Owning nothing is now a luxury, thanks to a number of subscription startups
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The thing is, I have some stuff that I really like. A teak bookcase I bought in the 1970s when I got my first real job after finishing school. A huge teak desk my wife bought me 20 years ago. My wife has some furniture her grandmother had and that she grew up with. We also have art and things we have bought while traveling around the world.
I see the advantages of not being encumbered by ‘stuff’ but some possessions help define our personal history and are simply a pleasure to own.
It's the rest of the stuff that can go. I helped a friend move last month. After we'd been to the 5 places she kept her stuff, we discovered she had 5 coffee machines, 5 cutting boards, 5 juicers, etc. etc.
The things you describe make you happier and are not stuff. The things I described are just stuff.
Storage unit rental, now that's a means of preying on people who can't let go and/or move often.
(It strikes me that there might be startup value in "home inventory management", although it would have to be made as frictionless as possible - wave a camera round your kitchen, inside all the cupboards, get a list of everything you own. Snoop your Amazon webpages so it can remind you not to buy things you already have.)
[0] sortly.com
Were the rental costs a waste? I suppose I would have saved a few hundred dollars if I could have just gotten rid of the stuff earlier, but it would have felt like a personal loss instead of a natural detachment.
But what if it doesn't make you happy AND selling/discarding it makes you unhappy?
I suspect that hoarders are not necessarily happy with the stuff they collect, but they would become unhappy when they have to let go of it.
Indeed. I have one of those giant wooden spoons you hang on a wall that I got at goodwill for like 3$. Most people would go "that is hideous, stupid and is just taking up space, throw it away" but I go "we carried that thing around all summer one year like a scepter being incredibly goofy with it in public, I'd never throw this thing away, we had a lot of fun that summer, I haven't even seen some of those friends in a few years now".
Then you get the reddit minimalist types that are like "Then take a digital photo of it and throw it away". No humanbot, I'm not like that.
I have been having a lot of "identity" problems lately, and it occurred to me that very little of what I own has any substantial story about it nor does it say much about who I am as a person.
The objects we collect exist as affirmations of the identity we've chosen for ourselves.
I have a some furniture hand made from my great-grandfather, grandfather, and father. I made a nice pair of speakers. This stuff will go to my kids.
Much rather buy from the Amish furniture store and pay more, than the disposable shit from Ikea.
I recently furnished my first "adult" house after years of having an Ikea apartment. I was pretty amazed at how up-market you have to go in order to exceed Ikea quality in commercial furniture. Lots of stuff sold in furniture stores is held together with hex-bolts and lock-tite anymore. Meaning you have to move up to Amish furniture if you want something higher quality. But that's like a 3-10x jump in price.
I ended up spending big on couches & dining table, then used Ikea stuff in the bedrooms and offices. I feel like that's a mid-point of cost and quality.
Bad Ikea, Flat-Pack Furniture from Anywhere Else, Beat-Up Antiques, Good Ikea, Unfashionable but Good Antiques, Oversized Overstuffed NFM[1] crap, Actually Good New Furniture, Fashionable Antiques
Not linear, there's a big jump for the last two categories.
While the quality/longevity runs more like:
Flat-Pack Furniture from Anywhere Else, Bad Ikea = Oversized Overstuffed NFM Crap, Good Ikea, Beat-Up Antiques, Unfasionable but Good Antiques = Fashionable Antiques = Actually Good New Furniture.
Basically my conclusion's been I need to either buy good stuff (unfashionable antiques, occasionally good new stuff—fashionable antiques are out of my price range) or just get Ikea. The whole rest of the low-end market's at least as bad, and usually more expensive. Some of it pretends it's part of some non-existent middle tier of quality and is priced to match, making it the worst possible furniture to buy (oversized overstuffed NFM crap—it's also usually in a tasteless faux-antique style).
I also think people who complain about Ikea's directions haven't assembled much shitty furniture from anywhere other than Ikea. It's all much worse.
[1] Nebraska Furniture Mart, here used as a category.
I haven't found anything amazing that's upholstered but I assume the good products there are just out of my price range. I've got a couple Flexsteel pieces and they're at least a hell of a lot more durable than your average Ashley Furniture near-future-landfill-fodder, while being similarly priced to the "higher end" (LOL) of that sort of thing. The upholstery itself still sucks but at least the frames and springs may pass the decade mark. Good fabric and good stitching are very expensive (see: any non-terrible clothes) so, again, I probably just can't afford the good stuff there so I've not really seen it.
[EDIT] meanwhile I have my grandparents' couches they bought something like 40 years ago, and despite heavy use they've probably got another 3-5 years left in them (springs starting to go, finally) and no burst seams or rips in the fabric, even on the cushions. Hell, the cushions aren't even getting flat. I guarantee they were just normal ol' furniture when they bought them, nothing fancy. Furniture quality has definitely gone downhill. Then again those couches, though likely on the cheaper end back then, would probably be a lot more expensive than our modern low-end in today's dollars. More so if you factor in wage growth. I don't even know where to find a couch that's likely to last 40+ years, now. It'd probably cost $10,000 if I did find it.
