Comment by bearbawl | Hacker News Reader

Comment by bearbawl | Hacker News Reader

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« 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.

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