better to rent or buy??

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Harold
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Post by Harold » Mon Jan 11, 2010 10:25 am

I’m starting think this is an irreconcilable discussion.

The financial decision is quite simple. There’s a cashflow of unrecoverable costs either way. For renters, it’s rent, insurance, anything the landlord isn’t obligated to provide, etc. For owners, it’s closing costs, mortgage interest, insurance, property taxes, major appliances, roof repair, lawn maintenance, etc. etc. (including perhaps costs associated with eventually selling the property). The challenge is properly quantifying what those future costs will be, but that’s part of the fun of most financial decisions.

When doing such a comparison, sometimes renting wins and sometimes owning wins. And as with many financial decisions, sometimes one doesn’t know until after the fact.

The much-discussed investment part is somewhat irrelevant. The owner invests the excess into his home, and the renter invests (or squanders) the excess elsewhere.

Seems so simple, but the issue seems to be that so much of a home purchase is a consumption decision. A bigger home, better amenities, a yard for the kids to play and the dog to run, and so on. There’s absolutely nothing wrong with “consuming” a good life for ourselves and our families, so that doesn’t need to be defended. But people seem to get defensive.

My guess is that a good part of the passion comes from trying to justify a consumption decision as a financial decision. I don’t really understand it otherwise, and I’ve yet to see one of those claiming bias towards renting actually lay down some numbers supporting buying.

I do suspect there’s a lot of recency in the current discussion. I’d love to see one from several years ago – I’d bet there’s plenty of “bias” towards owning there.

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Post by RobG » Mon Jan 11, 2010 12:24 pm

Harold wrote: My guess is that a good part of the passion comes from trying to justify a consumption decision as a financial decision. I don’t really understand it otherwise, and I’ve yet to see one of those claiming bias towards renting actually lay down some numbers supporting buying.
I agree with much of what you say, but I disagree with what I've quoted. I have not provided numbers, nor have the folks favoring renting. The reason I haven't is because the answer depends on the assumptions made, and varies significantly over the country. In addition, there really isn't a need to because over the long term there is little disagreement that buying will return more in the long run. If it didn't, nobody would be foolish enough to be a landlord. (There are a few folks like Shiller that say in theory it would be better to rent and invest all the difference. I believe the theory invokes the general belief that profits are maximized if each person focuses on what he is best at... thus would assume you are best at investing. On the other hand, folks like Malkiel believe owning your own house is very important.) Malkiel wrote a better book for Bogleheads ;).

Plus the calculator referenced in the wiki allows you to run whatever numbers you are going to believe.

Similarly, the consumption issue is a red herring, if not a tad insulting. The comparison is between renting a place or buying the equivalent place, not renting a slum and buying a castle.

If anything is missing, I would say it is the discussion on how renting minimizes the downside risk and the volatility associated with housing price decreases when leveraged and also unexpected costs such as an emergency repair (e.g roof, etc). On the other hand, buying allows for a significant upside.

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Post by Harold » Mon Jan 11, 2010 1:10 pm

RobG wrote:Similarly, the consumption issue is a red herring, if not a tad insulting. The comparison is between renting a place or buying the equivalent place, not renting a slum and buying a castle.
Ah, a miscommunication. Rather than a red herring, I had thought this was pretty much a central part of the issue.

I've never known buyers who didn't go bigger, buy fancier appliances, better countertops, prettier wallpaper, etc. My impression is that most renters wouldn't consider doing such things.

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Keep on renting

Post by Chicago Lion » Mon Jan 11, 2010 1:19 pm

To start, I am an owner. However, I think the financial benefits of owing are exaggerated. Between taxes(both yearly property taxes and those associated with transferring the title), repairs/upkeep and the acquisition of things needed for a home(ladder, hose, tools, etc) I think you end up behind.

The benefits of owning are that you generally get a nicer place and you keep it that way. I waited until I was in my 30s to buy and it turned out to be a great decision with the crash a few years ago.

I grew up a military brat and we either lived on post or rented. It worked out well that way as you can PCS suddenly leaving you with a real headache to find someone to rent or buy your house. Even finding someone to care for it if you are shipped abroad can be hard.

In summary, Rent for now.

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Post by Dagwood » Mon Jan 11, 2010 1:32 pm

VictoriaF wrote:
Yes, it all comes down to the personal choice. One difference is that the default choice still seems to be buying, and I am trying to explain that an alternative choice may be prudent ... and that renting is not synonymous with poverty or poor judgment.
This is really quite true. We've done a terrific job as a society brainwashing everyone into thinking they need to own a home, when many of these people would be better off renting. And of course, once you have a house, you need a gourmet kitchen, media room, four car garage, etc. right?