I'll bet that like almost everything throughout history, "good" furniture is far better quality than it's ever been, and "bad" furniture is now more stylish and accessible to more people than ever, albeit less durable than the best stuff. Do people really believe we've forgotten how to make couches?
Some IKEA furniture is actually decent. I don't want antiques in my house because I remodeled to have a modern look.
My dad bought kitchen cabinets from a small retailer, they gave him shit when he tried to replace one door because it was warped.
Honestly, I would rather deal with a major chain/retailer. I bought stuff at IKEA that wasn't wood but lasted over 10 years and served its purpose, and when it comes time to remodel I can buy something new and still end up paying less than for some "wood" furniture.
First of all, the main reason Ikea is so popular is because the stuff is usually packed in small boxes to be assembled, which is easier to move and ship. That's more efficient in shipping logistics and allows for people to live in higher density housing. Have fun moving your hand-made furniture from 100+ years ago down that condominium stairwell.
Second, Ikea has a strong corporate focus on the environment and sustainability:
https://www.ikea.com/ms/en_JP/customer_service/faq/help/abou...
So maybe pause before disparaging a company that's actually trying.
Now before we are quick to agree on a 'yes' -- to what extent do memories hold us back? Your teak bookcase for example reminds you of a positive accomplishment, and its loss would untether you, generally speaking not wanting to intrude. Now imagine someone who objectively should change, perhaps because your industry is dying. Too many mementos, a sign of reluctance, resistance even to change?
Yet change, wanted or not, is the one constant in our life.
I realize the article is about renting to save up (-- how's that going to work, btw? After all, someone needs to charge on top of the cost of owning). But a home of one's own like in the last century, really another cradle of identity, or mistaken materialism?
"I can't afford to buy so I don't want to anyways..." sounds like one of the primary motivators. Renting expensive items? How's this different from leasing or renting a supercar you can't afford to show off to friends or clients? It's not.
There's for sure some cases where this is a practical solution, like moving to another city for a year or two and getting some temporary furniture. But in most other cases in screams of sour grapes and businesses seeking to profit from people bad at math.
Rent a coffee table for $50 a month for a few years and then be happy you don't have to move it when you change apartments? Run the math on those numbers and you'll realize you're likely a fool. Sure, if you're buying things like cheap ikea furniture it's not likely to appreciate in value but most real hardwood furniture is generational and something of an investment.
Same with electricity. You get a better insurance policy if you have it new.
And I am getting an exempt, because I am using Holzpellets ( not sure how are they called in English )
EDIT: Wood pellets, that is.
Wood stoves last basically indefinitely (i.e they are only taken out of service when the building owner decides they're sick of using wood) but you're probably gonna have to do something to make the seams seal better every several decades.
Fireplaces last as long as the masonry they're made from (~250yr and counting) as long as you don't let them fall apart and leak CO everywhere. I know some people who live in a house built in the 1700s and while they have forced hot air for "base load" they use the fireplaces to make the downstairs rooms extra warm almost daily in the winter. That said, this is only one step above your "open fire".
You also ran pretty clear of the housing bubble. I wonder if there's a connection there.
I think the real difference is that Germany has proper tenant's rights and a functioning social landlord system.
And in case of damages and repairs, if you own the sofa, you're always sitting on the damages. Homeowners for example routinely spend thousands of dollars per year on their houses, whereas renters (generally), have repairs covered by the landlord.
this is a basic situation of opportunity cost. You can't just tally up the renting costs while ignoring the freed up capital, this is the exact mistake people make when they prematurely buy.
mind you renting your toothbrush probably isn't worth it, but if you're thinking about spending thousands of dollars and compare that to the compound interest you earn in a passive fund over a few years, you'd be surprised how much you lose out on.
In fact that's one of the drivers between middle class and upper class inequality. The upper class invests primarily in capital.
So I did. Remember you've still got pay the $50/month out of that savings. Even with 7% guaranteed annual interest on your initial investment you're still losing money after month 46 with renting at $50/month compared to paying $2000 up front.
And you still don't own the couch.
$50 a month for a $2000 couch is equivalent to a debt at 26%. You can't overcome that with investment. It only makes sense if you're planning to throw it away very soon.
I’m not sure what you do when you’re in a down market. Last time I lost a lot of money because I was dumb.
Putting money in a property especially if you can do your own upgrades can really pay off. Example, bought a house for $280k,I invested about $50k, its worth about $400k now.
Yeah 2008 happened, however, the prices at least in my area are back to 2007 levels. Short term real estate can be risky but long term it is a relatively safe investment.
Edit: As long as you are diversified and not putting all your money into meme stocks, of course
And you're deliberately oversimplifying the calculation, which is just as bad. You're assuming a guaranteed return of 7%, and that the capital isn't touched for the years. If withdraw $50 from your investment capital per month to pay the rental, the numbers don't come out as favourably. similarly, if you reduce the returns (7-8% is an average return, but it's not a guaranteed return, especialy on smaller sums where you may have to pay $25 per trade, or 1+% fees in fund management every year, or tax on the returns).
