4 ms·

its not renting vs owning that's the problem, its renting vs mortgage where mortgage is improperly considered synonymous with ownership. but that's because its

its not renting vs owning that's the problem, its renting vs mortgage where mortgage is improperly considered synonymous with ownership. but that's because its so rare to be able to own the home near the places you can rent. so sure, renting vs buying a home in cash will give the cash ownership a leg up. but then it shifts over to people that would love to espouse about the 'time value of money' and leverage, where putting all the cash down is suboptimal vs a mortgage. the % increase of the home value isn't amplified when using cash up front either. so lets optimize this further, renting vs mortgage with the option to pay it off at any moment is always better. but nobody has that cash, so we're back at square one. if you HAVE to do a mortgage, then its likely that renting will be a better deal for you for over 10 years straight, before the mortgage pays dividends.

eru 2y ago
> if you HAVE to do a mortgage, then its likely that renting will be a better deal for you for over 10 years straight, before the mortgage pays dividends. How do mortgages pay dividends? In any case, it's all about opportunity costs, and yields. To give an extreme example: if the house costs 100x the yearly rent, you are probably better off putting your money in the stock market instead of buying the property, and paying your rent from the returns on the stocks.
- kamaal 2y ago
  Having to pay rent likely makes retiring early, or even retiring itself impossible. Somethings like marriage, kids, buying home just have be done in life as early as you can. Note money is just a number at the end. The idea is not to have max($money), rather max($free_time, $health). Optimise for $free_time and $health, and then you have a very different life strategy to work towards.
  - eru 2y ago
    You are still ignoring opportunity costs. If you have $x, you can buy a house and save on $y rent. But you could also buy eg bonds, and make $z return per year. If z > y, going for the bonds is better. Free time and health don't even come into the picture here. [0] (Of course, taxes and regulations can make this more complicated. And there are systematic and idiosyncratic risks to take into account.) It's not automatic that buying owner-occupied property is always the best way to invest your wealth. [0] Well, I assume renting is better for your health: I was significantly less stressed about all the water damage that we had about two years ago, because I knew it was ultimately my landlord's problem, not mine. But the overall effect is likely to be rather minor, and it can go either way, as some people get a mental health benefit out of knowing that they own their home.
    - somenameforme 2y ago
      [0] is so unbelievably true having lived through a major natural disaster. People don't realize how much, in general, you're on your own you are after something like that. Really life and perspective changing. BUT I think you're also misunderstanding his point about buying - it's not about maximizing your wealth which in the end doesn't even matter, but rather about minimizing the things you need to worry about. Even bonds can be stressful because they're not guaranteed money as they might seem due to 'guaranteed returns.' If rates/inflation go up you're left with money losing pieces of paper. See Silicon Valley Bank [1] for the obvious example. Even if your house depreciates, it's still a house! There's even an upside - your rent to the government decreases. The one case where I think buying doesn't really make sense is for people who enjoy traveling long-term. You can still theoretically rent or sell the place, but now you're back to increasing life stresses especially in the rental cases because you have a lot of obligations there that would require employees if you're remote and so on. And then moving money internationally, especially between currencies, and all of this stuff. Just ugh, no no no. [1] - https://en.wikipedia.org/wiki/Collapse_of_Silicon_Valley_Bank https://en.wikipedia.org/wiki/Collapse_of_Silicon_Valley_Ban...
      - eru 2y ago
        Yes, even bonds can be stressful. But also: an owner occupied house is a single lumpy, undiversified asset. And in many cases it's bought on so much leverage, that its value is bigger than the buyer's entire net-worth. > Even if your house depreciates, it's still a house! There's even an upside - your rent to the government decreases. Yes. Though depending on government policies, you can also lose use of your house (or even lose your house). Depending on where you live and how you set up your holdings, investing in international stocks and bond can be more stable. To summarise: owner occupied housing does make sense for a lot of people. But it's far from being automatically always being the best choice.
    - kamaal 2y ago
