When we rented, we were subjected to eviction at any time, for nearly any reason, for basically no notice (60 days, which in the US is effectively zero notice). Your subjected to every whim the crazy wildly-irrational housing market throws at you (we've had 12% yearly rental increases for a decade straight now, despite living in bumblefudge-nowhere Midwest).
Renting in the US today is capital-e Evil, and just wholly broken. Unless we're ready to implement some guaranteed nationwide rent controls and guarantees against unjust eviction and harassment, making housing ownership possible for all citizens has to be the number 1 goal. Because home/condo ownership is the only way to gain any sort of housing security in most of the USA today.
[1] https://www.theatlantic.com/technology/archive/2019/02/singl...
It definitely feels like we're moving towards a system of feudal property barons extracting rent from people who are quickly being priced out of the means to own their own home.
I budget $2,000 a year for repairs on a modest-sized home; most years it's under $1,000, but HVAC and roof are infrequent and fairly expensive.
https://www.forbes.com/sites/forbesleadershipforum/2012/12/1...
Anecdotally speaking, I bought a house in a new minority subdivision in 2003 brand new build. The value went up by about $40K by 2008, crashed to $40K less than I bought it, and today it’s still worth $4K less than I bought it in 2003. It’s still a nice neighborhood so it hasn’t gone “downhill”.
Being the numbers oriented, unemotional person that I am, I did a strategic default in 2012 realizing that I could be eligible for an FHA 3.5% down loan in 3 years after the foreclosure, applied and received a loan exactly three years later and had a house built in a new subdivision in a predominantly White neighborhood. The value of the house has gone up $70K in 3 years and a house with basically the same floor plan is being sold for $70K more than mine was 3 years ago. .
And to hopefully stave off some of the expected replies:
- No the world shouldn’t work like that. But to paraphrase Buffett, “the world can stay racist longer than I can stay solvent”.
- No I’m not racist and it’s not that “I don’t want to be around Black people”. I am Black.
- Yes I know “White Flight” is a real phenomenon. But there is also a well studied “tipping point” when that occurs. I don’t see that tipping point happening.
[1]https://fred.stlouisfed.org/series/PHXRNSA [2]https://fred.stlouisfed.org/series/MIXRNSA [3]https://fred.stlouisfed.org/series/LVXRNSA [4]https://fred.stlouisfed.org/series/CHXRCNSA
If it sold for the price I bought it, I'd walk with at least $40k of equity after closing costs. But it's also increased in value about $60k.
And I'll have maybe $10k in maintenance and fix up costs over that decade.
I'd like something along the lines of federal rent control. Limit the rent that can be charged to reduce the profitability of buying up house after house. This would be unpopular with the current owners of homes as it would lower property values, but over time they would remain much more stable.
in any case, part of the solution is to equalize the capital gains tax with income tax rates and have the capital gains tax escalate with the number of homes owned (but keep a small tax advantage for long-term owners of a primary lived-in home). and get rid of 1031 exchanges for investment property, which greatly advantage large capital holders over the average citizen.
No politician will vote for this because they know where their bread is buttered. It would be suicide as they would find out when they lose every large donor. I doubt we'll ever get people into office that would vote for anything to disadvantage property holders.
Even if you vote it in through a referendum, I expect a judge will crush it through some weaselly interpretation of the constitution or other precedent. California in particular has had several major referendums reversed by the courts. Will of the oligarchy, not that of the people.
It is entirely different to move your company or business to another country vs another state. Most people are not going to expatriate and most companies wouldn't gain much from doing so. Property is already much cheaper in Mexico, but you don't see anybody with a high-skill workforce moving there.
Quick math for the rest of you out there: That means they paid 1000 in 2009 and now pay ~3500 in 2019.
Also, yes, I feel you there. Our rental agreement states a mandatory 10% increase if you rent from year to year. I've no idea why the company is this stupid though. The rents around us are falling or staying steady these days. So we just move to the block over every year and the old place stays empty for 3 months before then being rented out for the same or less than we paid. I'm sure there is some tax thing involved here that makes it so they don't have to care all that much.
Also, yeah, we don't have a lot, and we can just move houses in about a weekend in my 4-door.
So it's in their best interests to try to squeeze customers when possible, even with the occasional person that moves out, they'll net a lot more from tenants who just don't bother to dispute the increase.
Wait, what? It's a deposit, you get it back at the end of the lease.
Like, granted, if you have a lot of damage to the carpets, sure, you're gonna be out $80 for the cleaning of them. But I've always gotten it back in full after a month or so.
For me, moving is litterally a weekend (maybe including a Friday afternoon). We really don't have much to move. I'm not joking.
Also, my state allows you to just forward the mail to the new address for free. It only lasts a year, but you can re-up that at any time. We've just done that without much worry and we also have a lot of online stuff that works through the phones and whatnot.
I guess I'm just old hat at doing this kinda moving stuff. It's not much stress for me, though you are right, it is some extra stress. For us, it's worth the savings.
If you do have more possessions than you can move yourself, or your moving long distances, you end up spending a ton of money. Movers usually cost me 5-10k and I didn't even have a lot of stuff (2bd apartment worth of possessions). Ditto if you need your car(s) moved.