Your point about renting being a viable option is valid though, your numbers are just inflated.
$2000 is a lot for a sofa, and if I understand correctly is what people spend if they want a sofa for a long time and not just a cheap IKEA sofa to throw out after the dog / kids ruin it in 2 years. If someone’s spending this much on a sofa, I hope they expect to keep it 10 years and should be buying not making payments!
That said, you don't get what you pay for, you never get more than you pay for. Not being an expert in evaluating sofa quality I'll take the cheap Ikea sofas that last half as long.
Sure, so why is the sofa rental company in the business of owning sofas?
You've got to ask the question from the other side. You're paying someone else's cost of ownership and interest and overhead and profit margin.
In practice what consumer goods rental competes with is consumer credit. People don't sit on the floor for months while they save up the $2000 for the sofa, they buy it on credit. Lots of places offer interest free credit too! e.g. https://www.dfs.co.uk/content/finance
For most people there is no "rest of the money".
It can still be cheaper to rent, at least if you look at the small scale. Because in 30 years, those 4 million will be yours while people who rent will still have nothing. It’s also risky, because maybe those 4 million will really be 1 million.
Over all, owning real estate in a safe location is always going to be much better than renting. At least in Denmark. Hell, if you can manage to buy around 15-30 lower-cost apartments in a university city and rent them out, you’ll be able to pay your loans and have enough spare in passive income that you never have to work again.
- Mark Twain
Just have to be careful to only buy land 2.4m above sea level.
Are you saying the prices droppped sharply the last 5-6 years?
But I probably should have been more clear. I mean, first of all, there are more cities than Copenhagen. I have a 3 room 92m^2 apartment that is 15 minute walking distance from Aarhus H that cost us 2.2 million. Secondly, I’d personally call a place like Valby “downtown” Copenhagen even though it would probably be more correct to label it surburbia like you do.
Of course, there are other Danish cities than Copenhagen, and prices do vary. The parent comment I replied to simply stated that there are no 4M DKK houses, which simply isn't true.
What savings?
Rent as you stated already includes anticipated maintenance costs, property taxes, the landlord's mortgage costs, often an agency fee, plus a margin for the landlord.
I don't think I've seen rental rates ever cheaper than a personal mortgage. The main advantage of renting is avoiding long-term commitment but you'll pay a premium for that flexibility. Otherwise there wouldn't be an incentive for landlords.
You are correct that rent includes all the costs plus markup. But a big factor is that housing costs (esp in california) remain pretty steady once you buy. So that rent does include the housing cost...from 10, 20, x years ago.
Alternatively a developer builds a building and rents out the unit instead of marking up and selling units. So the cost isn’t as high as market price. An example: I recently rented a 1 bedroom in a desirable neighborhood for $3500 per month. Equivalent condos are over $1m dollars in that area. But it certainly didn’t cost the developer of my building $1m to build my unit.
(This is why I'm still renting...)
This pattern is really common in high cost of living cities.
But what will the price be in 10 years? The mortgage will go down, especially if you pay above minimum repayments, your wages will go up (theoretically) helping you make those payments. The mortgage price will go down, bottoming out at $0 while the rent will always increase.
note: Amsterdam an outlier like SF.
As a Swede in the middle of buying a house in the U.S. I have to say it's surprisingly similar.
The big differences between Sweden and the U.S. is the loan terms. Here in the U.S. the terms are extremely long, you'll typically get 10, 15 or 30 years with a locked interest rate. In Sweden you'd normally lock your rate for 1-5 years up to 10 years depending on your financial situation. When I owned a condo in Sweden I went for 1 year locked rate and then month-to-month once that first year passed. What you have instead of a fixed term is a fixed amortization. By law you have to pay back 2%/year until your principle is down to 70%, 1% until it's down to 50% and after that you can just pay interest if that's what you want to do.
Now I own my own place and I finally actually have rights and I will choose when I move on.
This is why you shouldn't agree to a rolling tenancy. When the initial tenancy period is over, negotiate for a year or two. Most landlords, in my experience, don't want their houses sitting empty so they're happy to have you on the hook for a year. Although, it depends where you live: I work remotely so I tend to rent in less expensive parts of the country like Devon where there isn't so much volatility in the market.
https://www.gov.uk/government/news/longer-tenancy-plans-to-g...
Periodic (rolling) tenancies can be ended with two-month's notice, so the landlord might decide to evict rather than repair. With longer tenancy agreements, the landlord can't evict until the tenancy expires, and so tenants can use their legal rights to compel the landlord to make repairs.
In short, the landlord can't kick people out as an alternative to spending money on repairs.
Yes, they're technically "obligated" but only real recourse is to pay somebody to fix it yourself and deduct that from the rent. While doing that you have to be 100% reasonable though (no overcharging, get multiple quotes and landlord must be kept informed).
