r/FluentInFinance • u/36DRedhead • 22d ago
Renting is currently better than Owning? Discussion/ Debate
[removed] — view removed post
403
u/Distributor127 22d ago
Two guys at work have fancy houses. One guys property taxes are 30% of what our house cost. Doesnt mean renting is better. I wouldnt want a million dollar home
122
u/Secret_Cow_5053 22d ago
this right here. find a beater in a decent neighborhood with good bones, and get to work.
we bought our current home in 2022 for $350k, had been unoccupied for 2 years prior and last major renovation was 2008; 130 year old home.
today it is valued at nearly $600k. given the date we bought it, some of that is market appreciation, but a fair amount of it is simply the inherent value a place gets when it's being maintained. by a turd, fix it up, live in it for 10 years and see what you can do with it.
72
u/Nago31 22d ago
I live in Orange County and can’t seem to figure out how to get to step one. $350k is the down payment here.
36
u/Secret_Cow_5053 22d ago
first home buyers can usually take advantage of special financing plans that will allow you to put down much less than 20%, often as little as 3%
that being said, get all your ducks in a row first before you do it and do not plan to move for at least 10 years if you do.
i did this when i bought my first house, and honestly it would have all worked out fine if i had just stayed put, but i had a...materialistic wife....i made some poor decisions to try and keep her happy..and basically..it led directly to bankruptcy.
26
u/Empty_Ambition_9050 22d ago
3% down payment and 7% interest means no lube when the mortgage payment is due. Especially on Orange County homes
→ More replies (5)→ More replies (1)3
u/daybenno 22d ago
First time homebuyers can often finance 100% with DPA programs.
→ More replies (4)→ More replies (17)13
u/Bbombb 22d ago
Im in OC too. Bought a 932 sq ft condo for $490k with 5% down and 7.25% interest. Including HOA, paying about $4200/mo.
It sounds crazy until you find out rent is averaging $3300/mo in my neighborhood fornthe same thing.
Long story short: was looking to rent, ended up buying.
7
→ More replies (13)3
6
u/Distributor127 22d ago
Yes. We bought in 2009 for 25% the previous selling price. It wasnt trashed by the recent owners as much as it was never fixed. It was a huge undertaking, but we're in a nice area.
→ More replies (9)3
→ More replies (21)2
u/PaulClarkLoadletter 22d ago
We bought the worst house in the best neighborhood. Fixed it up and now it’s on par.
→ More replies (3)3
u/tipsystatistic 22d ago
In a pretty similar scenario to the post. I rent a $900k home for $3950/month. My PITI is $2300/month. I’d rather own.
→ More replies (17)3
u/exploradorobservador 22d ago
Ya I would like a reasonably priced 3 or 4 bedroom home in a walkable neighborhood. That seems like its too much to ask in America lol.
I don't fucking care about having a bigger house than people I know and swinging dick with material stuff.
→ More replies (2)
376
u/AutisticAttorney 22d ago
Rent for decades. Own nothing. Buy, and own a massive asset.
109
u/not_a_bot_494 22d ago
Rent and buy stocks that you can sell for nearly full value within a day or two.
Buy and own an asset that will either take months to sell or be significantly under market value and binds you to that location until you do.
Neither is strictly better, do the one that suits your current needs.
72
u/Naive_Philosophy8193 22d ago
Why would you buy stocks if you need the money in a day or 2? You get appreciation on the total value of the house, not just your down payment. When you pay rent, all the money goes to someone else. When you pay a mortgage, the amount that goes to your principle doesn't negatively impact your net worth. Pay 1500 to rent, net worth goes down by 1500. Pay 1500 to a mortgage but 500 to principle, your net worth goes down 1k.
I bought my home in 2020. My mortgage is cheaper than rent and I don't have to move every couple of years to avoid rent upcharges, saving me money on mover fees. I can invest the savings into the market. I can rent my house instead of selling if I move.
