said of it appraises at X/.8 thenwe should be able to drop PMI. Lender called me back and said that X falls within Fannie/Freddie allowed range that an appraisal wasn't needed. This only works in a market where prices are increasing. Your mileage will vary depending on your lender.
- 5y ago

waylandsmithers 5y ago

One piece of millenial defeatism I hear a lot is "Ugh, I'll never be able to afford a 20% down payment, home ownership is impossible" I'm not sure where this myth came from, but as a millenial who went through the buying process in 2012 and again in 2016, I remember both times the lender just asked how much we wanted to put down. We could have gone as low as 3%, or maybe even lower. Yes, you have to pay PMI (private mortgage insurance) for probably a couple hundred bucks extra a month if you don't have 20% equity in the house- but you can stop paying it as soon as you get to 20, and you can count increases in the home value towards that (through renovations or just market conditions). You can even have the interest rate increased very slightly instead of a separate PMI payment if you want to spread out the cost over the entire loan. The point is, you'll likely need to have 3 months rent for first, last, and security deposit when you start an apartment rental anyway, so the initial costs might be closer than you think.

ozarkerD 5y ago
Very true. FHA loans let you put as little down as 3.5% for first time buyers. I wouldn’t recommend it but the opportunity is there.
- seattle_spring 5y ago
  FHA loans in a competitive market put the buyer at an extreme disadvantage versus conventional or cash.
  - asdff 5y ago
    You still hear of people in these markets snagging homes for like 5% down even with the competition. Maybe I misunderstand, but you don't pay any realtor any money until you buy the home. Seems that there isn't any pain being 'in the market' continually getting out offered 99 times out of 100, if it means you get an offer that one time and are going to be renting anyway until then. Plus the whole time you are presumably saving more money and coming up with a stronger down payment.

dynm 5y ago

This would be better if it included a slider for what yearly investment return you would expect for assets not in a house. If I don't spend my down-payment on a house, I'll put it in the stock-market or something. Those gains are typically a huge part of the calculation when considering to rent vs. buy. I might be mistaken, but as far as I can tell that isn't reflected here.

alach11 5y ago
I tried to account for that with the rate of return number in the results. You can compare rate of return to your expected returns in the stock market.
- dynm 5y ago
  Oh, great, I misinterpreted that! (I thought it was the return on investment in the house, not your non-house portfolio.) A slider would still be nice. I've attempted calculations like this in the past, and I was surprised how much the choice ended up depending on the difference between the assumed investment rate vs. house rate.

drfuchs 5y ago

Where do I enter the intangible value of owning: "Don't have to worry about getting priced out if the neighborhood becomes popular; can do any improvements I want, when I want, how I want, and they become an asset; don't have to worry about not getting lease renewed at an inconvenient time (perhaps in the middle of a school year) when the owner's nephew gets divorced and needs a place; on the other hand, don't have to worry if I do want/need to move unexpectedly, but I'm in the middle of a lease." Versus, of course, for renting: "don't have to worry that the roof will need replacement, etc." Finally, you can do all the calculating you want, but retrospectively the biggest effect on financial outcome is liable to be whether you bought in what turns out to be the Detroit vs. Silicon Valley of say 40 years ago. Who knew back then? Who knows now? You pay your money and you take your chances.

nick0garvey 5y ago
This is the whole point of doing the calculation. If you determine that you're going to have $10,000 less in pocket per year, then you can make the call whether the freedom of owning a house is worth it for you for that price or not.
hardtke 5y ago
A hidden intangible that cannot be measured is that owners are much more likely to know and socialize with their neighbors. Even in a mostly homeowner neighborhoods, "the renters" often don't develop social ties the same way that owners do. There is something about knowing you are stuck there quasi-permanently with the same people.
- forz877 5y ago
  A hidden major problem too can also be your neighbors, who can be incredibly annoying and won't go anywhere anytime soon. If you rent, oh well, go somewhere else. Not so easy with a house, also excluding neighbors who do legal things that devalue your home.
kube-system 5y ago
> Versus, of course, for renting: "don't have to worry that the roof will need replacement, etc." This is kind of a tangent, but worrying about maintenance is exactly why I own a house. When I rented, poor maintenance issues were my problem whether or not they were my responsibility. I'd much rather be empowered to do preventive maintenance or fix things immediately, than be forced to wait until something fails plus a few days for someone to show up to fix it.