If you stop paying rent because repairs aren't made you can be evicted.
And then you get evicted after the negotiated period ends anyway.
You cannot evict people because you want to sell (the new owner is your new landlord) or because you want to increase the rent. Unless you do something really wrong (like break things on purpose) you cannot be evicted.
About the only time to get rid of tenants is when you want to move in yourself, and then there is a longer protection time (3-9 months depending on the time you lived there). (Or I guess you can pay the renters to move out which I've seen sometimes.)
The rent can only be increased up to 15-20% in 3 years (without amenities), and can only be increased every 15 months. If you do renovations that improve the place you can demand 8% of the costs per year, but only up to 3€/sqm (or 2€/sqm if the place was cheap).
Still, prices in the cities have been going up a lot in the last few years (you can increase the rent when new tenants move in), but the prices to buy have gone up even more.
This comparison is usually apples to oranges. For example, in Austin, a 20s-30s homebuyer may have a budget of 300-400k for a property. This amount pretty much limits the options to homes on the edge of town or in suburbs. The same person may prefer renting in or near downtown, if they aren’t buying, and that could cost just as much as a mortgage on a much larger house (in a much less expensive location).
So, hard to do fair comparisons.
I suspect people, especially people considering buying their first home, have a specific profile of locations that behave in this new way because of that interest.
Basically just strike SF, NYC, Boston and Seattle of your list. Then strike off every city that lots of people from SF, NYC, Boston and Seattle are cashing out their inflated home values and moving to to raise their families off your list. The US is a big country. You're left with a very long list.
My sample size is <10 but 100% of the first time home buyers I know opted for a 2nd tier city or an exurb that's just barely within commuting range of wherever the big fat salaries are. The nature of the city other than physical location had approximately nothing to do with it. The techies who can drop a quarter mil on a 800ft^2 condo that's within biking distance of work and walking distance of a bunch of overpriced bars are in the minority and not indicative of overall trends. Take your narrow world view and even narrower assumptions of what young people want and shove it somewhere.
I would imagine things would be quite different and more like you say in more normal markets.
The rental market and housing market are two separate markets. Just because it costs $X to own a home doesn’t mean rent has to be $X or higher.
The same home could be rented for ~$4500 per month.
Keep in mind that most rented houses were purchased a while ago. If you bought the same house when it was $700K, you could still make a profit on a rent of $4500.
The reason why owning costs more is because buyers are also assuming appreciation. If you sell the same house for $1.5M 5 years later, you still make a nice profit even if your monthly cash flow is negative.
Also, once you hit 20% ownership, you no longer have to pay mortgage insurance.
I haven’t run the numbers lately to figure out which side wins, but the analysis is significantly more complicated than comparing monthly outlays in the first year.
That assumes that you can sell the house for more than what you bought it at.
You are correct that principle may be recouped and in addition, you get a mortgage interest tax deduction. However, you also pay 6% when you sell the place and maintenance costs (~1% per year) need to be accounted for.
There are several assumptions you need to make for owning to be cheaper than renting - that usually involves owning for a longer period of time (>5 years) and some modest appreciation (~3%+).
Of course, my numbers were from the SF market. There are many cities in the US where owning is cheaper than renting from day 1. SF just isn't one of those.
A good place to mention the NYTimes rent versus buy calculator: https://www.nytimes.com/interactive/2014/upshot/buy-rent-cal...
Not necessarily; as long as the value of the house[1] doesn’t fall more than the principal you’ve paid, you’ll get more cash from the sale than you put up as a down payment. The trouble with buying on margin, though, is that it amplifies losses— the worst single day in the stock market[2] was about a 20% drop, but you get the same effect from a 1% drop in your house value if you hold the 95% mortgage that you described.
[1] Folding transaction fees into the effective value
[2] https://en.m.wikipedia.org/wiki/Black_Monday_(1987)It's not unusual for people to accept different compromises when they're not necessarily going to have to live somewhere indefinitely.
For example, you can rent an apartment on the peninsula in the Bay Area for less than $3,000 a month, but buying the smallest house you can find on the peninsula will cost you at least $4,500 a month for just the mortgage.
If you rent in this case you can take the $1,500 in savings (plus the savings from no property tax, maintenance, homeowners insurance, etc.), and save/invest it.
Paying rent isn't that much lower than pay off a loan. And in one case you actually end up with property. Additionally, people invest much more in their own homes than rented property.
I am not in the US with a high property tax, but I believe this to be true almost universally.
Of course, you always pay a price if you commit to anything.
When you are owning a house or apartment - each payment of mortgage builds your own equity. This is not the case with renting, plus when you actually own it and have to move - you can also rent it.
Also, rent over here costs almost as much as mortgage(or in some cases - even more) - the only issue is the down payment - so the investment bit is very off.
I live in a national average housing market, bought a house in 2006, and save about 30% on a monthly basis as compared to a much smaller two-bedroom apartment. I include mortgage, tax, insurance and a 7% holdback for repairs.