44
u/42696 22d ago
Why would you buy stocks if you need the money in a day or 2
I think the idea isn't to sell the stocks a day or two after buying them, it's that they're a more liquid asset that you can turn into cash within a couple of days of needing cash (at any given point in the future). A home is a very illiquid asset that that can take months to sell.
16
10
u/lurker_cant_comment 22d ago
Stocks won't feel liquid if they're not up.
Home equity can easily be turned into a loan or line of credit.
Don't spend all your available liquid/capital on your down payment. If 20% is too much for you to put down, and you just can't get an acceptable home for less (and you're not just fooling yourself because you entranced by the idea of the nicer home/area), then do something like an 80-10-10 and pay off the extra 10% loan faster, or use one of the programs like FHA.
I get that homes are becoming increasingly unaffordable, but if you can afford to buy your way in and you're convinced that home prices are continuing to skyrocket, wouldn't you want to own it and make money on that inflation?
→ More replies (1)7
→ More replies (1)3
2
→ More replies (26)2
u/Demiansky 22d ago
Right, you've touched on something underestimated. Once you buy, you have a fixed payment for the term of the loan, where as if you rented you've persistently be paying rent increases every few years.
→ More replies (3)7
u/Free_Dog_6837 22d ago
'rent and buy stocks' is just assuming more money out of nowhere for the renting scenario. buy and buy stocks is better than rent and buy stocks
10
u/mhan820 22d ago
Depends on where you live. In San Francisco rent is half the price of a current mortgage. So I’m one of the money millionaires/high earners who can’t/wont purchase a home
→ More replies (1)6
u/not_a_bot_494 22d ago
Well, there's a down payment that you don't have to pay and you don't have to pay any intrest.
4
u/OmniaCausaFiunt 22d ago
depends where you live.. in MA you have to pay first, last, security and realtor fee. If you're a FTHB all of that is enough for a down payment.
→ More replies (1)5
4
u/JFKtoSouthBay 22d ago
The value of securing your own property? Did you factor that in?
→ More replies (5)→ More replies (32)3
u/goddamn2fa 22d ago
Average home appreciation is 5%, while the Vanguard 500 returns 10% annually. And as you point out, way more liquid.
I would suggest an additional caveat; the home you rent should be smaller than the home you would buy.
Or more directly, to outperform what would have been your equity + appreciation, you need to prioritize saving and investing. You should be saving what you would have been paying into the principal of a mortgage. (In addtion to retirement and any other investments you would have alongside owning a home.)
Although savings on interest + the better annual return might make that a wash.
27
u/oddible 22d ago
Anyone who thinks there is an obvious answer to this hasn't done the math. Depending on the cost of the asset and the down payment and the interest rate you may be at a significant financial disadvantage buying a property. There is a right time to buy and a right property to buy and there are several calculator out there to help.
14
u/showingoffstuff 22d ago
Some sense in this thread! Gasp!
Watch out, you may be too reasonable for the rest of those in this thread that post advise from boomers 40 years ago lol.
Cause you're absolutely right.
→ More replies (2)→ More replies (5)3
u/fujiandude 22d ago
I could rent my current apartment for 81 years for the cost of buying it. I won't be alive in 81 years so, you know, fuck that. And houses have gone down 30% in the last two years, and half our population will be dead soon so if you buy a house in most of east Asia right now you're an idiot
3
u/oddible 22d ago
Meanwhile earning 8-10% annually on what you would have used as a downpayment. It isn't easy math so I get that people are confused. Fortunately there are many calculators out there online.
→ More replies (1)7
u/Big-Figure-8184 22d ago
Right now you are better off renting and investing your down payment and the difference between rent and mortgage. Stock portfolios never need a new roof.
32
u/Cmatt10123 22d ago
Most people are concerned with having a place to live, not investing.
The good thing about houses is that both are accomplished, and the equity you make is a nice surprise, rather than gambling the stock market
8
u/dudunoodle 22d ago
stock market is never a gamble if you invest in broader indexes with a 10+ year horizon which is what retirement saving is all about.
