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Comment by BizarreByte | Hacker News Reader

Provided I never sell my house I can't create a scenario in this where my retirement doesn't work out. If I have to rent though? It's a very different situation.

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If you rent you need to spend less on housing in the early days, and invest the difference. If you do this all along you should be fine. However if like many who rent you just taking your savings from rent (vs a house - including not just the payment but also property taxes, insurance and maintenance) and party you are in trouble. Houses can be a great forced savings plan. (so long as you don't cash our refinance like many do, you don't move too often, and a bunch of other fine print things)

A lot of people probably underestimate how much a house costs even if you ignore mortgage (or have paid it off). It varies of course but I figure it's a good $1,000/month and that probably understates various infrequent but expensive maintenance items.

My house has cost significantly less than that over the time I've owned it.

Last year I spent 4000$(CAD) on maintenance, this year I'm at just under 1000$. It's about 60 years old and it really doesn't take much to keep it in decent condition, but I'm also happy to and skilled enough to do a lot of work myself.

If I owned a giant American style McMansion I could see it costing that much, but it's a very modest house.

When it comes to maintenance costs it's hard to estimate when talking online because every location, house, and person is very different.

It is an old house but it's less than 2,000 sq. ft. which is not small but certainly not McMansion size. $4K/year property taxes, >$1K/year insurance. Plowing (though that's fairly cheap because my neighbor who shares use of my long driveway does it). I do a lot of little routine stuff but did have a bunch of new windows about 5 years back and a bathroom needed to be redone at about the same time. Have to pay for trash collection. Have had some major projects over the years that were necessary like a new roof. Need a couple new appliances and associated work at the moment.

So, yeah, even owning my house outright, it probably costs a good $1,000/month to pay regular bills and keep it in a reasonably stable state.

Yah, I think this just comes down to location more than anything. I don't directly pay for garbage, plowing, or anything like that.

When I replaced the exterior doors and half of the windows that was about an 8000$ year and that is the worst it's ever been. The guy who installed those was a family friend though, so it was a bit cheaper and I helped.

This year I had to replace the water pump, but I did that on my own and it was about a 400$ job. I had to fix one of the soffits, but that was a pretty simple job too.

The only thing I dread is the roof, but that's still years and years off since it was new when I bought the place.

Generally if I put away 4000-5000$ a year for future maintenance I'm happy, that'll leave me with a giant fund if needed.

When doing a cost comparison of rent vs buy, don't count the principal payments. The interest payments, maintenance costs, and property tax are just as much money down the drain as rent is.

What has made owning a house vastly worth it over the past couple of decades is severe under-construction of new housing which has led to prices spiraling upward and creating a gold mine for homeowners. Will that continue? Probably yes. But consider the risk that it doesn't.

The properties can also be different. In general, you often can't rent a house long-term and set it up the way you like it. (It's simultaneously true that buying that house represents a much bigger commitment than renting an apartment is.)

> don't count the principal payments.

I strongly disagree. You compare all costs. Interest, principal, maintenance, insurance, taxes... If I knew how to calculate them I'd add things like risk that you need to move (realtor fees, potentially making payments on a house you are not living in...)

If you sell the house before you die, then you can pull out the difference, which can be applied to nursing home costs. Otherwise the gain of a house is in the lower rent you pay after you pay it off.

> > don't count the principal payments.

> I strongly disagree. You compare all costs.

Both can work, but if you include the principal as a cost you need to account for the asset value that is increasing your net worth. Of if you don't want to bother with that, counting just the interest as an expense is a resonable simplification.

But if you count all rent and all mortgage as a pure expense, then it's not apples to apples.

Houses have some big ticket maintenance items that come up rarely though. New roof, any kind of foundation work, etc. You've got to keep savings for these things. That said, a modest size and self maintenance go a long way.