Long term, renting is always losing proposition given the low cost of capital.
Also in your cost calculation did you include the rate of return you would've made of your principal by putting it into equities? I imagine if you bought in 2006 and held you would be very happy right now.
From a cash flow perspective, I'm spending about $20k in housing related costs annually. Given that it was 2006, I did a 15 year 105% ltv fixed mortgage. Renting, I would have saved a few bucks for a few years. Right now, renting a 3 bedroom in a neighborhood acceptable to me would add about $750/mo in costs. Total cash in hand with market returns would be around $10k.
Meanwhile, the house will be free and clear in a few years. When we move in 5-7 years, we'll be recovering the original equity, plus capital gains, which will likely be in the $50-150k range depending on the market timing.
If the choice was between have near zero housing costs and living on property my family owns or buying a house as an investment, I would agree you that the market is a lower cost, likely higher return investment. Unfortunately, I don't have that choice!
They were generally things people did because they didn’t have stable well paying jobs.
That’s still the reason. All this disruptive new economy rebranding notwithstanding.
I didn't realize it had gotten this bad until that moment, but we've been creeping toward installment plans and subscription services over ownership for a few years now and it's absolutely wild that it's not a warning sign that no one can actually afford to own anything upfront anymore.
It's much easier to acquire things than unacquire them - selling on craigslist, carting things off to goodwill, or lugging them around during a move is a hassle. Being able to just tell a company you're done, and they'll come pick it up, has a definite appeal. Guess it comes down to doing the math on actual costs and disposal/move/recycle effort.
One of my random interests last year was stargazing and astronomy - I bought a cheap telescope because I wasn't sure how long-term interested I'd be, and after a few weeks of heavy use it's been mostly sitting around. Might have been better value to rent a more expensive one while my time & interest were high.
That's a good point. I wish it was easier. I have a lot of things in my home I'd like to get rid of and which still could be of use to someone else. I'd gladly sell them for a dollar or two each, but at that price point it isn't even worth the time I'm spending writing this HN comment, much less putting it up on an auction, paying the processing fee, and mailing it to someone. I could give them away for free on one of the local giveaway/exchange groups, but the very thought of getting someone to drive a couple kilometers to pick up a dollar-item makes me cringe - it's a ridiculously anti-environmental practice.
It's one of the reasons I tend to put not-completely-destroyed things on a side of a trash container in our neighbourhood - a local dumpster diver may appreciate it and get extra mileage from things I no longer need.
But wasn't it like this some years ago? I think I sold so much stuff I didn't need anymore on eBay and sometimes made good money from it. Nowadays eBay is not very user-friendly for private people and therefore unusable for this.
"eBay Kleinanzeigen" (not sure if this exists outside of Germany) is there, but it's lacking the auction features which made selling stuff so much fun...
And that's not even counting the bulky things which are what I really want to get rid of.
Well, it beats driving a couple kilometers to buy a new widget.
Do you have local charities that will come and pick things up? Last time I moved and wanted to get rid of a kitchen table, some bookshelves a bunch of kids toys I just called the people running the local homeless shelter and two dudes with a truck showed up the next day a carted everything away.
In return i get complete peace of mind, free maintenance and the ability to update my furniture for no reason other than i want to.
I personally am pretty happy with renting most of this stuff but will be buying my own dtuff once i have my own house
Um, they're not throwing it out. Someone else uses it afterwards.
But this illustrates exactly the problem. "If you're careful" -- meaning you wouldn't want the average one you see. Meaning there's going to be considerably more waste when people have to buy second-hand than if they just kept their own that much longer.
I agree that it would be more efficient if people kept their sofas for a decade, but they don't, and me buying the sofas they don't want is a better option than them ending up on a trash heap. Plus, I'll probably keep them for ten years. I buy high-end furniture second-hand so I can do exactly that, rather than getting a new Ikea piece of junk that falls apart in a couple of years.
I suppose the ideal scenario would be for manufacturers not to make rubbish and for people to be able to afford good furniture that lasts for decades, but we don't live in that world.
Its not an either or, you can buy second hand and keep your stuff longer.
This is about purchasing, if you're purchasing 2nd hand you do have to be careful because you don't have the same rights etc. The "average" may be perfectly fine, just like the average second hand car is fine. I think you're reading too much into "being careful", that's all.
The other reason is, if everyone just "updates" stuff for no other reason than "because they want to", then that's obviously going to tend to cycle through products more rapidly than if people didn't just "update" on a whim, even if the second-hand-ness wasn't an issue.
I must be a sucker, because I've been carrying some of it around for close to a decade...
It's a good option for certain lifestyles, but can equally become surprisingly expensive if not manged.
You have to keep track, mentally or otherwise, of what's rented and what's not. You will treat the rented things differently, even if only subconsciously.
When the time comes to return it, you have to deal with a website or a flurry of emails. Probably there is some boxing and taping and printing and packing and mailing. You have to verify the return is received and monies are refunded.
