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One of my favorite interactive pieces from the NYTimes is a Rent vs Buy calculator which is very configurable: http://www.nytimes.com/interactive/business/buy-

by ljoshua 13y ago

One of my favorite interactive pieces from the NYTimes is a Rent vs Buy calculator which is very configurable: http://www.nytimes.com/interactive/business/buy-rent-calculator.html http://www.nytimes.com/interactive/business/buy-rent-calcula...

etanazir 13y ago
rent v. buy is a function of the specifics; not a generalization proposition.
nahname 13y ago
The numbers are very inflated against buying. 10% closing cost, 1.35% property taxes, utilities only if you buy, another 1.35% annually on maintenance/renos/insurance. Who is paying 2.6% of their property value each year on those things? Who gets utilities for free with their rent. That calculator is very dishonest.
- skorgu 13y ago
  Those numbers are configurable. Click the "Advanced settings" button.
- ceras 13y ago
  If you're buying in a typical American market (ie, homes selling for $200k) 2.6% annually on taxes/maintenance/renos/insurance does not seem absurd at all to me. I've heard others argue it's too low.
- pmorici 13y ago
  In Baltimore property taxes run close to 2% a year on appraisals that are usually 10% higher than what you actually purchased the property for. Those numbers are pessimistic so they don't mis lead people who don't bother to pay attention to the details. The property taxes in CA are lower than they might otherwise be if the home values weren't all so high. The government is going to get it's money one way or another.
- chimeracoder 13y ago
  > Who gets utilities for free with their rent. Depends on what you mean by 'utilities', but in New York City, landlords are required to provide heat and hot water to all tenants. Technically they are allowed to itemize this as a recurring surcharge on top of the rent, but in practice I have never seen this done. Electricity is not included in most modern buildings, though it sometimes is for older buildings which cannot separate the meters per unit easily.
- drone 13y ago
  My property taxes are (before homestead exemption, which reduces the taxed value at about 20% before calculating taxes) are 2.57%. Mind you, I have no state/city/county income taxes, so that money has to come from somewhere. Insurance runs about 1%. I've yet to know a landlord that didn't include the cost of taxes and insurance in rent. (In commercial deals, this is often broken out in double or triple-net.)
- VLM 13y ago
  "Who is paying 2.6% of their property value each year on those things?" Nationwide the figure of a couple grand per acre is remarkably constant. Although property costs may vary two orders of magnitude or more, a firefighter gets paid "about" the same everywhere, ditto a new police car costs about constant, etc. So I would guess someone living where an acre costs about $200K would pay about 2.6%. I would imagine in Detroit you could buy 50 houses for $100K but have to pay $100K/yr prop tax on them if the surface area adds up to enough acres. The only utility bill I paid in my apartment was electric and it averaged about $10 over the course of a year. In a house you'll find its another order of magnitude plus of course all the other utilities.
  - maxerickson 13y ago
    In Michigan property taxes are on the assessed value of the house and property (the assessed value is not necessarily reset to the transaction price of a sale). In general, acreage is cheap. The millions of small lots with $X00,000 houses on them tend to make up for all the acres with nothing on them.
- matwood 13y ago
  It depends on the location. When I rented I never had utilities paid for. I own now, and my properties taxes this year were .38% of the appraised value of the house when I bought it a few years ago. From what I understand, property taxes in the north east are very very high though.
  - TarpitCarnivore 13y ago
    Where I am in NJ property tax on 4 bed, 3 bath, 2300 square foot home is $13,400/year or about 1.7% of the assessed value.
    - matwood 13y ago
      I live in a vacation area with a lot of second homes. The way property taxes work is the local government says they need $X and then work backwards. Residents get a huge discount and pay about 1/3 what non-residents pay. The only hassle is proving your a resident every few years.
- DanBC 13y ago
  In the UK some people get some or all utilities "free". It'd be interesting to see a UK version of the calculator that took into account the local housing agreement rent prices, which are the maximum prices that can be paid for properties within an area by benefits.
- epic9x 13y ago
  It's actually not uncommon in some larger cities to get utilities completely paid. I'm just outside of DC and only pay rent and cable.
skorgu 13y ago
Agreed, this is the best one I've found as well. It's especially notable as it allows you to add common charges which in major cities often tips the balance of buying from maybe-good-in-ten-years to never.
iaskwhy 13y ago
Any idea why it does not allow me to set more than 30 years?
- pmorici 13y ago
  Because 30 years is typically the longest term you can get. True there are "40 year" mortgages but generally they are a worse deal than a 30 year and targeted to people who are bad at math. http://www.bankrate.com/finance/mortgages/is-the-40-year-mortgage-a-joke-1.aspx http://www.bankrate.com/finance/mortgages/is-the-40-year-mor...
  - iaskwhy 13y ago
    Thanks, this is interesting.
tansey 13y ago
I really like this tool. It also helps highlight one thing that I think Sal really underplayed: it doesn't necessarily matter what long-term historical rates have been. If you assume that Silicon Valley is going to be hot for even just the next 5-7 years, with both purchasing and rental prices increasing by 5% per year, then it very quickly becomes smarter to buy and sell the house within that 5-7 year window. At some point it all just comes down to your prior belief on the growth rates of the two markets.
- seanmcdirmid 13y ago
  And your nuts if you think even the SV market will grow forever. The key is to recognize value where others don't, and to otherwise realize that the market is efficient and all bubbles pop one way or the other eventually. My SV landlady talked about how hard the early 90s were, they almost didn't make it.

