I ran the numbers, buying a home makes zero sense in 2019.

New / Mgmt
xsAS42

New Mgmt

PRE
PARC
xsAS42more
Aug 31 96 Comments

So thanks to a long bull run in TC I have been seriously looking to move into a house in the range of $1.2mm - $2mm in NY/NJ region. After crunching numbers and looking at all the data it's obvious to me that I would be throwing money away. These are the top reasons I would rather rent a home or luxury apartment of a similar value instead of buying it:

1. Taxes
Even in NJ were taxes are about half as in NY it still doesn't make sense to pay this on top of your 30 year mortgage with interest. Based on my numbers this is akin to paying a 30% monthly premium as compared to a renting a similar space.

2. Downpayment
This is a huge opportunity cost. This combined with the first point is like giving a landlord 2-3 years of rent up front to pay a 30% premium every month and owe a 30 year debt. Why the FUCK would I ever do that?!?!!!!?!

3. Maintenance& Repair
Now everything is on you. That roof leaks, you have to fix it. Sink hole... fix it. Pool got fucked... too bad. Maintenance for a home is an additional $1,000 a month in my scenario.

Pros:

Seriously I only see two reasons to buy right now:

1. You absolutely need more space(sqft). Most available house are for sale and not rent because everyone is trying to get rid of this new toxic asset class. So if you really really need more square footage and are willing to give up 2-3 years of savings and pay 30% more than you were every month, then yeah buy.

2. You are moving away from a growing bustling city. You went to retire or just don't care anymore, so you're moving away from a high TC metro area. You would be crazy to rent from your local yokel. Buy in this case.

All other claims of home appreciation, and owning where you live or "paying yourself" are totally dumb made up and burn a hole in your bank account. There probably was a time in the US we're buying a home made sense... that's definitely not now.

Or am I wrong?

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TOP 96 Comments
  • SolarWinds AnEngineer
    When you rent, you're paying the same amount for zero equity.
    Aug 31 9
    • Amazon LwEF67
      You’re doing something wrong with your numbers. I’ve bought and sold a dozen homes over the last 10 years and every one except one I made 20-150% profit after fees. Learn to negotiate and learn how to to deduct as much as possible and have your renters pay as much as possible. If it’s your primary home then enjoy a place that is yours to invest in and grow a family in.
      Aug 31
    • SolarWinds AnEngineer
      LwEF67 the period you're describing is from the bottom of a real estate bubble the likes of which we've never seen, to the top of one of the longest ever bull runs. You've been exceedingly lucky with your timing and should not extrapolate those results into the future.
      Aug 31
    • Amazon LwEF67
      You can never predict the future. He said it’s not true, I countered with my personal experience. Sure there is always risk, but as the saying goes no risk no reward. Same goes for all investment vehicles. If you’re always afraid to act and jump in, you will always miss the upside. If you’re too risk averse, then buy bonds and don’t complain you can’t make money.
      Aug 31
    • SoFi pingus
      When the tide rises all boats rise, we are likely near the top of the RE cycle. RE is very specific to local markets though so it all depends on your market. I think OP is right about the NYC market, same goes with SF. Better to rent in those markets and buy investment properties in other areas.
      Aug 31
    • Google focusonthe
      When you rent, you put the entire down payment into the market.
      Aug 31
  • Amazon LwEF67
    Your math is bad and you’re an idiot. Ok summed that up.
    Aug 31 3
    • Deloitte
      bananafone

      Deloitte

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      bananafonemore
      Seconded. OP is a buck too clever to actually be smart. So many of these dumbfucks on Blind .🙄
      Aug 31
    • Salesforce barnacles
      Could you clarify as to why their math is bad?
      Aug 31
    • Amazon JJill
      Because they spent too much 💰 on buying a house and are trying to justify 😝
      Aug 31
  • Microsoft KNKM64
    You’re missing a major pro - you get to do what you want with the place. You can paint, landscape, remodel, etc to your exact tastes. I think there is an incredible amount of freedom in that. With renting you’re stuck with the owner’s tastes.