I guess some money is saved, and perhaps reuse is encouraged, but at the expense of cognitive cycles and time.
I'd rather just buy. The ecological wastefulness argument strikes me as, like recycling, operating on very, very thin margins.
It's not like they're going to be renting you luxury goods on the cheap.
(Although, if they can get VC money to subsidize renting stuff below cost ... I smell a unicorn ...)
My aunt's mother-in-law just moved back to England from Canada. She spent thousands to ship back junk. She could have sold or donated most of it and used the money to buy all new stuff back home and been way better off for it.
— Manna, Chapter 5
— https://marshallbrain.com/manna1.htmIt's just like the new 'trend' of Van-Dwellers or tiny homes. Sure, you open up your travel opportunities, but this isn't new. It just used to be called homelessness and low-income housing.
Knowing I'm renting a sofa, and that if I spill something on it, I'd be responsible sounds far too stressful (maybe I'm not, but I'd have to find the answer to that). Also, do they deliver and pick up the furniture when I'm done with it? Do I pay extra for that? I have questions about the model. Consumers tend to steer away from things they can't understand.
Then why did/do we have a ton of financial non-experts buying financial products that they don't understand?
There are tons of hidden costs with ownership like insurance, property taxes, HOA, repairs/maintenance I don’t have to deal with. Plus the opportunity cost of locking $200k+ in an illiquid asset with high transaction fees to eventually liquidate years later isn’t appealing unless you’re buying a home firstly as a permanent home for raising a family and not as an investment.
So they're basically high end rent-a-centers? Apart from the exact products I'm not really seeing what's new, the business model goes back to at least 1930 (https://en.wikipedia.org/wiki/Radio_Rentals) and has all the legitimacy of the payday loan industry.
Some people’s solution to that is renting everything, mine is just to live lean (small place, minimal furniture, just for sleeping and simple cooking really).
It sounds to me a lot like the "let them eat cake" mentality.
Another day older and deeper in debt.
St. Peter don't you call me cause I can't go,
I owe my soul to the company store.
Not owning anything allows you to go where the work is and keep your net worth in assets that produce actual income (like index funds and bonds), instead of sitting around collecting unemployment during a dry spell because you're encumbered by your depreciating assets.
I'm sure some people will use this as a way to temporarily live beyond their means...but it's not like Credit Cards don't enable this behavior already. The US is the land of the free of course, where we allow the weak to be preyed upon.
However the example of a contractor who lives an unencumbered life and saves a lot of money is not at all typical. It's similar to using the example of an investment banking associate or corporate attorney who pay high rent in Manhattan for some years and invest the rest, as an argument against buying a home and having a mortgage.
In reality, many/most people are better off with a mortgage because it forces them to save money, which they behaviorally wouldn't be able to do otherwise. Likewise, buying something and keeping it around probably prevents a lot of needless repurchases and upgrades of the same item. If you are rational the rental lifestyle can make sense in some cases. But for most it just facilitates impulsive behavior. Hence the rush to capitalize on it.
I'm going to go ahead and guess you don't have a large peer group who were buying houses in the late-2000s. A mortgage in no way forces you to save money, added to which it has a tendency to decrease savings due to the moral licensing of exactly your train of thought. "I'm already saving with my sweet ARM, I can afford to lease that car!"
People who are financially illiterate are going to be bad with money, regardless of the system.
I am curious though as to the distribution of freelance / contract rates. Is $200 / hour also 1% of engineers? More? Less? Financially for the same person what's actually a better route? For someone that can get $400k a year at google, is that better or worse than the contract route on average?
re-sell things they've bought at a loss
Only a loss compared to the price at the start. If you account for the utility they got from the item and depreciation it's probably just the current market value.
There's not many things you only ever buy one of.
You might be right... but I’m pessimistic here. Renters and leasees take less good care of the items they let or rent. The clothes will have a faster velocity to the waste dump, etc. manufacturers and purveyors will cater to this increased velocity...
People are worried about drinking straws. Imagine all the new plastic items to cater to this new usage pattern...
I know now that anything rented should maximize durability while minimizing cost. Time will tell which one weighs heavier, but I'm pessimistic also, and guess that minimizing cost is overall cheaper than durability.
It may be a boon for repair-ability though if they see it's economical to have in house fixers.
Again, Rent-A-Center has existed for decades already, and their goods are certainly not more durable than standard consumer goods.
For larger and more involved transactions (especially homes) things get more complex, but that's still the basic arithmetic.
Making more things rentable isn't a big problem. The big problem is that many people don't understand this arithmetic so they end up shooting themselves in the foot when you start giving them options. And unfortunately the people who need this knowledge the most are often the least likely to have it.
There's a simple solution which is to just teach a great personal finance curriculum in high schools nationwide. (Well, as simple as solving a problem for hundreds of millions of people is going to get.) Of course this being HN we can probably dream up fancier solutions like incentivizing people to take some personal finance training online.
It seems to me there's a fairly straightforward regulatory solution to this issue: require tighter financial checks, or reduce the protections given lenders in case of default.