jwally 5y ago

I'll throw in my $0.02; maybe add in a way to pay off the mortgage early; make extra payments or whatever.

sly010 5y ago

Maybe I am just missing it, but I don't see how this factors in the fact that you could invest the same money in the market.

coptun 5y ago
Yep this calc is practically useless. No one is renting and stuffing hundreds of thousands of dollars in cash under their mattress.

ruined 5y ago

add a rent-increase rate. most landlords bump rent every signing.

sys_64738 5y ago

When ones rents then are they not already paying somebody else's mortgage?

BrissyCoder 5y ago
I think you are missing the point.

WarOnPrivacy 5y ago

In 2021, the buy vs rent decision is a little like Should I buy a whale ranch on Mars or Venus? I suggest that the decision whether to rent a house might want to take into account that each rental ad is getting hundreds of applicants, each day - with few new ads showing up. ref: https://www.militarytimes.com/pay-benefits/mil-money/2021/07/01/military-families-caught-in-a-housing-crunch-suffer-deeply-this-pcs-season/ https://www.militarytimes.com/pay-benefits/mil-money/2021/07... ref: https://www.amisun.com/2021/06/27/once-in-a-generation-housing-shortage/ https://www.amisun.com/2021/06/27/once-in-a-generation-housi... ref: https://www.thedenverchannel.com/news/national-politics/the-race/nowhere-to-go-the-pandemic-pushes-the-housing-crisis-to-a-tipping-point https://www.thedenverchannel.com/news/national-politics/the-... ref: https://www.cbc.ca/news/bidding-wars-to-rent-a-house-in-ontario-tenants-and-agents-say-it-s-a-new-reality-1.6094412 https://www.cbc.ca/news/bidding-wars-to-rent-a-house-in-onta... Buying isn't any better with sales going to all-cash buyers who are paying way above and beyond market.

293984j29384 5y ago
Why would you assume it's to rent a house? It's a great time to be an apartment renter in big markets like NYC. I just got 2 months free on my lease renewal and I've seen even better deals out there but I didn't want to move.
- jaqalopes 5y ago
  Same here in Somerville outside Boston. There was a giant exodus last year due to COVID and landlords are desperate for any warm body even at a steep discount from the former rent.
  - seanmcdirmid 5y ago
    Completely the opposite here in Seattle. The rental market is bonkers right now, with very little inventory in places where people want to live. That is very different to how it was just a few months ago.
- pricecomstock 5y ago

yboris 5y ago

Mega-Classic from The New York Times: https://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html https://www.nytimes.com/interactive/2014/upshot/buy-rent-cal... A beautiful, in-depth calculator to answer "Is it better to rent or buy?"

theptip 5y ago
This is the one to use, the OP is overly simplistic. The NYT model is great, if only to realize that only two variables drive the output; what do you forecast the stock market to do, and what do you forecast the housing market to do. The compound interest from allocating your resources to the faster growing of the two vastly overwhelms small compounding or even large fixed costs. The real question is therefore - how long do you believe housing prices will keep increasing in your chosen area? A secondary concern that is harder to price and seldom included in these models is that buying housing is a good hedge against being priced out of the area you work & want to live. Of course it’s not a purely financial decision but I think it’s important to be aware of what you’re leaving on the table whichever option you choose.

yboris 5y ago

Everyone should consider a manufactured home (mobile home) as an option. I lived in New Jersey where house prices were very high ($200,000 minimum for anything on the market). I bought a mobile home (1st house for me) for $50,000 and lived there for 6 years. Thanks to the crazy prices recently, I was able to sell it for more (this is not typical). But during the time, I paid significantly less in per-month costs than I would have, had I been renting.