Renting isn’t cheaper than buying at nearly any point from 2008 to 2020 in any US city. Renting being cheaper than buying is a “new” phenomenon and still debatable since renting doesn’t result in equity and can never result in ownership. A house isn’t just an asset, it’s a place to live.

But as long as you need a place to live, you can't use it as an asset. You might be able to get a few loans on it, but that just means you keep paying monthly, like you're renting.

It's not an investment asset if you require it to live.

That said, renting is just as expensive as owning right now too. You're paying a mortgage and taxes and repairs and insurance either way, and with renting, you're also paying for a bit of landlord profit.

A you own house is both an asset and a place to live. If your accounting models cannot handle that concept then you need to update them. Accounting 101 probably can't as it is complex and tricky, but more advanced models can. Now because you have to live someplace a house is not an asset you can just go and trade for whatever, but it is still an asset.

> Renting isn’t cheaper than buying at nearly any point from 2008 to 2020 in any US city

There's a lot of nuance in disagreement with this. Renting often makes sense for young workers who have not yet settled down. Also in many parts of the US one can rent a simple 1bd apartment where one could not buy such a house. I rented and invested in stocks up to about 5y ago and I've come out much further ahead than if I purchased a house.

Sure, there's a lot of nuance in any sort of multi-variable economic question. That's not the point, the person I was replying to said renting is cheaper than buying, that hasn't been true for over a decade pre-pandemic. The primary reasons why this weren't true were low interest rates and a gradual recovery in housing prices after the correction 2008. 2020 changed both of these things, and so they are correct /now/, but /most/ people who own a home didn't buy in it the last 2 years, so their advice against buying a house on the basis of it being more expensive than rent is mute.

As a simple example, my fully-laden (mortgage + insurance + tax) cost on a 2600 sqft 4br/3.5ba house on a 1/2 acre lot in a nice suburb in San Antonio purchased in 2012 was around $1400/mo compared to this being the typical rent for a 1br apartment pre-2020 in San Antonio anywhere that wasn't in the ghetto. That was largely thanks to having a 2.4% interest mortgage and being able to buy in 2012 in the dip for property values. The same property that was purchased for $162k in 2012 sold for $340k in 2022, and the mortgage rate for the new buyer was around 6.5%, doubling both price and interest rate greatly changes the equation, but let's not act as if that hasn't been a relatively recent (pandemic-tied) shift.

Hasn't been the case for you, and arguably for a lot of people, but not for everyone. Everyone has to run the numbers and do their own calculus. Buying being better than renting is a good rule of thumb but it has some glaring exceptions.

The best rule of thumb is buying or renting will turn out about the same in the long run if you invest the difference saved by renting. Buy buying your up front payments are higher than renting, but you pay the house off and long term pay less and thus need less to live on. Renting you have more free cash up front, but you need more cash in the long run.

The above is the rule of thumb though. You have to run numbers for your life situation as they constantly change. Note that some of the numbers are for your life situation which itself can change. Renting is often better just if you buy and have to move there is a bunch of negatives.

> The best rule of thumb is buying or renting will turn out about the same in the long run if you invest the difference saved by renting.

Owning a home, I'm investing the difference I save by not having to rent. Difficult to see how a renter can come ahead unless the time horizon is just a couple years.

Rents only ever (mostly) go up. Mortgages only go down (refinances). Those lines can cross in just a few years into ownership. By now, renting the same house I own is about 4x more expensive.

One thing you really don't want when going into retirement is a constantly and unpredictably increasing housing cost when you'll be on a fixed income.

There is more than just house payments. There is also taxes and insurance, both of which go up over time (they are often rolled into the mortgage payment, but they are not the same thing). There are also maintenance costs which can be quite high (if you do it yourself they can be lower, but not everyone has the time or ability). Also most people are buying a much larger place than they would rent. These need to be factored in and they make the point where the line crosses farther out.

Did you consider scenarios with high inflation and high housing tax...