      Im guessing different people have different life priorities. So in some way its not correct to argue a point derived from an assumption/axiom other person doesn't believe in. >>Well, I assume renting is better for your health: I was significantly less stressed about all the water damage that we had about two years ago, because I knew it was ultimately my landlord's problem, not mine. Paid by your money. >> But the overall effect is likely to be rather minor, and it can go either way, as some people get a mental health benefit out of knowing that they own their home. I get a feeling if one is fairly rich they don't have to worry about money. When you are that rich, it doesn't matter whether you rent or own.
- elif 2y ago
  When i paid off my house and calculated my total payments, it came out to 6.8 years of the rent we had been paying when we bought it, (which was of course going up annually so it's probably better than 6x) 100x is just bad decision making
  - eru 2y ago
    100x was a bit extreme for the sake of a simple example, but rental yields in eg Singapore are around 2-4% apparently. And they don't have capital gains tax. So investing in stocks or bonds and using the returns to pay rent really does look more realistic in that part of the world.
- Sohcahtoa82 2y ago
  Where I live, rents are about equal to the cost of mortgage + property tax, if not slightly more. This means you don't save money in the short term by renting. Mortgage is temporary though, rent is eternal and usually increasing over time. This means you don't save money in the long term, either.
kamaal 2y ago
From where I come(South Indian Muslim), there is a saying that how quickly you own a home, get married and have kids decide the overall affluence you have in life. If eat that frog is a think for daily schedule, there is also such a thing for life itself. You just have to get a few things done as early in life as you can. Or you end up living for other people.
- somenameforme 2y ago
  It's only as one ages that we begin to realize how much wisdom there is in 'traditional' ways of life. It's almost like over millennia of humanity, we gradually found ways to maximize overall outcomes, even if they might come with aspects that aren't as ideologically ideal. At least this is something I can pass on to my own children.
  - eru 2y ago
    Most 'traditional' ways of life often aren't all that old. Definitely not millennia. (However they might still be a good idea. I don't know.) It also depends on how you translate the 'traditional way'. For example, on the one hand, for most of history people had about one surviving descendant per person, ie two kids that made it into adulthood to have their own kids. [0] On the other hand, they gave birth to many, many more kids. Which of the two perspectives do you want to preserve? Similarly, during most of the last few millennia most people used to have kids really late in life: they typically only had about perhaps 20 years or less left to live when their first child was born. Should we emulate that? Viewed through a different lens, people used to have kids really early in life: the distance in years between your own birth and the birth of your children was much shorter, too. Of course, the above paragraph is just a long winded way to say that people live longer these days. But still: how do you want to translate past behaviour? It's a choice that's up to you. [0] I'm basing that purely on the mathematical observation that population numbers have only gone up substantially in the last few hundred years. Thus replacement level fertility used to be the norm.
    - somenameforme 2y ago
thowawatp302 2y ago
You can’t ever roll rent forward into the new purchase. That’s not the same for a mortgage
kelnos 2y ago
This is a bit of a weird take. For starters, people don't buy a house to live in solely because of the financials around it. They also buy the house because they want it. When it comes to mortgage vs. buying outright, it just depends. I managed to get a very low interest rate for my primary home; the money I didn't put into the house is busy making quite a bit more than that very low interest rate for me yearly. If I were to rent out the house, I could probably get more for it than what I'm paying in mortgage interest + property taxes, so renting isn't really better (and then I'd be subject to the rent-jacking whims of my landlord). But even if I couldn't, I still just... want this house to be mine. There's value in that to me. > if you HAVE to do a mortgage, then its likely that renting will be a better deal for you This is very regionally-dependent. There are places where rents are significantly more expensive than mortgage payments, and places where homes cost so much that most people rent at a fairly reasonable rate in comparison.
- yieldcrv 2y ago
  > This is very regionally-dependent. Exactly, and so is a mortgage to home equity belief system. That's the point. Be objective.
deleted 2y ago
[deleted]