    That kind of work is not free - far from it, but if you enjoy DIY’ing then it can be a big part of deciding to buy.
    Aug 31 2
    • Salesforce srackme
      There's also an incredible amount of freedom in renting anywhere you want year after year
      Aug 31
    • Depends on what your family situation is. You definitely don’t want to be moving your spouse and 2 kids year after year, but if you’re single or just have one SO, could make more sense.
      Aug 31
  • New / IT
    spartan90

    New IT

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    Sopra Steria
    BIO
    Blah blah tech blah
    spartan90more
    Aug 31 0
  • Intuit sxersogrrt
    glad people like you exists for me to benefit from.. DM me if you want to rent out my luxury condo in Manhattan
    Aug 31 4
    • Samsung statarb
      Love to rent your Condo. Can you share an address?
      Aug 31
    • Oracle z3p0
      Why, don't you have a tenant?
      Aug 31
    • New / Mgmt
      xsAS42

      New Mgmt

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      OP
      Sure, glad you gave up 4 years of savings so I can live like a baller while you had to move out and find someone who could stop you from going into foreclosure. You're welcome.
      Aug 31
    • Bloomberg / Eng F.U. money
      Intuit you’re likely broke AF and will stay that way because you’re clearly not teachable too.
      Aug 31
  • Amazon / Mgmt dodo dodo
    If you pay down 20% on a 1 mil home and it appreciates 10% in two years, you almost got 50% return on the deposit money due to “leverage”. Plus you avoided throwing away rent money and built equity. If you cannot understand this only God can help ya
    Aug 31 9
    • Twitch / Eng Rbg04h2kd
      All assets work the same way, and when everyone chases after housing as an asset class, it's no different than the tulip mania. It's fairly reminiscent of the crypto mania just 2 years ago.

      Sf is even scarier because housing is kept afloat almost entirely by tech compensation that is increasingly driven by stock equity grants. People are reporting 400k tc typically because their stock comp has appreciated so much that its making up the 250k of the 400k tc.

      Therefore, when you're buying housing in the bay, you're essentially leveraging on leverage to the tech industry. Which in my opinion, is no longer what it was like in 2014, and strikingly similar to Wallstreet 2007 (in terms of people's attitudes, the allure to new grads from the ivey leagues, the number of MBA grads heading, etc. Meanwhile, innovation has clearly slowed down, and for an industry that survives entirely by rapid innovation (as many companies are not cashflow positive and rely on fast growth to get external investor funding, which is buoyed by overall excess liquidity in the market place driven by low interest rate environments), there's just so much that needs to go right for the rally to sustain itself, and so little to go wrong before the whole thing implodes.

      In simpler terms, I get the feeling that people are buying property beyond their comfort zone under the assumptions that their future equity will be worth a lot and then they can pay off their mortgage. But from recent ipos from slack, Uber, lyft, etc, we are seeing that the market is not that hot anymore and people's comps will gradually decline as the market falls. At which point, there may be downward pressure when people realize they can't or don't want to afford their expensive housing anymore, especially when it's tying them down.

      Also, when market downturns and unprofitable companies can no longer raise funding properly, layoffs may happen which could further drive down prices as people are forced to liquidate for cashflow reasons or because they're moving out to go to another city
      Aug 31
    • Twitch / Eng Rbg04h2kd
      Also Amazon, we all fully understand the concept of leverage. But just as the upside is great, the downside is equally scary. It's fine if property prices keep going up, but the moment it doesn't go up anymore, the burn is very real.

      Look at other hot markets like Vancouver. The folks that bought last year (avg. 2 mil dollar for detached) saw a 10 percent plus decline in the market. The actual return on equity to them is substantially more negative. Some of them probably lost out on half their down-payment.

      You can make the case that it may bounce back again, but in the current environment with the potential trade war going on, the fact that the fed does not want to aggressively lower rates, it's hard to tell. And if it keeps going down, you may lost your shirt on your down-payment
      Aug 31
    • Twitch / Eng Rbg04h2kd
      That said. The new thing is apparently modern monetary theory where us fed could potentially keep rates at 0 forever. How that doesn't generate rampant inflation is beyond me, but the theory is that innovation would keep inflation down by pushing out long term aggregate supply. And worst case scenario, govt can increase taxes to control inflation.