At least where I live the elderly can’t lose their house from failure to pay housing taxes.

This sounds good in theory but what are the options?

1. You can forgive the taxes in which case everyone else in the tax jurisdiction just pays this person's taxes indirectly.

2. You can lien the property and pass the bill on to the estate, in which case you're either having the heirs pay the taxes (and late fees, and interest) with extra steps, or if no heirs the buyer pays less for the property and the end result is basically #1.

I don’t see how a lien is the same as #1.

Say retired couple owns a $500k home and can't pay $5k/yr property tax. They will live for 10 more years.

With no lien, they are forced to sell and buy a cheaper $450k house, using the equity to pay property taxes. When they die, heirs get $450k.

With the lien, in 10 years the estate sells the house and the heirs receive $450k after paying the back taxes.

Obviously this is simplifying a lot, but I don't think the rest of society is being shortchanged by the lien mechanism. Except in the case where the unpaid taxes exceeds the value of the house.

Inflation highly favors those who own a house. Their mortgage payment is fixed, your rent payment goes up every year.

Property taxes will skyrocket though

Property taxes are built in to rents and then some.

My property tax is considered “extremely high” at $4500 a year.

Rent for $4500 a year is like a closet, even in a cheap place.

Where is $4500/yr "extremely high?" We are basically middle-of-the-road for taxes in our area and it's over $11k/yr.

I'm located in Nova Scotia and outside of the HRM 4500/year would be an absolute obscene tax rate in all except the biggest towns.

My properties taxable assessment value is only in the 250,000 range. So the property taxes are considered quite high.

Property taxes aren’t a flat rate.

Depends on the state.

I pay $2500/mo to rent a house that was purchased for $280k in 2015 and is now worth about $550k. That's comparable rent to what I would pay for a decently desirable 2bd apartment.

Property taxes county + city are about $4300 per year. They have increased recently, and so has the rent.

If they owner put down a 10% down payment, I estimate their total monthly payment for mortgage + taxes + insurance is about $2000, and will likely remain in that ballpark.

That means rent is currently paying the entire mortage/tax/ins plus $6k per year. At the end of their mortgage that monthly cost drops to about $700, and they will own an asset likely worth $500k+.

That is my rule of thumb - Landlords make a profit by renting to you, otherwise they wouldn't do it. So renting is always going to be more expensive than owning in the long run.

They would make a profit by renting below their monthly payment, because they are also gaining equity.

Making a monthly profit and ending up with a paid off, appreciated house at the end is profiting doubly.

I'm honestly shocked at how high property tax in the US is.

I'm from the Netherlands, where property tax is based on the municipality. A 400K home where I live amounts to 423€ in yearly property tax. Rate increases over time are capped. And there's many ways to protest against the market value the taxation is based on.

I suppose the basis for this relatively low taxation is that a huge amount of home owners here have a relatively valuable home (even the simplest of homes is expensive) whilst having a fairly moderate to low income.

If property tax would be 10x as your example suggests, I'd suspect 75% would go bankrupt.

And your landlord will pass that cost on to you.

It's all unrealized however until you sell it and downsize/move to a lower CoL area.

Ever hear of cash flow?

Not paying increasing rent ever year is actualized money in your pocket to save or invest how you see fit.

The unrealized part is the gain in property value, and your equity in it by paying down the mortgage.

But if you consider never selling the house, paying $2k/mo in rent vs $2k/mo in (mortgage + insurance + property tax) is going to start out break-even, improve as the rent climbs to $3k for the equivalent place to live, and then be a larger benefit after 30 years when that housing payment drops to just tax and insurance.

My property taxes, maintenance costs and insurance all go up every year too, so ownership costs are also not fixed

My property tax is 700$/year and the yearly increase is capped. I already pay less in tax than what my house is assessed at because of the cap. If I paid the assessed value my taxes would be ~800$/year.

In terms of inflation? Owning the house has already made that a lot less painful.

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