Wow! That is insane!
Here it's about $800 for anything less than 3 hours each way per truck load. And I think that is a rip-off. I've seen college towns that'll charge $50 for frat bros to move you about town all said and done (but then again a frat bro is moving your TV, so beware).
For me, moving about the same amount is going to cost $1000 including storage for a month. I guess if you are also having the movers pack everything, it might cost that much, but I've heard of people moving across the country for less money.
Also, paying myself is a strange concept. Yeah, it's 'lost time' but only to me and my family. It's not like other forms of employment. Besides, it keeps us a bit lighter on the clutter, though we would like some more things in life. $800 payed to myself is a lot different than $800 paid to some movers.
I suppose you don't have kids though, which may simplify things.
A fixed mortgage is much less painful.
I'm in total agreement, but the housing prices around here aren't very good (obviously expensive). Besides, we don't have stable work yet, so locking into a mortgage that will go underwater isn't wise.
Loyalty tax, perhaps. They expect people to just "take it".
Which means they're almost certainly exaggerating, unless they're in a condo in downtown Chicago, but they did say "bumblefudge-nowhere" so I'd say just straight BS.
Why even sign that agreement? That landlord obviously isn't going to give a toss if there's a issue. Its just a huge red flag for me.
Honestly? It was a good place and a good price. We've no intention of dealing with that issue either. We tend to move every year as the jobs change. Would we like to stay in this place for longer? Sure! But it's unlikely to occur.
IIRC there are renters rights in many areas that make this more difficult, requiring a court order typically, but not all areas have this and Landlords will put those clauses in the lease regardless just in case the tenants aren't familiar with the law.
In california for example, an HOA just has to get you to have $1800 in unpaid fines before they can simply evict you and sell the house to recuperate the costs.
That was part of the motivation for buying my first house. The rent was going up $50/month every 6 months, and the mortgage was going to cost only $100/month more than the rent. I figured in a year I'd break even, and in 2 years I'd be ahead.
The thing is that landlords may have purchased the place a long time ago. They can still make a profit with rent being less than what a mortgage+ would be today.
I’d like to invest in rental property, but would never want to be a landlord. My mother rented out a house and the renter trashed it.
Georgia:
"If a landlord does not have cause to terminate a tenancy early and evict a tenant, then the landlord must wait until the lease term has ended before expecting the tenant to move. In some cases, the landlord may still need to give the tenant written notice to move.
"Month-to-Month Tenancy
"If a tenant is in a month-to-month tenancy and the landlord wishes to end the tenancy, the landlord needs to give the tenant a written 60-day notice. This notice will inform the tenant that the landlord is terminating the tenancy and the tenant must move out of the rental unit by the end of 60 days. If the tenant does not move out of the rental unit by that time, then the landlord can file an eviction lawsuit with the court (see Ga. Code Ann. § 44-7-7). For more information on this topic, check out Georgia Notice Requirements to Terminate a Month-to-Month Tenancy.
"Fixed-Term Tenancy
"If a landlord does not have cause to evict a tenant who is in a fixed-term tenancy (such as for six months or one year), then the landlord must wait until the end of the term before expecting the tenant to move. The landlord does not need to give the tenant written notice to move unless the terms of the lease or rental agreement specifically require the landlord to do so. The landlord can expect the tenant to move by the end of the term."
Of course, there's no penalty if the landlord initiates it, but you lose your deposit if you do.
Not saying you're wrong but at least where I've lived, I could very easily find a new place to live in 60 days. I think usually landlords give the terms of a new lease much less than 60 days away from the end of the current lease, and most people usually don't decide to move or stay before they know how much their current place is going to cost.
Some people will never move at all because the thought of having to "go through all our stuff and pack it all" is too daunting.
I do not see how this possibly applies to renters though.
There is no such thing unless your home is paid off.
If you have a mortgage and are hit by a catastrophic life event that leaves you without a job and depleted of your emergency fund, your home is gone.
That risk exists regardless of whether you rent or own.
The risks he mentioned are unique to rentals. It's very common for leases to essentially say "We can kick you out if we feel like it," no justification necessary. Even if the lease stipulates some justification, they'll find a way around it ("Our maintenance crew noted your excessive noise on 37 separate occasions. You also have a wreath hanging on your door, which is another violation of the lease.").
It's extremely rare for a mortgage to contain any sort of terms that allow you to be arbitrarily kicked out of your home.
Plus, it's easy enough to avoid HOAs.
Stop paying your mortgage and it can be months or years.
I used to own a 1000 sq ft cape cod that was built in 1942. I fixed everything myself and since it was small, nothing could really get out of hand. I believe most of the pain involved in home owning lately has come from bigger houses with more complex systems/appliances.
The way to do it is really to find a small set of good, reliable tradespeople, give them your business for all your repairs and improvements, and pay them well. There aren't many of them, though, and they'll cost you. Finding that small set of reliable contractors is part of what your rent goes to.