      So...who the fuck knows
      Aug 31
    • Amazon / Mgmt dodo dodo
      You lost me when you started with “all assets work the same way”. There are too many assumptions in your thought process. Read it when you are rested
      Aug 31
    • Twitch / Eng Rbg04h2kd
      You need to pull your head out of your ass and come back with a reply that's constructive. If you don't understand what I'm saying, I suggest you go take a basic econ course in college before wasting our time with low level rhetorics
      Aug 31
  • Zocdoc Bankrot
    5 reasons why home buying makes sense:

    1) You can buy a bigger and better home for a monthly mortgage payment equivalent to your rent.

    2) Part of your mortgage payment also goes towards your equity. You build zero equity while renting.

    3) Tax deductions: You get a significant part of your mortgage and property taxes back in form of a tax refund.

    4) Your monthly mortgage payment will stay the same for 30 years, rent goes up every year. Landlords in NY/NJ are notorious for raising rent by as much as 10 to 20% every year. The apartment I rented for $1,900 six years ago, now rents for $2,800. Imagine how much it would be 10 years down the line.

    5) Your mortgage payments will stop after 30 years, and you would’ve built up millions in equity. But you will always keep paying rent.
    Aug 31 7
    • Facebook leetworld
      1 is irrelevant because you ignore total costs like maintenance and property tax which is huge.

      2 you can build same amount of equity by tucking away money in stock market.

      3 yes true, but it's less good since trump

      4 is valid point but there are other ways to solve expense smoothing.

      5 is another fallacy because you could have built up the same equity in stock market
      Aug 31
    • Zocdoc Bankrot
      We need a lot more “woke” people like xsAS42 who want to keep paying rent so we can keep renting them studios for $4,000 per month with 10-15% rent increase YoY. 😂
      Aug 31
    • Google focusonthe
      Rent increases can change the game at the right level. Genuine qn: does NYC/nj not have rent control?
      Aug 31
    • Zocdoc Bankrot
      @focusonthe

      “To qualify for rent control, a tenant must have been continuously living in an apartment since July 1, 1971, or be a qualifying family member who succeeded to such tenancy. When vacant, a rent-controlled unit becomes "rent stabilized", except in buildings with fewer than six units, where it is usually decontrolled. In units within single and two-family homes, the tenant must have resided in the unit continuously since March 31, 1953, to qualify for rent control. Once the unit becomes vacant, it is decontrolled. Rent control does not generally apply to units built after 1947.”
      Aug 31
    • Google focusonthe
      Interesting. I have a rent controlled place in sf, and itd make no sense for me to move and buy!

      What's rent stabilized?
      Aug 31
  • Alteryx / Product SIxE21
    Given all of the costs you mentioned in the OP. Are landlords renting at a loss? Realistically the rent you pay includes all the costs you mentioned + "profit". My mortgage (incl. Taxes and insurance but not maintenance) is probably 2/3rds what rent would be for a comparable house.
    Aug 31 8
    • New / Mgmt
      xsAS42

      New Mgmt

      PRE
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      xsAS42more
      OP
      No, clearly YOU are making stuff up. No one can buy a home on a 30 year mortgage and rent it out to one person/family and make "passive income". That's what multifamily units are for and in that case you're competing directly with real estate management companies that actually know how to run a business and have backing from their local municipalities. But yeah you should go try to so that. Buy a house so someone else can pay you for it, see how that goes.
      Aug 31
    • Amazon LwEF67
      Done it and am doing it, I have 4 active properties I’m renting right now. Good luck to you, it can absolutely be done. You’re too risk averse, keep your money in savings and pay me rent 😂
      Aug 31
    • PayPal ABM ✌️
      In sfba, all with 30 yr mortgages, all cash flow positive?
      Aug 31
    • ON Semiconductor blinder77
      That's why you work at Amazon, not OP ;)
      Aug 31
    • New death++
      The landlords who bought 7-8 years ago are cash flow positive now because of appreciation. If you buy now, you won't cash flow now. Maybe if it keeps appreciating you will eventually cash flow, but rent will cover only cover 50-60% of mortgage/property taxes/maintenance.
      Aug 31
  • Amazon JustQuit
    I make $85k a year and bought a $200k house a few years ago. 2,300 sq feet 4 bed 2 bath. I’ll be done paying it off next year.