Right now we own a house because we have stable employment and a family, dog, etc. Earlier in our married life we rented when different priorities took precedence. Neither one is right or wrong, and the better one depends on your priorities given your lifestage.

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Post by RobG » Mon Jan 11, 2010 3:19 pm

Harold wrote:
RobG wrote:Similarly, the consumption issue is a red herring, if not a tad insulting. The comparison is between renting a place or buying the equivalent place, not renting a slum and buying a castle.
Ah, a miscommunication. Rather than a red herring, I had thought this was pretty much a central part of the issue.

I've never known buyers who didn't go bigger, buy fancier appliances, better countertops, prettier wallpaper, etc. My impression is that most renters wouldn't consider doing such things.

I have to admit that many here who feel that renting is a superior strategy assume that homeowners possess inferior investment ability. You have to wonder if this unwarranted overconfidence in their own ability hurts them in their other investments, putting them further in the hole. Personally, I've always felt renters are trying to justify their own horrendous financial blunder of investing in equities ten years ago instead of property.

But such talk really has no place in a thread about whether renting or buying is a better financial decision; instead a new thread should be started about whether an investor who makes poor choices will do better than an investor who makes good choices. I think the answer is obvious.

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Post by diasurfer » Mon Jan 11, 2010 3:33 pm

LadyGeek wrote:
updated wiki article wrote:The Bogleheads' forum has suggested that if you do not know if you will be in a property for more than 5 years, there is no financial advantage to owning a home. Renting is the best choice in this case.[3]

With no other information, that is probably a good rule of thumb. However, stating that it's always better to stay in a house for (pick a number) years instead of renting may not be realistic. The situation varies with the individual. In some cases, the advantage can occur as early as 2 years. In other cases, it could be as late as 15 years, and for some it may never break even.[3]
I still want to retain that 5 year "rule of thumb", because it's a very useful guide as a place to start. However, it's very clear that you can do better with more information.
I realize the wiki is full of caveats and urges further analysis, but still I argue that the best advice you can give regarding home purchase is "don't use any rule of thumb!".

I unfortunately didn't look beyond the "rule of thumb" quoted above in the 2002-04 time frame when I finally had a decent paying job. I didn't know if I wanted to live in Hawaii for as long as five years, so I continued to rent. I'm still here, and the $350K house I passed on then is now $700K, even after slight bubble deflation out here. I've effectively been priced out of the market because renting is such a better deal now.

So now I am now a passionate advocate for renting in situations such as mine. If we were to move to the mainland, in most locales I would buy. It just depends!

"Rules of thumb" regarding real estate are hazardous to your financial health. In hindsight, the "rule of thumb" above failed because I applied it right before a housing bubble. But if the wiki is meant for the ages, eventually a bubble will come again and the "rule of thumb" above is BAD advice. It cost me hundreds of thousands in lost equity.

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Post by Harold » Mon Jan 11, 2010 3:36 pm

Rob, you seem to be totally misunderstanding my observation. I'm not saying owners are foolish for buying a bigger home, etc. I'm merely observing that they do.

As I said in my earlier post (and as you seem to be saying above), the investment part is irrelevant. So it doesn't matter whether renter/buyer has better judgment there.

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Post by RobG » Mon Jan 11, 2010 4:06 pm

Harold wrote:Rob, you seem to be totally misunderstanding my observation. I'm not saying owners are foolish for buying a bigger home, etc. I'm merely observing that they do.

As I said in my earlier post (and as you seem to be saying above), the investment part is irrelevant. So it doesn't matter whether renter/buyer has better judgment there.
I disagree. The investment part is THE question relevant to this thread. Is it a better investment to rent or buy? That is the question. In order to make a proper comparison you have to assume they are considering similar properties or all bets are off. It is pretty well known that houses aren't a great investment: the wiki points out that on average it returned 0.4% over inflation, so buying a bigger home than you need is probably a poor financial decision relative to renting a smaller home. At any rate, the debate is whether or not buying a house is a worse investment than renting. As you said earlier, it depends on the circumstances so it is difficult to answer the question in general.