BeetleB 5y ago
Be wary of mobile home parks, though. The owners of the parks are increasingly selling them to two types of folks: 1. Those who are looking to jack up rates and price people out. 2. Those who are looking to replace the park with, say, an office building or a mall. Particularly in the 2nd case, you are being evicted. And despite the name, mobile homes are not mobile in most cases. You will lose everything. Some states are passing regulations to protect the homeowners, so check your local laws.
dragontamer 5y ago
I have some friends in Texas who had their first home as a manufactured home in a trailer park. But note that the validity of mobile homes / manufactured homes depends strongly on your local culture... culture that's quite different from state-to-state, or city-to-city even. There are plenty of locations where mobile homes were driven out by NIMBY laws, and are simply not an option.
rascul 5y ago
I do a lot of work on houses, many of which are mobile homes. Many of them are made as cheap as possible and don't last well. The newer ones tend to be much better, as standards have improved. I would highly recommend having someone who has experience with mobile homes give it a thorough inspection before buying a used one. They can be great, though. I have an 1800 sq ft double wide built in 1993 that is in pretty good condition, but it had been fairly well maintained and I've had to do only minor repairs.

asdff 5y ago

It would be cool if this took in zip code to automate things like property tax rate or wherever else that data is relevant. It would be interesting to have some check mark too if you are a first time home buyer to apply those benefits.

dasil003 5y ago
Judging by how hard it was to get a concrete answer on what my property tax would be after actually buying a house a couple months ago, I suspect this might be a big lift.

mauvehaus 5y ago

You get old enough, and you get tired of somebody else making decisions from afar that affect your day to day life with no real consequences to them. Little things like the kitchen layout being moronic and having zero drawers get old when it isn't your choice to remodel or live with it. And while it's nice to say "just move", let's not forget that moving costs a couple months rent and a massive time investment to find a place to move to that's actually better. And then your current landlord gets some shitheel realtor to rent the place who repeatedly tries to schedule showings on an hour's notice. I'm pretty convinced most people buy because they're either tired of the bullshit that comes with renting or want to buy into a specific school district, not because they're worried about making a return on their investment.

hatchnyc 5y ago
Yeah, I wish we had German-style "unfurnished" apartments available in the US where you can rent an apartment that's literally concrete subfloor and unpainted walls, no kitchen appliances or cabinets, etc. I guess Americans move too frequently to make this viable.
- dougmwne 5y ago
  Would your landlord pay you for the improvements you make? Is seems a full interior build out could cost tens of thousands of euros. Why not just buy if you have that much free cash sitting around for a down payment? And what happens if your landlord tries to push you out?
  - hatchnyc 5y ago
    I think this is not going to make sense if your only point of reference is residential rentals in a typical American city, but this is how it is done in at least some places in Europe. People tend to stay in one place for much longer than Americans. If you're on a budget you can go to Ikea and buy a kitchen...based on my friends' places I'd say that's the norm.
    - 5y ago

XnoiVeX 5y ago

This calculator needs to adjust for inflation/deflation.

actusual 5y ago

There is an edge case I see. When I set downpayment == to purchase price, it assumes I'll still be making payments, when there actually wouldn't be a loan. Not sure this matters.

BrissyCoder 5y ago

For me the quality of life, security and mental health that comes from owning trumps whatever the results a calculator like this is going to say. It doesn't factor in the anguish from having a family and seeing 30 other groups inspecting every single decent rental open home. Has been like that the last 3 years or so in Brisbane.

cheese_van 5y ago

How you weight the various factors involved with choosing a location varies by your stage in life. But a key consideration should be, "Do I want to live here? Does it accommodate my interests? Will living here bore me?" If you don't ask these questions the ROI will be less meaningful. And to an extreme, as I purchased after retirement, "Is this the house and community I'm won't terribly mind dying in?" It's a damned odd thing to ask yourself, if like me, it's your final house, but you'd better do it, the devil with ROI.

