4 ms·

Renting is the equivalent of throwing away your money paying more than a mortgage in a lifetime and without having anything tangible in your hands after.

Ozzie_osman 5y ago
That's not always true. Renting can definitely be a better decision from a purely economic perspective (just Google "rent vs buy calculator" to see why).
fxtentacle 5y ago
It depends. I would have to pay my current rent for 83 years to match the purchase price of a similar house. Plus if I rent it, then repairs need to be paid for by the housing company. If I buy, then I'm paying for them. So with the current high housing asset prices and low rental prices, purchasing a house doesn't make financial sense.
- fragmede 5y ago
  There's a line where if makes sense to own vs rent, and sometimes local market conditions will land you in one camp vs the other. But at the end of the decade, if you're paying, eg $2,000/month in rent vs mortgage, after 30 years, one person owns their house, the other can look forwards to paying rent for another 30 years.
  - hnaccount_rng 5y ago
    Right now you'd neither a) after 30 years own the house at 2k/month and b) would have to pay for all the renovations within the 30 years (and I'd expect at least one pipe burst in that time). There are advantages of just renting. Even beyond the "I can just move if I have to" part.
  - chii 5y ago
    > $2,000/month in rent vs mortgage the mortgage is not 100% comparable to the rent, since not 100% of the mortgage is unrecoverable cost, unlike rent. Some percentage of the mortgage payment is the principle payment. If you subtract this principle payment, and add in the cost of capital for the mortgage (which is the opportunity cost of the initial deposit), you can then compare the cost of mortgage with rent. In most cases, rent should be cheaper (but of course, not always). A nice rule of thumb is to have a 5% rule - if you can rent annually for less than 5% of the cost of the property, you'd be ahead financially.
  - rosndo 5y ago
    Money you didn’t waste on buying a house could’ve been invested in less risky faster-appreciating assets like index funds. In many cities where buy prices are high the renter will end up with a higher net worth in the end.
cycomanic 5y ago
That's what's called a "Milchmädchen Rechnung" (milkmaid calculation) in German. It highly depends on the interest rate and the property market development. Now it has been true in recent years, largely due to the artificially low interest rates and the large housing demand. However, it could (and has historically before) make much more sense to invest your capital otherwise and rent instead.
fulafel 5y ago
It's a different model, like buying groceries vs loaning money to get a farm. There are responsibilities, tied capital, operating risks that may devalue the asset or render it useless, liquidity and asset price risks, and known money sinks and on the upside you may have a valuable asset still on your hands when you move on or kick the bucket. And upside possibilities of course too like windfall from apprecating asset prices. The main thing that makes renting a worse deal in many jurisdictions are the tax subsidies towards home ownership and taxation of rentals, otherwise in a working market it's a little rentiers profit and a lot of risk pricing / speculation. Generally renting may take a smaller slice of your cash flow and allow you to invest the difference which will decide which will affect which scenario will come out $$ wise ahead in the endgame.
rosndo 5y ago
This is ridiculous, there are many cities where it’s vastly cheaper to rent than to own. Look at London or Barcelona for example. Landlords in these cities aren’t hoping to come anywhere near covering their mortgages with rent payments, they are hoping to profit from real estate appreciation. This is really basic economics, it’s incredible to see people railing against this on HN. Even the home-ownership obsessed US is full of cities where it’s a vastly better financial decision to rent instead of buying.
- tigershark 5y ago
  I live and own an house in London. Rents are absolutely crazy here, you have no idea what you are speaking about.
  - rosndo 5y ago
    Oh please, I pay 6000GBP a month for my apartment. I know all about crazy rents, I also know that the purchase price would be disproportionally high compared to the rent I’m paying. Most landlords here are betting on property values continuing to grow, they’ll never turn a profit on rents.

Ozzie_osman 5y ago

That's not always true. Renting can definitely be a better decision from a purely economic perspective (just Google "rent vs buy calculator" to see why).

fxtentacle 5y ago

It depends. I would have to pay my current rent for 83 years to match the purchase price of a similar house. Plus if I rent it, then repairs need to be paid for by the housing company. If I buy, then I'm paying for them. So with the current high housing asset prices and low rental prices, purchasing a house doesn't make financial sense.

fragmede 5y ago
There's a line where if makes sense to own vs rent, and sometimes local market conditions will land you in one camp vs the other. But at the end of the decade, if you're paying, eg $2,000/month in rent vs mortgage, after 30 years, one person owns their house, the other can look forwards to paying rent for another 30 years.
- hnaccount_rng 5y ago
  Right now you'd neither a) after 30 years own the house at 2k/month and b) would have to pay for all the renovations within the 30 years (and I'd expect at least one pipe burst in that time). There are advantages of just renting. Even beyond the "I can just move if I have to" part.
- chii 5y ago
  > $2,000/month in rent vs mortgage the mortgage is not 100% comparable to the rent, since not 100% of the mortgage is unrecoverable cost, unlike rent. Some percentage of the mortgage payment is the principle payment. If you subtract this principle payment, and add in the cost of capital for the mortgage (which is the opportunity cost of the initial deposit), you can then compare the cost of mortgage with rent. In most cases, rent should be cheaper (but of course, not always). A nice rule of thumb is to have a 5% rule - if you can rent annually for less than 5% of the cost of the property, you'd be ahead financially.
- rosndo 5y ago
  Money you didn’t waste on buying a house could’ve been invested in less risky faster-appreciating assets like index funds. In many cities where buy prices are high the renter will end up with a higher net worth in the end.

cycomanic 5y ago

That's what's called a "Milchmädchen Rechnung" (milkmaid calculation) in German. It highly depends on the interest rate and the property market development. Now it has been true in recent years, largely due to the artificially low interest rates and the large housing demand. However, it could (and has historically before) make much more sense to invest your capital otherwise and rent instead.

fulafel 5y ago

It's a different model, like buying groceries vs loaning money to get a farm. There are responsibilities, tied capital, operating risks that may devalue the asset or render it useless, liquidity and asset price risks, and known money sinks and on the upside you may have a valuable asset still on your hands when you move on or kick the bucket. And upside possibilities of course too like windfall from apprecating asset prices. The main thing that makes renting a worse deal in many jurisdictions are the tax subsidies towards home ownership and taxation of rentals, otherwise in a working market it's a little rentiers profit and a lot of risk pricing / speculation. Generally renting may take a smaller slice of your cash flow and allow you to invest the difference which will decide which will affect which scenario will come out $$ wise ahead in the endgame.

rosndo 5y ago

This is ridiculous, there are many cities where it’s vastly cheaper to rent than to own. Look at London or Barcelona for example. Landlords in these cities aren’t hoping to come anywhere near covering their mortgages with rent payments, they are hoping to profit from real estate appreciation. This is really basic economics, it’s incredible to see people railing against this on HN. Even the home-ownership obsessed US is full of cities where it’s a vastly better financial decision to rent instead of buying.

tigershark 5y ago
I live and own an house in London. Rents are absolutely crazy here, you have no idea what you are speaking about.
- rosndo 5y ago
  Oh please, I pay 6000GBP a month for my apartment. I know all about crazy rents, I also know that the purchase price would be disproportionally high compared to the rent I’m paying. Most landlords here are betting on property values continuing to grow, they’ll never turn a profit on rents.