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> Paying property taxes and mortgage interest and insurance and maintenance and real estate commissions are also throwing away money. I don't understand, do yo

> Paying property taxes and mortgage interest and insurance and maintenance and real estate commissions are also throwing away money. I don't understand, do you think landlords don't pay tax, insurance premiums, or maintenance costs for their property? Those are all passed on to tenants with room left over to make the landlord a profit.

WalterBright 5y ago
Of course the landlords do. But I'm talking to the assumption that paying rent is throwing away money, while buying a house is not throwing money away.
- Clubber 5y ago
  >But I'm talking to the assumption that paying rent is throwing away money, while buying a house is not throwing money away. Compare paying someone $3k a month to use their asset vs paying a bank ~$3k (probably less) a month while owning that same appreciating asset. When renting, that $3k is gone, a guaranteed loss. With buying, it goes into an asset you can later sell, hopefully at a higher price. Alternatively you can keep it and not have to pay mortgage or rent once it's paid off and still have a place to live. You can also borrow off whatever equity you've built up. Also that mortgage payment is locked in, so you aren't subject to the landlord raising rent after your contract expires in a couple of years. It's a big investment that you also get to live in. You could lose money on it, but it's unlikely in most populated places, and you will most likely lose less than what you would otherwise pay in rent. Just make sure you buy in an area / state that isn't shrinking.
  - WalterBright 5y ago
    Interest payments are not adding to your wealth, they're subtracting from it. Almost none of your house payment in the early years of the mortgage goes towards increasing equity. > that mortgage payment is locked in Unless you bought an adjustable rate mortgage. Once you do buy a house, you'll discover that taxes, maintenance, insurance, etc., are not at all locked in. If you don't pay the taxes, you won't have a place to live, as the government will toss you out. Nearly all people imagine that if they paid $X for a house, then sold it for $(X +Y) that they made $Y profit. They leave out all other costs, like taxes, real estate commissions, insurance, etc., etc., etc.
    - Clubber 5y ago
      >Interest payments are not adding to your wealth, they're subtracting from it. Almost none of your house payment in the early years of the mortgage goes towards increasing equity. Ya that's fair based on the payment schedule, banks gotta get their money if you pay it off early; but still more equity than renting. >Unless you bought an adjustable rate mortgage. Ya a lot of people got burned by balloon payments in 2008 after the market tanked. They were speculating more so than buying a house to live in many times I suspect. I bought a house in 2002 and it never went below what I paid for it by 2008. I bought at a really good time for my city though. >Nearly all people imagine that if they paid $X for a house, then sold it for $(X +Y) that they made $Y profit. I don't think anything ever works that way. Always giving someone a cut. >They leave out all other costs, like taxes, real estate commissions, insurance, etc., etc., etc. Ya all that sucks. But if you are renting, you still pay that for somebody else, it's baked in plus profit. If renting wasn't profitable, they wouldn't do it.

WalterBright 5y ago

Of course the landlords do. But I'm talking to the assumption that paying rent is throwing away money, while buying a house is not throwing money away.

Clubber 5y ago
>But I'm talking to the assumption that paying rent is throwing away money, while buying a house is not throwing money away. Compare paying someone $3k a month to use their asset vs paying a bank ~$3k (probably less) a month while owning that same appreciating asset. When renting, that $3k is gone, a guaranteed loss. With buying, it goes into an asset you can later sell, hopefully at a higher price. Alternatively you can keep it and not have to pay mortgage or rent once it's paid off and still have a place to live. You can also borrow off whatever equity you've built up. Also that mortgage payment is locked in, so you aren't subject to the landlord raising rent after your contract expires in a couple of years. It's a big investment that you also get to live in. You could lose money on it, but it's unlikely in most populated places, and you will most likely lose less than what you would otherwise pay in rent. Just make sure you buy in an area / state that isn't shrinking.
- WalterBright 5y ago
  Interest payments are not adding to your wealth, they're subtracting from it. Almost none of your house payment in the early years of the mortgage goes towards increasing equity. > that mortgage payment is locked in Unless you bought an adjustable rate mortgage. Once you do buy a house, you'll discover that taxes, maintenance, insurance, etc., are not at all locked in. If you don't pay the taxes, you won't have a place to live, as the government will toss you out. Nearly all people imagine that if they paid $X for a house, then sold it for $(X +Y) that they made $Y profit. They leave out all other costs, like taxes, real estate commissions, insurance, etc., etc., etc.
  - Clubber 5y ago
    >Interest payments are not adding to your wealth, they're subtracting from it. Almost none of your house payment in the early years of the mortgage goes towards increasing equity. Ya that's fair based on the payment schedule, banks gotta get their money if you pay it off early; but still more equity than renting. >Unless you bought an adjustable rate mortgage. Ya a lot of people got burned by balloon payments in 2008 after the market tanked. They were speculating more so than buying a house to live in many times I suspect. I bought a house in 2002 and it never went below what I paid for it by 2008. I bought at a really good time for my city though. >Nearly all people imagine that if they paid $X for a house, then sold it for $(X +Y) that they made $Y profit. I don't think anything ever works that way. Always giving someone a cut. >They leave out all other costs, like taxes, real estate commissions, insurance, etc., etc., etc. Ya all that sucks. But if you are renting, you still pay that for somebody else, it's baked in plus profit. If renting wasn't profitable, they wouldn't do it.