conductr 5y ago

Anyone have luck with that default $2500 maintenance budget? My lawn guy is basically that whole budget. Any service call is $500 minimum. I’ve replaced roofs, siding, HVAC systems, water hearers, etc. Trimming my mature trees costs over $3000! I know it’s just a placeholder but I always see an insanely low placeholder on these calculators and can’t help but think they are not properly setting expectations for prospective home buyers

hasbot 5y ago
I don't spend anywhere near $2500 a year on my '53 house. I did just get a new $10k roof, though, but annualizing everything my maintenance budget is maybe $1500.
dataminer 5y ago
Yes, depending on the condition of the house, and how temperamental it is. I was lucky with my last house, in 5 years of ownership only spent $6000, I took care of the lawn on my own. Roof was changed a year before I bought it so never gave me an issue and was under warranty. Water heater was a rental and was taken care by the company I was paying $20/month. After I sold the house, furnace gave up a week before the closing date so I got it fixed for $500. There was a water issue in the basement which cost $5000 to fix, but it still didn't blow the budget. Just a datapoint, but sometimes $2500/year is a reasonable budget.
jurassic 5y ago
I interpret the typical advice to cover DIY materials, required service calls (e.g. plumbing issue), and occasional high-ticket items (roofs, water heaters) but not relative luxuries like paid lawn care. I guess it depends how fancy your neighborhood is, but professional lawn care is not the norm at all where I grew up.
throwaway0a5e 5y ago
Nobody is subbing out literally everything. Most people in-house half or more of their tasks for substantial savings.

hasbot 5y ago

Need the ability to add pet fees and deposits when renting.

LouisSayers 5y ago

Another factor people miss is that the place you buy might be much worse than a place you could rent. Atm I share a rented place with others, but it's in a great location - walkable distance to Melbourne's CBD. I pay $250 per week for a good size room and the house is worth at least $1.5M. If I were to go buy a place in the current market I could only afford a place perhaps around $850k at most. I'd have to move away from the city and wouldn't be close to all the trendy bars and restaurants. I'd also be stuck having to work to pay my mortgage. Instead, I've taken up part time work, quit my job and work on building my own business full time. For my situation it makes zero sense to own a home.

ceejayoz 5y ago
Australia’s real estate market is particularly bad in this regard.
chucknthem 5y ago
The market around me is the opposite. The single family home I bought was just remodeled with modern amenities and the house is in a nice walkable neighborhood. The rentals around me costs less than my mortgage but they're not nearly as nice. I'd be willing to rent a place like mine, but there simply isn't any rental inventory like it. Maybe above a certain price people would rather spend that on a mortgage than rent.

hnhousingthrow 5y ago

These calculators don't reflect the reality/absurdity of the current economy. Anecdotal, but I bought a house in eastern California last year for $600k, now Zillow says it's worth $835k. Also, I'll unlikely ever be able to afford a house in the Bay Area, even though I make $220k/year at a company there. Still don't know what I'll do if my employer makes us return to the SF office in a few months. Relatedly, a ~70 year old woman bagged my groceries today and I doubt she's doing it for fun. Seems the accelerating wealth inequality is destroying our society/communities if it hasn't already.

anonAndOn 5y ago
I submit the housing market of Phoenix, Arizona as an example of peak bubble. There are numerous houses on the market today that were previously sold... ~30 days ago. This feels more ludicrous than the speculative housing bubble of '07.
- throwaway0a5e 5y ago
  Yeah, pretty much anywhere California money is cashing out and fleeing too is way more insane than California itself.
  - sidlls 5y ago
    Meanwhile for half the sale price of one 1200 sq. ft. 3/2 townhome on the Peninsula I could purchase 3 4-unit multifamilies on mortgage, each grossing about $50k/year in rents. Will the appreciation of these properties be the same as that townhome? Almost certainly not. But money has time value, and the ancillary costs of ownership in CA are far greater.
  - NegativeLatency 5y ago
    Traveled though Missoula this summer and the housing market is absolutely wild.
- jb775 5y ago
  The fact that you and everyone else claim we're in a peak bubble is evidence to me that we're not in a peak bubble.

rhacker 5y ago

I think the largest issue for me with renting is dealing with someone that pretends to be following the law. All I see is a bunch of management companies that are collecting $40 here and $40 there. If it truly wasn't about the background check fee, those prices would be pass through and automated on a website - not a $40 check made out to the management company. It's an industry rife with a ton of illegal and evil practices. We don't have a dog and someone tried to charge us $300 cleaning fee for a giant dog piss area in a closet. I loathe renting with a passion.

