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Comment by WildGreenLeave | Hacker News Reader

I am buying a place in the capital city of my country for this exact same reason. I want to travel and be free to do what I want, yet I also need a place to live in for the months that I'm not away traveling. I could rent something but that would be the same price as my mortgage and it will be lost money anyway. Instead I picked buying so only a small part (interest) is lost, but everything else goes back into my own pocket. So even if I'm only spending 50% in my own place it is still cheaper then renting.

However, you are talking about things that I don't really have to worry about since it is an apartment. So maybe there is a slight difference here.

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It's important to realise that you can't compare your rent with your mortgage payments without factoring in a lot of things. The rent you pay includes things like taxes, insurances, upkeep, depreciation, risk and opportunity costs that your landlord has to pay while still coming out ahead. And he has to deal with all the administrative things too. So if you're a homeowner yourself, ask whether you're still coming out ahead carrying those costs yourself, plus the risk that something around your house breaks, plus the risk that your home might lose value for another reason, plus the opportunity cost of your down-payment not being invested otherwise (e.g. stocks). At the end of the day, it depends on the location and how far apart the purchase prices have diverged from rents. With the current economic situation and low interest rates, house prices where I live have mostly broken away from rents so significantly that it doesn't make any sense to buy from a financial standpoint.

I've checked your profile and saw you are living in Germany, I am living in The Netherlands and buying in Amsterdam. I do not know if it is different in Germany so I cannot say too much about that. However, regardless of what the situation is, in the end the landlord will have to come out ahead when you are paying rent. Only by that definition it should save you money in the long run when buying your own place.

The only argument that can be made is that the money you do not spend on your own house is money that could be put into a different investment like the stock market. But in NL renting a place is roughly as expensive as my monthly mortgage payments. So both situations it is money I cannot put in the stock market. Insurance and heating is being added on top of those monthly payments regardless of the option you pick.

In Berlin your rent will most surely be less than mortgage payment unless you take a very very long mortgage (like 50 years). Plus you need a down payment.

The reason it makes sense for landlords is that they have nothing else to do with the money if interest rate is zero or close to it - the alternative is slowly losing it (or higher risk stuff like stocks).

So they slowly build equity while not profiting every month, counting on prices continuing to rise for their long-term profit and if they run several properties you can get economies of scale going for managing them.

On a month to month outgoing basis I can imagine you might be correct that renting works out cheaper in some cases.

However, it's missing something I think is important. In my case we have a £335k home at 1.6% interest which means every year we pay £5000 in interest, but we paying off around £15000 of the principal on the loan. After 10 years we could sell the house, spend the £150k+ (assuming the home value stays the same) we've paid off on a sailing boat and head off around the world or whatever takes our fancy.

If we'd have rented we might have been able to save maybe £200 a month in outgoings. Even invested in index funds it's unlikely to come close.

It doesn’t work like that.

You certainly paid a tax when you bought your home. I don’t know how it’s called or how much is it in your area, but you have to add that to the cost of what you bought, or deduce it from what you will sell (assuming the home value stays the same).

Then you also have to deduce all the real estate yearly taxes. And then all the costs associated with the real estate property itself (the ones you wouldn’t have to pay as a renter). Then you’ll have to deduce the real estate agency fees.

Then and only then you can start making some comparisons between buying and renting.

In the UK there is stamp duty which you pay when you buy a house. First time buyers though get a pretty good deal, nothing on up to £250k, I think we paid around £2000.

However, there aren't property taxes which you wouldn't need to pay as a renter. The closest thing to my knowledge is council tax but that is the same whether you buy or rent.

On the other hand, I've spent hundreds of pounds on rental contracts, referral fees, unfair deposit deductions etc.

All those things you mentioned in your last paragraph are illegal in Germany (or at least in Berlin). You just cant easily compare between countries like that - it can very well be that it "always" makes sense to buy in England because the rules ensure it while the opposite is true in another country.

The rental/real estate markets work differently in Austria and Germany and that's (partially) why home ownership patterns in those countries are so different to England's. Vienna and Berlin both have something close to 90% of the population renting rather than owning, and it's not because they are idiots.

There are massive incentives erected to keep renting tenant-friendly in a way that would never fly in a more capitalist country like the UK or the US.

I didn't suggest that buying always makes sense. I was only trying to point out that comparing month to month costs isn't a fair comparison, since a significant part of the money you put into a mortgage becomes available to you in the fullness of time. With rent, once you've paid it it's gone.

You're right, sorry I just wanted to reiterate as i often experienced that people in other countries don't understand how regulated the market is the German speaking countries.

E.g. many large american cities like chicago would have purchase prices similar to berlin but 2-3x the rental prices due to these regulations keeping Berliner rents artificially low.

Trying to actually check my vague memory: if numbeo[0] is anywhere near accurate (I anecdotally believe it's close enough to give you a good rough estimate) Berlin is both drastically more expensive to buy than Chicago (almost 50% more expensive) and drastically cheaper to rent (a bit over 40% cheaper).

Obviously this completely changes your buy vs rent calculous!

[0]https://www.numbeo.com/cost-of-living/compare_cities.jsp?cou...