My dad used to do a lot of the home maintenance himself. Sometimes it worked fine, and sometimes (like the time he tried to replace the roof himself right before a thunderstorm, without having a giant tarp) it was pretty disastrous. In any case, it's not really realistic in today's world (where you usually need two incomes to survive) with today's homes (which are giant, complex, and built to a labyrinth of building codes that you are probably violating when you do improvements yourself).
Personally I loathe doing any kind of maintenance work. I hate dealing with drywall, paint, wiring, pipes, and whatever else you have to deal with when maintaining a home.
I preemptively replaced my water system this spring (electric to gas heater, added water softener). Took me a whole week (5-10pm work) and lots of pre-planning, but every time I walk downstairs I can't help but admire all the coppers lines I piped in. I dunno it was kinda like Hello World of the building trades, hearing the heater kick in after all was done was awesome.
Now, I've worked with my hands my whole life and have done tons of smallerish projects around this house, but this was the biggest one I tackled. Saved me 3-5k I'm sure and it really gave me a sense of accomplishment.
To each is own though.
I like the _control_ I have in owning my place, but I abhor the responsibility of fixing systems.
I hate all that stuff. I hate spending hours at Home Depot trying to find the right parts and tools to do things.
I just hate dealing with hardware in general.
Unfortunately, at least in our market, there's not much built in the last 20 years where the builders favored actual rooms instead of just one giant open public space. If you're lucky the basement's finished so maybe you get two of those.
More rooms is nice if you don't like being on top of every single other person in the house all the time, without having to go to your bedroom (aren't we supposed to only go there for sleep, for sleep-hygiene reasons?) to escape. In recent houses this means using ~3x the space you actually need to accomplish that, mostly by adding a room or two in a finished basement, because the main public area's gigantic, yes, but also entirely open.
It's also very nice to be able to contain messes. So nice. One large shared living space plus kids means no part of your house ever doesn't look like shit without heroic efforts or paid help.
Also the quality of repairs completely depends on your land lord. I've had some great ones, but on average I much prefer having the ability to repair what I want when I want.
You can do a ton of home improvements yourself and save a ton of money, or work to build relationships with reliable trades people (they exist) and pay someone else to take care of all of that. If you rent your entirely at the mercy of your land lord.
The trend should not be to "give up on the dream of home ownership" but make it easier and more reasonable for most people to achieve.
Leaving my boots out isn’t worth half a million dollars and my spare time. I’m not muddy often enough to even consider where I leave my footwear. I worked in agriculture during college. It was literally never an issue.
My bicycle is in a secure storage room near my car and motorcycle. A security guard checks on them regularly, even when I am out of the country.
I have hobbies that I pursue outside my apartment. I even rent a garage with a friend for one of those hobbies.
Why does home ownership have to be made easy for most people? From where I’m sitting home ownership and “the American Dream” appear to be incredibly wasteful and not particularly appealing.
There’s a long list of things I would rather do than home improvements, regardless of how easy those improvements are.
Can’t we all just make the decisions that are best for ourselves?
I don't think for a minute that owning a home costs less month-to-month over renting - with maintenance and upkeep, repairs and new appliances periodically, it's probably a break-even at best. But, at the end of it in 20 or 30 years I can sell the house and have that money (to buy a smaller house, or move into something senior-citizen appropriate, or a condo or whatever). With renting, that's not the case.
It also helps that I live in the Midwest, where property prices are not insane. I just sold my first house (made almost $30k over what I paid 18 years ago), and now I'm buying a 5-bedroom, 3k sq ft house in a nice neighborhood... for $230k.
Is it for everyone? No. But there's no way I'd rent, at least not at this stage of life.
Maybe the landlord can hire less expensive maintenance staff than you can, but maybe they can't. Is it really that different to have the house plumber come down and fix something vs. hiring a plumber from the yellow pages?
The landlord has to pay the mortgage same as you would. Maybe he gets a better rate because he can get some 1%er special equity deal, but fixed loans are like 3.5% so his margin can't be huge. He doesn't get a break on the taxes for the primary residence (although this went away I think?).
Ultimately it's difficult for a landlord to be so much more efficient that he can offer the rents at a lower rate and still make money.
How is that buy vs rent? Sounds like just house vs apartment?
For example, "Social Benefits of Homeownership and Stable Housing" (https://realtoru.edu/wp-content/uploads/2014/06/Homeownershi...)
"Research has consistently shown the importance of the housing sector on the economy and the long-term social and financial benefits to individual homeowners. The economic benefits of the housing market and homeownership are immense and well-documented. [...] In addition to tangible financial benefits, homeownership brings substantial social benefits for families, communities, and the country as a whole."
(Yeah, I know everyone is going to hate the "NATIONAL ASSOCIATION OF REALTORS" bit. But the citations and such seem reasonable. An older version is at https://www.nar.realtor/sites/default/files/migration_files/...) "Reexamining the Social Benefits of Homeownership after the Housing Crisis" (https://www.jchs.harvard.edu/sites/default/files/hbtl-04.pdf):
"Turning to the policy implications, federal homeownership promotion effects have been at least partially justified by claims that homeownership creates better citizens, results in healthier neighborhoods, and provides a range of other social benefits. Thus, it is important to assess the validity of those claims. This is not to say that other good reasons for supporting homeownership do not exist, only that if homeownership is not generating the claimed social benefits, we should stop using them as a justification.
