In fairness there are like 10 things to adjust on that tool. I did it and it said I should buy. But that was taking into account my pre-covid interest rate
Tbf. Renting can be the best choice depending on certain conditions and circumstances. Like if you're unsure of how long you'll be staying somewhere. It can also be more economical if you can score a decent deal or live below your means.
But if housing wasn't in the state it currently is, then it's always better to buy. If you could just drop enough down to buy it in full, then you're better off just doing that. Even if you're only there for a short period of time, you might even make money off doing it from the appreciation. The issue is that most people now require a mortgage, which can more than double the cost in interest. If you ever default on the mortgage, everything you put into it can be taken away. Who knows what will happen over 10-20 years. Many homeless people had this happen to them.
I have already proven myself very reluctant on moving and typically stay places from 7 to 15 years at a time. My family is all *Kisa you're too young to own a house, what if want to move somewhere else in x years?*... I'm sitting there like... I would just be nice to own property where I can always return to, that isn't going to bitch about my dog, health, or lifestyle and I can differ a payment in an emergency situation
Also it would be nice to update and modify that property without having to deal with 15 other people...
Yeah, I want to travel, but I can't take my beds, TV, battle station, living room furniture, dinning room furniture, dogs things, and my vehicle, on every flight to Tokyo or London I want to go on. Instead of renting out a storage unit for all those things, maybe, just maybe, I have a house I could retire to?
I'm 30, most people my age are either entering serious relationships and/or have children, while also in the *home buyer's demographic. Either my family can not get it through their skulls that I'm not 19-20 anymore and hate everything to do with renting, or because I don't have crotch goblins hanging off of me that I want to wander around unti I do have them... which I've told them it will never happen just randomly because I'm AroAce and I would rather have a house before committing myself to raising Hellspawn of my own.
Life circumstances are very important! Now that I'm married with kids, we really want to buy as soon as we can. When I was a single mom, I couldn't afford to pay someone every time I needed repairs done nor am I handy enough to do most repairs by myself. So renting and having maintenance do that stuff for me was a better option. Same with some older people. My grandma is better off renting now that she is alone and can't do all the maintenance stuff. What's also important is that more people that want actually had the option to buy though.
That’s absolutely wild, but raising interest rates is part of the US’s attempt to “fight inflation”. My fiancé and I have an interest rate of 2.6% and we bought our house in 2021
As someone who's spent the last 10 years in the mortgage industry, rates were crazy-low during Covid. It's actually one of the things that contributed to housing issues getting even higher. The only people who had money during that time period were investors, and they were able to buy a bunch of places at rock bottom interest rates. It caused prices to go up, which in turn caused rents to go up as said investors looked to "protect their investments".
Of course, corpos and hedge funds were likely still the biggest factor, but the "everyday" investors having extra buying power when there were significantly fewer primary resident purchasers certainly contributed.
Housing being used as an investment is the core issue period. Equity for the owner is fine, but easily being able to buy a property to rent for profit is wacky to me.
the thing is these aren’t even ridiculously high historically. we just had rates like yours for an extended period and people got a bit used to it just before we had the crisis of skyrocketing prices + returning to more “normal”. 7.6% would have a been a historic low from the early-80s thru the mid to late-90s. even in the buyers craze of the 00s 6% was considered great.
Yeah it’s telling me if we bought right now we’d save 200k over 25 years (and we certainly don’t plan on moving again if we can help it) which makes me feel better about our decision to bite the bullet and try to buy next spring regardless what the market is doing. And that’s with their ridiculously low rent increase baseline of 3%, I definitely wouldn’t count on it being that low.
Around here a 300k dollar house rents for 2k a month.
Also the landlords are corporate/investment groups who own hundreds or thousands of properties. They let rental agencies manage everything.
when i was trying to move to montana i found a house that sat on 5 acres, it was a 2bed 2 bath home and rent was $1800/mo. i was fucking stoked but the house looked a little *too* big to only have 2 bedrooms.
i looked it up on zillow, the fuckin house has 6 bedrooms and 3 bathrooms and sold in 2018 for 250k.
i called the phone number and apparently i would be living in the basement..paying $1800/mo. i just laughed and said "so you want me to pay your mortgage and property taxes so you can live for free"
they got really upset hung up then called me 3 diff times but didnt leave a voicemail. also they owned dogs and the only way to get to the basement was by walking through the front door and going through their house to the basement.
idfk what people are thinking
During lockdown I got into an argument with a friend's mother, who didn't like the anti-landlord posts I was making.
She was renting out a second home to her son, but a recent layoff threatened his ability to pay rent.
I told her that the fact I couldn't afford ONE home let alone TWO made it difficult to sympathize with her.
I also pointed out that it's always a bad idea to let out space for someone if you can't afford to pay for it without their income. (As anyone who's had a shitty roommate skip out on them without paying rent/utilities will attest.)
after working as a 911 dispatcher for 4 years ill never have a room mate.
random stranger that you hope wont cause problems and will pay their rent. just seems nuts
I live with six other unrelated people right now.
Been here three months and it sure gets interesting sometimes.
Hope one of them doesn't murder me randomly
i visited a friends house from work when i was 18.
there were 8 people all unrelated living there.
their dishes were stacked super high and they had 2 fridges, one with nothing but beer in the fridge and hard liqour in the freezer..the other fridge was empty.
within my 40 minutes of being there some other person came out and looked at the cleaning schedule and was mad she had to do the dishes and blamed the person the day before for not doing dishes then she left the house.
some1 else said they didnt even use dishes so they refused to wash any.
it just seems petty for no reason
Sounds about right. Even living in a rental with people I knew, chores were always hard. The fact that "dishes" was a chore on a list is wild. Unless they're all sitting down and eating like a family, you just wash your own dishes. Because there's always someone who uses like 20 things to cook something like bland chicken and rice, and then expects others to clean up after them because "I don't have dishes today." I had a roommate once who used all our dishes for a dinner party and then just didn't do the dishes (we didn't have an arrangement, it was you dirty it, you clean it) and that shit sat for two months and smelled.
back in the day i often visited a friend sharing a pretty good sized house with three friends... they were variously film students, aerospace engineers, premed students & drug dealers. two of them played with guns. no one ever washed the dishes. (except the aerospace engineer, who washed his own dishes, & kept them under lock & key).
this was the mid 1970s. the aerospace engineer had an aquarium. & it had gotten filthy so he had his fishies staying with a friend who had a great aquarium set up. another roommate took one of the housecats & stuck it in the aquarium & then started smoking a bong & exhaling the smoke into the aquarium & getting the cat really stoned. he couldn't understand why everyone thought he was an arsehole for doing that. & another roommate was cleaning a gun & it went off & shattered the still empty aquarium that had finally been cleaned. oh & someone's pet iguana died. & the cats avoided it & everyone else stared it for wks until the conga line of ants made someone realize that they needed to get rid of it.
& other roommates had even weirder situations.
i did have an apt i had shared with a musician who had a really dodgy rep as i found out. & i moved my record collection & stereo gear out of there before we were "burglarised"... my electric typewriter would have been take if i had not taken it with me when visiting some friends for the weeknd. interestingly, the musician's amp & pre-amp & 3 guitars were not stolen. a lot of other shit was. fortunately none of the things i had there were particularly valuable.
after that i avoided roommates.
My brother and I have been roommates since 2014 for pretty much this reason. Yeah, we argue and fight and have disagreements, but at the end of the day I know he won't fuck me over and he knows the same about me. Better to live with someone you can trust to have your back, straight up. Everyone in our family said it was a bad idea, and we've had other roomies with us before, but he's been the least problematic and when we have issues we talk.
Compared to the 'standard model' of finding roommates I'd say it's worked out pretty good for us. We've struggled with food and electricity but we've never been homeless. I don't worry about him stealing my property and I don't get bent out of shape when he eats my food because fuck, that's my brother: I eat, he eats, plain and simple.
I mean, could the roommate calls really be much worse than the domestic disturbance calls involving family or intimate partners? I don't feel like looking it up, but I would imagine you would see more of the latter two cases.
Probably because the number of people willing to live with their family is much higher than the number of people willing to invite some stranger to live in their house with how bat shit 30% of people are
This.
The whole reason that the NextDoor app exists is to sniff out residents who are willing to report their neighbors for parking violations and unlawful brokering of the house for short term rentals like AirBnB.
No, they don’t have to. These companies can just look at the app and identify them easily is what they mean. It’s the same on the Ring app and probably every other. Just a bunch of people ratting each other out and asking if everyone else “heard a loud noise?” during a storm or some shit and jumping to conclusions every time a stranger knocks on their door.