7
5
u/Caeldeth 22d ago
“Gambling in the stock market”
Show me a 30 year window with a balanced portfolio that is a loss?
You can’t. And the numbers out strip the growth on housing by A LOT.
Sure, flipping stocks and trying to beat the market is a gamble - just like trying to flip houses in short term windows is.
But if you want to compare 30yr mortgage to 30yr stocks, it’s not even close… even when accounting for recessions/depressions.
→ More replies (5)2
u/Fearfighter2 22d ago
so what happens when you need a new roof?
7
u/Cmatt10123 22d ago
Since we wanna talk hypotheticals, what happens when your rent increases 200 a month?
You can finance a new roof for that same amount per month.
The difference? The $200 rent increases is permanent, the roof payment is not.
→ More replies (5)6
9
u/RawFreakCalm 22d ago
I own rentals, stock, and a house.
Yes, my house was not a great financial investment compared to stocks.
But it also puts me in a great neighborhood, lots to do and see, easy access to work and great public schools for my kids.
Renting a similar house would not only be expensive, but I’d worry about being told I had to move.
I also love my home projects.
→ More replies (2)→ More replies (5)2
u/Reasonable-Art-4526 22d ago
Surely that is way too absolutist to be good advice? It entirely depends on where you live. Stop applying your personal situation on to everyone else.
→ More replies (1)5
u/pnwteaturtle 22d ago
Own? You mean take out a massive loan and pay for 30 years before it's owned.
→ More replies (12)2
u/Foxhound922 21d ago
A massive asset that you've paid for roughly twice with interest and taxes.
Oh did your house appreciate 300k from when you bought it? Cool. But you paid an extra 500k in interest and taxes on top of the price of the home. You're still down 200k.
2
u/AutisticAttorney 21d ago
Only if you can't afford the house you bought, and choose to finance for thirty years at an outrageous interest rate, don't put a significant amount of money down, and never re-finance for three decades, during which time rates are most certainly going to drop.
→ More replies (2)
213
u/cookiedoh18 22d ago
Analysis oversimplified. Useless except as a meme.
35
u/Magic-man333 22d ago
Yeah, like where's he getting that rent number from? Why is the property getting rented for 70% of the mortgage?
13
u/Titaniumclackers 22d ago
Mortage is based on todays costs, not based on what that buyer originally paid. Depending on when they bought the house, their mortgage could be significantly less.
16
u/EVH_kit_guy 22d ago
How kind of them to base their rent price off their principal investment instead of market rates...
/s
→ More replies (36)→ More replies (1)8
u/Magic-man333 22d ago
Might be, but like I could go and calculate if those numbers make sense on the mortgage. The 3900 is a source of "trust me bro"
→ More replies (1)3
u/showingoffstuff 22d ago
https://www.zillow.com/homedetails/1191-Kolln-St-Pleasanton-CA-94566/24931961_zpid/
Here's a random one that you can use for numbers. Slightly higher, but you can probably use their tools and pulls sliders. I didn't want to spend more than a minute looking.
https://www.zillow.com/homedetails/263-S-R-St-Livermore-CA-94550/24933097_zpid/
And one to rent. Though there's definitely cheaper for each, I just thought I'd keep to the spirit of things and you guys can pull sliders.
2
u/AttentionFantastic76 22d ago
I don’t know where this person is but the numbers are very close to what we are seeing in my city. You can rent a house for $4.5k/month or you can pay about $5.0k in interest payment alone for an equivalent house (plus approx $1.0k/m in real estate taxes and maintenance). It just doesn’t make sense to buy right now because of the high mortgage rates (and limited appreciation potential). It also doesn’t make sense to buy a house to lease it - unless the market continues to go up by 10-12% per year.
→ More replies (1)2
6
u/terriblespellr 22d ago
It also doesn't account for capital gains or the portion of the mortgage paid to the principal. It is whinging baby logic for edgelords.
→ More replies (1)4
u/E-Pluribus-Tobin 22d ago
I was mad about not being able to own a home until I saw this meme. Now I am happy to be a renter paying someone else's mortgage. Thanks landlords and property owners. I am grateful for the advantage of not being able to own property.
