Kinda confused by this thread. If you buy a house, you can sell and recoup a bunch of your costs (even if you haven't full paid off the mortgage!). If you rent, all that money is down the drain, if you move, you get exactly $0 back. What am I missing?
Certain cities are so expensive to buy in that you can actually make more money if you just invest the money equivalent to a mortgage in something with a high rate of return. Usually things like index funds. This requires the line to go up, but it's pretty clear at this point that the line is completely detached from reality and everyone in both parties (in the US) will do everything in their power to make it continue to go up. I got something insane like a 12% return last year while a million people died and millions more became unemployed.
That said, the two people I know who had enough money to try this (both in tech) got so pissed off at a series of bad landlords that they ended up just buying anyway. EDIT: Note, this is for apartments only.
I promise you 90% of the people in this thread have absolutely no fucking idea what they're talking about and are dispensing terrible financial advice along with bank industry propaganda.
Let's say you have enough money to pay a down payment and closing costs on a home. You have two choices: 1) Purchase a home with a mortgage or 2) Rent from a landlord, and invest the money you otherwise would have put down in stocks. This article is - correctly - claiming that 2 is the better financial decision.
The reason is this. Consider the costs of home ownership. First, you have to drop ten thousand dollars or so on closing costs. So that's $10,000 right down the drain, a good chunk of a year's rent completely flushed away that you would not pay had you rented. You also have to drop, say, $50k on a down payment (which you can recoup - more on that later) that you could otherwise invest.
Now, consider costs associated with owning a home. Mortgage principal, mortgage interest, property taxes, homeowners' insurance, and home maintenance. All of these expenses other than mortgage principal are absolutely no different than paying rent. It's just money flushed down the shitter, too. So 80% of your housing expenses, right there, are down the shitter just like renting.
Now, let's say you do buy the home, it appreciates in value, and you want to sell it. Great, well time to spend another $20,000 on closing costs again - right down the shitter.
Let's say the real estate market appreciates 4% annually and the home was purchased for $250k with 20% down and a 3.6% interest rate. The homeowner wants to sell after 5 years, when the home is worth $305,000 and the homeowner has 28% equity in the home (approx. $85k).
So, you paid $30k in closing costs in order to make 28% of 55k in home appreciation, or $15k. Your decision to purchase a home cost you $15k ON TOP OF YOUR HOUSING COSTS. Let's say rent is $150 more a month than the cost of a mortgage, interest, taxes, insurance, and maintenance put together (an EXTREMELY generous assumption).
You spent $15k on closing costs to save - again, generously - $9k on housing costs. Purchasing that home was a terrible decision. If you invested the $60k you spent on a down payment and closing costs instead, you would probably be up well over $10k over where you are now.
I promise you, this is a solved question. Do not listen to the godawful advice in this thread.
Kinda confused by this thread. If you buy a house, you can sell and recoup a bunch of your costs (even if you haven't full paid off the mortgage!). If you rent, all that money is down the drain, if you move, you get exactly $0 back. What am I missing?
Certain cities are so expensive to buy in that you can actually make more money if you just invest the money equivalent to a mortgage in something with a high rate of return. Usually things like index funds. This requires the line to go up, but it's pretty clear at this point that the line is completely detached from reality and everyone in both parties (in the US) will do everything in their power to make it continue to go up. I got something insane like a 12% return last year while a million people died and millions more became unemployed.
That said, the two people I know who had enough money to try this (both in tech) got so pissed off at a series of bad landlords that they ended up just buying anyway. EDIT: Note, this is for apartments only.
:this:
If you hate your landlord, then go buy if you can. But don't pretend you're doing it because it's a good investment. It isn't.
I promise you 90% of the people in this thread have absolutely no fucking idea what they're talking about and are dispensing terrible financial advice along with bank industry propaganda.
Let's say you have enough money to pay a down payment and closing costs on a home. You have two choices: 1) Purchase a home with a mortgage or 2) Rent from a landlord, and invest the money you otherwise would have put down in stocks. This article is - correctly - claiming that 2 is the better financial decision.
The reason is this. Consider the costs of home ownership. First, you have to drop ten thousand dollars or so on closing costs. So that's $10,000 right down the drain, a good chunk of a year's rent completely flushed away that you would not pay had you rented. You also have to drop, say, $50k on a down payment (which you can recoup - more on that later) that you could otherwise invest.
Now, consider costs associated with owning a home. Mortgage principal, mortgage interest, property taxes, homeowners' insurance, and home maintenance. All of these expenses other than mortgage principal are absolutely no different than paying rent. It's just money flushed down the shitter, too. So 80% of your housing expenses, right there, are down the shitter just like renting.
Now, let's say you do buy the home, it appreciates in value, and you want to sell it. Great, well time to spend another $20,000 on closing costs again - right down the shitter.
Let's say the real estate market appreciates 4% annually and the home was purchased for $250k with 20% down and a 3.6% interest rate. The homeowner wants to sell after 5 years, when the home is worth $305,000 and the homeowner has 28% equity in the home (approx. $85k).
So, you paid $30k in closing costs in order to make 28% of 55k in home appreciation, or $15k. Your decision to purchase a home cost you $15k ON TOP OF YOUR HOUSING COSTS. Let's say rent is $150 more a month than the cost of a mortgage, interest, taxes, insurance, and maintenance put together (an EXTREMELY generous assumption).
You spent $15k on closing costs to save - again, generously - $9k on housing costs. Purchasing that home was a terrible decision. If you invested the $60k you spent on a down payment and closing costs instead, you would probably be up well over $10k over where you are now.
I promise you, this is a solved question. Do not listen to the godawful advice in this thread.
I guess it would become more economical the more people there are paying into the mortgage, the same as with an apartment building.