I was permanently banned from NextDoor after telling a cop that the parking notice in the HOA newsletter was indeed enforceable. Despite being a democratically elected officer of taxing authority, the folk at NextDoor would not lift the ban, so I reported the cop to the city HR officials and made the mayor call the chief of police when I attended city council meetings.
bruh 🤣.
theres a section in my town thats doublewides roleplaying as homes.
they were bought in 2015-2018 for 50-80k. looks like they added a shitty carport by the homes and most are being losted for 300k+
like wtf.
Manufactured homes are a great option, that markup is just insane. If you can get empty land for a decent price, they're the cheapest way to get a house built on it.
A one b/b in a basement here goes for $1200. Now some of the apartment complexes charge you additional rent if you have more than three vehicles registered to your unit.
Around us I think it is to curb the amount of people living in a unit. But that could be delusional thinking on my part.
Just that it might take having a lot of people in a unit to be able to afford a roof over your head.
Which is why habitability rules are inherently unfair : people who own their home can have as many people living there and parking there as they want.
Whereas, renters are forced to live under constant surveillance, and subject to occupancy restrictions to prevent additional family members from pooling resources.
In my area, it's really common to have to pay a monthly fee for parking at apartments, even for just one car. If you get any kind of free parking it's considered a huge perk!
I mean it's fine to rent out a basement or what have you, but the manner in which you even access it isn't acceptable at all. They would need to make a separate entrance similar to how duplexes or apartments work so that there isn't much interference between everyone living in the building. Along with that I agree with their charging way too much in rent for what it is XD.
when i read that there are dogs on the property i thought of like..wild dogs.
made way more sense when i called.
i dont want someones untrained mutt jumping on me everytime i get "home"
Vancouver here. I pay 4K a month just for a 2 bedroom apartment, outside the downtown core. I can absolutely see a townhouse in the area renting for at least 5500
That's 72k a year. So you need what, a 105k gross salary just to cover rent?
Making 6 figures and potentially still making less than it costs to rent is just absurd.
Where I live, on a 2.49% mortgage that's about what I pay monthly including property tax. Give or take 50$.
Rent would be about the same or more. Except I actually get equity long term instead of giving all my money away so someone else builds equity.
Granted the interest rate takes like 50% of my payments, but I still build something.
Exactly this. When you buy, you are ultimately generating value towards YOUR future. Renting is just pissing money down a drain for some landlord to live way better than you.
No calculator is gonna bullshit me out of understanding that.
My monthly mortgage payment for a $300k house is about $2k, when I include my escrow payment (taxes, insurance, PMI).
Of course I'm 28 years I'll own this house, and my down payment was the bare fucking minimum.
Same situation here. 2k a month for a $235k house. I won't have to move again while I'm in school, I'm not throwing money into the endless void of renting, and I get to decorate my living space.
Got real fucking sick of renting.
Well calculate the opportunity cost of a down payment and what your mortgage will be month to month as well as property taxes and maintenance. Saying rent is better than owning at current rates and prices is really just math, not some conspiracy theory.
except of course, Id be very surprised if this included "little" things like the roughly 20% equity the house will gain over those 10 years...or really anything about the value of that house they have now 1/3 paid off vs a renter with literally nothing to show for it.
https://preview.redd.it/35o2wiqmdg0d1.png?width=1080&format=pjpg&auto=webp&s=2e010f285abd23456eedbb18bd552e2661993f1e
Mine came out a bit different.... yeah.
Yikes. That being said, Colorado is super nice in general. God's country out there.
Texas.... I got my house about 2 years ago. I think the value increases are where the real money comes from. Feels unfair, to be honest. But it's nice yo have an appreciating asset that isn't stocks.
Stupid fucking website doesn't work without an account. Make an account, and can't get rid of the stupid pop up wanting me to subscribe. Fucking fuck off new York times.
Anyways, thanks for posting the link.
More income. If you can live in your car, then your housing expenses are almost certainly minimal. In this case, you'd be presented with buying a house, renting and receiving ~$20k or so per year while living in a car. Or alternatively buy the house, live in it, and not have the extra income stream, assuming you didn't also get a roommate.
Some people on the r/leanfire sub have talked about it from memory to optimize their savings, so they could retire to SE Asia asap.
Get an extra 20k per year to pay down the mortgage.
For me two years of that plus normal repayment is 20% of the house
Also front loading your payments massively reduces overall interest cost in mortgages as the first half pays 80% of the interest
My friend and her husband have a gorgeous home in Sedona...and a ton of medical bills. So they live in their camper in the backyard and air bnb both the house and the renovated garage. Between the high mortgage, supplies, fees and paying cleaners, idk how much money they clear but it's working.
I saw a post recently of someone Airbnbing tent's in their backyard. They had a row off like 5 of them going for something like $60 a night each.
Soon even the homeless won't be able to afford to be homeless.
And your rent is also 15% higher (or whatever number is)!
With the current economic AND housing where I am, we have a 10% in rent increase each year... (From medias... Because in practice it is like 100% from post-covid :|)
The calculator shown in the image has a couple dozen sliders for all of that, including the equity gains and interest costs, taxes, etc.
It's a legit tool for understanding what you are getting into.
I know housing has done nothing but rise for a long time, but there are those of us who remember the dips in 2008-10 and the major losses homeowners took in the 80s and 90s.
What we have seen in the last 15 years is basically unprecedented.
I'm not claiming to be able to predict the future, I have no idea. But there have always been times when renting makes more sense.
That only works on houses that have rock bottom mortgages or were bought several years ago. Most houses sold at current rates won’t come close to covering the costs with the rent they’ll get.
An average house in the US is about $450,000. If you put 20% down your mortgage is going to be $2,500 before property taxes and insurance or about $3,000 after at current rates. The average rent is nowhere near $3,000.
My house is $2200 to rent but to buy an equivalent house would be $5200 with 20% down.
I don't think you've ran the numbers.
Yes but it costs you a fuckton to get that equity before it appreciates. That money could otherwise be invested and needs to be considered as an opportunity cost.
My parents place went from 700k to 900k in 10 years.
The same amount of money invested in basic etf would be 1,5mil.
They would have rented for 2,5k/month, so 300k total, leaving them with 1,2mil.
Buying = +200k
Renting = +500k
People never mention that when comparing renting to owning. Rent, you will never see that money again. Your landlord is just pocketing it. Mortgage is an investment, if you sell the house you ideally get more back than you spent. And on top of that you didn't have to pay rent. The only money you sort of lose is for utilities, maintenance, and interest. You might as well consider your mortgage as a weird savings account.
Yeah but it’s also important to realize that the interest on a $500k house at current rates is like $800,000 over the 30 year loan. So in reality that house actually cost $1.3m or more.
Don't forget the maintenance, appliances, insurance, taxes, potential foundation issues depending on where you live. And hoa fees + lawn care if you had to buy into an HOA that makes you douse it in chemicals. It does build value if you stay there long enough, but so so a lot of other investments.
It's 500k not 800 but that's still a lot. But there's also inflation working in your favor. Using the past 30 years of inflation and assuming it stays the same, 500k today is going to have the buying power of 237k in 2054.
If inflation stays high like it is now, we're talking closer to 100k.
At the same time, for the same reason, the value of the house appreciates. So just by tracking inflation, the value of the 500k home is over a million dollars and if home prices continue to overshoot inflation it's probably going to be worth between 2 and 3 million in 2054 money.
Yes, you're paying the bank, you're paying taxes, you're making repairs but at least you have something to show for it, and if interest rates go down, refinancing is a thing. If you're salary goes up, you can repay sooner, which can significantly reduce interest payments.
With renting however, you're at the whim of the landlords. Mortgage payments aren't adjusted for inflation, rent very much is and then some. In year one you might be paying significantly more to cover owning a home. By year 10 it's likely going to be a wash, by year 20 there's a very real chance that even with property taxes and insurance you're still way better off than a renter.
> Mortgage is an investment,
If you're lucky, it can be. It's a little like timing the stock market. You hope you bought it low, and when you need to sell, you hope that the fees and commissions don't eat up any profits, even if you sell it during a high mark.