The situation in the UK is different than Germany - there are a lot less tenants protections & a lot less rent control (almost every renter in Germany is enjoying some sort of rent control - at the very least the landlords can't easily raise rent on an existing tenant and can't easily end the contract - which is by default unlimited in duration).

Rent is kept artificially low & safe in Germany via legislation, where as purchasing happens on the free market.

Also culturally Germans are very fiscally conservative and risk averse, it is not as common to take up debt (=mortgage) as in the UK or the US.

Housing prices change. Rent prices change. Here in SoCal I was going to buy a place but the pandemic hit so we decided to rent.

Our rent payment is about half what we would pay if we bought. Just look at the last two places I rented: Rent1: $2500/mo Condo next door: $850k. That’s 4K mortgage and 1k HoA.

Rent2: $4100 Equivalent mortgage: $10k/mo

Doesn’t make sense to buy unless you are speculating on housing prices.

Housing prices don't change (much) after you buy. Rent is at the mercy of your landlord and the market. Here in metro Milwaukee rents are up 30% since I bought a house, but my mortgage/taxes/insurance is up 1% (I pay $18/mo more now in taxes).

My home value has skyrocketed as well, but so has every other home. However, the growth cancels out, I get my home's growth as a sort of discount were I to sell and buy another home. It's called the housing ladder and is key to preserving wealth as your housing needs change and the market gets more expensive.

Your example works in shorter time frames, buying vs renting in a given year or 3. But over the long haul I've only regretted thinking like that in my 20s and not just snatching up a home and land.

It's easier to make a person who will need a house than it is to build a house, and it's extremely difficult to make more land to put a house on.

Edit: grammar/clarity

« in the end the landlord will have to come out ahead when you are paying rent » is way too simplistic I’m afraid. He doesn’t have to « come ahead », or at least not in the way you think he has to.

You don’t know how your landlord got the property you’re renting. He may purely and simply never bought it. Or he bought it when it was costing nothing for him, or on the reverse a lot which prevents him to sell. Or selling it would generate massive tax for him. Or it is a diversification strategy. Etc.

And to say « renting is roughly as expensive as my mortgage payment » to justify to buy is a very common and very bad argument that is built on a misconception of what is at stake.

When you buy a property, being a flat or a house, you have costs associated with it. A lot of them. Costs associated with the purchase and costs associated with the property.

First of all, you’ll have to pay some sort of one-off real estate tax when you buy. Then you will pay all the interests of your bank credit (which are higher the longer is your credit). Then you will pay all on the on-going real estate taxes. Then you will pay all the costs of the property itself (all the on-going things a renter do not have to pay, all the big 5-10 years maintenance tasks like frontage restauration).

So renting is bad only if it is costing more than all those costs during the period, minus the real estate price increase during the period.

I don’t know where you live but in a lot of big cities, it is actually way way cheaper to rent than to buy.

The truth is most people do not really look at the proper numbers when they want to justify to buy a property because there is a lot more involved in being the owner of the place than what people want to admit.

I do get the feeling that NL/Amsterdam is one of the few exceptions to everything you are saying. I am aware of all the costs but 3 key things to note here: 1) I am not paying the real estate tax for this apartment. (This is a coulance thing from the Dutch government and is only available till the first of april for houses above 400k EU.) 2) The rents in Amsterdam are roughly the same as my mortgage. The interest rates are at an all time low at 1.4% for 20 years. 3) Interest rates can be deducted from my income so I don't have to pay tax over it (either 36% or 49%). While rent cannot be deducted.

To give you an idea about numbers. My mortgage is around 440k with a monthly payment of +/- 1500eu (includes interest). For the same apartment a 1500eu rent a month isn't unheard of. On top of this you have to pay for electricity and heating yourself and the insurance. When renting the additional tax (e.g. waste or sewer) is also added on top of the monthly payment regardless of buying or renting. The only thing that you have to pay when buying is when things break down, or the so called 'VvE' which is an organisation maintaining the building itself.

So yes I do agree with the statement that it cannot easily be compared, but in the situation of The Netherlands I feel like this is the right choice to make.

Edit: Although, if you (or anyone) disagrees with it I am curious to know why.

I am not disagreeing with you. I don’t know all the numbers for your case and I don’t want to compute everything for your specific scenario.

But I’m just saying that there is a general assumption in most discussions around buying versus renting that buying is always better. It’s not.

It’s the general argument « when you buy you don’t throw your money out the window ».

In reality you do throw money out the window when you buy, only differently, and I’m highlighting the numbers people usually do not take into account when they make their comparison.

Comparing mortgage payments and rents is usually not the good way to do that, because the costs when you buy are only partially monthly based.

One other number I didn’t mention above: real estate agency fees.

Another thing to consider: You should not compare to your entire mortgage payment--only to the interest portion of the payment. The principal portion of the payment is not an expense: It goes from one of your pockets to the other because it is your own home equity. Also you need to apply any tax advantage you get from mortgage interest(in the USA it's deductible), so subtract your effective tax rate. You also need to add to that your estimated property taxes / 12 (and that's often tax deductible), and add any expected yearly expenses / 12.

So mortgage_interest * (1-T) + property_taxes/12 * (1-T) + home_expenses/12. Compare that to rent payment.

What about using it as a vacation rebtal while away. There are probably companies that take care of the details. Personal stuff could be locked away somewhere.

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