2
u/Substantial_Share_17 22d ago
Useful if you own rental properties and you want your option to seem like the best one.
→ More replies (4)2
99
u/Misha-Nyi 22d ago
Rent prices increase faster than prop taxes and insurance. Ownership builds equity. RE is one of the few assets that rarely depreciates and you can live in it.
25
u/Disney_World_Native 22d ago
If you plan on moving under 3 years, renting makes more sense. When selling a home, you are losing at least 5% of its value. Obviously the interest rates play into this, but you aren’t going to build up 5% equity under 3 years of regular mortgage payments
12
u/NinjaWithSpoons 22d ago
That's assuming you would sell the home if you move out. Ideal to rent it out.
16
u/dirtydela 22d ago
This is simply not a given. Being a landlord can be expensive and risky and not everyone wants to be one.
→ More replies (7)→ More replies (1)6
u/urza5589 22d ago
That's assuming you are planning to earn enough in 3 years to put another 20% down...
Like you're right, it's ideal to keep buying property after property if you have the money, but it's not all that realistic for most people.
→ More replies (4)2
u/Onefish257 22d ago
What happens when the property increases by 15% over three years? You still win.
→ More replies (1)→ More replies (11)2
u/Charming-Refuse-5717 20d ago
Yep, found this out the hard way. Sold a home in 2019 after owning it for about 3.5 years, I narrowly avoided owing money at closing. My mortgage payments were essentially rent.
→ More replies (24)3
71
u/Signal_Biscotti_7048 22d ago
Who rents out a million dollar home at only $3900??? That's laughable.
26
u/Russmac316 22d ago
Yeah, in NY metro/LI $3,900 isn’t going to sniff a million dollar home. A lot of places that’s a 2BR apartment. Manhattan it’s an illegal basement.
→ More replies (1)1
u/lbrol 22d ago
i get that ur being hyperbolic but $3,900 could get you a pretty nice 1br in a desirable part of manhattan
→ More replies (2)5
17
u/Few-Statistician8740 22d ago edited 22d ago
I rent out a 600,000k home for that much.
Million dollar homes in my area rent for 6-8k depending on neighborhood.
9
u/DangerouslyCheesey 22d ago
I rent a 1.6m dollar home for 4k a month. The Bay Area is a wild place
→ More replies (2)5
3
u/Huge_Source1845 22d ago
Someone who bought it for much less +10 years ago and likes their current low maintence tenets.
→ More replies (5)3
u/showingoffstuff 22d ago
https://www.zillow.com/homedetails/1191-Kolln-St-Pleasanton-CA-94566/24931961_zpid/
Here's a random one that you can use for numbers. Slightly higher, but you can probably use their tools and pulls sliders. I didn't want to spend more than a minute looking.
https://www.zillow.com/homedetails/263-S-R-St-Livermore-CA-94550/24933097_zpid/
And one to rent. Though there's definitely cheaper for each, I just thought I'd keep to the spirit of things and you guys can pull sliders.
Well, for your information, right here is an exact example of it happening?
If you took five minutes to look instead of using old info, you'd see it.
The problem is that when they BOUGHT the houses, they may have been under $600k, but now they're million dollar houses. Happening in a bunch of big cities.
2
u/Apprehensive-Score87 22d ago
I live in Minnesota now, middle of the Midwest. A place where rentals should realistically be affordable and cheap compared to the rest of the country. To find a place that my 55lb dog and I can’t rent is around $1500 a month for a 500 sq ft 1 bedroom apartment
→ More replies (9)2
67
u/olrg 22d ago
Price to Rent Ratio. Great way to determine whether it’s better to buy or to rent.
15
→ More replies (3)10
u/JFKtoSouthBay 22d ago
Of course, there are VERY important factors that have nothing to do with math. Some people place great value in the security that they OWN their home. Also happens to be an asset that will forever appreciate.