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onecommentman 5y ago

1. Do you have strong positive family ties to the area? Including in-laws. 2. Is your area where you’re currently living your querencia, your place of the heart? As contrasted against just the first place you landed after university. 3. Do you have or expect to have kids in the near future, or does your ideal potential mate want kids? If the answer is yes to any of these three questions, lean towards house. Overheated markets? Not your querencia? Want your family raised in a detached house in a decent area but priced out for the foreseeable future? You have a relocation decision, not a rent/buy decision. Bonus question: Can you support two mortgages, or rent+mortgage? There are a lot of paradises where you can build a house pretty cheaply. Rent for work, and build/buy for life. There’s a Buddhist calm that comes over your life when you own your own house free and clear in a place you love.

throwaway803453 5y ago

One of the reasons I planed to put most of my money in an expensive home and paying cash is to protect against liability. I had always thought your entire home is protected against lawsuits, but according to the link below it is only between $300k-$600k in CA. Meaning if someone 100% owns their $1M primary residence in CA, a lawsuit could force them out of their home. Please tell me I am misunderstanding this. https://www.jdsupra.com/legalnews/2021-say-hello-to-california-s-new-13281/ https://www.jdsupra.com/legalnews/2021-say-hello-to-californ...

throwitaway1235 5y ago

Assuming you live in a city, don't buy yet. We're in another historic bubble. The pop is on its way. Many homeowners have taken advantage of Covid related forbearance on their mortgages. Expect a lot of foreclosures once they expire (begining now).

vineyardmike 5y ago
> Many homeowners have taken advantage of Covid related forbearance on their mortgages. Expect a lot of foreclosures once they expire (begining now) I've seen no evidence that this is true. Do you have a source?
- throwitaway1235 5y ago
  One of many sources regarding forbearance related to Covid. https://www.nasdaq.com/articles/3-moves-you-need-to-make-if-your-mortgage-is-about-to-come-out-of-forbearance-2021-07-19 https://www.nasdaq.com/articles/3-moves-you-need-to-make-if-... I don't have a source for increased foreclosures due to soon to be expiration. That's my speculation only.

kkotak 5y ago

In the US, the only way to generate passive wealth is through homeownership for most people. Others know how to invest and manage their portfolio actively.

joshfee 5y ago

This is a pretty good attempt, but I've yet to find a calculator that is as comprehensive as this gem. https://michaelbluejay.com/house/rentvsbuy.html https://michaelbluejay.com/house/rentvsbuy.html The site may not be flashy but the content is by far the best out there.

gwbas1c 5y ago

FYI: Historically home values keep place with inflation. Homes will depreciate in many markets if they aren't maintained; or sometimes just because the value doesn't go up as fast as inflation. Inflation is really around 4%. (I figured this all out when I built a house a few years ago.)

hamburgerwah 5y ago

These always fail to take into account enormous legal and tax advantages of purchasing a home. First time home buyer tax credits, IRA tax credit, mortgage interest tax credit, capital gain tax exclusion rollover, one time capital gain exclusion, and on and on. It is almost always better to a buy somewhere you can afford to given your salary and savings. If you want to pay for a certain lifestyle at the exclusion of owning a home that's just fine but don't pretend it's a better deal. If you are looking for a good up and coming place I think it is all but guaranteed at this point that homes in and near cameron county texas will 10X if not 100X within a couple of years due to spacex.

tsujp 5y ago

This doesn't consider the opportunity cost of having more money now for other investments. Say an index fund or what have you. That's fine but I don't think the rent vs. buy scenario exists within it's own vacuum sealed container.

speedgoose 5y ago

It's a much simpler answer in Norway : Yes you definitely should buy unless you can't afford it yet or plan to move in a very short time.

EVa5I7bHFq9mnYK 5y ago

This fails to take into account the average salary increase associated with moving to another location. For me, it was like 20% every few years. I think, over the years, the faster career advancement for a more mobile person dwarfs all the other costs in that table.

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j-sizz 5y ago

Ignores opportunity cost of having invested cashflow difference in assets of comparable risk