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Post by RobG » Mon Jan 11, 2010 4:13 pm

diasurfer wrote:
LadyGeek wrote:
updated wiki article wrote:The Bogleheads' forum has suggested that if you do not know if you will be in a property for more than 5 years, there is no financial advantage to owning a home. Renting is the best choice in this case.[3]

With no other information, that is probably a good rule of thumb. However, stating that it's always better to stay in a house for (pick a number) years instead of renting may not be realistic. The situation varies with the individual. In some cases, the advantage can occur as early as 2 years. In other cases, it could be as late as 15 years, and for some it may never break even.[3]
I still want to retain that 5 year "rule of thumb", because it's a very useful guide as a place to start. However, it's very clear that you can do better with more information.
I realize the wiki is full of caveats and urges further analysis, but still I argue that the best advice you can give regarding home purchase is "don't use any rule of thumb!".

I unfortunately didn't look beyond the "rule of thumb" quoted above in the 2002-04 time frame when I finally had a decent paying job. I didn't know if I wanted to live in Hawaii for as long as five years, so I continued to rent. I'm still here, and the $350K house I passed on then is now $700K, even after slight bubble deflation out here. I've effectively been priced out of the market because renting is such a better deal now.

So now I am now a passionate advocate for renting in situations such as mine. If we were to move to the mainland, in most locales I would buy. It just depends!

"Rules of thumb" regarding real estate are hazardous to your financial health. In hindsight, the "rule of thumb" above failed because I applied it right before a housing bubble. But if the wiki is meant for the ages, eventually a bubble will come again and the "rule of thumb" above is BAD advice. It cost me hundreds of thousands in lost equity.
I also think the 5 year "rule of thumb" is a bit dangerous... it should be at least five years IMO with some caveats. The answer depends a lot on the price of homes relative to how much they would rent for and the volatility of the market. If price/rent is high enough it indicates buyers/owners are expecting a lot of appreciation and that might not materialize in a short amount of time. In fact, with some price/rent the calculator shows that it will never pay to buy with some quite reasonable assumptions.
It would be nice if we could come up with a chart showing number of required years vs. price/rent but other assumptions are very important too.

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Post by SpecialK22 » Mon Jan 11, 2010 7:48 pm

I think the "five year rule" is a decent starting place from which someone can begin asking themselves if they should buy or rent. I don't particularly like rule of thumb advice either; however, I realize that since the wiki is aimed at a general audience, much of the information presented will inherently be general in nature. I look at the rule of thumb in age versus bonds the same way. Many other caveats also apply to the 100 - your age rule.

My decision to buy vs rent was also primarily a financial decision. I was not looking to move up and take on the largest mortgage I could get. I am fully aware that many people do this, but it is far from an absolute. Further, the assumption that renting vs buying a similar property will always be cheaper as the renter is similarly flawed; there are too many factors which would effect if it is financially better to buy vs rent. I suppose I can use my own situation as an example where I believe it is more financially prudent to buy, that is unless my market still has a ways to fall and recovery is likely to take decades (I personally think that is unlikely).

Background:
20% down payment
Condo in good condition and in a nice area
Fixed 30 year mortgage
All closing costs were paid through either the lender or the seller
Received the $8k tax credit
$1632 credited towards monthly condo assessments (seller had paid assessments through the remainder of 2009, so 6 months worth of paid assessments were remaining when I bought)

Total monthly payment for 2010 (principal, interest, condo assessments, taxes, insurance) = $1009.72

If the condo was a 100% financed, the monthly payment would be about $1148.58 (principal, interest, condo assessments, taxes, insurance). The only thing I am unsure of is what the PMI would be which would need to be added.

Cost to rent a similar unit within the development: $1100-$1150
Renters insurance would have been about $40 a month based on my previous renters insurance in the same area
Total monthly rent and insurance would be between $1140 and $1190

I'll also throw in that median rent for two bedrooms in the area is $1376.

Utilities would be the same since they would be paid by the occupier whether or not the occupier was the renter or owner.

If anyone else would like additional information to enhance the argument, just ask and I'll try to incorporate it.

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Post by LadyGeek » Mon Jan 11, 2010 8:35 pm

SpecialK22 wrote:I think the "five year rule" is a decent starting place from which someone can begin asking themselves if they should buy or rent. I don't particularly like rule of thumb advice either; however, I realize that since the wiki is aimed at a general audience, much of the information presented will inherently be general in nature. I look at the rule of thumb in age versus bonds the same way. Many other caveats also apply to the 100 - your age rule.
That's exactly why I left it. Similar to "your age in bonds", it's a place to start.