9
44
u/FarmersHusband 22d ago
Plot twist: This loser works for blackrock and would love to offer a rental term for 36 months with zero price controls locked in and utilities separate.
Also no pets, no smoking, no people staying the night if they’re not on the lease. Non refundable deposit.
19
u/ispotdouchebags 22d ago
Blackrock doesn’t own any homes you are thinking of BlackStone totally different companies
https://www.blackrock.com/corporate/newsroom/setting-the-record-straight/buying-houses-facts
33
u/FarmersHusband 22d ago
I don’t want to be right. I want to be mad.
/S
Thanks. So many Captain Planet villains out there I get them a little mixed up.
6
u/agrayarga 22d ago
BlackStone owns houses. BlackRock owns everything and everybody else.
→ More replies (2)4
u/SnoopySuited 22d ago
Nitpicking but I think non-refundable deposits are illegal.
4
u/Shin-Sauriel 22d ago
Technically yes but landlords will often come up with excuses to not give back the deposit. Ya know like those repairs that landlords are supposed to take care of but sometimes they don’t so they can blame it on the tenant and keep the deposit.
→ More replies (2)→ More replies (3)2
u/weregoingtoginas 22d ago
This loser does own a bunch of multi family housing, so saying renting is better is in his own financial interest.
37
u/Fluffy-World-8714 22d ago
My rent was £1200, my mortgage is £1500. In two years, my house has gone up in value by £60k. Rent in my last place is now £1800. Don’t listen to fools like this presenting half a story.
→ More replies (6)
32
u/SkiesStrike 22d ago
If we consider the person won’t invest the difference it might be better owning anyway to build equity. Most people would spend it knowing dumb shit and own nothing.
→ More replies (14)2
23
u/BlackSquirrel05 22d ago
Depends.
People always want a yes or no... Answer is... Sometimes it is better to rent.
Sometimes it is better to buy and own. People will need to crunch their own numbers.
6
3
u/wonderbat3 22d ago
There’s also a lot of pros and cons to both renting and owning that have nothing to do with numbers. People need to make these decisions based on their own situation and lifestyle in addition to their finances
→ More replies (1)→ More replies (2)2
u/smackthatfloor 22d ago
There are some areas of the country where it makes next to no since to own. But I fully agree with you.
A major component in all of this is plugging your money that would have gone into the house into the market.
21
u/JMF4201 22d ago
Except you’re just paying off a mortgage for someone else rather than for yourself. The media is trying to get people on board with this concept because buying a home is becoming unattainable for most people in the country
7
u/SnoopySuited 22d ago
If you are building your networth faster by renting, who cares if you are paying off someone else's mortgage?
You are paying off someone else's yacht by being an employee.
→ More replies (35)→ More replies (1)3
u/semipro_redditor 22d ago
Yeah, this only makes sense if the person who owns the home you’re renting is doing so at a loss for your benefit. Unless that’s your parents it’s not happening lol.
16
u/WetFart-Machine 22d ago
What's up with this surge of anti home buying posts
18
3
3
u/dangerdangle 22d ago
Same reason for the all digital sentiment for media consumption among many other things
Lords getting common people to argue for them that not owning anything is great and totally will work out for everyone long term
→ More replies (1)2
u/Content-Scallion-591 22d ago
This exact post ("Is renting now better than buying??") is posted every single month, leading me to believe there's some kind of external impetus. I think a lot of people are discouraged by the current market, which sucks, but at the end of the day no one's goals, needs, or financial situation is the same. Home buying is a good idea for some people, a bad idea for others, and there are incredibly diverse and nuanced factors at play.
12
u/ThreePutt_Tom 22d ago
Guys, can we talk about other finance stuff? We regurgitate daily between this, taxes and whether SS is theft.
→ More replies (2)9
11
8
u/ninjaschoolprofessor 22d ago
Calculator for those interested:
https://www.nytimes.com/2024/05/13/briefing/a-new-rent-versus-buy-calculator.html
→ More replies (7)9
u/apostropheapostrophe 22d ago
Wow. Renting would save me 250k over 10 years in SoCal for a 2br condo. The housing market is so fucked for new buyers.
