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Comment by swebs | Hacker News Reader

>Are you better off:

> - Tying up your cash into a home

> - Finding an alternative investment, coupled with a rent payment?

This is the part I don't get. That would require renting to be cheaper per month than having a mortgage, yet it will always be more expensive for the same property because the landlord is paying the mortgage* plus marking up the price to make a profit.

*Or at least charging the equivalent market value since there will be other landlords in the city who are paying a mortgage

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It really depends on the local price:rent multiple. In some places the price gets driven up because landlords are counting on future capital appreciation rather than cash flows from rent.

" The gross rental yield on the average London property last year stood at 3.5 per cent, according to research from Deutsche Bank. In other words, a landlord buyer at these levels, according to the bank, will typically require 200 years to pay off their mortgage after tax and interest are taken into account using only the cash flows from their property, assuming a 65 per cent loan-to-value ratio, a 35-year mortgage term and a constant rate of interest." https://www.ft.com/content/922574d8-5cc4-11e7-b553-e2df1b0c3...

In other words - the landlords are taking a levered risk that renters are not.

Housing is very location-dependant so that may very well be the case in your city, but not all cities are like this. Renting in my city is cheaper than a mortgage (even without accounting for property taxes). There are multiples reason that can explain this, such as local laws, popular knowledge ("renting is throwing money away!"), no understanding of opportunity cost, anything not paid on rent would be spent elsewhere, and a general lust for house.

That is why it's very important to have a critical mind when evaluating a decision such a buying a property, as no two situations are the same. In some case it absolutely makes sense to buy, in others not. There's also non-financial reasons for buying, but discussions like this is strictly about financial reasoning.

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