People often arrive at the scene when most of the options are gone years back, and they wish they bought at the price that existed back then. Get disappointed and lawyer through the arguments to justify renting a home.
Bought the apartment in 2018, sold in 2024 (close to the bottom of the local-market slump). Still profited ~10% (before fees) compared to buying price. All that principal amortization payed for the downpayment (and some) of my much bigger current apartment.
To some extent the apartment board might be to optimistic on future maintenance costs too.
The actual apartment I was renting was pretty well kept though, proper cleaning, air ventilation inspections, very good laundry room, fully renovated less than 10 years before I moved in. The apartment I bought however was similar conditions.
It is possible to get a first-hand rental contract but it takes years upon years and you can never get something in the location you want.
With age your ability to earn decreases as well.
There are real-world examples of providing affordable housing that allows people to live with dignity, even if they can't afford to buy a home.
How Britain (almost) solved the housing crisis:
If you stay long enough, buying is cheaper. But if you move after just a few years, you'll have mostly paid interests on your mortgage, you had closing tax, your house may even have lost value... So there are many cases it would have been cheaper to rent.
How long you need to stay to make your purchase worthwhile depends where you live.
(In the end, the gamble paid off great - the condo appreciated by about 300k in those 5 years)
Maybe in urban centers. But go out into the hills and you will find many towns where land prices tanked once the local resource industry moved on. It isn't just 18th century gold rush stuff. There are towns from the 80s that just emptied when the local industry moved on.
https://justinmcelroy.com/2022/07/26/visiting-canadas-50-mil...
EDIT: Oh, I think you were talking about deprecation? Even in the downtrodden areas, land values going down isn't technically deprecation. It's just like a bar of gold sitting in your garage: its market price might fluctuate, but that has nothing to do with deprecation.
As opposed to just flatly stating that owning a home is always good and dismissing any opposition out of hand as “lawyering”?
Here’s my first attempt to lawyer: I don’t want to live in a house. Is owning a house always good for me?
Some people in your boat would choose to buy an investment property in one place and rent in another in order to still get exposure to the real estate appreciation that is so common, while not having to buy a condo in a difficult area like yours. But it would probably be so much easier to just to invest in a few good residential property REITs.
Probably lower return than the best case scenario of owning a rental, but with all the costs diluted across a large portfolio (instead of 'surprise, you need a new roof!')
Why wouldn't you want to leave behind wealth for your kids? They are your kids.
so sure, renting vs buying a home in cash will give the cash ownership a leg up. but then it shifts over to people that would love to espouse about the 'time value of money' and leverage, where putting all the cash down is suboptimal vs a mortgage. the % increase of the home value isn't amplified when using cash up front either.
so lets optimize this further, renting vs mortgage with the option to pay it off at any moment is always better. but nobody has that cash, so we're back at square one.
if you HAVE to do a mortgage, then its likely that renting will be a better deal for you for over 10 years straight, before the mortgage pays dividends.
If eat that frog is a think for daily schedule, there is also such a thing for life itself. You just have to get a few things done as early in life as you can. Or you end up living for other people.
There is a wisdom in this. Most of the sayings in any culture are largely a distillation of a kind of civilisation darwinism. All it took people to survive big problems in life, distilled in neat statements.
(However they might still be a good idea. I don't know.)
It also depends on how you translate the 'traditional way'. For example, on the one hand, for most of history people had about one surviving descendant per person, ie two kids that made it into adulthood to have their own kids. [0] On the other hand, they gave birth to many, many more kids. Which of the two perspectives do you want to preserve?
Similarly, during most of the last few millennia most people used to have kids really late in life: they typically only had about perhaps 20 years or less left to live when their first child was born. Should we emulate that? Viewed through a different lens, people used to have kids really early in life: the distance in years between your own birth and the birth of your children was much shorter, too.
Of course, the above paragraph is just a long winded way to say that people live longer these days. But still: how do you want to translate past behaviour? It's a choice that's up to you.
