4 ms·

Why is rent wasting money? I am not entirely sold on that idea. If you have a lot of cash that you do not need to access in a foreseeable future then maybe.

franklovecchio 13y ago
It's a waste in capital _relative_ to what this chap's doing. Now, in terms of _experiences_ or _ease_, it's not necessarily a waste. Plus, rent usually comes with deposits. I've had the experience of rarely getting back deposits. So, there's some overhead right there.
flatline 13y ago
Rent is generally quite cheap in Colorado, at least it was when I lived around Boulder. I remember seeing this interactive map, but now I can't read it on my phone to justify my claim: http://www.nytimes.com/interactive/business/buy-rent-calculator.html http://www.nytimes.com/interactive/business/buy-rent-calcula... At some point, buying is definitely the best investment, often times if you rent, you are basically paying the mortgage without any of the incentives of owning.
- bdcs 13y ago
  Buying vs renting is definitely not the best investment. You must consider that the down payment put into, e.g., stocks can earn a serious return (perhaps enough to pay the rent), while you avoid property taxes, maintenance, etc. From Shiller himself: http://www.nytimes.com/2013/07/14/business/owning-a-home-isnt-always-a-virtue.html?_r=0 http://www.nytimes.com/2013/07/14/business/owning-a-home-isn... In fact, a study (I can dig up the source if requested) found that owning a house vs renting has very, VERY rarely made financial sense in the last 50 years in the USA. Yes, real estate exploded, but so did many other investment vehicles. Keep in mind you can rent a ranch-style home in the suburbs, not just metropolitan apartments.
onebaddude 13y ago
>Why is rent wasting money? It's isn't. The idea that it's wasting money, or that you're paying someone else's mortgage, or whatever other argument is thrown out there are part of one of the biggest financial misconceptions going. Do the cost/benefit of renting vs ownership, accounting for maintenance, taxes, interest rates, macro-economic conditions and whatever else and the costs should be very similar. Of course, it ebbs and flows with the markets, but at the margins is where the decision should be made. Owning is never a clear winner in all circumstances. That said, with the drastic drop in house prices since 2007 and historically low interest rates, buying has been (in the US at least) a financial gift from the heavens for the past few years. Unfortunately, that ship has sailed.
- franklovecchio 13y ago
  > The idea that it's wasting money, or that you're paying someone else's mortgage, or whatever other argument is thrown out there are part of one of the biggest financial misconceptions going. That I believed this was assumed, and that I was comparing _renting to purchasing a house_ was also assumed (but probably not so clear!). I was comparing renting to what the dome-builder was doing. With that said, renting vs. ownership is obviously situational. To live 2 miles (walking distance) from downtown Denver: ~650 for rent ~150 for a garage w/ electricity ~100 for utilities $900 month. When I looked into buying in Denver anywhere in the same distance, I was looking at $1250 month w/ no garage, unless I lived in the Arts District (a bit rougher), and most of those houses needed to be torn down.
  - zecho 13y ago
    Sure, if you're looking at the final dollar amount. Other factors need to come into play when you own a home. My rent was about $1000/month with utilities for about 1000 sq. feet. I now pay a mortgage of $1375/month + about $75 in average monthly utilities. But with that I get a home with 1600 sq. feet living space, not including the finished attic or the unfinished basement and the 7500 sq. foot lot I now have to mow, minus the garage and house space. Per sq. foot of space, you're likely to do really well, if space is what you need. There are three main reasons I bought: 1) I have a young daughter and I thought she might like a yard. 2) I'm tired of the noise from apartments and 3) the interest rates were about as close to free as I think they'll get for a long time and I plan to stick around here for at least the next decade or so. In your case, you might not need the space or want the hassle of maintenance. Personally I think making the rent vs. buy argument into an investment argument is ultimately worthless. There are better investments out there, like your time. Shelter is not an investment, it's a basic human need. Buy/rent exactly what you need and nothing more. It's a lifestyle choice. Put your money to work in real markets. Living in a geodesic dome will probably ruin your social life, but if you don't need a social life, great!
ars_technician 13y ago
You are not building equity when renting. If you plan to be in a location for more than a year, it's worth buying a home. Mortgage payments (minus interest) are then just going back into your own pocket vs. rent which is going into your landlord's pocket. Even if you never want to do your own maintenance, you can pay a handyman and still be far ahead in cash.
- dredmorbius 13y ago
  You are not building equity when renting. If the net cost of renting is lower than the net cost of renting money to own a mortgage, then you've still got the option of investing in other assets which may appreciate over time. Say, a business. Which represents real net economic growth, not merely asset inflation. If you plan to be in a location for more than a year, it's worth buying a home. Stating that as a blanket recommendation is so false it's not even wrong. A buy-vs-rent decision depends on a great many factors, including transaction costs (high for real estate sales), moving costs, appreciation risks, etc. There are many areas where even a 10-15 year tenancy may favor renting over buying. Mortgage payments (minus interest) are then just going back into your own pocket. Not if your property's under water. Haven't we learned anything?
  - chii 13y ago
    wait, is under water here to mean literally under water - as in sinking into the ocean?! Or is that jargon for something?
    - anoncowherd 13y ago
      It's a figure of speech. The idea is that your apartment's current market value is lower than your outstanding debt (or perhaps the total price you paid for the apartment).
- markkanof 13y ago
  This is extremely optimistic. It's usually more like if you are going to stay in a place for 3-5 years then maybe it's worth buying. The first few years you are paying almost all interest and not much principle. In addition you need to factor in transaction costs (realtor fees, lending fees, etc.). Plus it can often take close to a year to go through the full cycle of buying and then selling a home. Using your one year rule just isn't realistic.