"The updated literature review presented above does provide support for several social benefits of homeownership. Even after taking self-selection and other confounding factors into account there is considerable evidence that positive homeownership experiences result in greater participation in social and political activities, improved psychological health, positive assessments of neighborhood, and high school and post-secondary school completion. The jury is still out, however, on several other claims including improved physical health, and both the cognitive abilities and positive behaviors of children."
On the one hand, yes, you're right that the repair expenses can be a big deal. If you don't want anything but the basics for the technology in your home, sometimes a home warranty can be a good option too but experiences vary significantly.
On the flip side though, after my 15 year mortgage is up I'm not going to pay another dime outside of maintenance on this thing. On a 30 year, you'll still pay a fortune over the life of the loan which makes the renting argument a lot closer.
It also depends on the phase of your life. Personally, I can't imagine having kids and dogs without a yard. If I didn't have kids or hadn't found an area where I really wanted to settle down, renting would make perfect sense.
At the point that you find somewhere to spend the rest of your life, become a part of the community, get involved, make local friends, raise a family...home ownership makes a lot more sense.
I'm a firm believer in outsourcing repetitive work. I've had a yard company since the first 2 months in my first house because the time trade off for me was more than worth it. You also will eventually learn your way around finding good and reliable contractors for the important things (plumbing, electrical, general repairs). Word of mouth is hugely important there.
A lot of this stuff is pretty easy to learn too. I was pretty proud of myself the first time I disassembled a toilet to fix it. The more you learn, the less you need to call for help for small stuff.
If you can assume historical returns, renting is a financially superior choice. Well, assuming my math was correct. Both are big assumptions admittedly.
The reason is that when you buy, while you are effectively saving by having your money go towards your home, over the long term on average home prices don't increase.
On the other hand if you invest that down payment, it will compound.
Note that the result is not the same if you buy a place with cash and rent it out to others, because in this case you can reinvest your returns. However if you buy a place to live in, for most people they need a mortgage and their theoretical savings can not be reinvested.
Or in other words, O(c^n) is a superset of O(n) for c > 1.
I assume you mean adjusted for inflation here? Even then that hasn't been true.
The problem with renting is that you're still paying the mortgage, only in the renting case you're also paying the middleman who then pays the mortgage. This is why rent per month is higher than mortgage per month for the same house. So the returns from that downpayment you instead invested need to make up for the monthly loss in rent, plus the lack of an asset at the end of the process.
It's not a small difference either. My current mortgage is $1250/month for a single family home. 13 years ago when I was renting the rates started at $1600/month for a tiny studio apartment unless you were willing to commute an hour each way. Rents have gone up in the meantime. You need to be making some baller returns on your downpayment if you're going to beat that.
This comparison isn't entirely fair because the rental unit also included maintenance and groundskeeping. In my house I have to do all that work myself or hire someone. However, in the rental unit I had to pay for the utilities. This is a problem because the landlord will never replace something like an AC unit or a refrigerator with anything but the absolute cheapest and most expensive to run model. In my house when I replace it I have the option of buying the high efficiency model and enjoying the cost savings over the life of the unit. Plus when something breaks in my home I just fix it or go out immediately and hire someone to fix it. In the apartment you have to contact the landlord who then sits on it for two weeks before contacting his maintenance guy who only comes by once every couple of weeks to look at it and then order the part so maybe he can fix it on his next visit. In the meantime I'm freezing my ass off with no heat for all of January. I don't miss renting at all.
That statement is very location specific.[1] In SF, it's cheaper to rent than to buy (on a monthly basis) and because of rent control, it's often cheaper to rent versus buy over your lifetime.
In SF, it costs ~$1,000 to rent what would cost $600,000 to buy. In Cleveland, it cost ~$1,000 to rent what would cost $100,000 to buy.
Obviously very different outcomes if you rent versus buy in each city.
https://smartasset.com/mortgage/price-to-rent-ratio-in-us-ci...
These and other reasons contribute to why rental costs and TCO for residential properties are not in lock-step.
So the real answer is (unsurprisingly) "it depends". Sometimes you are better off financially to rent, sometimes to buy - very dependent on location, dwelling needs, frequency of moving, etc. In the USA the balance is often tipped towards buying by tax incentives, which are politically if not economically popular.
I used the numbers from here: https://economics.harvard.edu/files/economics/files/ms28533....
Specifically in section IIIA
"The stylized fact from the studies on long-run housing capital appreciation is that over long horizons, house prices only grow a little faster than the consumer price index"
> The problem with renting is that you're still paying the mortgage, only in the renting case you're also paying the middleman who then pays the mortgage. This is why rent per month is higher than mortgage per month for the same house. So the returns from that downpayment you instead invested need to make up for the monthly loss in rent, plus the lack of an asset at the end of the process.