1. https://www.investopedia.com/terms/t/timevalueofmoney.asp
If the subscription economy has the effect of being a low-interest loan on anything, it's not a bad deal. One would be unwise to turn down a 0% car loan-- save your money, and grow it, instead of paying up front for the entire car. Same idea, but applied to the subscription economy.
I have a 0% loan right now on my LEAF. I'm likely to pay off that loan pretty soon as the value of that insurance (to me) is decreasing as the car ages, but I can't dump it unless the loan is paid off.
At least with something desirable like a car, where some parts of the world have seen a significant shift towards renting.
No idea how well it works for beds, but it wouldn't surprise me if there's margin there too.
A classic scenario is renting a movie. Let's use DVDs as an example--even though they're falling out of favor, they're a little simpler to talk about, and the economics of online aren't that much different.
Studios like big numbers and would like to sell movie media/rights/access/whatever (it's complicated) to someone who can drive lots of demand. So the rental outlet will get a steep discount on those things for buying in bulk.
Meanwhile, you're not even sure if you'll want to watch that movie more than once, and the resale value of a used DVD after a couple years is basically zero. So renting the DVD at least the first time, and maybe every time you want to watch it, is a pretty good deal.
Case in point, Redbox's "markup" over whatever they're paying the studios is large, but it's still a pretty good deal for you and me.
I think the real benefit to the consumer of renting from Redbox instead of buying is that Redbox has economies of scale on exchanging movies between consumers and distributing them geographically. If a consumer buys a movie, watches it, and resells it, that's a lot of hassle, whereas Redbox has managed that redistribution by building automation.
I think what happened is they started selling to Walmart et al for the same price.
This article (admittedly from 2008) says studios hate Redbox. And that Redbox gets its DVDs from regular movie wholesalers (I assume where Walmart gets them too).
https://arstechnica.com/tech-policy/2008/10/universal-studio...
I actually don't know the details of Redbox. The specific example I remember is Blockbuster video, which used to get copies of movies for virtually free, in exchange for sharing a portion of their profits with the studios: https://www.quora.com/How-much-do-movie-rental-stores-e-g-Bl...
I think the studios agreed to this because of market segmentation, for any given movie there are people who have no interest in paying $20 to own it, but will pay a few bucks to rent it once or twice. If the studios didn't support this model they'd be leaving money on the table.
It's all ancient history at this point so my memory is fuzzy, but I think hobbyist stores actually had the better business model by that measure (they'd focus on a limited selection of classics that people would rent again and again). Then Blockbuster came along with these studio deals they were able to negotiate based on their volume, allowing them to offer practically unlimited copies of new releases. In conjunction with a decent selection of classics this enabled them to lure customers away from the hobbyists. A combination of pressure from the studios and the emergence of competitors with lower operating cost (Redbox, Netflix etc.) later crushed Blockbuster. And watching the studios raise their fees until Blockbuster collapsed surely contributed to Netflix's decision to produce a lot of original content. And now we're caught up to the present day.
I think a better option is shared ownership, such as several neighbors sharing a lawnmower, or similar things that see regular use, but also have significant idle intervals between uses.
Communal spaces and tools save money and foster collaboration.
In that model they wouldn't rent _or_ buy a bed, because they could just sleep on the floor. Or more accurately, they'd rent or buy whatever they think would maximize income including the cost of it; e.g. if having a bed maximized overall health over life or something then they'd buy or rent the most basic bed that fulfills the criteria of keeping their back healthy or whatever.
I own loads of furniture that's like, mine. It has value to me in the fact that it's my object, unencumbered by financialization.
Personally I seek to minimize financialization wherever possible. I'll pay slightly more up front for things to just delete the monetary stuff from my brain. I don't want to think about it, I want my life to work and money to exist at the side of it not in the forefront.
Renting only makes sense for short term needs. I don't need to buy expensive equipment I only use once a year so renting that makes sense but for a couch it makes far more sense to buy it outright and use it for 10+ years rather than pay constantly for it.
I suspect that even this article itself is a hidden marketing move to change social norms so people think renting is the cool new thing to show off.
Just like everything you should do the math...if you only plan to live in a city or apartment for 1-2 years then renting a furnished apartment (either officially furnished or DIY with one of these startups) could make sense. The alternative in my experience is buying a lot of cheap Ikea furniture that's a pain to buy/put together/toss that may or may not come out to what you'd pay renting much nicer furniture with assembly/delivery included both ways.
Every single mobile provider in the US makes it clear how much mobile service is if you want to pay for just the mobile network, or to lease the phone and the mobile network. Apple offers a monthly payment plan that is equivalent in cost to paying upfront for the same phone and AppleCare+.
All of the information is clearly available for the lease vs pay upfront, and mobile network vs mobile network + phone calculation.
The one that people who make poor financial decisions use.
The service providers didn't automatically drop your monthly rate after you the subsidized phone was paid off, so people felt like they might as well get a new phone since they were paying for it anyway.