franklovecchio 13y ago

It's a waste in capital _relative_ to what this chap's doing. Now, in terms of _experiences_ or _ease_, it's not necessarily a waste. Plus, rent usually comes with deposits. I've had the experience of rarely getting back deposits. So, there's some overhead right there.

flatline 13y ago

Rent is generally quite cheap in Colorado, at least it was when I lived around Boulder. I remember seeing this interactive map, but now I can't read it on my phone to justify my claim: http://www.nytimes.com/interactive/business/buy-rent-calculator.html http://www.nytimes.com/interactive/business/buy-rent-calcula... At some point, buying is definitely the best investment, often times if you rent, you are basically paying the mortgage without any of the incentives of owning.

bdcs 13y ago
Buying vs renting is definitely not the best investment. You must consider that the down payment put into, e.g., stocks can earn a serious return (perhaps enough to pay the rent), while you avoid property taxes, maintenance, etc. From Shiller himself: http://www.nytimes.com/2013/07/14/business/owning-a-home-isnt-always-a-virtue.html?_r=0 http://www.nytimes.com/2013/07/14/business/owning-a-home-isn... In fact, a study (I can dig up the source if requested) found that owning a house vs renting has very, VERY rarely made financial sense in the last 50 years in the USA. Yes, real estate exploded, but so did many other investment vehicles. Keep in mind you can rent a ranch-style home in the suburbs, not just metropolitan apartments.

onebaddude 13y ago

>Why is rent wasting money? It's isn't. The idea that it's wasting money, or that you're paying someone else's mortgage, or whatever other argument is thrown out there are part of one of the biggest financial misconceptions going. Do the cost/benefit of renting vs ownership, accounting for maintenance, taxes, interest rates, macro-economic conditions and whatever else and the costs should be very similar. Of course, it ebbs and flows with the markets, but at the margins is where the decision should be made. Owning is never a clear winner in all circumstances. That said, with the drastic drop in house prices since 2007 and historically low interest rates, buying has been (in the US at least) a financial gift from the heavens for the past few years. Unfortunately, that ship has sailed.

franklovecchio 13y ago
> The idea that it's wasting money, or that you're paying someone else's mortgage, or whatever other argument is thrown out there are part of one of the biggest financial misconceptions going. That I believed this was assumed, and that I was comparing _renting to purchasing a house_ was also assumed (but probably not so clear!). I was comparing renting to what the dome-builder was doing. With that said, renting vs. ownership is obviously situational. To live 2 miles (walking distance) from downtown Denver: ~650 for rent ~150 for a garage w/ electricity ~100 for utilities $900 month. When I looked into buying in Denver anywhere in the same distance, I was looking at $1250 month w/ no garage, unless I lived in the Arts District (a bit rougher), and most of those houses needed to be torn down.
- zecho 13y ago
  Sure, if you're looking at the final dollar amount. Other factors need to come into play when you own a home. My rent was about $1000/month with utilities for about 1000 sq. feet. I now pay a mortgage of $1375/month + about $75 in average monthly utilities. But with that I get a home with 1600 sq. feet living space, not including the finished attic or the unfinished basement and the 7500 sq. foot lot I now have to mow, minus the garage and house space. Per sq. foot of space, you're likely to do really well, if space is what you need. There are three main reasons I bought: 1) I have a young daughter and I thought she might like a yard. 2) I'm tired of the noise from apartments and 3) the interest rates were about as close to free as I think they'll get for a long time and I plan to stick around here for at least the next decade or so. In your case, you might not need the space or want the hassle of maintenance. Personally I think making the rent vs. buy argument into an investment argument is ultimately worthless. There are better investments out there, like your time. Shelter is not an investment, it's a basic human need. Buy/rent exactly what you need and nothing more. It's a lifestyle choice. Put your money to work in real markets. Living in a geodesic dome will probably ruin your social life, but if you don't need a social life, great!

ars_technician 13y ago

You are not building equity when renting. If you plan to be in a location for more than a year, it's worth buying a home. Mortgage payments (minus interest) are then just going back into your own pocket vs. rent which is going into your landlord's pocket. Even if you never want to do your own maintenance, you can pay a handyman and still be far ahead in cash.

dredmorbius 13y ago
You are not building equity when renting. If the net cost of renting is lower than the net cost of renting money to own a mortgage, then you've still got the option of investing in other assets which may appreciate over time. Say, a business. Which represents real net economic growth, not merely asset inflation. If you plan to be in a location for more than a year, it's worth buying a home. Stating that as a blanket recommendation is so false it's not even wrong. A buy-vs-rent decision depends on a great many factors, including transaction costs (high for real estate sales), moving costs, appreciation risks, etc. There are many areas where even a 10-15 year tenancy may favor renting over buying. Mortgage payments (minus interest) are then just going back into your own pocket. Not if your property's under water. Haven't we learned anything?
- chii 13y ago
  wait, is under water here to mean literally under water - as in sinking into the ocean?! Or is that jargon for something?
  - anoncowherd 13y ago
    It's a figure of speech. The idea is that your apartment's current market value is lower than your outstanding debt (or perhaps the total price you paid for the apartment).
markkanof 13y ago
This is extremely optimistic. It's usually more like if you are going to stay in a place for 3-5 years then maybe it's worth buying. The first few years you are paying almost all interest and not much principle. In addition you need to factor in transaction costs (realtor fees, lending fees, etc.). Plus it can often take close to a year to go through the full cycle of buying and then selling a home. Using your one year rule just isn't realistic.