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Comment by eweise | Hacker News Reader

All I know is my mortgage is $1,800 a month and to rent my place now is at least $6K/month. I love knowing that my monthly payment can't go up.

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Something I've noticed is that some cities are better for renters, and others are better for buyers.

My current city in central Europe is very renter-friendly. A nice apartment would cost $600k, but rents practically never exceed $1500/month. Under such circumstances an apartment doesn't seem like a great investment.

I've also lived, briefly, in Canada -- where rents were often extremely high relative to home prices. (I have a friend who pays $300/month on a mortgage and rents the place out for $2000/month. At the same time, the house has nearly tripled in value over the past ~7 years.)

I saw this when I lived in the Chicagoland area. A co-worker was giving me the business for renting instead of buying something. The he let it slip that his property tax alone was $35k/year, almost 2x what I was paying in rent, and that didn’t even include the mortgage.

Surely this must not have been a like-for-like comparison, unless your landlord is very charitable or somehow secured a much lower property tax rate than your coworker did (as is possible in California through various Prop 13 mechanisms). Have you looked up what the property tax bill is on your apartment?

He had a nice house in an expensive area. I think his wife was someone important at a bank.

I was in a one bedroom apartment, so not like-for-like, but I didn’t need or want anymore space than I had. I was also in a nice area, and in the nicest apartments in that area, as far as I could tell.

A couple people who moved out there when I did bought places, and I heard nothing but regrets from them a year later.

That's an enormously high property tax bill for Chicagoland. I live in Oak Park, famously one of the highest-taxed areas in the county, in a relatively large house, and my taxes are not close to that (more than $10k less).

I don't doubt you or your friend, but their situation was unique.

I think he was in Oak Park. I drove by his place once. He has a pretty good size corner lot.

That said, he was often trying to show off, so who knows.

Who are these people who can afford $6k/month for a rental? It has to be a very small percentage of the population, yet I see these kind of numbers thrown around a lot.

Statistically, I’m in the top ~5% of income earners (from the data I can find), with no debt, and I couldn’t afford $6k/month.

I bought a house because I don't understand the rental market anymore. I don’t really like being a home owner, but the rent prices these days are so out of hand. I think the most I ever paid for rent was $1,680 and I felt irresponsible doing that. I don’t know how all these rentals are full with the prices they’re charging. Does everyone have roommates?

The $6k number is a touch high, but the answer is realistically 30-something DINKs and up. I make $150k a year, let’s say, and if I have a spouse with a corporate career let’s say it’s similar so maybe $250k-300k per year in income? Well that’s about $12,000 in income after taxes, medical, and a 10% retirement contribution.

So, yes, $6k per month is house-poor numbers, but it’s workable for sure. If you’re even better off, good for you, it may fall into affordable range.

Making that much, I wouldn’t want to put anymore than 25% of my take-home toward rent. That would mean making $312k take-home… after taxes, retirement, etc.

Maybe I’m conservative, but being house poor while making $300k is insane.

I’m thinking someone would need to be pushing $400-500k for household income. That would put them in the top 3%. I don’t get the supply and demand curve on it. Making that much, and renting. It’s an even smaller market than the full 3%.

I wouldn't want to purely out of the waste, but from a risk perspective, why not? Your other costs don't scale with housing or income, so if you're spending $70k on housing, you might be at $100k overall expenses. Add another $50k for income taxes and $50k for retirement savings and you're still at 50-100k left over for whatever you like (using 250-300 household income).

6k for a mortgage would be scary in case of job loss, but for rent, whatever, just move.

The lease terms would be important. Not all leases let you out whenever you want.

Plus, if a sizable portion of that household income is in the form of stock or a bonus, that isn’t showing up each month in the paycheck, lowering the monthly cash flow. If there is a layoff early in the year before the bonus pays out, and you can’t exit the lease, that would be a bad spot to be in.

There is still risk on the table, depending on how some of this is structured.

With the numbers I had it only takes 1-2 years to save 1 year of runway, so just do that first (presumably you've had a chance to save before getting your 250-300k income anyway). I suppose that the type of people to spend 6k on rent probably aren't saving much, but they could if that were their goal for some reason.

> I’m thinking someone would need to be pushing $400-500k for household income. That would put them in the top 3%. I don’t get the supply and demand curve on it. Making that much, and renting. It’s an even smaller market than the full 3%.

I know a couple in that range of HHI (doctor/lawyer) who sold their house and moved to a rental in that range.

Their take is that their time is very valuable to them, and dealing with their house involved a bunch of time spent on management and administration that can’t be made to adequately go away without effectively hiring a house manager.

House in the north bay. https://tinyurl.com/bdhzx9xd

People who live with roommates.

yep

my life cannot be uprooted based on the whims of a crummy landlord or because my obligation has crept out of my budget

i bought conservatively and now have a tiny payment relative to what i’d otherwise have to pay to live in the bay area. peace of mind is hard to put a price on

Sounds like you're stuck there forever. Golden handcuffs, real estate edition.

The more positive spin is that you've bought into a huge bias to stay put in exchange for pros (and cons).

Well, not really but I really like where I live so I don't consider moving.

Good for you, but it's not true for everyone.

Here a variable rate is norm and has been since I remember.

I was eyeballing a particular house with specific financing in mind just before covid started, and if I'd pull a trigger on that transaction my monthly payement would more than double at some point.

Property taxes and insurance go up pretty much every year.

Not faster than rent. You can always challenge your property taxes and shop your homeowners insurance. If your rent goes up, you can only move, which isn’t really an option when all landlords are raising rents in lockstep.

Half of American renters are cost burdened, for example.

https://news.ycombinator.com/item?id=43119657

(own my primary US residence free and clear, my housing savings goes into investments, which grow faster than inflation)

i guess it will depend a lot on where you bought

some parts of california have been affected by insurers more than others, but in those more minimally affected? prop tax is suppressed via prop 13 (for better or worse), and the cost of insurance is a drop in the bucket relative to what id be paying for a roof over my head otherwise tbh

Which has the exact same impact on rental properties. In many jurisdictions it is worse for rentals (no homestead or occupancy reductions)

Presumably those go up roughly the same for rental properties as well. So while your payments may still go up, you're paying it either way on top of interest/rent.

Where I’m at there is a limit on how much property tax can increase. It is reassessed when a home is purchased by a new owner.

This is done to allow people to age in place, and not price someone out of a neighborhood they’ve live in all their life.

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