Right, but the down payment ends up compounding to greater than the value of the entire home at the end of the 30 years and the difference is significant enough to cover (rent - mortgage)
> This comparison isn't entirely fair because the rental unit also included maintenance and groundskeeping. In my house I have to do all that work myself or hire someone. However, in the rental unit I had to pay for the utilities. This is a problem because the landlord will never replace something like an AC unit or a refrigerator with anything but the absolute cheapest and most expensive to run model. In my house when I replace it I have the option of buying the high efficiency model and enjoying the cost savings over the life of the unit. Plus when something breaks in my home I just fix it or go out immediately and hire someone to fix it. In the apartment you have to contact the landlord who then sits on it for two weeks before contacting his maintenance guy who only comes by once every couple of weeks to look at it and then order the part so maybe he can fix it on his next visit. In the meantime I'm freezing my ass off with no heat for all of January. I don't miss renting at all.
I completely agree. The thing I actually really wanted to buy a house because I want a grand piano and to not have to worry about moving it. Sadly at least from my own calculations I just can't justify it.
Perhaps I should take your idea and use it myself =D
To cherry-pick in the other direction, if you could either buy or rent starting in 1980 or so, in 30 years you'd see ~7x return (no inflation adjustment). There are homes you could buy in 1980 that would exceed that, but not very many places, and it's tricky to know what those are without hindsight. (Investing is pretty easy in hindsight, in general.)
To the extent that the stock market is modeled by an exponential curve, it has deviations from that curve on the order of your entire working lifespan.
Discussions about the utility of the stock market for retirement revolve around you investing in it continuously. In that chart, even though a point investment in 1960 may not turn out well, the money someone is putting in every year will start to do pretty well in the 1980s. The analysis around buying in a bit every year is different, but in the previous paragraphs, I'm talking about a point-in-time investment of a particular sum, so we can just follow the chart across. If you can finagle a rent that is significant lower than a mortgage, then you can also include in your model putting that difference into the market. (Though, for that to be "valid", note you actually have to, you know, do that.) But while rents and mortgages tend to be close to each other for various reasons, at different times and places they trade off which is more expensive, so that's not an assumption you're justified with in the general case.
So if you've got a mortgage cheaper than rent in 1960, you're going to pretty handily beat the guy investing in 1960 for quite a span of time. If you can get rent cheaper than a mortgage in 1980, and invest the difference over time as well, you're going to handily beat the guy buying the house.
What about if you buy a house, say, right now? Well... that's the million dollar question, isn't it?
[1]: https://www.macrotrends.net/1319/dow-jones-100-year-historic...
It's not that simple of course, because there are many other concerns like property taxes, insurance, maintenance, renovations/upgrades, furnishings, etc... But the idea that you have to lock away a massive down payment into a non compounding asset isn't necessarily true.
In my calculations I found a home to be slightly more expensive than renting when taking everything into account. But it's a huge lifestyle upgrade for some people, myself included.
Would the difference between rent vs buy be enough to draw down at what is considered a safe rate of 4% to pay for some place to stay - ie if you could save $1000/month by renting instead of having a paid off house would you be able to have an extra $300,000 (12000/.04)?
Of course, this is varies a bit depending on the numbers involved.
You'll have property taxes as well, which could be meaningful depending where you live. I was talking to one of my neighbors the other day who has lived in his home here in Seattle for over 40 years and he told me he is taking out a equity line of credit against his fully owned home to pay the property taxes as they've increased beyond what his retirement income can cover.
Once the home gets older you get into more than just maintenance as well; you get into replacement. Replacing the appliances, roof, windows, mechanicals, etc can be lead to some very serious expenses. The same neighbor needs to replace his roof, which he also can't afford until he gets the credit line.
Property taxes on 3 bedroom place in san francisco are going to be at least $1,000 a month. Even when you've paid it off, it stays expensive.
We've asked you countless times to stop posting low-quality comments to HN. If you keep it up we are eventually going to ban you.
You can always try to find someone you can relatively trust to do an inspection but a good contractor can be just as hard to find, and finding one willing to take a day out of his busy schedule to checkout the home you're interested in can be difficult.
I don’t consider a home an investment in the traditional sense.
I do consider a paid off house to be worth the amount of money that I would have to save to have a safe rate of return to live somewhere minus maintenance and property taxes.
If a paid off house will save me $12000 a year. The value of that house to me is $12000/.04
Also, a house is a great inflation hedge. Rent goes up with the market. The mortgage stays the same. Property taxes and insurance can go up.
It's actually even better than that: if inflation goes up, you pay back the mortgage with cheaper dollars than you bought it with. If you're expecting higher inflation in the future (and it hasn't yet been priced into interest rates) a house is a great purchase.
The flip side is that if you get deflation (say, an economic recession hits and a lot of people in your area lose theirs jobs, possibly including you), a house is a leveraged asset, and you can quickly lose everything. As many homeowners found out in 2009.
Anecdotally when my parents bought their house in 1978, the $600 a month they were paying on their mortgage was a slight stretch. When they were in their last year in 2008, that amount was laughably small.
Hopefully wage growth keeps up with inflation then.
