Housing

Buy or Rent?

Northrop Grumman / EngHowCouldYu
Mar 10

Let’s say you’re working for FAANG and you are looking for housing. Buy or rent? I mean your mortgage monthly is about the same as rent..

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  • Google anons2
    When I looked in the bay, monthly mortgage with prop taxes and everything was like $2-3k more than renting. Not sure where you get the numbers for the "same"
    Mar 1016
    • New / EngTC++
      I can't believe how many people just compare mortgage payment alone vs rent, not taking into account property tax, HOA and maintenance costs.
      Mar 10
    • @TC++ that's my pet peeve also.
      People do the biggest financial decision of their life and you would be amazed how few of them even calculate the numbers behind it. Usually they dismiss everything with something like "I'm throwing the rent out the window so it is better to pay the mortgage and get a home after".
      This is simply amazing to me. Most of them don't even understand all the other costs associated: closing costs, HOA, taxes, agent fees etc etc
      Mar 10
    • Google nlxS44
      There are also soft factors to consider. When you buy, you can’t really move without a huge cost. Buy in Mountain View but then change jobs to Uber and need to work to SF — might not be an option anymore.
      Mar 10
    • Uber ubergoog
      Uber has an office in Palo Alto...
      Mar 10
    • Google nlxS44
      That’s beside the point.
      Mar 10
    • Fully agree. There is a lot of research showing that once you buy you give up on average on your career because you are way less flexible
      Mar 10
    • Northrop Grumman / EngHowCouldYu
      OP
      But come on all you smart people, wtf are you supposed to do? Just rent for 1/3 of your life??? Like wtf. Look I completely understand looking at the NUMBERS prior to any execution or purchases (ie prop taxes, maintenance, HOA, PMI, etc.), but I don’t care what you say, actually paying for a property that you’ll own vs tossing money out the window ideally sounds way more logical. I mean I get the numbers have to match but like come on? Plus in terms of the flexibility, just have someone rent your current pad and move closer...

      Idk I feel like being all pessimistic on home ownership is a discouraging tale that is unrealistic and wrong.
      Mar 10
    • Northrop Grumman / EngHowCouldYu
      OP
      But hey just my 2 cents, I think it’s worth a discussion.
      Mar 10
    • Why are you so attached to buying? Are you an animal that needs some territory to exist??

      What is the real difference with renting?? You realize there is a huge industry and lobby with skin in the game that tells you those stories about homeownership to make you feel like you need to own (and they make their cut).

      Think about it: what is the difference between renting and buying in regards with the actual home. It is almost nothing. Wouldn't you pick the option that allows you to maximize money in the long term? That seems to be renting today.

      Don't be emotional. Do what makes sense economically
      Mar 10
    • Google noogler@
      Why does one continue living in SF Bay Area (or any high COL city like NY) paying high property tax till they die? A decent family house costs at least $1.5m with *100% down payments*. With 20% down payments, 30 years’ total payments (including interests, prop tax, insurance, maintenance, HOA) would be around $3m. Of course tax breaks alleviate a bit, but no one knows how those breaks will be adjusted in futures. Also, how many home owners count the amount of property tax for N-M years after retirement (N=years you die, M=years you retire)? If one retires early say at 50-55 years, and continue living say 85-90 years, the prop tax for today’s 1.5m would be 35 years x 15-20k = 525-700k alone assuming tax remains flat (which is impractical).

      Personally I prefer to grow my savings with investment and then to retire in a cheaper place, probably a lot of years sooner than who will continue grinding till making enough to continue maintaining a high COL after retirement in the Valley. Just my $.02
      Mar 10
  • More seriously. Google "nyt rent vs buy". It's the best calculator out there
    Mar 103
    • Northrop Grumman / EngHowCouldYu
      OP
      Ok I’ll check it out thank you
      Mar 10
    • Google anons2
      Problem is these calculators completely hinge on what you expect the housing "appreciation" to be
      Mar 10
    • Yes, that's why it's a difficult decision. It's based on forecasting.

      The reason why people continue to buy in the bay area is partially because they have only lived here a couple years and think it will continue to go up 10%a year... It won't
      Mar 10
  • What are you currently paying for rent?