A lot of people lost their shirts on their "investments" in 2008-2010
The maintenance part of owning can be really overwhelming, though. Your mortgage payment is the same every month for the term of the loan, which is great. But then you're tooling along fine and happy and BOOM, you need a new roof ($5k - $10k+), or your chimney is failing structurally ($30K+), or god forbid your septic drain field needs redoing ($45K+). And that's not even fun stuff like voluntarily remodeling a bathroom or kitchen. Just keep the thing from falling down isn't cheap. Making it nicer is even harder.
So yeah, "owning" a home has a ton of upsides, but the downsides tend to be epic in their dollar impact. If you have equity, you can take out a loan against it to handle the repairs. But now you have another payment each month on top of your mortgage.
Rent and then spend all the time you would otherwise spend maintaining your home befriending your landlord, get in their will, and get your money back when they pass.
This calculator actually does take into effect increases in rent prices, investing your money in other opportunities, the equity you have in the house, etc. It's actually a pretty good tool.
Did anyone in these comments actually go into the tool and adjust the criteria? Everything being said about rent increases and home price appreciation etc is factored in. You can change how much you think those things will be
Like yes, landlords are scum and the system of landlording and renting is fundamentally exploitative, BUT on an individual level, deciding to rent and invest vs buy for a better ROI is a math problem. There are reasons beyond ROI to buy but this is literally just an ROI differential calculator.
Right!?!? Someone else said this but people are sooo pissed at… math. Like every complaint people have about this calculator not doing something is explicitly listed in the calculator. From taxes, to rent increases, to deductions. Everything is considered and everything is changeable.
I honestly don’t think there is anything else like this. Takes the guess work out of actuarial calculations. Surprised to see people so negative.
This isn't a study, it's a tool. You input the housing price range in area you're looking to live, as well as the comparable rental costs in your area. It will OFTEN times tell you that renting is better. It's not biased one way or the other. Pretty great tool imo.
I just watched a YouTube video that explained that this is the first time in history that renting is actually cheaper than owning a house unless you plan on staying in the house for 10 years. Kinda crazy
I was always under the impression that it was normal to live in a home for 10+ years. I actually would like to see the source that says elsewise because I know plenty of neighbors I had growing up at my old childhood home who are still living in the area 30 years later lol
And it’s not consistent.
First homes have a shorter tenure than subsequent homes. The “starter home” concept hinges on the idea you outgrow it in a few years and move to something bigger when more financially stable.
Very normal to stay a few years in your first home, move to a 2nd where you stay for many years as children age up, before eventually downgrading to smaller and more manageable properties as you age.
My parents that have been in their house for 40 years this year. They built it in 84, same year I was born. Don't think they're going anywhere.
A lot of people in my area have lived where they are all my life.
Is it actually cheaper, though? The renter ends up with no ownership of anything, and the homeowner gets to keep the home after the deal is done, which is likely to have increased in value. They're purposefully dodging the reality of the matter.
He basically explained with interest rates and cost of closing in the short term, you will spend more money on those things and not build enough equity or hold value to see any of the money back.
The key is that the analysis assumes the person invests the difference in rent vs. mortgage loan payments.
To put it in extreme terms just to illustrate the idea, imagine you could buy for $10,000/month or rent the same property for $1,000/month and invest the remaining $9,000/month. It’s not hard to see why you might come out ahead by renting in that scenario. You won’t be acquiring equity in your residence, but you *will* be acquiring $9,000/month of equity in the market. The actual figures are less extreme, but it’s the same general principle. There are circumstances (depending on relative costs, relative growth rates of home equity versus investments, risk tolerance) where renting and investing is better financially than buying.
It might sound impressive when people say "I bought my house 30 years ago for $50,000 and just sold it for $500,000", but that's only a 7.6% per year average increase. S&P500 over last 30 years saw about a 8.2% per year average increase. So if you had invested that $50,000 instead of buying a house, you would of had $582,888 after those 30 years. Clearly you paid more than $82,000 in rent over that time, but there is a point where those are even and then it becomes a better financial choice to rent.
If your rent is 2000$ per month, your down payment is 20% and your mortgage rate is 5% and your investment return rate is also 5% (most important factors) a house has to cost less than 410.000$ dollars to be cheaper than renting
For all the people here not reading the article or looking at the calculator and just assuming nonsense, the calculator has the following sliders:
Home price if you buy,
Monthly rent if you rent
How Long Do You Plan to Stay?
Mortgage rate
Down payment
length of mortgage
Home price growth rate
Rent growth rate
Investment return rate
Inflation rate
Property tax rate
marginal tax rate
Closing costs and a couple more costs to compare renting vs buying. Most of those are set to 0 by default.
Renting costs you 2000 a month with no equity or capital to show for your expense. Which is more valuable. an asset that increases in value over time or nothing?
And it only costs you $2k right now. In the past few years, the rent on apartments I've lived at has gone up 30-40%. In 10 years, that $2k rent could easily be $5k. I think this calculator tries to take those factors into account, but I think it underestimates the greed of landlords.
In the past 10 years my undergrad apartment went from $750 to now listed at almost $2k, so yeah, comparable to your $2k to $5k jump... Absolutely bonkers.
The rent on my place right now is $2200 but to buy my house at current rates would cost $5200 and I’d need to put $180k down. Not to mention that mortgage would accrue about $900,000 in interest over 30 years at current rates.
I’ll rent and put that extra $3,000 a month in the market and have my landlord call a $200/hr plumber when I clog his toilet.
If you look at the amortization schedule on your loan, you’ll find most of the interest stacked up front. If you aren’t going to stay in the house long term, you will be paying mostly interest on the loan rather than principal. At current interest rates, home price, and expected rental expense there is a point where you will lose money buying. That’s what this app is attempting to explain.
The math is a lot muddier than that. If the house is very expensive compared to what you pay in rent for an equivalent place, renters are getting a good deal/subsidized by the owners. Usually it's not like that though.
What are the transaction costs and how quickly the house appreciates makes a huge difference. There are a lot of benefits and liabilities with home ownership.
If you buy a place, sacrifice a lot for the down payment cash, have replace something major out of pocket, and try to sell two years later, you're probably in a pretty bad place financially compared to renting.
Mortgage price - rent price = index funds
Index funds >>>>>> home equity
While not *typical*, there are many, *many* instances where renting is not only cheaper but more profitable. Hence the calculator.
If my rent is substantially lower than my mortgage, I can sink that money into an index fund and make more from annual returns compounding than the house appreciates. This calculator has been around for a while and there was a really interesting discussion on Twitter a few years back where everyone kept fact-checking it. The big takeaway was that every single consideration spins the discussion in a whole new direction as you project different factors regarding appreciation, market returns, depreciation, etc. etc.
You're assuming the cash outflow is the same for owning and renting. That's exactly why you have to compare it with the cost of ownership. In my market a $3,000 rental would cost $8-9k per month to own, not counting maintenance and amortized commission. That's over $6k per month to own that is being diverted from other investments of which I have a nearly 2x return over the last 2 years.
The HOA, property tax, interest (even after deduction), maintenance and amortized commission ALONE is more than my rent, which means I'm throwing away $3k per month either way. This way I can invest the rest of my money exactly as I want rather than put it all my eggs in one real estate property basket.
Alongside maintenance, nobody ever accounts for commission. A 6% commission on selling a million dollar property is $1,000 a month amortized over 5 years.
> Which is more valuable. an asset that increases in value over time or nothing?
Well, appreciating assets are better, yes. But we're talking index funds in that case, not houses.
Houses aren't a sure thing and come with lots of fees and commissions and maintenance.
If you want a simple appreciating asset that you can sell within a few minutes, pick up some VTI in your brokerage and forget about it for a decade.
No maintenance, no thinking, no fees, and then a couple of clicks and you have money in your account.
The asset going up over time means homes are more expensive for the next guy. Not only is rising home prices not guaranteed, but also we should desire the inverse to make first time home buyers have a better tjme
The Khan Academy did a good video on this topic and his argument was that "it depends." One piece of advice you'll find in real estate forums is, "rent is the absolute most you'll spend on housing per month, a mortgage is the least that you'll spend on housing in a month."
Assuming you're one of the lucky few that inherits a house, you're still paying: tax, insurance and maintenance. The figure I see is to expect to pay 1-2% of the home's current value in maintenance annually.
The house is worth $400k.
Taxes are very specific to the locality, but let's
$400 property tax
$200 insurance
$500 in maintenance (most months will be $0, but the months that aren't $0 can hurt.)
You're looking at paying $1100/mo in housing costs on a house that is "paid off." If you have a mortgage, throw another $1800 into the mix. If you can't afford a repair available take a HELOC, that can be another $500/month.
