I’ve seen a recent finance bro fad saying renting and investing is better than owning. My brother in Christ my rent was much higher than my mortgage for a shittier spot and I didn’t get equity.
During the last housing bubble, you could rent the same place for less than 1/2 the cost of buying it. Renting and investing made more sense then.
Currently buying a house is overpriced but rent is even more so.
The best financial decision right now is to live with your parents your entire life. If you don’t have a parent you can stay with, then a tent and cardboard boxes in the park it is.
It really depends on the circumstances. For me personally renting and investing is indeed better - but my rent is 500 Eur per month for 100m² cold and I can’t finance a similar sized house for that here. Everyone needs to do their own math for their situation.
I just did the math for renting/investing vs buying, including rent/house value yearly increase, income taxes on capital gains, mortgage rate, down payment amount, and initial house price. The results indicate a strong dependence on rent price and taxes/insurance for buying. I found that renting/investing can be a better financial option depending on the inputs. As another commenter pointed out, the main reasons are taxes/insurance and the greater time return rate for market vs home value. This was surprising to me, so I’m glad I ran the numbers. That tells me the real difference is your life choice of wanting a place of your own vs renting and moving around.
I should’ve known better than to trust my intuition on this. I previously ran the numbers on investing vs double mortgage payments and found investing to be far superior.
Taxes and maintenance wouldn’t be included in the mortgage. A new roof is expensive, so are HVACs, floors, etc. These things will need to be replaced. A rule of thumb is to budget 1% to 4% of the total house value per year. For a 400k house that could be up to $16k extra per year, or $1333 more per month than your mortgage. Those costs for maintenance and taxes don’t go towards paying down your principal so they aren’t directly gaining equity. With the rent and invest option, the investing is the counter to equity. When you sell your house you usually pay a realtor commission. There are a lot of factors to include when seeing if rent & invest is better than mortgage & buy.
That being said, I prefer to buy. I don’t plan on moving anytime soon.
People who don’t own homes don’t understand just how expensive and time consuming it can be. And most of that money and work doesn’t go towards building equity.
The maintenance and taxes on my home are far cheaper then rent in my area. I could not afford to rent the home I own.
People don’t understand that a landlord is going to charge enough rent to cover all those costs and still make a profit. Otherwise they would just sell the home.
Yes, the landlord is going to make a profit, but that’s going to be true of literally any service that’s being provided by a private entity, especially when they’re carrying a large amount of risk.
But it’s disingenuous to claim that there’s no benefit to tenants in a rental situation. They don’t have to worry about having to unexpectedly drop $30k on a new roof or HVAC system, or finding and dealing with contractors to do maintenance (or finding the time and energy to do it themselves).
In the house I own yet could not afford to rent I have no issue with those unexpected costs because I am able to save the money that is not going to a landlord in order to pay them.
The renter is paying for the cost of a new roofer or HVAC system anyway, whether the home ends up needing one or not, and they have zero say in how or when it happens.
What you’re not getting is that’s a plus to some people. They don’t have to worry about budgeting and all of that.
Just because you don’t get anything from a rental situation doesn’t mean no one can. I absolutely know people who have sold their houses and went back to renting because they were tired of the hassle of home ownership.
What you’re not getting is I don’t think economic policy should be based around people with more money than sense.
We are in a housing crises right now, the vast majority of people want to own a home but could never reasonably afford to. I don’t give a shit about the small fraction of a percent of people that find it more convenient for them.
“I absolutely know people who never set foot in a hospital” is not an argument against healthcare.
I’ve seen a recent finance bro fad saying renting and investing is better than owning. My brother in Christ my rent was much higher than my mortgage for a shittier spot and I didn’t get equity.
During the last housing bubble, you could rent the same place for less than 1/2 the cost of buying it. Renting and investing made more sense then.
Currently buying a house is overpriced but rent is even more so.
The best financial decision right now is to live with your parents your entire life. If you don’t have a parent you can stay with, then a tent and cardboard boxes in the park it is.
It really depends on the circumstances. For me personally renting and investing is indeed better - but my rent is 500 Eur per month for 100m² cold and I can’t finance a similar sized house for that here. Everyone needs to do their own math for their situation.
I just did the math for renting/investing vs buying, including rent/house value yearly increase, income taxes on capital gains, mortgage rate, down payment amount, and initial house price. The results indicate a strong dependence on rent price and taxes/insurance for buying. I found that renting/investing can be a better financial option depending on the inputs. As another commenter pointed out, the main reasons are taxes/insurance and the greater time return rate for market vs home value. This was surprising to me, so I’m glad I ran the numbers. That tells me the real difference is your life choice of wanting a place of your own vs renting and moving around.
I should’ve known better than to trust my intuition on this. I previously ran the numbers on investing vs double mortgage payments and found investing to be far superior.
It depends, it can definitely be more worthwhile to rent.
Taxes and maintenance wouldn’t be included in the mortgage. A new roof is expensive, so are HVACs, floors, etc. These things will need to be replaced. A rule of thumb is to budget 1% to 4% of the total house value per year. For a 400k house that could be up to $16k extra per year, or $1333 more per month than your mortgage. Those costs for maintenance and taxes don’t go towards paying down your principal so they aren’t directly gaining equity. With the rent and invest option, the investing is the counter to equity. When you sell your house you usually pay a realtor commission. There are a lot of factors to include when seeing if rent & invest is better than mortgage & buy.
That being said, I prefer to buy. I don’t plan on moving anytime soon.
People who don’t own homes don’t understand just how expensive and time consuming it can be. And most of that money and work doesn’t go towards building equity.
The maintenance and taxes on my home are far cheaper then rent in my area. I could not afford to rent the home I own.
People don’t understand that a landlord is going to charge enough rent to cover all those costs and still make a profit. Otherwise they would just sell the home.
Yes, the landlord is going to make a profit, but that’s going to be true of literally any service that’s being provided by a private entity, especially when they’re carrying a large amount of risk.
But it’s disingenuous to claim that there’s no benefit to tenants in a rental situation. They don’t have to worry about having to unexpectedly drop $30k on a new roof or HVAC system, or finding and dealing with contractors to do maintenance (or finding the time and energy to do it themselves).
In the house I own yet could not afford to rent I have no issue with those unexpected costs because I am able to save the money that is not going to a landlord in order to pay them.
The renter is paying for the cost of a new roofer or HVAC system anyway, whether the home ends up needing one or not, and they have zero say in how or when it happens.
What you’re not getting is that’s a plus to some people. They don’t have to worry about budgeting and all of that.
Just because you don’t get anything from a rental situation doesn’t mean no one can. I absolutely know people who have sold their houses and went back to renting because they were tired of the hassle of home ownership.
What you’re not getting is I don’t think economic policy should be based around people with more money than sense.
We are in a housing crises right now, the vast majority of people want to own a home but could never reasonably afford to. I don’t give a shit about the small fraction of a percent of people that find it more convenient for them.
“I absolutely know people who never set foot in a hospital” is not an argument against healthcare.
As always, you have to run the numbers. Ownership also comes with hidden costs. Property taxes and maintenance aren’t cheap.
Those costs are included in the rent.
Precisely. When comparing against home ownership, people often only consider the mortgage.
Yeah, I think renting has less hidden costs, but it might increase in an unpredictable way, or you might need to move out sooner.