eru 2y ago

> if you HAVE to do a mortgage, then its likely that renting will be a better deal for you for over 10 years straight, before the mortgage pays dividends. How do mortgages pay dividends? In any case, it's all about opportunity costs, and yields. To give an extreme example: if the house costs 100x the yearly rent, you are probably better off putting your money in the stock market instead of buying the property, and paying your rent from the returns on the stocks.

kamaal 2y ago
Having to pay rent likely makes retiring early, or even retiring itself impossible. Somethings like marriage, kids, buying home just have be done in life as early as you can. Note money is just a number at the end. The idea is not to have max($money), rather max($free_time, $health). Optimise for $free_time and $health, and then you have a very different life strategy to work towards.
- eru 2y ago
  You are still ignoring opportunity costs. If you have $x, you can buy a house and save on $y rent. But you could also buy eg bonds, and make $z return per year. If z > y, going for the bonds is better. Free time and health don't even come into the picture here. [0] (Of course, taxes and regulations can make this more complicated. And there are systematic and idiosyncratic risks to take into account.) It's not automatic that buying owner-occupied property is always the best way to invest your wealth. [0] Well, I assume renting is better for your health: I was significantly less stressed about all the water damage that we had about two years ago, because I knew it was ultimately my landlord's problem, not mine. But the overall effect is likely to be rather minor, and it can go either way, as some people get a mental health benefit out of knowing that they own their home.
  - somenameforme 2y ago
    [0] is so unbelievably true having lived through a major natural disaster. People don't realize how much, in general, you're on your own you are after something like that. Really life and perspective changing. BUT I think you're also misunderstanding his point about buying - it's not about maximizing your wealth which in the end doesn't even matter, but rather about minimizing the things you need to worry about. Even bonds can be stressful because they're not guaranteed money as they might seem due to 'guaranteed returns.' If rates/inflation go up you're left with money losing pieces of paper. See Silicon Valley Bank [1] for the obvious example. Even if your house depreciates, it's still a house! There's even an upside - your rent to the government decreases. The one case where I think buying doesn't really make sense is for people who enjoy traveling long-term. You can still theoretically rent or sell the place, but now you're back to increasing life stresses especially in the rental cases because you have a lot of obligations there that would require employees if you're remote and so on. And then moving money internationally, especially between currencies, and all of this stuff. Just ugh, no no no. [1] - https://en.wikipedia.org/wiki/Collapse_of_Silicon_Valley_Bank https://en.wikipedia.org/wiki/Collapse_of_Silicon_Valley_Ban...
    - eru 2y ago
      Yes, even bonds can be stressful. But also: an owner occupied house is a single lumpy, undiversified asset. And in many cases it's bought on so much leverage, that its value is bigger than the buyer's entire net-worth. > Even if your house depreciates, it's still a house! There's even an upside - your rent to the government decreases. Yes. Though depending on government policies, you can also lose use of your house (or even lose your house). Depending on where you live and how you set up your holdings, investing in international stocks and bond can be more stable. To summarise: owner occupied housing does make sense for a lot of people. But it's far from being automatically always being the best choice.
  - kamaal 2y ago
    Im guessing different people have different life priorities. So in some way its not correct to argue a point derived from an assumption/axiom other person doesn't believe in. >>Well, I assume renting is better for your health: I was significantly less stressed about all the water damage that we had about two years ago, because I knew it was ultimately my landlord's problem, not mine. Paid by your money. >> But the overall effect is likely to be rather minor, and it can go either way, as some people get a mental health benefit out of knowing that they own their home. I get a feeling if one is fairly rich they don't have to worry about money. When you are that rich, it doesn't matter whether you rent or own.
elif 2y ago
When i paid off my house and calculated my total payments, it came out to 6.8 years of the rent we had been paying when we bought it, (which was of course going up annually so it's probably better than 6x) 100x is just bad decision making
- eru 2y ago
  100x was a bit extreme for the sake of a simple example, but rental yields in eg Singapore are around 2-4% apparently. And they don't have capital gains tax. So investing in stocks or bonds and using the returns to pay rent really does look more realistic in that part of the world.
Sohcahtoa82 2y ago
Where I live, rents are about equal to the cost of mortgage + property tax, if not slightly more. This means you don't save money in the short term by renting. Mortgage is temporary though, rent is eternal and usually increasing over time. This means you don't save money in the long term, either.

kamaal 2y ago

From where I come(South Indian Muslim), there is a saying that how quickly you own a home, get married and have kids decide the overall affluence you have in life. If eat that frog is a think for daily schedule, there is also such a thing for life itself. You just have to get a few things done as early in life as you can. Or you end up living for other people.

somenameforme 2y ago
It's only as one ages that we begin to realize how much wisdom there is in 'traditional' ways of life. It's almost like over millennia of humanity, we gradually found ways to maximize overall outcomes, even if they might come with aspects that aren't as ideologically ideal. At least this is something I can pass on to my own children.
- eru 2y ago
  Most 'traditional' ways of life often aren't all that old. Definitely not millennia. (However they might still be a good idea. I don't know.) It also depends on how you translate the 'traditional way'. For example, on the one hand, for most of history people had about one surviving descendant per person, ie two kids that made it into adulthood to have their own kids. [0] On the other hand, they gave birth to many, many more kids. Which of the two perspectives do you want to preserve? Similarly, during most of the last few millennia most people used to have kids really late in life: they typically only had about perhaps 20 years or less left to live when their first child was born. Should we emulate that? Viewed through a different lens, people used to have kids really early in life: the distance in years between your own birth and the birth of your children was much shorter, too. Of course, the above paragraph is just a long winded way to say that people live longer these days. But still: how do you want to translate past behaviour? It's a choice that's up to you. [0] I'm basing that purely on the mathematical observation that population numbers have only gone up substantially in the last few hundred years. Thus replacement level fertility used to be the norm.
  - somenameforme 2y ago

thowawatp302 2y ago

You can’t ever roll rent forward into the new purchase. That’s not the same for a mortgage

kelnos 2y ago

This is a bit of a weird take. For starters, people don't buy a house to live in solely because of the financials around it. They also buy the house because they want it. When it comes to mortgage vs. buying outright, it just depends. I managed to get a very low interest rate for my primary home; the money I didn't put into the house is busy making quite a bit more than that very low interest rate for me yearly. If I were to rent out the house, I could probably get more for it than what I'm paying in mortgage interest + property taxes, so renting isn't really better (and then I'd be subject to the rent-jacking whims of my landlord). But even if I couldn't, I still just... want this house to be mine. There's value in that to me. > if you HAVE to do a mortgage, then its likely that renting will be a better deal for you This is very regionally-dependent. There are places where rents are significantly more expensive than mortgage payments, and places where homes cost so much that most people rent at a fairly reasonable rate in comparison.

yieldcrv 2y ago
> This is very regionally-dependent. Exactly, and so is a mortgage to home equity belief system. That's the point. Be objective.

deleted 2y ago

[deleted]