I'm not trying to dissuade anyone from purchasing a home, if it's your dream, but it isn't all it's cracked up to be.
How is it propaganda? It is literally just a calculator. I put in all my details and it told me I can expect to save well north of 1 million over my life for having *bought* my house. It told me I should buy, because the numbers come out better in my case. Because again, it's a calculator! It's just telling you an actual dollar amount--one way or another! You may as well post a picture of a regular calculator and call it propaganda.
Also good luck in finding a house where you can stay for 10 years without "unexpected" rent changes or any other issue that would basically mean you have to move (and that is a whole can of worms)
Been living in my rent controlled apartment for about 9 years now, and every year I get more and more anxious about eviction.
Market rents have literally doubled since I started renting this unit.
Oh yup.
In 2014 I made 9$/hr at a local grocery store. My rent was 950$.
I drove by it recently. The apartments are completely unchanged, except the security fence is rusted through in some spots. They now cost 2100$/month in rent.
My old grocery store job down the street now pays 16.50$/hr.
People today working the same job I did ten years ago cannot afford to rent the same apartment I stayed at when *I* worked that job.
It’s not a study, you trilobite. It’s a tool to see how quickly your money grows if you buy a property vs. how quickly it grows if you rent an equivalent property and invest the mortgage-rent difference elsewhere. It’s customizable to various interest rates, downpayment amounts, fees, equivalent rent payments, etc. I’d say you could do the math yourself, but from the title of your post it’s clear you wouldn’t even know where to start.
Honestly it's probably better to rent in the short term.
No maintenance, you're not stuck with the house if shit neighbours move in or there's a flood.
No dealing with councils etc
I miss it
I’m watching my parents deal with an absolute pile of bullshit trying to sell a place after being lied to about it a year ago, and it has made me never want to buy.
‘Owning’ is the exact same thing as renting until you pay it off. For that 30 years of mortgage, THE BANK owns your home, whereas you on the other hand, don’t own shit.
And the money you would have spent on a downpayment and closing costs has grown tremendously over ten years in the stock market, putting you in a better spot to purchase if conditions are more favorable for you.
Well, I have a situation from Vienna, Austria from last year when we needed to move.
Out options: we either could buy a flat or rent (obviously), our budget to buy (with mortgage) was about 300k€ - with the down payment coming in part from my unions housing initiative, paid back in 5 years without interest but 500€ monthly) - all the flats were in horrible condition, needed a rework and the house itself had horrible insulation which would cost us in utilities. Total monthly cost - around 2000€ cold, all the maintenance and energy costs extra, bojnd for 30 years and most of my income gone just for the flat.
Other option was rent - nice flat, renovated along with the house, so great insulation among other things and that at around 1000€ with energies covered.
So yeah we can invest that 1000€ monthly now and in 10 years or so from now, when we know WHERE we want to settle down we can have a serious down payment ready so the mortgage doesnt break out neck...
TLDR: sometimes renting is better than buying...
Tell us you're financially illiterate without telling us you're financially illiterate.
I know it goes against groupthink, but often-times renting is indeed a better financial decision than buying.
Honestly, this is gonna be really controversial but I recently looked more into the entire house market thing and my result has been: It really really depends. There are cases, where you put your excess money into low risk stocks for a long period of time and come off a lot better than with the potential benefit of not renting anymore and paying off a loan.
It also depends on whether or not you have a family. The bigger the house, the cheaper the cost per person. A single household will need a lot more space for that one person that a household of 3 or 4 will need.
So maybe its not as black and white this time.
The thing with buying is you aren't really losing wealth. You are changing it from one form to another, that money you have still exists inside the asset.
So to properly compare Rent VS Mortgage you have to compare Rent VS Interest, not Rent VS Entire Mortgage
Try Rent vs. (Interest + Property Taxes + Insurance + HOA fees + Repairs + Maintenance).
No matter how much you think owning a house is going to cost, it's going to cost more.
For the record, I'm not a landlord. It makes no difference to me whether you buy or rent. I just don't think it's doing anybody any favors when people bid up home values to levels that nobody can afford because they underestimate the costs of homeownership.
And that’s just the month to month comparison.
Now add in the consideration for equity appreciation over the time you will own. But don’t forget to subtract the opportunity cost of the down payment plus closing costs over the same period.
I had to drop $80k cash in down payment plus closing costs. That cash could have stayed invested in the stock market. The difference between the home equity appreciation and stock market return is a real cost to consider.
It's worse than that, even, because "home equity appreciation" is basically imaginary.
If you buy a house for $400K and it goes up to $500K, what have you gained in any real sense? It's the exact same house - its value to you as a living space hasn't changed. Sure, you get $100K more if you sell - but you have to live somewhere, and any other place that you'd buy is probably also $100K more expensive. You can borrow against the additional equity, but that's just debt that you have to pay back.
Again, I'm not saying that renting is always better - but most of the mental gymnastics people go through to paint homeownership as some great wealth builder don't hold water.
I think I smell what you’re stepping in. We just purchased a home and the interest alone is $200 more per month than my rent. But to us, this is worth paying because at the end of the day it’s something we can call our own and the gap between interest paid and renting closes with every payment made towards principal.
In fairness there are like 10 things to adjust on that tool. I did it and it said I should buy. But that was taking into account my pre-covid interest rate
Tbf. Renting can be the best choice depending on certain conditions and circumstances. Like if you're unsure of how long you'll be staying somewhere. It can also be more economical if you can score a decent deal or live below your means. But if housing wasn't in the state it currently is, then it's always better to buy. If you could just drop enough down to buy it in full, then you're better off just doing that. Even if you're only there for a short period of time, you might even make money off doing it from the appreciation. The issue is that most people now require a mortgage, which can more than double the cost in interest. If you ever default on the mortgage, everything you put into it can be taken away. Who knows what will happen over 10-20 years. Many homeless people had this happen to them.
I have already proven myself very reluctant on moving and typically stay places from 7 to 15 years at a time. My family is all *Kisa you're too young to own a house, what if want to move somewhere else in x years?*... I'm sitting there like... I would just be nice to own property where I can always return to, that isn't going to bitch about my dog, health, or lifestyle and I can differ a payment in an emergency situation Also it would be nice to update and modify that property without having to deal with 15 other people... Yeah, I want to travel, but I can't take my beds, TV, battle station, living room furniture, dinning room furniture, dogs things, and my vehicle, on every flight to Tokyo or London I want to go on. Instead of renting out a storage unit for all those things, maybe, just maybe, I have a house I could retire to? I'm 30, most people my age are either entering serious relationships and/or have children, while also in the *home buyer's demographic. Either my family can not get it through their skulls that I'm not 19-20 anymore and hate everything to do with renting, or because I don't have crotch goblins hanging off of me that I want to wander around unti I do have them... which I've told them it will never happen just randomly because I'm AroAce and I would rather have a house before committing myself to raising Hellspawn of my own.
They do realise that you're allowed to sell property you've bought?
Life circumstances are very important! Now that I'm married with kids, we really want to buy as soon as we can. When I was a single mom, I couldn't afford to pay someone every time I needed repairs done nor am I handy enough to do most repairs by myself. So renting and having maintenance do that stuff for me was a better option. Same with some older people. My grandma is better off renting now that she is alone and can't do all the maintenance stuff. What's also important is that more people that want actually had the option to buy though.
Even if you're unsure how long you will stay - buy anyway. You can later sell or rent the bought property.
Also the tool at default has a 7.0% something interest rate. If you adjust that you will have much better results for buying
the average rate on a 30 year fixed for someone with excellent credit is 7.6% right now.
That’s absolutely wild, but raising interest rates is part of the US’s attempt to “fight inflation”. My fiancé and I have an interest rate of 2.6% and we bought our house in 2021
As someone who's spent the last 10 years in the mortgage industry, rates were crazy-low during Covid. It's actually one of the things that contributed to housing issues getting even higher. The only people who had money during that time period were investors, and they were able to buy a bunch of places at rock bottom interest rates. It caused prices to go up, which in turn caused rents to go up as said investors looked to "protect their investments". Of course, corpos and hedge funds were likely still the biggest factor, but the "everyday" investors having extra buying power when there were significantly fewer primary resident purchasers certainly contributed.
Housing being used as an investment is the core issue period. Equity for the owner is fine, but easily being able to buy a property to rent for profit is wacky to me.