    Move out of the big city. Much happier life and much cheaper too.
    Aug 31 7
    • Amazon / Mgmt dodo dodo
      Which city did you move to ?
      Aug 31
    • Bloomberg / Eng F.U. money
      Some people don’t want to trade having an exciting fulfilling life filled with adventure for a shelter in Podunk town where nothing ever happens and you drive by the same grocery store and gas station waiting for your turn to...
      Aug 31
    • Oracle z3p0
      Way to make a point by picking Podunk instead of Raleigh or Austin...
      Aug 31
    • Bloomberg / Eng F.U. money
      I don’t see a difference.
      Aug 31
    • Amazon JustQuit
      You city folk wouldn’t know happiness if it hit you in the face. A big city like New York isn’t exciting or fulfilling. Just loud. I live in an area where there is ample outdoor activities. I jet ski on a beautiful lake on the weekends and paddle board down a calming river every morning. Not a single person in sight unless I bring a friend.

      Enjoy your smog though.
      Sep 1
  • Google focusonthe
    A home rarely makes sense from an investment perspective. It's a lifestyle choice, and needs to put a value on happiness derived from it to come out ahead.
    Aug 31 2
    • New / Mgmt
      xsAS42

      New Mgmt

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      xsAS42more
      OP
      So what if you could rent that lifestyle for how ever long YOU want at a 20% - 30% discount every month and not give up 3 years of savings to do it?
      Aug 31
    • Google focusonthe
      I mean, that's exactly what I do. But if you like the homeowners lifestyle, adding a garden, making changes in the house, wanting to pull down a wall etc, then it's much harder to rent.
      Aug 31
  • Microsoft / Eng
    prac

    Microsoft Eng

    PRE
    Microsoft
    pracmore
    I had a coworker who thought like you, rented a house for him and his family in Seattle area for the past 14 years. He says he is waiting for the housing market to crash again.... (shrugs). I would hate to know how much rent he has paid so far, Seattle housing has increased a lot over the past 14 years.
    Aug 31 3
    • Amazon / Mgmt dodo dodo
      I know many such friends in bay area
      Aug 31
    • New / Mgmt
      xsAS42

      New Mgmt

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      xsAS42more
      OP
      Yeah like I said I think 2019 is NOT the right time. And if he has rented this while time he must have found the ideal house for HIM. I do think I would do this for 5 years and are evaluate
      Aug 31
    • New / Mgmt
      xsAS42

      New Mgmt

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      xsAS42more
      OP
      Bay Area is a bad example
      Aug 31
  • Bloomberg / Eng F.U. money
    First, so many brainwashed clones over here. Second, if you don’t even live in NYC, your opinion is invalid.

    After accounting for
    - mortgage rate
    - down payment
    - home price growth rate
    - rent growth rate
    - investment return rate
    - inflation rate
    - property tax rate
    - marginal tax rate
    - closing costs of buying home
    - costs of selling a home
    - maintenance and renovation
    - homeowner’s insurance
    - monthly common fees
    - common fees deduction
    - security deposit
    - broker’s fee
    - renter’s insurance
    If you own for less than 30 years in NYC you’re fucked. It’s not a matter of opinion, it’s a fact. After cashing out you will be left holding less money than the version of you who decided to rent in an alternate universe. /thread
    Aug 31 3
    • Symantec NGge16
      This analysis misses an important factor: the effort, attention and skill required to efficiently invest in alternatives to housing.

