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Comment by agilebyte | Hacker News Reader

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.

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>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.

> 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.

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!

What does space have to do with renting vs buying? You can rent whole houses, too.

Slightly OT, but when renting a house you don't generally have a lot of security. At the end of your lease (which is typically only a year long), if the landlord wants to move in or rent to someone else or sell the place, you've got to pack up and get out. Moving every year or two can quickly add to the cost.

Note: This obviously applies more to renting an entire house than an apartment in an apartment building.

Why does this `obviously' apply more to houses than to apartments?

Sorry, I am not from the USA, so I don't know the peculiarities of your peculiar housing market.

Couldn't you just negotiate a rental agreement that gives you more protection?

He means that the owner is more likely to sell a single-family home than an entire apartment block. If the apartment does sell, it is 99.99% more likely that the buyer will want to keep the tenants in place.

As for negotiating a better rental agreement? Why would the landlord give you more protection? He has nothing to gain and everything to lose by doing so. The reality is that if you're a good tenant (don't trash the place, pay on time), no landlord will want to kick you out if he doesn't have to. I've been a landlord; good tenants are money in the bank!

> As for negotiating a better rental agreement? Why would the landlord give you more protection?

That's why it's called a negotiation. You have to give the landlord something they want in return. E.g. slightly more rent is the most obvious choice.

As for a sale: Just negotiate in your rental agreement that the new owner is bound by the same terms as the old one.

Perhaps you could expand the agreement, and not piss off your landlord.

You'd probably kick you out too if you'd caused enough trouble to overtake the cost of finding and inducting new tenants.

I'm talking about the tradeoffs, with space being one example. You can certainly rent a whole house, at what will most likely be more than the owner's mortgage so if you want to compare apples to apples on the final dollar amount, you're going to have to give up a few things.

The owner is taking on some risk, and hassle. So mortgage plus makes sense.

For the curious, it looks like in this situation it is always better to rent given the following assumptions:

- $900 rent - Rent increasing 3%/year (default) - $356,000 home with 3.5% down (FHA minimum), closest I could get to a $1,400/mo mortgage since the parent said $1250 didn't get the amenities of a $900 rent - Home values increasing 2%/year (default) - 3.75% mortgage rate (my current rate) - 1.25% property taxes (default)

From the NYT Rent v. Buy calculator: "If you stay in your home for 30 years, renting is better. It will cost you $209,282 less than buying, an average savings of $6,976 each year."

At this point it's a lifestyle decision. Either you want to own a home or you don't.

Lots of good discussion about financials and which option is cheaper. But I think one major point not being brought up here are all the subjective benefits of homeownership, which--for me at least--were much more important than a few thousand dollars this way or that way on the TCO. Some thoughts:

* Landlord can decide to sell the house any time

* Improvements and diy projects are a pain, have to negotiate with landlord (if possible at all)

* In the category of standalone house type properties, rental inventory is vastly inferior to inventory available for purchase

* Hard to do any lasting improvement or landscaping with the axe of eviction via rental sale hanging over one's head

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.

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-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.

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-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.

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.

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?

wait, is under water here to mean literally under water - as in sinking into the ocean?! Or is that jargon for something?

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).

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.

I would say more than three years to recoup costs of buying.

> If you plan to be in a location for more than a year, it's worth buying a home.

Even in the big inflation years I recall the over under on this as closer to seven years. Depends on your circumstances of course.

So run the numbers: http://www.nytimes.com/interactive/business/buy-rent-calcula...

> If you plan to be in a location for more than a year

To paraphrase another response, this is so wrong it physically hurts. This type of nonsense is exactly what causes people in their early 20's to buy a $350,000 house and end up foreclosed on 18 months later.

Running any rent v. buy calculator for my area shortly before buying my home (at the end of 2010) told me that I needed to be in the area (e.g. within a 30-minute commute by car) for 7 years to break even on the purchase of a home. After that the benefits of buying quickly took over the benefits of renting, but for those first 7 years it is technically a financial loss.

This is just flat-out dangerous and wrong "advice."

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