Also note the caveat about payback period- 2 years, 15 years, or never. You can always find a situation to fit any of these.
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Post by sscritic » Mon Jan 11, 2010 9:20 pm

SpecialK22 wrote: 20% down payment
Total monthly payment for 2010 (principal, interest, condo assessments, taxes, insurance) = $1009.72

If the condo was a 100% financed, the monthly payment would be about $1148.58 (principal, interest, condo assessments, taxes, insurance).
The difference is 20% of price for $138.86 a month. If you had paid cash (100%) down, the monthly costs would go down by four times as much (the other 80%) or $555.44.

The cost of the house is $1009.72 - $555.44 = $454.28 a month in taxes, insurance, and condo fees; the cost of borrowing is $555.44. By my approximation, you put down $26,000 and borrowed $104,000 on a $130,000 condo (payments of $558.29 at 5% on a 30 year fixed). There is an opportunity cost of putting $26,000 into the house and not into an index fund; if you had rented, you would still have that money earning something. The other problem is that you have ignored the cost of upkeep. Just as the condo association is charging you for the eventual cost of a new roof and new paint, you should be charging yourself for any replacement costs that you will eventually be responsible for. If you were renting, your landlord would be including those costs, just as the condo association is. For apples to apples, you should be setting aside the cost of your repairs and replacements (new washer/dryer, floor replacement, interior paint, see other thread for disposal, etc) on a monthly basis too. While your condo is in good shape now, you will have expenses over the next 15 years. [Or you can just let it rot, but that will reduce the price you get from any buyer.]

P.S. This assumes your condo association is well run and there will be no special assessments adding another $15,000 to your cost.

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Post by SpecialK22 » Mon Jan 11, 2010 10:21 pm

sscritic wrote:
The other problem is that you have ignored the cost of upkeep. Just as the condo association is charging you for the eventual cost of a new roof and new paint, you should be charging yourself for any replacement costs that you will eventually be responsible for. If you were renting, your landlord would be including those costs, just as the condo association is. For apples to apples, you should be setting aside the cost of your repairs and replacements (new washer/dryer, floor replacement, interior paint, see other thread for disposal, etc) on a monthly basis too.
You're right. I should have included savings I am putting towards repairs. I already start with $9632 to be put towards repairs ($8000 tax credit plus 6 months of prior paid assessment fees) that strictly came from the purchase of the property. The lack of closing costs paid by me also kept the cost of the purchase down. Saving the difference between purchase and rent leaves me say $131-$181 a month to save towards repairs (1140 or 1190 - 1009). I think I start out with a nice cushion for repairs.

I agree that I lose the opportunity cost by putting 20% down; however, I couldn't get financing for the condo with anything greater than 80% LTV (at least with the good terms I received).
sscritic wrote: P.S. This assumes your condo association is well run and there will be no special assessments adding another $15,000 to your cost.
Valid point but renting also carries the risk of the owner poorly managing the property or even selling the property. If you are renting and the owner forecloses, you will find yourself looking for a new place despite on time monthly payments. If the owner decides to sell, you will also find yourself looking for a new place unless the new owner takes you on as a tenant.

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Post by Fbone » Mon Jan 11, 2010 11:08 pm

I just used the NYT calculator and it said buying for me is better than renting after 1 year.

Glad I've been owning for past 13 years.

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Post by leod » Mon Jan 11, 2010 11:20 pm

i move every 3-5 years. we probably be renters for a long time

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Post by Harold » Mon Jan 11, 2010 11:43 pm

RobG wrote:The investment part is THE question relevant to this thread. Is it a better investment to rent or buy? That is the question.
Rob, renting isn't investing. Paying property taxes isn't investing. The financial decision comes down to which of renting or buying would cost you more in money that you're not investing (i.e. that is just spent, never to be returned).

The buyer invests money above that in a home. The renter may or may not invest the money above that in something that may or may not build more value than a home. It's really irrelevant to the financial decision of buying a home (unless you feel a home is such a unique investment that nothing exists of greater return for the risk).

I'm seeing your point about comparing similar properties. If so, sure seems like comparing those unrecoverable costs would result in buying winning most of the time. I just hadn't realized that many people living in small apartments considered buying small condos for their first homes. Most seem to buy as big a house as they can get (and load it up with as many amenities as they can).

That's where I was coming from with consumption -- I don't think many would consider renting such a property, nor if renting would they buy all that stuff for it. But many of those who buy such a place feel they're "investing" in the American Dream and doing everything right.

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Post by longview » Wed Jan 13, 2010 2:10 pm

In the CA area, you have situations like a $1.5-$2 million dollar house vs renting the same or similar house for 5k/mo.