      The "best" approach for someone who loves investing (and is good at it) is not necessarily the best approach for someone who has different interests and tempermant.
      Sep 1
    • LinkedIn nbalxocbb5
      I tend to agree, but I'd like to see the math.
      For example - are you taking into account the built-in leverage of a mortgage? What are you using for growth of market-invested funds? 6%? 7%?
      What's the length of time where owning wins out? 30 years? 40?
      Sep 1
    • Google / Eng djaciendjs
      What about selling your current house and buying somewhere else? Theoretically you can be a home owner for as long as you live and yet not keep the same mortgage or home. If someone bought NY house and lived there for 10 years. sold it and bought in San Jose. Is that not better than renting?
      Sep 1
  • GitHub WuLX60
    One thing you didn't mention is how rent goes up over time with inflation, whereas purchasing a home locks in your monthly payment. If you're in an area where housing is limited, this can be a very good hedge against inflation.
    Aug 31 2
    • New / Mgmt
      xsAS42

      New Mgmt

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      xsAS42more
      OP
      Instead of paying a 20% or 30% downpayment, you could use that money to negotiate a 3-4 year lease to lock in rent.
      Aug 31
    • Deloitte
      bananafone

      Deloitte

      PRE
      Deloitte
      bananafonemore
      Good luck with negotiating a multi-year lease that doesn’t include staggering increases in rent payments YoY (generally, you pay for the privilege of NOT moving).
      Aug 31
  • Oracle z3p0
    For those pointing to appreciation and equity, what can you do with those if you don't sell? If you sell, where do you move? If you get a home equity loan, you're back to where you were. Stock markets have gone up 3x since 2008. Buying or renting reflects a preference in investing.
    Aug 31 3
    • Amazon LwEF67
      This is one of the more logical responses, it’s an investment vehicle. If done right it can make great money, if done wrong you can lose it too. Diversify. If you work in the software industry and make good money you should be able to invest in stocks, funds, bonds, crypto, real estate, metals, on and on. Don’t just rely on one investment to make money.
      Aug 31
    • Oracle z3p0
      It should be okay for someone who doesn't want a rich lifestyle to not spend all their time and energy in investing. Too many people judging others here.
      Aug 31
    • New / Mgmt
      xsAS42

      New Mgmt

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      xsAS42more
      OP
      This. I mentioned opportunity cost, but these green little sheep have no idea what that actually means.
      Aug 31
  • Facebook leetworld
    OP you're of the few who gets it. Renting is superior from a purely financial perspective. Buy if you care about things you get from buying that you can't get renting (stability of not having to move, doing home renovation, or there are no rentals with your desired features or size).
    Aug 31 1
    • Square qty44
      I wouldn't mind renting, but definitely not a lot of options that fit our needs with pets and kids.
      Sep 2
  • There are areas where it’s better to buy , and there are areas where it’s better to rent.

    Also, buying for living yourself is always something which is done for larger space etc. (not purely for “numbers”)
    Sep 1 0
  • Facebook public2
    Yes you are wrong but that's ok. We need renters :)
    Aug 31 0
  • Apple cuberix
    Read about leverage, no one will lend you that much money at that low a rate. With the tax benefits and historical average asset growth, almost all cases I calculated came out on top after 30 years.
    Aug 31 0
  • Microsoft Nudibranch
    Zero down or pay DP in cash then pay yourself back from heloc and roll that into your mortgage with a refi after. Get a good broker and you'll be under 3.5% gross out the door. Buy bank owned or short sales which are still abundant and you'll have instant equity. If you buy a house like you buy a new car then yeah, just rent.
    Sep 1 4
    • SAP
      norsk

      SAP

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      norsk more
      What does the last sentence mean? And what’s wrong with conservatively putting 20% down?
      Sep 1
    • Amazon / Mgmt kkbhzs2
      Nudibranch what is DP. Your response has gems but very cryptic. Care to explain pls
      Sep 1
    • Microsoft Nudibranch
      DP=down payment.
      Last sentence=if you buy a turn key home via traditional financing on the open market then you're going to part with a bunch of cash which OP is trying to avoid.
      Sep 2
    • Microsoft Nudibranch
      Norsk, I'd only put down the minimum required to get a competitive rate. Always keep your cash whenever possible, particularly when the lending rates are so cheap.
      Sep 2
  • Cisco Htov50
    You are looking at wrong areas, look at CO, KS, TN
    Sep 1 0

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