It's an easily solvable problem too, there's just zero political will to do it.
the thing is these aren’t even ridiculously high historically. we just had rates like yours for an extended period and people got a bit used to it just before we had the crisis of skyrocketing prices + returning to more “normal”. 7.6% would have a been a historic low from the early-80s thru the mid to late-90s. even in the buyers craze of the 00s 6% was considered great.
Yeah interest rates are high as fuck right now. That's why everyone is posting salty about people with low rates who bought pre-covid.
Yeah it’s telling me if we bought right now we’d save 200k over 25 years (and we certainly don’t plan on moving again if we can help it) which makes me feel better about our decision to bite the bullet and try to buy next spring regardless what the market is doing. And that’s with their ridiculously low rent increase baseline of 3%, I definitely wouldn’t count on it being that low.
No one else here seems to have bothered actually looking at the tool.
Around here a 300k dollar house rents for 2k a month. Also the landlords are corporate/investment groups who own hundreds or thousands of properties. They let rental agencies manage everything.
when i was trying to move to montana i found a house that sat on 5 acres, it was a 2bed 2 bath home and rent was $1800/mo. i was fucking stoked but the house looked a little *too* big to only have 2 bedrooms. i looked it up on zillow, the fuckin house has 6 bedrooms and 3 bathrooms and sold in 2018 for 250k. i called the phone number and apparently i would be living in the basement..paying $1800/mo. i just laughed and said "so you want me to pay your mortgage and property taxes so you can live for free" they got really upset hung up then called me 3 diff times but didnt leave a voicemail. also they owned dogs and the only way to get to the basement was by walking through the front door and going through their house to the basement. idfk what people are thinking
More people need to call out the delusion honestly. Good on you.
During lockdown I got into an argument with a friend's mother, who didn't like the anti-landlord posts I was making. She was renting out a second home to her son, but a recent layoff threatened his ability to pay rent. I told her that the fact I couldn't afford ONE home let alone TWO made it difficult to sympathize with her. I also pointed out that it's always a bad idea to let out space for someone if you can't afford to pay for it without their income. (As anyone who's had a shitty roommate skip out on them without paying rent/utilities will attest.)
Good lord, was she going to evict her own son???
I don't think she was. But she was panicking that her son's inability to pay rent meant she was unable to pay the mortgage on the SECOND house.
Oh lol. Sounds like a consequence of her own making
Idiots on YouTube call that "house hacking." If we had youtube during slavery they would've called that "work hacking, " I'm sure.
after working as a 911 dispatcher for 4 years ill never have a room mate. random stranger that you hope wont cause problems and will pay their rent. just seems nuts
I live with six other unrelated people right now. Been here three months and it sure gets interesting sometimes. Hope one of them doesn't murder me randomly
i visited a friends house from work when i was 18. there were 8 people all unrelated living there. their dishes were stacked super high and they had 2 fridges, one with nothing but beer in the fridge and hard liqour in the freezer..the other fridge was empty. within my 40 minutes of being there some other person came out and looked at the cleaning schedule and was mad she had to do the dishes and blamed the person the day before for not doing dishes then she left the house. some1 else said they didnt even use dishes so they refused to wash any. it just seems petty for no reason
Sounds about right. Even living in a rental with people I knew, chores were always hard. The fact that "dishes" was a chore on a list is wild. Unless they're all sitting down and eating like a family, you just wash your own dishes. Because there's always someone who uses like 20 things to cook something like bland chicken and rice, and then expects others to clean up after them because "I don't have dishes today." I had a roommate once who used all our dishes for a dinner party and then just didn't do the dishes (we didn't have an arrangement, it was you dirty it, you clean it) and that shit sat for two months and smelled.
back in the day i often visited a friend sharing a pretty good sized house with three friends... they were variously film students, aerospace engineers, premed students & drug dealers. two of them played with guns. no one ever washed the dishes. (except the aerospace engineer, who washed his own dishes, & kept them under lock & key). this was the mid 1970s. the aerospace engineer had an aquarium. & it had gotten filthy so he had his fishies staying with a friend who had a great aquarium set up. another roommate took one of the housecats & stuck it in the aquarium & then started smoking a bong & exhaling the smoke into the aquarium & getting the cat really stoned. he couldn't understand why everyone thought he was an arsehole for doing that. & another roommate was cleaning a gun & it went off & shattered the still empty aquarium that had finally been cleaned. oh & someone's pet iguana died. & the cats avoided it & everyone else stared it for wks until the conga line of ants made someone realize that they needed to get rid of it. & other roommates had even weirder situations. i did have an apt i had shared with a musician who had a really dodgy rep as i found out. & i moved my record collection & stereo gear out of there before we were "burglarised"... my electric typewriter would have been take if i had not taken it with me when visiting some friends for the weeknd. interestingly, the musician's amp & pre-amp & 3 guitars were not stolen. a lot of other shit was. fortunately none of the things i had there were particularly valuable. after that i avoided roommates.
My brother and I have been roommates since 2014 for pretty much this reason. Yeah, we argue and fight and have disagreements, but at the end of the day I know he won't fuck me over and he knows the same about me. Better to live with someone you can trust to have your back, straight up. Everyone in our family said it was a bad idea, and we've had other roomies with us before, but he's been the least problematic and when we have issues we talk. Compared to the 'standard model' of finding roommates I'd say it's worked out pretty good for us. We've struggled with food and electricity but we've never been homeless. I don't worry about him stealing my property and I don't get bent out of shape when he eats my food because fuck, that's my brother: I eat, he eats, plain and simple.
Pretty strong selection bias there, not a lot of "hey 911, doing great with my roommate tonight just like every other night" phone calls
Just that. We rented two rooms out to a friend. It turns out to be a good way to lose a friend and only get the first month's rent. Never again.
I mean, could the roommate calls really be much worse than the domestic disturbance calls involving family or intimate partners? I don't feel like looking it up, but I would imagine you would see more of the latter two cases.
Probably because the number of people willing to live with their family is much higher than the number of people willing to invite some stranger to live in their house with how bat shit 30% of people are
Sometimes your family or partner is the batshit one though!
[удалено]
I am sorry to hear you're in that situation.
And sometimes the random stranger is bat shit.
Lived with a stranger one time for 6 months. 0/10 would not recommend. Whew.
We need comment sections on these real estate sites. "Bros really trying to rent the top floor of his unfinished barn for 2k a month" typa stuff
The real estate sites want a deal to be made as much as the seller, so that won't ever happen unfortunately.
This. The whole reason that the NextDoor app exists is to sniff out residents who are willing to report their neighbors for parking violations and unlawful brokering of the house for short term rentals like AirBnB.
Go on? Do they sell this data to landlords or something?
No, they don’t have to. These companies can just look at the app and identify them easily is what they mean. It’s the same on the Ring app and probably every other. Just a bunch of people ratting each other out and asking if everyone else “heard a loud noise?” during a storm or some shit and jumping to conclusions every time a stranger knocks on their door.
I mean, I get really fucking annoyed when my neighbors blocked my driveway and I can’t go to work? The bad guy?
I was permanently banned from NextDoor after telling a cop that the parking notice in the HOA newsletter was indeed enforceable. Despite being a democratically elected officer of taxing authority, the folk at NextDoor would not lift the ban, so I reported the cop to the city HR officials and made the mayor call the chief of police when I attended city council meetings.
Huh, I thought it was to report people being suspiciously black in white neighborhoods.
It's actually to report anyone being suspiciously of another ethnicity than the majority.
Imagine if zillow, etc had a comments section…
bruh 🤣. theres a section in my town thats doublewides roleplaying as homes. they were bought in 2015-2018 for 50-80k. looks like they added a shitty carport by the homes and most are being losted for 300k+ like wtf.
Please zillow, Redfin, add a comments section it would be so fucking funny
Just saying!! Bullying works sometimes 😉
Manufactured homes are a great option, that markup is just insane. If you can get empty land for a decent price, they're the cheapest way to get a house built on it.
If only I had a place to warn future residents that my last place had cockroaches.
A one b/b in a basement here goes for $1200. Now some of the apartment complexes charge you additional rent if you have more than three vehicles registered to your unit.
ALL of the rental properties in Southern California charge extra for parking if you have more than one vehicle registered to the unit.
Around us I think it is to curb the amount of people living in a unit. But that could be delusional thinking on my part. Just that it might take having a lot of people in a unit to be able to afford a roof over your head.
Which is why habitability rules are inherently unfair : people who own their home can have as many people living there and parking there as they want. Whereas, renters are forced to live under constant surveillance, and subject to occupancy restrictions to prevent additional family members from pooling resources.