    The median home value in San Jose is around 1,082,600. (According to Zillow)

    So let’s say you’re looking at buy something at 1 mil. If you only require a $800k mortgage on a 30 year mortgage your monthly payments will likely be $3,959 a month (4.3 interest rate — which is good)

    Your property tax will likely be around $7,940 annually (Santa Clara avg tax rate is .794%) most people usually estimate 15k a year for property tax in the bay. So to be safe it’s an extra 1k per month on top of your mortgage.

    Depending on the spot you may end up with HOA which can range from 200 - 500 extra a month.

    So by time you get to paying for garbage, water, electricity, etc you’re already coughing out close to 5-6k a month.

    So as much as I tell myself a mortgage is basically the same as rent it would really only be the same if I bought a 600k house and there aren’t too many of those worth buying at the moment.

    Oh and if you don’t have that 200k down for that million dollar home you’re looking 6-7k a month — yikes I’ll take my 3k rent.
    Mar 107
    • Northrop Grumman / EngHowCouldYu
      OP
      But that 3k Rent is essentially wasted money in a sense. No long term return. Just literally handing it over. Vs mortgage where theoretically most of the payment is YOURS. So idk..
      Mar 10
    • Nope. Search "opportunity cost". What is the best thing you could do with your money? If you don't buy then you need to invest your down payment and the extra money that you are not paying in mortgage.

      The bet is that this opportunity is way bigger than the value of the house in 30 years.
      That's what people don't get when they say you are throwing money out of the window when you rent.
      Mar 10
    • eBay abababbb
      Reasoning makes sense..you’re missing one cost though which is maintenance..as an owner is all on you. You might not need it now but you’re likely to drop another 100k at least in the next 20 years
      Mar 10
    • Northrop Grumman / EngHowCouldYu
      OP
      Oh I see. Hmm
      Mar 10
    • Facebook / Eng435
      You’re forgetting the money that you’re not earning by investing that 200k downpayment, so add another ~1k a month.
      While renting might be throwing money out the drain, look at averything you throw down the drain when buying:
      * property taxes
      * morgage interest
      * hoa (maybe)
      * insurance
      * opportunity cost of not investing the downpayment
      * closing costs
      * maintenance

      Is all of that lower than the rent? In many cases it’s higher.

      That said, rent sucks when sudenly owners want to sell. And your future expenses might be much harder to predict.
      Mar 10
    • Apple hakunanaMa
      Op - if you invest there is a chance you would lose 20% of portfolio in a span of 45 days. Market is manipulated by machines. Looks what happened in last 4 months, I haven’t even recovered from that blip but houses didn’t see that blip.
      Mar 10
    • Amazon / MgmtKYuG83
      That 3K rent is wasted. And so is the 4k of that mortgage payment that is just going to interest, taxes, insurance and possibly hoa. With a 30 year note on a million dollar house, only $2.5k a month is going to equity in the home...
      Mar 12
  • Rent. I think self driving cars are gonna destroy real estate prices
    Mar 107
    • Northrop Grumman / EngHowCouldYu
      OP
      How
      Mar 10
    • LinkedIn qQiF85
      By making it much more bearable to sit for 3 hours a day in a self driving car. No need to pay a huge premium to live that close to work.
      Mar 10
    • Northrop Grumman / EngHowCouldYu
      OP
      Ah. Interesting.
      Mar 10
    • New / EngTC++
      I had the same thoughts. You could have a mini-office in self driving car. You jump into self driving car in the morning, drink coffee, eat breakfast and start your workday. Then jump into the office when you arrive.
      Mar 10
    • Apple hakunanaMa
      Interesting perspective!! Something to think
      Mar 10
    • Uber SFNomad
      It would take 10-15 years before this vision is realized. Meanwhile unless major policy change happens, the Bay Area will continue to have limited space for housing and even fewer good school districts.
      Mar 10
    • Intel / Engpleb
      I think you, guys, overrate your willingness to sit in a moving box for 3 hours everyday. Just wait until you hit a pothole and spill your hot coffee on your bright white shirt or laptop. I wouldn't do it.