But, I've always loved the long game. Plant trees for shade in ten years. Build a pergola (more shade, cooler house). Replace the old crappy X with a higher quality model that will pay for itself in five years. So on & so forth.
You do have to learn to do some of the work yourself, because tradesmen are more trouble than they are worth for small jobs.
Like you, I only own a place as a compromise with my wife. And like you, I hate everything that comes with homeownership. People don’t realize there are a lot of hidden costs in owning a home.
When you rent, if you secure a 12 month lease, you know exactly how much you’re spending in housing over the next year.
When you own, all bets are off. This year for example we’ve already spent a couple thousand dollars on appliances that broke. There are things around the place we know are gonna need repairs soon and those are gonna cost us a few hundred more.
Our situation is compounded by being under an HOA, so special assessments are always a possibility.
I know two people who sold their homes and went back to renting specifically because they couldn’t put up with maintaining a home anymore.
I saw renting as paying for a service. I know I wasn’t building equity, but I saw it as paying for not having to worry about all the crap I have to worry about now. Any issue was a phone call and $0 away from getting resolved and the maintenance folks were always awesome at the place where we lived.
Only for exactly 12 months though. After that, your rent could double for all you know, and there’d be nothing you could do. You can move, of course, but now you’ve been forced to upend your life.
I live in a rent stablized apartment, and I feel lucky not just because my current price is lower than market rate overall. But of course, that’s not a scalable economic solution.
* As my ol' granma used to say, two moves is the same as a fire. New furniture all around!
But you don’t know what you are going to be paying in year 2,3,4,5 etc.
Our rent went up from $1300 in 2012 to $1700 in 2016. It’s now $1900/month.
Besides that, I don’t have people making noise all around me and everyone had the apartment mandated Comcast bundle including the wireless router where we had 10-15 wireless signals interfering with ours.
I had the opposite problem. When I lived in a condo previously, I had the poor luck to live next to a shitty neighbor who would have parties at 5AM on Monday morning because she didn't work. The fact is anyone can get unlucky and have a shitty neighbor, but at least when you rent if the hassle is bad enough you can much more easily up and move.
There is something to be said for this.
However, there is also something to be said for the ability to not be kicked out of your living space directly ("we have decided not to renew your lease") or indirectly ("should you renew your lease, we will be increasing rent by $500 and installing smart locks in every apartment").
However, the reason I made my original comment is I feel that so often, at least in the US, the downsides of home ownership are completely minimized (I think people usually vastly underestimate maintenance costs, both in time and money) while the downsides of renting are blown out of proportion (the "you're just throwing money away" false comparison).
Take gun ownership or something less controversial: a grill. If you own the home, you can grill to your heart's content. If you rent, there's likely all sorts of rights you forfeit in a contractual agreement (lease) and using a grill is often explicitly banned (it's a fire hazard and doesn't effect the property owner to disallow it, only helps them).
Thankfully, many states have enacted protections that override what can be contracturally restricted for living dwellings, granting new explicit rights but these are by no means exhaustive and vary from state to state and even by municipality.
In the case described, you're choosing convenience over liberty. "Those who would give up essential Liberty, to purchase a little temporary Safety, deserve neither Liberty nor Safety." In this case I would support home ownership over dealing with mild inconveniences of maintenance (then again, I'm used to performing maintenance).
At the same time, many don't have that same choice and its not about choosing prefered conveniences. Renting is the only option for many because they can't even imagine starting a mortgage or gathering the necessary downpayment. On-top of that, as mentioned by others, property ownership becomes a huge financial liability that in today's economy and job market for many makes juggling finances even harder by reducing socioeconomic mobility. Maybe they wish to own and could currently afford it but the liability is too great to consider due to volatility in the job market.
With ownership, slightly better income opportunities often have to be passed by because once relocation fees, market flux, and logistics of a current mortgage are factored in, many opportunities turn out to be large setbacks. Unfortunately many must choose between renting and flexibility for enough income to live reasonably vs many granted rights they're forced to give up in order to survive--I dont consider this a convenience choice. This should not be the case, but IMHO, it's a result of the ongoing further and rapid concenteation of wealth and power in the United States that lead to these scenarios.
We are losing our country to a very few peoples' gains. Perhaps its always been this way but it feels like a more recent trend from my limited view
Don't know if it is still the case, but last time I was in an apartment (early 2000s) there were also limitations for Internet and Television. DirecTV was popular at the time, I was the first to put a dish in a bucket on the balcony. The apartment managers said I had to take it down and use Comcast. Fortunately, when presented with a printout of the FCC rules they reneged and dishes started popping up all over the complex... Which didn't do great things for the brochure :)
I'd rather have a dream where I have more responsibility and ownership as I progress in life rather than the dream of eternally renting and owning nothing. Sure I have to deal with shit I used to just call up my landlord and have them deal with it, but learning new skills and how to fix random things is fun too, at least to me. Not everyone's cup of tea I get it, but neither is renting forever.