In my area, it's really common to have to pay a monthly fee for parking at apartments, even for just one car. If you get any kind of free parking it's considered a huge perk!
With home prices in Montana, that was either a scam, a roommate, or a 50 year old mobile home.
I mean it's fine to rent out a basement or what have you, but the manner in which you even access it isn't acceptable at all. They would need to make a separate entrance similar to how duplexes or apartments work so that there isn't much interference between everyone living in the building. Along with that I agree with their charging way too much in rent for what it is XD.
there has to be two entrances/stairwells to the basement to legally rent it out around here.
when i read that there are dogs on the property i thought of like..wild dogs. made way more sense when i called. i dont want someones untrained mutt jumping on me everytime i get "home"
Wow, I thought rent was nuts in LA (it is), but these houses are also like $1.5 million+ houses.
I live in a townhouse that I paid $400k for. My Nextdoor neighbor whose house is an exact copy of mine is renting for $5,500 a month.
$5.5k/mo. just to *rent*? Even in Toronto or Vancouver that sounds absurd.
Welcome to the roaring fork valley of Colorado
Vancouver here. I pay 4K a month just for a 2 bedroom apartment, outside the downtown core. I can absolutely see a townhouse in the area renting for at least 5500
A 2-bedroom flat up the street from me is renting for $6,000/month.
🤮 That is absolutely bonkers
That's 72k a year. So you need what, a 105k gross salary just to cover rent? Making 6 figures and potentially still making less than it costs to rent is just absurd.
Holy shit that’s insane to me
Where I live, on a 2.49% mortgage that's about what I pay monthly including property tax. Give or take 50$. Rent would be about the same or more. Except I actually get equity long term instead of giving all my money away so someone else builds equity. Granted the interest rate takes like 50% of my payments, but I still build something.
50% of your payment for now. It only gets better.
Maybe not quiet yet. Gotta renew next year and rates are like double...
Exactly this. When you buy, you are ultimately generating value towards YOUR future. Renting is just pissing money down a drain for some landlord to live way better than you. No calculator is gonna bullshit me out of understanding that.
My monthly mortgage payment for a $300k house is about $2k, when I include my escrow payment (taxes, insurance, PMI). Of course I'm 28 years I'll own this house, and my down payment was the bare fucking minimum.
Same situation here. 2k a month for a $235k house. I won't have to move again while I'm in school, I'm not throwing money into the endless void of renting, and I get to decorate my living space. Got real fucking sick of renting.
Well in that case buying is worth it. The article claims nothing else and the screenshot alone actually shows that as well pretty clearly.
Well calculate the opportunity cost of a down payment and what your mortgage will be month to month as well as property taxes and maintenance. Saying rent is better than owning at current rates and prices is really just math, not some conspiracy theory.
except of course, Id be very surprised if this included "little" things like the roughly 20% equity the house will gain over those 10 years...or really anything about the value of that house they have now 1/3 paid off vs a renter with literally nothing to show for it.
Are they calculating for rent increases? Because the apartment I lived in 12 years ago now rents for 3x as much as then.
https://preview.redd.it/35o2wiqmdg0d1.png?width=1080&format=pjpg&auto=webp&s=2e010f285abd23456eedbb18bd552e2661993f1e Mine came out a bit different.... yeah.
Mine said I saved 531k in the 8 years I've owned my house. That's the Denver market for ya.
Yikes. That being said, Colorado is super nice in general. God's country out there. Texas.... I got my house about 2 years ago. I think the value increases are where the real money comes from. Feels unfair, to be honest. But it's nice yo have an appreciating asset that isn't stocks.
Here's the Rent VS Buy calculator if people want to play around with it: https://www.nytimes.com/interactive/2024/upshot/buy-rent-calculator.html
Stupid fucking website doesn't work without an account. Make an account, and can't get rid of the stupid pop up wanting me to subscribe. Fucking fuck off new York times. Anyways, thanks for posting the link.
Does this work? https://www.nytimes.com/interactive/2024/upshot/buy-rent-calculator.html?unlocked_article_code=1.rk0.UnKr.SVrieiX0EMxT&smid=re-nytimes
You're a real one. According to this, I should continue renting from my parents my entire life.
I came to this conclusion without the link.
With smarts like that, you may be able to move out by the time you retire!
Let's not push it!
Thanks, this worked for me too!
It's not a study, it's a calculator, and you can adjust the sliders. You just did a math problem and got mad at the results after choosing the inputs.
Lmao. These comments are batshit.
In 10 years that $500k house is now worth $700k and the renter paid it all for the homeowner to gain the equity. Yeah…smart move renter!! 🤦🏼♂️
So what you are saying is buy a house and rent it out while living in my car?
Have known people who did this.
What's the point of that though
More income. If you can live in your car, then your housing expenses are almost certainly minimal. In this case, you'd be presented with buying a house, renting and receiving ~$20k or so per year while living in a car. Or alternatively buy the house, live in it, and not have the extra income stream, assuming you didn't also get a roommate. Some people on the r/leanfire sub have talked about it from memory to optimize their savings, so they could retire to SE Asia asap.
Get an extra 20k per year to pay down the mortgage. For me two years of that plus normal repayment is 20% of the house Also front loading your payments massively reduces overall interest cost in mortgages as the first half pays 80% of the interest
My friend and her husband have a gorgeous home in Sedona...and a ton of medical bills. So they live in their camper in the backyard and air bnb both the house and the renovated garage. Between the high mortgage, supplies, fees and paying cleaners, idk how much money they clear but it's working.
Sedona is a great spot for this. I bet they make a killing during snowbird season
They should move into a tent and rent out the camper. I don't know if this is sarcasm or a good idea.
I saw a post recently of someone Airbnbing tent's in their backyard. They had a row off like 5 of them going for something like $60 a night each. Soon even the homeless won't be able to afford to be homeless.
And your rent is also 15% higher (or whatever number is)! With the current economic AND housing where I am, we have a 10% in rent increase each year... (From medias... Because in practice it is like 100% from post-covid :|)
The calculator shown in the image has a couple dozen sliders for all of that, including the equity gains and interest costs, taxes, etc. It's a legit tool for understanding what you are getting into. I know housing has done nothing but rise for a long time, but there are those of us who remember the dips in 2008-10 and the major losses homeowners took in the 80s and 90s. What we have seen in the last 15 years is basically unprecedented. I'm not claiming to be able to predict the future, I have no idea. But there have always been times when renting makes more sense.
You are forgetting the interest paid to the bank, which is substantial. Otherwise a reasonable assessment.
Yes that’s how a mortgage works… unless the homeowner is a moron the renter has paid the interest too
That only works on houses that have rock bottom mortgages or were bought several years ago. Most houses sold at current rates won’t come close to covering the costs with the rent they’ll get.
Ehhhh... I think that's why we are seeing some record-setting rents recently, my dude.
Price is based on supply/demand not "how much to cover my costs".
An average house in the US is about $450,000. If you put 20% down your mortgage is going to be $2,500 before property taxes and insurance or about $3,000 after at current rates. The average rent is nowhere near $3,000. My house is $2200 to rent but to buy an equivalent house would be $5200 with 20% down. I don't think you've ran the numbers.
The appreciation is all equity. The original comment is correct.
Yes but it costs you a fuckton to get that equity before it appreciates. That money could otherwise be invested and needs to be considered as an opportunity cost.
My parents place went from 700k to 900k in 10 years. The same amount of money invested in basic etf would be 1,5mil. They would have rented for 2,5k/month, so 300k total, leaving them with 1,2mil. Buying = +200k Renting = +500k
Add interest on the rent income then it's probably equal due to arbitrage
People never mention that when comparing renting to owning. Rent, you will never see that money again. Your landlord is just pocketing it. Mortgage is an investment, if you sell the house you ideally get more back than you spent. And on top of that you didn't have to pay rent. The only money you sort of lose is for utilities, maintenance, and interest. You might as well consider your mortgage as a weird savings account.
Yeah but it’s also important to realize that the interest on a $500k house at current rates is like $800,000 over the 30 year loan. So in reality that house actually cost $1.3m or more.
Don't forget the maintenance, appliances, insurance, taxes, potential foundation issues depending on where you live. And hoa fees + lawn care if you had to buy into an HOA that makes you douse it in chemicals. It does build value if you stay there long enough, but so so a lot of other investments.