[0] I'm basing that purely on the mathematical observation that population numbers have only gone up substantially in the last few hundred years. Thus replacement level fertility used to be the norm.
How do mortgages pay dividends?
In any case, it's all about opportunity costs, and yields.
To give an extreme example: if the house costs 100x the yearly rent, you are probably better off putting your money in the stock market instead of buying the property, and paying your rent from the returns on the stocks.
Mortgage is temporary though, rent is eternal and usually increasing over time. This means you don't save money in the long term, either.
100x is just bad decision making
Somethings like marriage, kids, buying home just have be done in life as early as you can.
Note money is just a number at the end. The idea is not to have max($money), rather max($free_time, $health). Optimise for $free_time and $health, and then you have a very different life strategy to work towards.
If you have $x, you can buy a house and save on $y rent. But you could also buy eg bonds, and make $z return per year. If z > y, going for the bonds is better.
Free time and health don't even come into the picture here. [0]
(Of course, taxes and regulations can make this more complicated. And there are systematic and idiosyncratic risks to take into account.)
It's not automatic that buying owner-occupied property is always the best way to invest your wealth.
[0] Well, I assume renting is better for your health: I was significantly less stressed about all the water damage that we had about two years ago, because I knew it was ultimately my landlord's problem, not mine. But the overall effect is likely to be rather minor, and it can go either way, as some people get a mental health benefit out of knowing that they own their home.
For starters, people don't buy a house to live in solely because of the financials around it. They also buy the house because they want it.
When it comes to mortgage vs. buying outright, it just depends. I managed to get a very low interest rate for my primary home; the money I didn't put into the house is busy making quite a bit more than that very low interest rate for me yearly. If I were to rent out the house, I could probably get more for it than what I'm paying in mortgage interest + property taxes, so renting isn't really better (and then I'd be subject to the rent-jacking whims of my landlord). But even if I couldn't, I still just... want this house to be mine. There's value in that to me.
> if you HAVE to do a mortgage, then its likely that renting will be a better deal for you
This is very regionally-dependent. There are places where rents are significantly more expensive than mortgage payments, and places where homes cost so much that most people rent at a fairly reasonable rate in comparison.
Exactly, and so is a mortgage to home equity belief system. That's the point. Be objective.
let's say you are an investor (crypto and day trading, living at home rent free in your parents' basement: "more tendies mom!")
but alongside your crypto and day trading, you scrape together enough cash to buy a house as an investment. it's an investment, you rent it out and earn rental income. What's rent? let's say it's $10,000 a month. Great! so, in addition to the appreciation of the property over time, you also get $120,000+ a year (the + is because you get some of the money at the beginning and middle of the year and you can pour it into lucrative day trading and crypto)
with me so far? nothing up my sleeve.
now you're feeling flush and you figure with your success, you don't have to live in mom's basement any more. Heck! you own a house, you can live there! and eat your cheetos in the the living room instead of the basement! So, you move in.
If you live in the investment house you own, you no longer get the $120,000+ a year. Why...why...why, wait, it's just like you are paying $10,000 a month rent!
Moral to the story: owning does not save you from paying rent, you are still paying rent, forgoing that income on your investment. Yes, that "it's so obvious everbody knows it" personal finance advice you read in major publications is complete and utter garbage.
don't thank me [tips cap] glad to help. And now you know how i feel sharing the planet with people, "experts" even, who don't have a clue what they are talking about.
As an investment, you forego some upfront capital (downpayment), have some monthly costs (mortgage payment) and a monthly income (rent) and at the end you have an asset (current value) and maybe an obligation to pay another lump sum (principal - downpayment if interest only mortgage).