I'll give an analogy: my dad used to hoard toilet paper, preferring to "own" large stockpiles of it rather than just get it as necessary from the store. Why? Because he grew up in WW2, in an occupied country, and had to shit in the river and wipe his butt with stones. This doesn't even compute for my American-born generation: to us, the supermarket is always there, and if you need toilet paper you go buy it.
Similarly, if you can assume that another rental will always be there when you need it, there's no need to own. And in dense urban areas with lots of landlords, that's a pretty valid assumption. Somebody refuses to rent to you (which has happened), just rent from somebody else. I'd rather own financial assets like stock - which I can take with me anywhere, and which usually have a much greater monopoly position than the landlord - and then use the income thrown off by them to rent accommodation.
Would I be fucked if there were a financial crisis or breakdown in social order? Yes. But if I were to own a typical 1/4 acre suburban detached home, I'd still be fucked - because you're still renting water & sewer access from the city, electricity from the utility, Internet from Comcast, food from the grocery store, etc, not to mention that your ownership only extends to your ability to pay the bank monthly. If you want to actually be secure & independent, you not only need your own land with a sturdily-built home, you also need solar panels, well water, a septic system, and obscurity. And you need to own it free & clear with no debts.
A similar logic applies to people who take Uber instead of owning a car, or who pay monthly for a SaaS instead of buying software outright, or who get food delivered rather than owning cookware and cooking themselves. As long as they can count on the service always being available, it works.
I don't see how the risk of being evicted (is this something people worry about?) is any greater than the numerous possible disasters that could strike a place you own in ways renters don't have to worry about.
This kind of semantic babble only serves to cloud people's judgment. For some people, owning makes more sense. For others, renting makes more sense. Not sure what is hard to understand about that.
However, after doing the math I think I will rent for my entire life since it makes much more sense financially (much to my surprise)
At any point that I feel like it, I can pick up and move. Whether it is to a place across the street or on the other side of the country.
I wouldn't have nearly that much freedom if I had the misfortune of owning my own place.
One very reasonable 'end game' for those who do not want to own is to invest enough cash in the stock market so that your rate of return supersedes your rent, thus guaranteeing that, if rent increases are within reason, you are able to finance renting interminably. Stock markets typically have a higher rate of return than real estate, so...
Buying a home is a bad investment, because I could have all that money getting 7% returns in the stock market.
* If your neighbor decides to throw a party at 2:00 a.m. on a Wednesday, you're automatically invited!
* Getting to meet all your neighbor's pets on the 4'x6' area of lawn designated for walking them!
* No need to worry about interior decorating; your favorite wall color is always white! (And your favorite exterior color is that weird greenish-beige!)
* No need to worry about that hobby that takes up too much space: you don't even need to consider it!
* If you're really lucky, the excitement of drug busts and gunfire in the parking lot. Your own action-adventure show!
Here's an example: In SF, your cost of ownership is roughly 2% per year (1.4% property taxes, 0.5% for Earthquake Insurance, 0.3% for repairs and depreciation and HOA), which comes to a total of 2.2%.
The average Rent for an equivalent house is roughly 3% of the purchase price per year. So the spread is just 0.8%. Which means, if you can take the equity you would have put into the house and put it somewhere else, as long as you get a 0.8% real return (easier said than done with the high PEs we're facing), then you'll be ahead with renting. And of course, if you need to do a mortgage as most do, that adds a additional 1-3% to the cost of ownership making it even more in favor of the renter.
Now keep in mind, here in SF, it's pretty extreme. Most places have a much larger spread between renting and owning.
According to Trulia[1] the median sale price for two-bedroom homes increased from $1.010M five years ago to $1.407M today, which corresponds to an annual return of about 6.8%. Assuming that trend continues, the actual spread would be more like -4.3% for ownership (2.5% cost minus 6.8% appreciation) vs. 3% for renting, or 7.3% altogether in favor of ownership. You'd only come out ahead by renting if you can find an investment returning more than 7.3% per year.
[1] https://www.trulia.com/real_estate/San_Francisco-California/...
If the cost were 0.5% I don't think it would be worth paying, that would buy a lot of seismic reinforcement.
For CA: "Based on where you live, insuring a single-family house can cost from $2.50 to $5.50 per thousand dollars of coverage" .25% to .55% That's quite significant.
https://www.valuepenguin.com/california-earthquake-insurance...
When buying insurance, you answer questions about your property and the insurance company estimates the cost of replacement of the structure. In my case, it’s about 30% of the market value of the home.
My worry with CEA is in "the big one", will they have enough money? They have $17 billion in assets, which is theoretically enough. However, the Northridge quake caused over $10 billion in damage, and the 1906 earthquake was over $8 billion in todays dollars. (Although I question that number too. 500 city blocks were destroyed in 1906. Would it only take $8 billion to rebuild 500 SF city blocks?)
If we see a major San Andreas quake that devastates LA, the CEA could run out of money.
I imagine everyone in the building trades will be fully employed in the rebuilding effort even if CEA runs out of money. The state would probably bail the CEA out, but either way people are going to be waiting for a long time for someone to come give them a new house.
Yet you'll almost always come out ahead financially, so not ridiculous at all. Real estate is a great way to build wealth, and owning your home comes with all sorts of financial advantages.