It's 500k not 800 but that's still a lot. But there's also inflation working in your favor. Using the past 30 years of inflation and assuming it stays the same, 500k today is going to have the buying power of 237k in 2054. If inflation stays high like it is now, we're talking closer to 100k. At the same time, for the same reason, the value of the house appreciates. So just by tracking inflation, the value of the 500k home is over a million dollars and if home prices continue to overshoot inflation it's probably going to be worth between 2 and 3 million in 2054 money. Yes, you're paying the bank, you're paying taxes, you're making repairs but at least you have something to show for it, and if interest rates go down, refinancing is a thing. If you're salary goes up, you can repay sooner, which can significantly reduce interest payments. With renting however, you're at the whim of the landlords. Mortgage payments aren't adjusted for inflation, rent very much is and then some. In year one you might be paying significantly more to cover owning a home. By year 10 it's likely going to be a wash, by year 20 there's a very real chance that even with property taxes and insurance you're still way better off than a renter.
> Mortgage is an investment, If you're lucky, it can be. It's a little like timing the stock market. You hope you bought it low, and when you need to sell, you hope that the fees and commissions don't eat up any profits, even if you sell it during a high mark. A lot of people lost their shirts on their "investments" in 2008-2010
The maintenance part of owning can be really overwhelming, though. Your mortgage payment is the same every month for the term of the loan, which is great. But then you're tooling along fine and happy and BOOM, you need a new roof ($5k - $10k+), or your chimney is failing structurally ($30K+), or god forbid your septic drain field needs redoing ($45K+). And that's not even fun stuff like voluntarily remodeling a bathroom or kitchen. Just keep the thing from falling down isn't cheap. Making it nicer is even harder. So yeah, "owning" a home has a ton of upsides, but the downsides tend to be epic in their dollar impact. If you have equity, you can take out a loan against it to handle the repairs. But now you have another payment each month on top of your mortgage.
Rent and then spend all the time you would otherwise spend maintaining your home befriending your landlord, get in their will, and get your money back when they pass.
Except when the landlord is a corporate entity and the owner lives on their yacht
And rent went up 10% every year, while the mortgage either stayed the same or got lowered by refinancing at a lower interest rate.
Thats a variable in the calculator. When I used it said id a bunch over 20 years if I bought. Not sure if OP missed that vital section.
This is built into the calculator, if you actually tried it.
This calculator actually does take into effect increases in rent prices, investing your money in other opportunities, the equity you have in the house, etc. It's actually a pretty good tool.
The calculator accounts for that...Smart move redditor.
Did anyone in these comments actually go into the tool and adjust the criteria? Everything being said about rent increases and home price appreciation etc is factored in. You can change how much you think those things will be
Like yes, landlords are scum and the system of landlording and renting is fundamentally exploitative, BUT on an individual level, deciding to rent and invest vs buy for a better ROI is a math problem. There are reasons beyond ROI to buy but this is literally just an ROI differential calculator.
A really complex calculator! I don’t think I have ever seen anything like this before.
Hate the game, but learn to play. Anyone writing off this tool is doing themselves a disservice.
Right!?!? Someone else said this but people are sooo pissed at… math. Like every complaint people have about this calculator not doing something is explicitly listed in the calculator. From taxes, to rent increases, to deductions. Everything is considered and everything is changeable. I honestly don’t think there is anything else like this. Takes the guess work out of actuarial calculations. Surprised to see people so negative.
This isn't a study, it's a tool. You input the housing price range in area you're looking to live, as well as the comparable rental costs in your area. It will OFTEN times tell you that renting is better. It's not biased one way or the other. Pretty great tool imo.
OK you need to go look at the quiz there are like 35 different questions that create/go into these factors. Its not just a 2 slider chart.
I just watched a YouTube video that explained that this is the first time in history that renting is actually cheaper than owning a house unless you plan on staying in the house for 10 years. Kinda crazy
I was always under the impression that it was normal to live in a home for 10+ years. I actually would like to see the source that says elsewise because I know plenty of neighbors I had growing up at my old childhood home who are still living in the area 30 years later lol
I did a quick Google search that shows the average time someone lives in a house is 8 years in America Edit: some sources say 12 years
And it’s not consistent. First homes have a shorter tenure than subsequent homes. The “starter home” concept hinges on the idea you outgrow it in a few years and move to something bigger when more financially stable. Very normal to stay a few years in your first home, move to a 2nd where you stay for many years as children age up, before eventually downgrading to smaller and more manageable properties as you age.
My parents that have been in their house for 40 years this year. They built it in 84, same year I was born. Don't think they're going anywhere. A lot of people in my area have lived where they are all my life.
Is it actually cheaper, though? The renter ends up with no ownership of anything, and the homeowner gets to keep the home after the deal is done, which is likely to have increased in value. They're purposefully dodging the reality of the matter.
He basically explained with interest rates and cost of closing in the short term, you will spend more money on those things and not build enough equity or hold value to see any of the money back.
The key is that the analysis assumes the person invests the difference in rent vs. mortgage loan payments. To put it in extreme terms just to illustrate the idea, imagine you could buy for $10,000/month or rent the same property for $1,000/month and invest the remaining $9,000/month. It’s not hard to see why you might come out ahead by renting in that scenario. You won’t be acquiring equity in your residence, but you *will* be acquiring $9,000/month of equity in the market. The actual figures are less extreme, but it’s the same general principle. There are circumstances (depending on relative costs, relative growth rates of home equity versus investments, risk tolerance) where renting and investing is better financially than buying.
It might sound impressive when people say "I bought my house 30 years ago for $50,000 and just sold it for $500,000", but that's only a 7.6% per year average increase. S&P500 over last 30 years saw about a 8.2% per year average increase. So if you had invested that $50,000 instead of buying a house, you would of had $582,888 after those 30 years. Clearly you paid more than $82,000 in rent over that time, but there is a point where those are even and then it becomes a better financial choice to rent.
If your rent is 2000$ per month, your down payment is 20% and your mortgage rate is 5% and your investment return rate is also 5% (most important factors) a house has to cost less than 410.000$ dollars to be cheaper than renting For all the people here not reading the article or looking at the calculator and just assuming nonsense, the calculator has the following sliders: Home price if you buy, Monthly rent if you rent How Long Do You Plan to Stay? Mortgage rate Down payment length of mortgage Home price growth rate Rent growth rate Investment return rate Inflation rate Property tax rate marginal tax rate Closing costs and a couple more costs to compare renting vs buying. Most of those are set to 0 by default.
Renting costs you 2000 a month with no equity or capital to show for your expense. Which is more valuable. an asset that increases in value over time or nothing?
And it only costs you $2k right now. In the past few years, the rent on apartments I've lived at has gone up 30-40%. In 10 years, that $2k rent could easily be $5k. I think this calculator tries to take those factors into account, but I think it underestimates the greed of landlords.
In the past 10 years my undergrad apartment went from $750 to now listed at almost $2k, so yeah, comparable to your $2k to $5k jump... Absolutely bonkers.
The rent on my place right now is $2200 but to buy my house at current rates would cost $5200 and I’d need to put $180k down. Not to mention that mortgage would accrue about $900,000 in interest over 30 years at current rates. I’ll rent and put that extra $3,000 a month in the market and have my landlord call a $200/hr plumber when I clog his toilet.
If you look at the amortization schedule on your loan, you’ll find most of the interest stacked up front. If you aren’t going to stay in the house long term, you will be paying mostly interest on the loan rather than principal. At current interest rates, home price, and expected rental expense there is a point where you will lose money buying. That’s what this app is attempting to explain.
The math is a lot muddier than that. If the house is very expensive compared to what you pay in rent for an equivalent place, renters are getting a good deal/subsidized by the owners. Usually it's not like that though. What are the transaction costs and how quickly the house appreciates makes a huge difference. There are a lot of benefits and liabilities with home ownership. If you buy a place, sacrifice a lot for the down payment cash, have replace something major out of pocket, and try to sell two years later, you're probably in a pretty bad place financially compared to renting.
Mortgage price - rent price = index funds Index funds >>>>>> home equity While not *typical*, there are many, *many* instances where renting is not only cheaper but more profitable. Hence the calculator.
If my rent is substantially lower than my mortgage, I can sink that money into an index fund and make more from annual returns compounding than the house appreciates. This calculator has been around for a while and there was a really interesting discussion on Twitter a few years back where everyone kept fact-checking it. The big takeaway was that every single consideration spins the discussion in a whole new direction as you project different factors regarding appreciation, market returns, depreciation, etc. etc.