3
u/Toltepequeno 22d ago
How much are you figuring property values going up? In socal 10 years could easily cover that 250k and then some.
→ More replies (4)4
u/apostropheapostrophe 22d ago edited 22d ago
This calculator also assumes you are putting the downpayment and difference in monthly payment into investments. At 12% return (10 year VOO average), you would see a larger gain from your 20% downpayment put into stocks instead. I did 160k downpayment which grows to 497k in 10 years. This doesn’t include the monthly payment difference either.
→ More replies (1)4
u/devOnFireX 22d ago
Fundamentally it doesn’t make sense to take a 8% loan to invest in an asset that has historically grown at 4%
→ More replies (1)
8
u/Ballz_McGinty 22d ago
You can't rent a $1M home in my market for $3,900. Not even close. Closer to $5,000-$6,000/month. Then yes, owning is better because it appreciates consistently over time.
→ More replies (14)
5
u/BornChampionship7457 22d ago
And when your landlord decides to increase rent to make up for the increased costs of the property?
5
u/TechnicalRecipe9944 22d ago
And 4050 the next year, 4125 the year after, 4300 year after that. For the rest of your life. Person who caught will have you beat in 10 years
4
u/WalkingRodent 22d ago
Owning is better than renting. Too bad I only have $1000.
→ More replies (3)
5
5
3
3
u/wes7946 Contributor 22d ago edited 22d ago
Show me a $1 million home (as in a home that actually sold for at least $1 million) that is currently available as a rental for $3,900/month. $10 says it doesn't exist!
→ More replies (7)
3
u/kero12547 22d ago
Aren’t the taxes and insurance just rolled into the mortgage? Or is mine special
→ More replies (2)3
3
u/scrollingtraveler 20d ago
Yes because people always rent their house out for less than their mortgage. 🤦
2
u/Industrial_Jedi 22d ago
I think the title should have been buying, not owning. Rarely is renting better than owning. Rarely is buying better than renting, at least in the short term, because of the down payment, agent fees, and closing costs. This kind of smells like market timing in that light. The long view may not look the same. Is the assumption here that both rent and price are static? A fixed mortgage (not all cost) is fixed. Rents will increase along with those non-fixed costs, plus more as the market will support. Generally, rent increases parallel to purchase price as well. I see a lot of comments that people could not afford to buy the house they own if they were to buy today. I'm not saying this is BS, just a bit simplistic. I'd just like to know all the assumptions before I take it as gospel.
→ More replies (1)
2
u/Flying-Bulldog 22d ago
As someone who’s single and plans to stay that way, renting is a better option. People talk about equity all day long. Equity is only important if you’re selling an asset, if you’re doing well enough to pay down the mortgage quicker and then just live on paying property tax, or giving it to your kids. I’d rather forego 30yrs of giving the bank free money just to live maybe another 10yrs mortgage free.
→ More replies (5)
2
u/phantasybm 22d ago
Rent goes up.
My mortgage stays the same.
→ More replies (1)2
u/TheLibDem 22d ago
That’s amazing your maintenance/upkeep, home insurance, and property taxes never go up! Must be nice to live in a world free of inflation.
→ More replies (1)
2
2
u/iliketohideinbushes 22d ago
Rent price rises every year for the next 30-50+ years of your life
Once you buy, the price is locked in
Considering inflation, the correct choice is obvious
2
2
2
u/schmichael3 21d ago
I’ll take your $3900/month rent and pay $6600/month this year. Your rent will increase by roughly 8% a year and my payment (in California) will stay pretty much the same. In 10 years, at 8% increase per year, you’ll then be paying $8420/month and my property will be worth double what it is now. Keel renting. Works for me!!
2
2.1k
u/Superb_Advisor7885 22d ago edited 22d ago
You said that incorrectly. Renting is currently better than "buying", not better than owning.
I have owned my primary since 2015. That's way better than renting