> What is stopping...
Nothing except that people don't know any better.
Tell everyone you know (without being annoying) how much you pay for unlimited by using a prepaid plan on your top-of-the-line phone. Maybe they'll start to learn. I've already switched a few people, you can too.
I spent like 2 months going couch shopping every other weekend. I couldn’t decide. Whatever I bought I’d own, and be tied to forever, it feels like. Selling shit is time consuming and annoying. Moving it later or donating it is annoying and maybe been expensive. And the damn couch itself was expensive too. It felt like this big decision that I had to get right.
I didn’t end up buying anything.
I’d have much rather just picked out something interesting to rent for a while, see if I like it. If I do do, great. If not, it’s easy to change it.
I wouldn't want to own a car because the value of cars drops as soon as you take the car out of the lot. But owning a house /apartment might be a good idea if the market is relatively stable and you can actually afford it.
It also depends on lifestyle. For a person like me, who moves around a lot, owning furniture for example doesn't make sense. The moving costs, maintenance costs and so on are just a pain. I'd rather rent the furniture, or rent a furnished place.
What actually does appreciate is _real property_ aka land. Because there will only ever be a finite amount of that, and each parcel is in a particular place and can't be moved. If everybody wants to live in Brisbane, or Guernsey, the price of land there explodes because it simply isn't possible.
And even then, appreciation is driven by population. In a world where population stops growing or even shrinks, prices for real property may fall in most places.
I am personally uncomfortable with the idea of renting clothing, and don't like the idea of renting a bed or furniture, but am a big fan of renting a car (Zipcar) and will probably rent ski gear for next years season.
Like most things, some people go all in, and decide to rent everything. But my hunch would be that most people will find 1-2 things they don't want to necessarily shell out full price for, and will rent for a bit, before probably buying the gear themselves at some point.
I kinda wish I’d thought of this before a couple of bad years of the Universe deciding it didn’t much like me much. I’m sort of back on my feet (employed) but I don’t own much more than some minimal furniture, clothes, car and computer gear. The rest could easily be filled by renting.
Most of the other things wouldn’t have much resale value anyway, if I bought it outright.
Pardon the sarcasm but I sincerely doubt you know what you're talking about if your biggest worry was moving/storing/selling your furniture.
I got through it, but I do not want to ever be in a position again where I have to watch my stuff get given away because it’s old crappy stuff that can’t be sold for food money.
By renting, I can have a few nice things and when I can’t, we’ll, too bad, but I need that money for something else, like food or medecine.
Also, I don't see how "being unable to sell your stuff because it's crappy and old and having to give it away for free" is worse than "being unable to sell your stuff because it didn't belong to you in the first place and is taken away as soon as you lapse a payment". Except of course in the former case some other poor person might still get some use out of the old and crappy stuff and in the other case some company is taking the (relatively new) thing and likely just shredding it.
Renting means being potentially being able to ditch payments while you still have at least some money to survive on, if you can recognize that is a possibility.
I’m skittish now. The moment the paycheck stops, for some reason beyond my control, I’m dropping everything unnecessary to survival and paring down to being able to live in a closet, if necessary.
It might be I don't understand the costs though. Is renting furniture or clothing like leasing a car, or is it more expensive (or less expensive)?
Math looks a bit better if you do long distance moves constantly.
Not a frugal option in any sense, but if you have plenty of disposable income and value minimalism and simple moves, sure, why not.
Edit - Couch pricing a bit off (looks like they’re around 1500-2000, but I doubt they’re renting things at that quality and I’m sure furniture has some fantastic bulk pricing) Probably paid off in 2.5/3 years of renting.
I want to rent, not own. And that includes a home, at least until I have a family.
Why? Besides the optionality of moving, or not worrying about flooding etc. Lots of things are not necessary to be exclusively owned by you, anyway, like a car that you park every day to collectively take up tons of space on city roads.
It’s because every time you buy something you invest in it. That’s money you could have invested elsewhere (opportunity cost).
Say you had $100K in 2011. You could either:
A) Make a down payment on a house, live in it, and keep buildng equity in it
B) Do that, but rent out the house to another person and use the money to rent anywhere else
C) Rent the house you live in and invest in Bitcoin instead
Guess which strategy would have had you far far ahead.
C is better than B which is better than A.
And that’s why I prefer to rent. Decouple orthogonal things: using and investing.
I'm not against the concept. But I'm not fully sold. The subscription model is great for many things but not everything. Companies are seeing this as a new opportunity and they're driving their marketing strategies around it by selling a subscription model to everything.
I didn't realize how this could work until I looked at my own life and realized I would rather be an IC than a manager.
I still want to own my own means of production and earn economic freedom, but on my own terms. If I can't get it on my own terms, being a cog in someone else's machine isn't really all that bad.
Reframed this way, it's less a battle of haves vs have nots and more a cooperative project to make more for all. Ultimately capitalism has to find a way to incorporate the best parts of communism.
Maybe a dumb question, but what is an IC in this context?