Comment by WA | Hacker News Reader

Comment by WA | Hacker News Reader

Parent Full thread

On the other hand, many Germans believe: renting is paying someone else, buying is paying yourself (which is nonsense). Especially in more rural areas, buying/building a house is considered a big achievement in life. People are even willing to move from a smaller city to little towns just to be home-owners.

Buying a house can be a net loss over the years, if you're not located in a major city. Especially in East Germany, house prices are declining. See this graphic [1]. Everything yellow basically doesn't yield any returns. Housing prices in orange and red areas decline over the years.

But even in green areas, there are so many knobs you can turn to make buying or renting more feasible than the other. It boils down to lifestyle decision: Do you want to live in your own house or not? If you prefer to rent: Are you willing to save money by other means? Because buying a house works for many people simply because they're forced to "save" a certain percentage of their income every month.

I prefer renting, because of the flexibility. I put quite a bit of money in stocks instead.

[1]: http://cdn3.spiegel.de/images/image-726182-galleryV9-uttw-72...

>It boils down to lifestyle decision

Exactly.

My philosophy is, to a first approximation, forget the financial aspect. Yes, depending upon tax policies, rent/buy ratios, etc. it may make more or less sense to rent vs. buy in a given location. But, for me, it really comes down to flexibility on the one hand and stability/ability to modify things to your liking on the other. Neither is the "right" approach but IMO it's what most people should be focusing on rather than whether it's a good investment or whether they're "throwing money away" on rentals.

> On the other hand, many Germans believe: renting is paying someone else, buying is paying yourself (which is nonsense). Especially in more rural areas, buying/building a house is considered a big achievement in life. People are even willing to move from a smaller city to little towns just to be home-owners.

People change to small towns because they want stress free life and a better/larger home for the same price of a small apartment in big cities. Living in cities brings also disadvantages!

Frankly the only people who say this are investors. If you look at it from a purely investing perspective it makes sense to buy a house and then rent it out, rather than buy a house and live in it as an investment.

But most people are not investors, they want a home to raise their kids and be a place they belong. That's the disconnect

In Canada, there's a capital gains tax exemption for your (owned) primary residence. If I wanted to live in a given place, it would be stupid to buy the place, rent it out, and rent another place myself with the rent money minus the income tax I paid from it. When selling the place, I owe capital gains taxes on it. Taken together, that ends up being a worse deal for me than merely buying what I need and using it for myself, tax-free.

Of course, what renting gives you is the flexibility to live in a smaller place and avoid overpaying for extra space that you might want to use at a later time. Still, the savings from renting a smaller place have to be greater than the tax expenses that I get charged for renting out.

Reply on news.ycombinator.com