In the UK at least, for buy-to-let properties, the interest-only mortgage is common, so at the end of the mortgage term you have to repay the principal, and the profit comes from the different between the current value and the principal. In most situations, the rental income is almost entirely used to cover the mortgage payments, maintenance, costs, and paying tax, so during the mortgage period most landlords actually make very little income. It's essentially a bet on whether over the term (maybe 20 years), the difference in value will be better than the lost opportunity cost of not investing the downpayment elsewhere and the risk of periods of having to cover the mortgage and expenses without income during periods when the house is unoccupied, or tenants refuse to pay, etc. Particularly in the early years, the rental income may be substantially lower than the costs to the landlord, but over time, inflation will allow rental prices to increase but the mortgage costs will remain level. A smart landlord will invest the monthly profit at that point, to reduce the impact of the principal at the end of the mortgage.
In some ways, a house bought as a home is very similar, but in others very different. Typically bought as a home, a mortgage will be higher because the aim is usually to pay off all the principal as well as interest, and the simplistic view is that obviously having a mortgage for your home is better because you're always paying off the capital and end up with an asset at the end, the GP's point is that it isn't actually that simple.
Let's say you lived in the house. You're paying for the mortgage directly, let's assume that on average the mortgage costs are the same as the rent for an equivalent house, but actually at the start, the mortgage is probably going to be a significantly bigger chunk of your monthly expenses. On top of that, you have all the maintenance costs - some will be urgent and necessary, others can be deferred for later (although financially, perhaps not the best option because inflation will make the cost more or less the same now as later).
If you had the same house as a buy-to-rent property, you'd have the same maintenance costs and the same mortgage costs (whether it's interest only or capital repayment, the main difference is just when you pay it), so really the only difference is that you are receiving a rental income and losing the ability to live in the house.
As such, there is actually an equivalence between having a mortgage on a house that you live in and paying rent for that house instead - and the equivalent amount is the amount that you would have received as rent (minus taxes and costs from renting). If you could have rented that property out at £1000 per month, by choosing to live there, you are effectively paying that £1000 a month rent yourself.
In truth, the main factor in choosing whether to rent or get a mortgage is a mixture of availability and cost of credit (which varies depending on your financial situation) and how much you have available to spend on accommodation each month. Having a mortgage front-loads the payments - having a much higher payments initially, but fixed so that as inflation reduces the monthly cost in real terms, much cheaper later on, compared to renting where there is effectively a constant monthly cost in real terms once inflation is applied to it (probably annually, every time the price is renegotiated).
Personally, I'd chose a mortgage, because I was chose a cheap house compared to the area so that I was able to afford the monthly payment (the base mortgage was approximately 50% more than the equivalent rent would have been), and then used every bit of spare money I had each month to overpay, which meant that I paid off the house before the end of the mortgage term.
You might think that paying off the mortgage is an obvious success - I now own a house I can live in rent-free, but the alternative - paying much less each month and investing the rest, with compounding gains would probably be returning me an income that's equivalent to the rent that I would be continuing to pay if I didn't have a house.
Which one is better is down to personal preference, and also quite heavily influenced by societal norms - in the UK and USA, we're very strong believers in owning property, but in much of Europe, the vast majority of people rent and see no problem with that.
Part of the value of a house is the value of living in it, the rent. It costs to live in a house, and the amount it costs is the rent. And this is true whether you own the house or if somebody else owns the house.
Living in a house you own vs renting out the house you own decreases your net inbound cash flow by the amount of the rent; rent is paid, even if it is your house.
this is very basic economics, very basic finance, but, as understood by somebody smarter than all of you, who has kindly taken the time to explain it. You are welcome.
(Consider living in a house that you do not own, and paying the rent. Now, marry your landlord. What has changed? Answer: nothing, the rent you now save is also income the couple has now lost.