by ljoshua 13y ago

etanazir 13y ago

rent v. buy is a function of the specifics; not a generalization proposition.

nahname 13y ago

The numbers are very inflated against buying. 10% closing cost, 1.35% property taxes, utilities only if you buy, another 1.35% annually on maintenance/renos/insurance. Who is paying 2.6% of their property value each year on those things? Who gets utilities for free with their rent. That calculator is very dishonest.

skorgu 13y ago
Those numbers are configurable. Click the "Advanced settings" button.
ceras 13y ago
If you're buying in a typical American market (ie, homes selling for $200k) 2.6% annually on taxes/maintenance/renos/insurance does not seem absurd at all to me. I've heard others argue it's too low.
pmorici 13y ago
In Baltimore property taxes run close to 2% a year on appraisals that are usually 10% higher than what you actually purchased the property for. Those numbers are pessimistic so they don't mis lead people who don't bother to pay attention to the details. The property taxes in CA are lower than they might otherwise be if the home values weren't all so high. The government is going to get it's money one way or another.
chimeracoder 13y ago
> Who gets utilities for free with their rent. Depends on what you mean by 'utilities', but in New York City, landlords are required to provide heat and hot water to all tenants. Technically they are allowed to itemize this as a recurring surcharge on top of the rent, but in practice I have never seen this done. Electricity is not included in most modern buildings, though it sometimes is for older buildings which cannot separate the meters per unit easily.
drone 13y ago
My property taxes are (before homestead exemption, which reduces the taxed value at about 20% before calculating taxes) are 2.57%. Mind you, I have no state/city/county income taxes, so that money has to come from somewhere. Insurance runs about 1%. I've yet to know a landlord that didn't include the cost of taxes and insurance in rent. (In commercial deals, this is often broken out in double or triple-net.)
VLM 13y ago
"Who is paying 2.6% of their property value each year on those things?" Nationwide the figure of a couple grand per acre is remarkably constant. Although property costs may vary two orders of magnitude or more, a firefighter gets paid "about" the same everywhere, ditto a new police car costs about constant, etc. So I would guess someone living where an acre costs about $200K would pay about 2.6%. I would imagine in Detroit you could buy 50 houses for $100K but have to pay $100K/yr prop tax on them if the surface area adds up to enough acres. The only utility bill I paid in my apartment was electric and it averaged about $10 over the course of a year. In a house you'll find its another order of magnitude plus of course all the other utilities.
- maxerickson 13y ago
  In Michigan property taxes are on the assessed value of the house and property (the assessed value is not necessarily reset to the transaction price of a sale). In general, acreage is cheap. The millions of small lots with $X00,000 houses on them tend to make up for all the acres with nothing on them.
matwood 13y ago
It depends on the location. When I rented I never had utilities paid for. I own now, and my properties taxes this year were .38% of the appraised value of the house when I bought it a few years ago. From what I understand, property taxes in the north east are very very high though.
- TarpitCarnivore 13y ago
  Where I am in NJ property tax on 4 bed, 3 bath, 2300 square foot home is $13,400/year or about 1.7% of the assessed value.
  - matwood 13y ago
    I live in a vacation area with a lot of second homes. The way property taxes work is the local government says they need $X and then work backwards. Residents get a huge discount and pay about 1/3 what non-residents pay. The only hassle is proving your a resident every few years.
DanBC 13y ago
In the UK some people get some or all utilities "free". It'd be interesting to see a UK version of the calculator that took into account the local housing agreement rent prices, which are the maximum prices that can be paid for properties within an area by benefits.
epic9x 13y ago
It's actually not uncommon in some larger cities to get utilities completely paid. I'm just outside of DC and only pay rent and cable.

skorgu 13y ago

Agreed, this is the best one I've found as well. It's especially notable as it allows you to add common charges which in major cities often tips the balance of buying from maybe-good-in-ten-years to never.

iaskwhy 13y ago

Any idea why it does not allow me to set more than 30 years?

pmorici 13y ago
Because 30 years is typically the longest term you can get. True there are "40 year" mortgages but generally they are a worse deal than a 30 year and targeted to people who are bad at math. http://www.bankrate.com/finance/mortgages/is-the-40-year-mortgage-a-joke-1.aspx http://www.bankrate.com/finance/mortgages/is-the-40-year-mor...
- iaskwhy 13y ago
  Thanks, this is interesting.

tansey 13y ago

I really like this tool. It also helps highlight one thing that I think Sal really underplayed: it doesn't necessarily matter what long-term historical rates have been. If you assume that Silicon Valley is going to be hot for even just the next 5-7 years, with both purchasing and rental prices increasing by 5% per year, then it very quickly becomes smarter to buy and sell the house within that 5-7 year window. At some point it all just comes down to your prior belief on the growth rates of the two markets.

seanmcdirmid 13y ago
And your nuts if you think even the SV market will grow forever. The key is to recognize value where others don't, and to otherwise realize that the market is efficient and all bubbles pop one way or the other eventually. My SV landlady talked about how hard the early 90s were, they almost didn't make it.