Also, you're paying that super. Nothing is free; it's a part of your rent. You may get lucky and have a responsive management company... or you may not, and that is likely tied pretty closely to how much your rent costs each month. It's not hard to get in tough with service people and, you know... you can always just learn how to fix things yourself.
Get a yard service - I pay $150 a month for them to come twice a month.
Get a home warranty - it’s about $600 a year and they fix everything - appliances, hot water heaters, plumbing, etc. I haven’t purchased one for current home because it’s a new build, but I did for furnished rental property I previously owned. In the grand scheme of things for an owner occupied home it’s probably not a great deal but it’s worth the peace of mind for some.
It very often costs a lot more than $600 to maintain a home for a year. The warranty service only makes money if they can spend less than that on the home. As a result, the biggest and most profitable warranty companies are the ones that promise the most and spend the least.
Heck, now that I’m looking, it is overpriced.....
So, how often do things break, then?
I've always thought of home ownership as full control of what gets replaced and when. No unnecessary refurbishments unless you like that sort of work, or opt in for preventative maintenance. Most people I know who live in single family houses haven't had to do much actual or imminent repairs. Wirings last for decades. Ditto for pipes and sewers. Heating too. Some have done minor jobs like repainting a few rooms, or painting the roof every ten years. Others couples do a lot of redesign, refurbishing, and redecorating all the time but they seem to like it.
In my experience, owning your house is a very cheap way to live unless you like to re-do things all the time. There's the risk of disasters like pipes breaking and flooding walls but those are, honestly, dead rare (and you carry insurance, of course).
Ditto for yard. You can make the yard do with minimal maintenance if you choose to do so. Or you can create a varied garden that generates a lot of work throughout the season if you like that sort of thing. But it's quite easy to create a minimal maintenance yard and most home owners I know seem to have opted for just that.
Disclaimer: I don't live in USA and maybe things are different there.
What you describe does exist, it's called property management, and they generally take some %age of your rent.
My wife and I would not give up owning our house for anything, and would never go back to renting. I pride myself in being able to make minor repairs to all kinds of things around the house, and seeing them as fun engineering challenges rather than burdensome responsibilities. My wife loves gardening and needs plenty of yard space for planting.
Most of all (and I may be in the minority here), I really value peace and quiet, and true peace and quiet can only be achieved in a detached house, and preferably even with some generous distance from the next house. If I think back to living in an apartment, I was super easily annoyed by any noise made by neighbors, including pounding footsteps, loud music, screaming children, barking dogs, etc.
Of course the house we own isn't exorbitantly large, or not larger than what we need it for, but even if we'll need to "downsize" at some point in the future, it will be to another detached house, and not an apartment.
Irony: one of the few reasons I continue to put up with the hassle of homeownership is that it affords me the freedom to play music as loud as I like, as late at night as I please, without irritating my neighbors.
And to clarify, I like to play music too, sometimes very loudly. It's just when I don't have control of the noise that I have a problem.
It's the services of a rental property manager without the rental part.
With adults these days (me included) being more technically savvy but less... handy, it seems perfect.
1. Whatever broke wasn't covered by the warranty. For example on a fridge, the most common component to break is the compressor, and that's not covered by a home warranty because it costs just slightly less than the cost of a refrigerator to repair. 2. The warranty company gets to choose who fixes your problem and they choose the lowest bidder, which is almost always a person who doesn't have better work to do because they aren't very good. Every single time I've used a home warranty, I had to have someone come back and re-do the work because it was so shoddy.
YMMV, but I've heard similar stories from others who have used them. I now consider a home warranty to be a negative rather than a positive because I've had to pay another person to come in and fix something correctly that was done improperly by a home warranty repair person.
Luckily, growing up, my father made sure I could do just about every possible home repair. I may not do them all now; but, I can and I know enough to avoid being ripped off.
YMMV in other places, but that's why we're in a non-walkable boring suburb with dumb, giant yards making the distance to the nearest pools and parks (and everything else) further than they need to be.
The issue with fixes gets even worse when you live in an older city and most of the homes are 80+ years old. It was a nightmare when you start to think about all the little things that are eventually going to need repaired/replaced in the not so distant future.
For now I am happy not having to do any yard work and only having to pay and electric and internet bill. The simplicity is great but I do miss having a little more space for storage/hobbies.
But on the flip side there is a huge feeling of satisfaction and pride when you accomplish certain tasks or home improvement projects. You've bettered the property you own and often have learned new skills. It also makes the beer taste even better when you're finally ready to relax.
I live in and own a detached single family home (was a compromise with my spouse) and to be honest, I hate it. I hate having to take care of the yard, to deal with unreliable tradespeople when things break, to deal with the huge expense of minor home repairs - and this is even after outsourcing as much of that work as possible.
Compare that to renting an apartment, which I loved. If something broke, I just called the super, and that was that. This ridiculous idea that renting is "throwing money away" is absurd. I'm paying someone to deal with all the shit I absolutely don't want to deal with, and more importantly I'm paying for the freedom to easily up and move if something else fits my fancy.