(you will need to make adjustments for depreciation allowance for investment property, tax deductibility of expenses, etc. but that's details, not conceptual. Do you suspect that these line items actually could make the difference between this being a wash vs a no-brainer money machine? they don't. If tax deductions make landlordship more (or less) advantageous, then the market will shift landlords⇔tenants till a new equilibrium is achieved where the rents and deductions balance out, with people living in all the same places. no value was created or destroyed, except less govt interference in markets is better, dead weight losses and all that))
What about drawbacks of owning a house? You will spend non-trivial amount of your time, energy and money just to keep it up, keep fixing all things that deteriorate. And everything deteriorates. I mean really non-trivial, count how much your hourly rate is and how much you will waste instead of making some fun good activities, getting more healthy, enjoying life, resting, traveling and so on. Is that really how you want to spend some part of your me-time?
You are also locking yourself down at very specific place which may be a craphole in a decade, without good jobs around etc.
Also it will in normal cases vacuum your savings, degrading quality and fun in life in (at least) initial years after purchase - those are often the best years of one's remaining life.
People tend to look back with rosy glasses on the past, highlighting positives and shrinking negatives, thats basic psychology of each of us. Looking back at period of ownership people mostly look at money made, not all that stress and time with just keeping some property in same state.
Middle grounds are apartments, very little maintenance compared to house&land, much lower costs, but also less privacy and less feeling of 'in my own'.
There is room for each approach, ie right out school locking oneself in specific place may not be the smartest idea. Maybe you will earn some money on sell but maybe also some much better opportunities and better life will be missed due to inflexibility. Freedom is invaluable, properties ownership tends to take some of it away.
To up keep your home! You also pretty much up keep your rented home too. And at the end you spend to maintain other people's home.
>>Is that really how you want to spend some part of your me-time?
Most of the times its not that bad, you talk like you are on-call 24x7 throughout the year.
>>You are also locking yourself down at very specific place which may be a craphole in a decade, without good jobs around etc.
That's called stability, and that brings wealth and happiness. Honestly people look down upon these things, people use wrong words(lifer, coaster etc) to put down stability. In reality stability, with a predictable schedule is one of the best things that you do to your health, and overall life stability/happiness.
>>Also it will in normal cases vacuum your savings, degrading quality and fun in life in (at least) initial years after purchase - those are often the best years of one's remaining life.
This is mostly an assumption, in my experience the exact opposite is true.
>>People tend to look back with rosy glasses on the past, highlighting positives and shrinking negatives, thats basic psychology of each of us. Looking back at period of ownership people mostly look at money made, not all that stress and time with just keeping some property in same state.
Its always a bad idea to make any investment today, and you feel deep regret to have not made an investment 20 years back. Im not talking about real estate in specific, but even things like education, or exercise, look pointless and something you can do without today, but you wish you had done more or atleast started decades back.
>>Middle grounds are apartments, very little maintenance compared to house&land, much lower costs, but also less privacy and less feeling of 'in my own'.
You don't even own walls in a apartment, its like the worst of all the worlds.
Just one point - there is no way ownership of some home brings actual happiness, you overload the term massively. Not only some theory, I simply never met such a person so that this would be actually valid. I've lived in 3 different cultures and talk about 100s of folks knowing well personally.
Although I've met quite a few folks that, by chasing the dream of some home in suburbs 'to have their own place' ruined their marriage often beyond repair, including happy childhood of their kids.
There was this stock broking platform owner here in India who was going on Youtube for years and telling people to rent instead of buying.
Last year, his landlord showed him the door, and he had to vacate.
Even for the rich. Not being to able to continuously associate with a place. Not being able to modify the premises, not being able to keep the beautification they would have done to the premises or just being asked to leave without having any control over the place is grounds enough to own a place.
>>Although I've met quite a few folks that, by chasing the dream of some home in suburbs 'to have their own place' ruined their marriage often beyond repair, including happy childhood of their kids.
Their wife and kids will likely hate homelessness more. Some times you have to experience worse to value to these things.
Everytime food gets bland at home, I go fasting for a while. Suddenly the blandest salad tastes good.
You can talk to the sages modern or ancient. They will give you this one advice- Avoid the big problems, and things that can kill you. You can only go upwards from here.
