Comment by refurb | Hacker News Reader

Comment by refurb | Hacker News Reader

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So, in most cases, going from renting to buying a similar property is definitely worth it. You'll pay about the same monthly (all included).

As someone who owns in SF, this is definitely not the case here.

For a $1.5M home in SF, the total monthly outlay includes mortgage ($5,557 @ 3.75% with 20% down), property taxes ($1,454), property insurance ($2,250) for a grand total of $9,262 per month. You could rent the same house for $6,000 per month. And that doesn't even include expected maintenance ($625 per month) and opportunity cost of your $300,000 down payment ($1,250 @ 5%). So grand total, you're spending over $11,000 per month or $5,000 more than the cost of renting.

The reason for this is appreciation. If you're house goes up in value by 5% per year, that $75,000 that more than covers the extra $60,000 you're paying over renting. Question is - will it keep going up that much?

Edit: updated with actual numbers.

Then why does anyone who owns property in SF rent it out rather than selling it?

Probably because a lot of those people bought the same house for $600,000 10 years ago. Their monthly cost is likely less than rent.

I know someone who bought a house 5 years ago and rented it out. She had to cough up $1,000 per month to pay all expenses. Rent has now caught up so she's breaking even.

In the rest of the US where housing prices aren’t as inflated, it can actually be cheaper to own.

It might possible that most of the people in SF who own property have owned it for a long time. So for someone buying a house now, they would be paying a ton of money. If you bought the house more than 10 years ago, when prices were much lower, your mortgage would be much more reasonable and the monthly costs you would be paying would be less than what people are renting for currently.

Hence complaints of NIMBYism. The lack of new development in SF drives housing and therefore rental prices upwards, and so if you owned property before the bubble, you can now charge rent at the modern, high rental costs while paying a mortgage based on the lower pre-housing crisis prices. You could easily be pulling in thousands of dollars a month this way with a single rental property. So lots of people are now have a big incentive to fight against new development.

Your insurance numbers sound more like yearly numbers than monthly... Or are you really paying $25k per year for insurance?

yeah I know. We are planning to come back to the bay area in the next few years, and real estate is definitely the #1 issue we have. More expensive to buy, much more expensive to maintain (taxes, etc)

It's often slightly cheaper to own than to rent in the Netherlands.

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