      I would rather bet on VR to facilitate teleconferencing so we could work in the same office from home.
      Mar 11
  • Definitely renting.
    Mar 100
  • The other thing you should consider is: look at Detroit.
    One of the most prosperous cities during the car boom. Everyone wanted to buy there similar to here today.

    Did you see what it became today?
    Can you make sure that the bay area will not become Detroit in 30 + years ? Something to keep in mind.

    Renting allows you to dodge that risk.
    Mar 103
    • Apple hakunanaMa
      Can you give a gist of what happened there? I see that its an autonomous car hub for testing and all
      Mar 10
    • Wikipedia Article on "decline of Detroit"
      Mar 10
    • Yeah racism+the car industry went down.
      The same thing will one day happen with software
      Mar 10
  • Nvidia roombay
    What will be the rent for 3 bedroom home in 2030 in Bay Area?
    Mar 101
    • Glu Mobile PQSK63
      At a rent control unit, no more than 2.5k a month :)
      Mar 11
  • Ness Technologies __|__
    Buy is not same as rent. If you buy house in a down market and it appreciates over the years then buy would make sense. If you buy now and am pretty sure there will be a recession at least in the next 5yrs then the depreciation might make you think that u made a stupid decision to buy
    Mar 102
    • Apple hakunanaMa
      Anticipating recession is stupidity too. There are no signals of recession for now, also once that joker trump is out of the office it would be even better
      Mar 10
    • Ness Technologies __|__
      Actually it’s stupid to think that the real estate will never see correction
      Mar 10
  • Sure.

    But the assumption is that owning a home is the same expense as renting which it isn’t.

    And unless you can cover all the rest of the and still save you will end up house poor. And then you better hope the market doesn’t pop and you will be able to get a return on your home so that you can retire somewhere else.
    Mar 100
  • Google zzzyyxxx
    Mortgage same as rent ? Where exactly ? You can rent a SFH in Cupertino for $5-5.5K. Mortgage would be easily $10k.
    Mar 100
  • LinkedIn ThinkJosh
    Depends on a lot of other factors, try exact numbers in an online buy vs rent calculator.
    Mar 102
    • LinkedIn qQiF85
      Can you help me find the exact stock market and housing market future performance ? My crystal ball is broken.
      Mar 10
    • LinkedIn ThinkJosh
      There is no prediction here. Just exact numbers. Read my post again.
      Mar 10
  • This comment was deleted by original commenter.

    • Following your logic if renting was 500$ and buying the same place was 1m$, I should buy.
      :Facepalm:
      Mar 10
  • Gigamon / Eng
    done

    GigamonEng

    BIO
    what's th is
    donemore
    Dont forget if you dont pay back your mortgage soon you will end up paying lot of interest. So for 800k loan you may end up paying 1.5 m back. So where is the saving. If you have lot of cash on hand yes.. makes sense to buy.
    Mar 100
  • Uber qdqwdhs
    Buy if you have the strength to pay mortgage during recession or at least 4 years and in a place where it's easily rentable such as school district etc! Buy a home that's below your range and have some cash! Buying gives you long term advantage provided you save money and repay the mortgage within 5-10 years if you plan to pay for 30 years I don't think buying makes sense considering the current market.
    Mar 100
  • Oracle now@google
    You need a crystal ball. We bought 12 years ago. We thought it was crazy expensive back then with 50% of after-tax income going to mortgage/tax/hoa. Now the mortgage is paid off and house doubled in price so in retrospect it was the right choice.
    Mar 111
    • Datadog New Relic
      you could’ve more than doubled whatever you paid for the house 🤷🏻‍♀️
      Mar 12
  • Google / Eng
    xxx.

    GoogleEng

    PRE
    Amazon
    xxx.more
    If you don't mind a lot of roommates. Bought a 4b4b and rent 3 rooms out. The rent almost covered mortgage payment.
    Mar 120
  • eBay abababbb
    Buy only makes sense if you believe houses will appreciate significantly..otherwise it might be a financial disaster and destroy your flexibility at the same time..I’m personally all in for flexibility and I believe it’s more likely to see depreciation than appreciation at this point so...RENT
    Mar 100
  • Facebook public2
    If it's really the same but obviously but likely not the same early on.
    Mar 100

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