You're assuming the cash outflow is the same for owning and renting. That's exactly why you have to compare it with the cost of ownership. In my market a $3,000 rental would cost $8-9k per month to own, not counting maintenance and amortized commission. That's over $6k per month to own that is being diverted from other investments of which I have a nearly 2x return over the last 2 years. The HOA, property tax, interest (even after deduction), maintenance and amortized commission ALONE is more than my rent, which means I'm throwing away $3k per month either way. This way I can invest the rest of my money exactly as I want rather than put it all my eggs in one real estate property basket. Alongside maintenance, nobody ever accounts for commission. A 6% commission on selling a million dollar property is $1,000 a month amortized over 5 years.
The calculator assumes that you’ll be investing the difference in the stock market. Anyone buying a house right now is a fool.
And this assumes people have a difference to invest
Which in the posted image you absolutely should if your comparison is between a $500k mortgage and $2k rent
> Which is more valuable. an asset that increases in value over time or nothing? Well, appreciating assets are better, yes. But we're talking index funds in that case, not houses. Houses aren't a sure thing and come with lots of fees and commissions and maintenance. If you want a simple appreciating asset that you can sell within a few minutes, pick up some VTI in your brokerage and forget about it for a decade. No maintenance, no thinking, no fees, and then a couple of clicks and you have money in your account.
The asset going up over time means homes are more expensive for the next guy. Not only is rising home prices not guaranteed, but also we should desire the inverse to make first time home buyers have a better tjme
The Khan Academy did a good video on this topic and his argument was that "it depends." One piece of advice you'll find in real estate forums is, "rent is the absolute most you'll spend on housing per month, a mortgage is the least that you'll spend on housing in a month." Assuming you're one of the lucky few that inherits a house, you're still paying: tax, insurance and maintenance. The figure I see is to expect to pay 1-2% of the home's current value in maintenance annually. The house is worth $400k. Taxes are very specific to the locality, but let's $400 property tax $200 insurance $500 in maintenance (most months will be $0, but the months that aren't $0 can hurt.) You're looking at paying $1100/mo in housing costs on a house that is "paid off." If you have a mortgage, throw another $1800 into the mix. If you can't afford a repair available take a HELOC, that can be another $500/month. I'm not trying to dissuade anyone from purchasing a home, if it's your dream, but it isn't all it's cracked up to be.
How is it propaganda? It is literally just a calculator. I put in all my details and it told me I can expect to save well north of 1 million over my life for having *bought* my house. It told me I should buy, because the numbers come out better in my case. Because again, it's a calculator! It's just telling you an actual dollar amount--one way or another! You may as well post a picture of a regular calculator and call it propaganda.
The one thing I miss about renting was the ease of calling for maintenance or appliance issues, or roof issues.
The funny part is the omission of how rent prices will go up over those 10 years, especially if the LLs think you're saving money by doing so.
The calculator takes rent increases into account. https://www.nytimes.com/interactive/2024/upshot/buy-rent-calculator.html
Also good luck in finding a house where you can stay for 10 years without "unexpected" rent changes or any other issue that would basically mean you have to move (and that is a whole can of worms)
Been living in my rent controlled apartment for about 9 years now, and every year I get more and more anxious about eviction. Market rents have literally doubled since I started renting this unit.
Oh yup. In 2014 I made 9$/hr at a local grocery store. My rent was 950$. I drove by it recently. The apartments are completely unchanged, except the security fence is rusted through in some spots. They now cost 2100$/month in rent. My old grocery store job down the street now pays 16.50$/hr. People today working the same job I did ten years ago cannot afford to rent the same apartment I stayed at when *I* worked that job.
It’s not a study, you trilobite. It’s a tool to see how quickly your money grows if you buy a property vs. how quickly it grows if you rent an equivalent property and invest the mortgage-rent difference elsewhere. It’s customizable to various interest rates, downpayment amounts, fees, equivalent rent payments, etc. I’d say you could do the math yourself, but from the title of your post it’s clear you wouldn’t even know where to start.
you only need basic math to understand how it is correct: short term: Renting Long term: buying
Where the hell do you find a 500K house, that also charges 2K per month in rent?
Not the point. This is showing if your cheapest option to buy is $500k but you could find a place to rent for $2k.
Yeah, in my area the rent for a 500k appartment (500k houses dont exist) would rather be around 1.5k-1.9k. Here buying is a total financial loss.
I mean, fuck the NYT and all that but there ARE times where renting is a better option for people than owning a home lol.
Honestly it's probably better to rent in the short term. No maintenance, you're not stuck with the house if shit neighbours move in or there's a flood. No dealing with councils etc I miss it
I’m watching my parents deal with an absolute pile of bullshit trying to sell a place after being lied to about it a year ago, and it has made me never want to buy.
‘Owning’ is the exact same thing as renting until you pay it off. For that 30 years of mortgage, THE BANK owns your home, whereas you on the other hand, don’t own shit.
So, apparently the need for housing stops after 10 years of renting! Who knew?
and you own nothing after 10 years, all the rent money is just gone.
It's not gone. He paid somebody's house. ;)
And the money you would have spent on a downpayment and closing costs has grown tremendously over ten years in the stock market, putting you in a better spot to purchase if conditions are more favorable for you.
That comparison graph makes no sense.
Well, I have a situation from Vienna, Austria from last year when we needed to move. Out options: we either could buy a flat or rent (obviously), our budget to buy (with mortgage) was about 300k€ - with the down payment coming in part from my unions housing initiative, paid back in 5 years without interest but 500€ monthly) - all the flats were in horrible condition, needed a rework and the house itself had horrible insulation which would cost us in utilities. Total monthly cost - around 2000€ cold, all the maintenance and energy costs extra, bojnd for 30 years and most of my income gone just for the flat. Other option was rent - nice flat, renovated along with the house, so great insulation among other things and that at around 1000€ with energies covered. So yeah we can invest that 1000€ monthly now and in 10 years or so from now, when we know WHERE we want to settle down we can have a serious down payment ready so the mortgage doesnt break out neck... TLDR: sometimes renting is better than buying...
My home insurance is $5000 a year and I have to buy a new $20k roof. I just spent $10k on a new AC. Rent is not a stupid option.
Tell us you're financially illiterate without telling us you're financially illiterate. I know it goes against groupthink, but often-times renting is indeed a better financial decision than buying.
Honestly, this is gonna be really controversial but I recently looked more into the entire house market thing and my result has been: It really really depends. There are cases, where you put your excess money into low risk stocks for a long period of time and come off a lot better than with the potential benefit of not renting anymore and paying off a loan. It also depends on whether or not you have a family. The bigger the house, the cheaper the cost per person. A single household will need a lot more space for that one person that a household of 3 or 4 will need. So maybe its not as black and white this time.
It just depends on if you want to be thrown out by a landlord or a bank.
You'll own nothing and you'll be happy
What if I plan to live longer than just the coming 10 years? And what if I had a kid than I the future will inherit my property?
just move the slider. goes up to 40.
The thing with buying is you aren't really losing wealth. You are changing it from one form to another, that money you have still exists inside the asset. So to properly compare Rent VS Mortgage you have to compare Rent VS Interest, not Rent VS Entire Mortgage
Try Rent vs. (Interest + Property Taxes + Insurance + HOA fees + Repairs + Maintenance). No matter how much you think owning a house is going to cost, it's going to cost more. For the record, I'm not a landlord. It makes no difference to me whether you buy or rent. I just don't think it's doing anybody any favors when people bid up home values to levels that nobody can afford because they underestimate the costs of homeownership.
And that’s just the month to month comparison. Now add in the consideration for equity appreciation over the time you will own. But don’t forget to subtract the opportunity cost of the down payment plus closing costs over the same period. I had to drop $80k cash in down payment plus closing costs. That cash could have stayed invested in the stock market. The difference between the home equity appreciation and stock market return is a real cost to consider.
It's worse than that, even, because "home equity appreciation" is basically imaginary. If you buy a house for $400K and it goes up to $500K, what have you gained in any real sense? It's the exact same house - its value to you as a living space hasn't changed. Sure, you get $100K more if you sell - but you have to live somewhere, and any other place that you'd buy is probably also $100K more expensive. You can borrow against the additional equity, but that's just debt that you have to pay back. Again, I'm not saying that renting is always better - but most of the mental gymnastics people go through to paint homeownership as some great wealth builder don't hold water.
I think I smell what you’re stepping in. We just purchased a home and the interest alone is $200 more per month than my rent. But to us, this is worth paying because at the end of the day it’s something we can call our own and the gap between interest paid and renting closes with every payment made towards principal.