Comparing buying cash, vs renting. it seems either can win based off your guess at the future. If you think housing will come down, renting is better. If you think housing will skyrocket, buying is better. So, then, isn't the question if you think housing is a better "investment" than $2 million in fixed income?

I was always told you shouldn't consider your house an investment (even though it's where most people have most of their money).

So, renting gives less downside risk, less upkeep cost, no property tax, $2 mil sitting in fixed income, and probably worse appliances/finishes/stuff flippers add. Buying gives more upside opportunity, no landlord risk, and probably nicer finishes/appliances/flip-friendly additions.

Which seems like the stereotypical opinion on the Wiki... renting is more conservative and the place is maybe not "as nice."

If someone wants to breakdown why buying is financially better in this situation I would appreciate it. I'd love to believe that buying is the smart financial move. (note: houses here still cost 100% more than they did 10 years ago... hard to believe that a big adjustment isn't around the corner).

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Post by JordanIB » Wed Jan 13, 2010 2:47 pm

Fbone wrote:I just used the NYT calculator and it said buying for me is better than renting after 1 year.

Glad I've been owning for past 13 years.
This shows how dramatically different things can be by market. When I run the numbers for my NYC situation, I almost never get an answer that buying is better than renting, even after 30 years. It's the monthly maintenance cost that throws things completely out of whack.

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Post by RobG » Wed Jan 13, 2010 3:16 pm

JordanIB wrote:
Fbone wrote:I just used the NYT calculator and it said buying for me is better than renting after 1 year.

Glad I've been owning for past 13 years.
This shows how dramatically different things can be by market. When I run the numbers for my NYC situation, I almost never get an answer that buying is better than renting, even after 30 years. It's the monthly maintenance cost that throws things completely out of whack.
I think the calculator is useful, especially for pointing out differences in markets, but it has a major problem. That is, it gives you the "expected" result based on averages of appreciation, etc. (And this doesn't include the problem of whether or not the assumptions are realistic).

The real result will be worse than the calculator predicts about one half of the time, perhaps significantly worse. For example, it overlooks the volatility of the housing market. If house values suddenly drop it will take a lot more than a year for you to break even.

Another example: if a major unexpected repair is needed, like the roof, termites, etc you could be faced with another huge loss in value that can't be made up for in a short period of time. These losses can be serious enough to bankrupt a person who is forced to sell at a loss.

So remember those calculator results are correct 1/2 of the time, and when you make the decision you need to factor in the consequences of the calculator being wrong.

FWIW, I plan on adding something to this effect to the wiki, maybe tonight.

rg

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Post by SpecialK22 » Wed Jan 13, 2010 3:49 pm

RobG wrote:I think the calculator is useful, especially for pointing out differences in markets, but it has a major problem. That is, it gives you the "expected" result based on averages of appreciation, etc. (And this doesn't include the problem of whether or not the assumptions are realistic).
Good point, Rob. The assumption of fixed annual rates of appreciation is a major problem with many financial planning calculators found on the web. To exacerbate the problem, this calculator relies on several factors such as rent increases, property appreciation, investment returns, etc. increasing by a fixed percentage annually. There are multiple possible situations which could make even a strong case for buying or renting turn weak. The one factor that I feel tends to generally make the strongest case for buying over renting is if the individual plans to stay in the property for many years.

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Post by diasurfer » Wed Jan 13, 2010 4:02 pm

I don't understand this concern. These values are all adjustable! The following statement appears in the wiki:

"Please consider increasing the Investment Returns under general settings to 7 or 8%, or to try a range of values."

Do we need a reminder to try a range with every other value (eg, maintenance costs, inflation, appreciation rate, etc etc)?

I always try a range of values. I'd like to reverse engineer the calculator so I can input an array of values and plot a series of the output curves as surfaces. One of these days ...

RobG's main concern is a different one. He's essentially saying, like for maintenance cost for example, that you may input the correct average value over the 30 years, but that still doesn't reflect the risk of "going bust" due to a particularly high year of expenses. Kind of like getting wiped out by a margin call a la Market Timer's Mortgage Your Retirement scheme.

Of course, in the case of home ownership, that's what Emergency Funds are for.

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Post by diasurfer » Wed Jan 13, 2010 4:12 pm

Special K22, I reread your post and now I'm think you are essentially saying the same as RobG. By "fixed" you don't mean that you can't adjust it, you just mean that once you adjust it, it remains at that value for 30 years. I don't know how else you would do that other than through a Monte Carlo simulation, which opens a whole other can of worms.

