Comment by onlyrealcuzzo | Hacker News Reader

Comment by onlyrealcuzzo | Hacker News Reader

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> I would advise to use the rent or buy calculator

I've used it. It's not good.

If you asked someone to make a calculator that makes renting as attractive as possible - it would look similar to the NYT calculator.

It's not surprising this calculator comes from a city where the majority of people rent, and is read mainly by "elites" who live in areas where more people rent...

At the time, I lived in LA in this exact calculator convinced me that housing was a horrible investment in 2013.

Had I bought then instead of had my money in the S&P my net-worth would almost be triple what it is now.

Luckily, I'm doing fine either way, and did buy and lock in a 2.7% interest rate, after learning this calculator has some serious flaws and building a much more realistic spreadsheet to model it...

Most home made calculator/spreadsheet completely gloss over all the fees and details. But also most people have already emotionally decided to buy and want to pretend they did the math to justify their decision.

In what specific ways is the calculator flawed?

I looked at it and what I noticed:

It assumes home prices will rise equal to inflation which hasn’t been true in recent years

It doesn’t allow you to add monthly utilities for renting but assumes 100$/month for buying. I personally have never rented a place where all utilities were covered

It assumes quite high property taxes compared to what I pay

It assumes market returns of 4.5% which is true in a long term sense but not really in the short term

It assumes rents will increase 3% per year, configurable but not true in recent years

It factors in closing costs so I guess it’s assuming you will sell at the end of the period? This is a somewhat strange assumption to me. At the end of the period I could borrow against the value of the house without selling it for instance.

I think it’s a really good tool though I wish it had just a few more options to tweak, and that the defaults got updated to reflect current rates perhaps

You can change all those assumptions? I changed most of them and even by having rent going up 5% a year and a market return for housing of 6% a year.

It also assumes the SP500 only returns 5% a year while in practice historically it is closer to 10.

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