Personally, I never paid much attention to "cost more or less after X years" for any value of X other than 30. For that, I think the calculator is pretty good. I think trying to use the calculator for short periods of time is to use it as a real estate market timing tool, which is dangerous.

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Post by JordanIB » Wed Jan 13, 2010 5:11 pm

RobG wrote:
JordanIB wrote:
Fbone wrote:I just used the NYT calculator and it said buying for me is better than renting after 1 year.

Glad I've been owning for past 13 years.
This shows how dramatically different things can be by market. When I run the numbers for my NYC situation, I almost never get an answer that buying is better than renting, even after 30 years. It's the monthly maintenance cost that throws things completely out of whack.
I think the calculator is useful, especially for pointing out differences in markets, but it has a major problem. That is, it gives you the "expected" result based on averages of appreciation, etc. (And this doesn't include the problem of whether or not the assumptions are realistic).

The real result will be worse than the calculator predicts about one half of the time, perhaps significantly worse. For example, it overlooks the volatility of the housing market. If house values suddenly drop it will take a lot more than a year for you to break even.

Another example: if a major unexpected repair is needed, like the roof, termites, etc you could be faced with another huge loss in value that can't be made up for in a short period of time. These losses can be serious enough to bankrupt a person who is forced to sell at a loss.

So remember those calculator results are correct 1/2 of the time, and when you make the decision you need to factor in the consequences of the calculator being wrong.

FWIW, I plan on adding something to this effect to the wiki, maybe tonight.

rg
Absolutely, but when discussed on this board, I tend to assume that these caveats are accepted by most running the numbers. Certainly the next 5-30 year are very unlikely to play out exactly as one projects on the calculator.

That said, the NYT tool is light years ahead of nearly any other rent vs. buy calculators out there. The fact that you are able to adjust annual rent increases, RE appreciation, property taxes, deductibility of common charges, etc., to supplement the standard rent/purchase price/down payment/interest rate variables, is quite useful.

But certainly standard disclaimers about predicting the future apply, as they do with nearly any discussion in these forums.

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Post by RobG » Wed Jan 13, 2010 5:37 pm

There are some good points being brought up. After thinking about this I think the take-home message is that the calculator is a great tool for determining if buying is a bad idea. That is, if the calc. says it isn't going to work then the odds are stacked against you!

On the other hand, if the calc says buying will pay off then you have to seriously consider what would happen if it is wrong.

rg

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Post by RobG » Wed Jan 13, 2010 5:41 pm

JordanIB wrote:It's the monthly maintenance cost that throws things completely out of whack.
Jordan - I think we are on the same page overall, but I have a question. What is the "monthly maintenance costs" that you refer to? My taxes and insurance are less that 1% of the cost of the house.

Thanks,
Rob

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Post by sscritic » Wed Jan 13, 2010 6:08 pm

RobG wrote:
JordanIB wrote:It's the monthly maintenance cost that throws things completely out of whack.
Jordan - I think we are on the same page overall, but I have a question. What is the "monthly maintenance costs" that you refer to? My taxes and insurance are less that 1% of the cost of the house.
I don't know what Jordan was referring to, but when your roof leaks, are you not going to fix it or replace it? From a financial point of view, you should treat your home as a condo association treats its expenses. If you know your exterior paint has a 10 year lifetime, you should be setting aside 1/120 of the cost of a paint job each month. If your roof has a 20 year lifetime, you should be setting aside 1/240 of the cost of a new roof every month. Those are monthly maintenance costs. If you don't smooth them out, then you aren't really getting an accurate picture of the cost of owning.

I guess you could plan on selling your house as soon as the roof leaks, but you might not get a good price.

On the other hand, since Jordan was talking about NYC, perhaps he was talking about the co-op's monthly maintenance fees, which cover exactly the same expenses as well as current expenses in a more formal way.

JordanIB
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Post by JordanIB » Wed Jan 13, 2010 9:52 pm

sscritic wrote: On the other hand, since Jordan was talking about NYC, perhaps he was talking about the co-op's monthly maintenance fees, which cover exactly the same expenses as well as current expenses in a more formal way.
Indeed I was referring to co-op fees, which yes, are intended to cover the same costs as a home-owner incurs. I guess it's more accurate to simply say that when I've crunched the numbers, the whole package -- co-op fees included -- make it a poor decision to buy. While obviously there are more complexities involved, at a very basic level, places I've looked at would end up costing nearly double my rent.

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