Not sure why you're getting downvoted for this, it's actually a quite relevant point, i.e., the the side-by-side comparison should include the consideration that you get to enjoy rent-free accommodation in the home for a certain number of years (or even generations!) once it's paid for. It gets more complicated when you have to factor in a positive probability for various outlier events such as the house getting bombed in a war, the entire city going Detroit, etc;
- owning a house may make it harder for you to decide to move and accept a job/opportunity elsewhere, or to travel -- the impact of which is unquantifiable
- for some people, by the time they'd finish paying off a house they'd already reasonably expect their parent's to have passed on and left wealth/property; for these people, particularly entrepreneurs, having free capital in the intervening period would turn out to be more rewarding so rental is a very sensible option
- not everybody is born where they want to end up; I've moved between 3 cities and 2 countries in my 12 years as an adult (each time increasing my earnings, opportunities and life experience significantly, like climbing rungs on a ladder), and I'm hoping to move a 4th time so that I can finally have access to the top-rung opportunities other people born in major cities and 1st world countries take for granted -- the idea of owning houses in each of these cities and somehow managing to rent them out as some propose here is absurd to me, I barely have enough time to take care of my basic needs, nevermind run a multi-national property empire, and besides which there a
Ultimately as nice as this calculator is, this is a very personal decision.
> owning a house may make it harder for you to decide to move and accept a job/opportunity elsewhere, or to travel -- the impact of which is unquantifiable
Why is it harder? Not sarcastic at all, by the way : it's just that I am in Hong Kong and it's actually quite common for expats here to buy a house, give it out for rent, and never come back to Hong Kong again! In fact, I know of some cases where people have bought flats without even looking at them! (In both cases, someone they know manages rent collection + maintenance, presumably for a small fees?). So I was wondering what is different about the US / wherever you are right now.
Yes, it's a very personal decision, those were the exact words I was looking for! I suppose hardcore economists would say that the Utility Function is very personal.
If you decide to move, you have to do something with the house. I'm not sure about Hong Kong, but in the US, even once you own the house free-and-clear, a house is still a major expense -- insurance, property taxes, etc.
You can sell it or rent it to cover those costs, but both of those options take time and effort. To sell it, you need to market it, negotiate with a buyer, etc. To rent it, you need to market it, pick a good tenant, collect rent, do maintenance and repairs, probably deal with legal matters like eviction, etc.
I guess you could just give it away (but doesn't that still involve a bunch of title transfer fees?) or just stop paying taxes and let it get repossessed (but doesn't that destroy your credit?).
If you rent, you can just pack up and leave -- the only limits are any terms stated in the lease.
All of that said, I'm doing exactly what you mentioned -- I bought a house instead of renting, even though I don't plan to stay here very long (I'm actually thinking of moving again in a few months, once I've been here for a year). But I did it with the explicit intention of renting the house to make a profit once I move -- and I plan to do that with my next place, as well.
I currently pay $55/month for someone to worry about collecting rent, finding someone to rent, negotiating, checking credit, etc. for my rental property. It is not very profitable in terms of cash flow, but I am building equity into the house.
Yep, finding a property manager is one great solution to the problem. Did you find a good one easily? I've heard it's really hard to find a good one that actually manages the property well and keeps it rented out consistently. I haven't really looked myself, though, so all I really know about it is from stories on BiggerPockets.
I went with the agent who sold me the house in the first place, and found me a rental before then. I don't know how much of it was luck and how much was by design but the rental is in a location where rent is higher than mortgage payments by quite a margin and I found a good company to manage it.
I don't think it's harder, my house is in Florida but I live in the Bay Area now. As long as you have someone that can collect the rent etc.. for you it's not a big deal if you did not stretch yourself too thin with the purchase.
You sound like me. That said I still try to buy property, just not where I live, so I look at as purely a long term investment that will hopefully be profitable in the distant future.
I think it's being downvoted because the calculator does take this scenario into account, but the commenter (and you) seem to have not looked at it very hard. It clearly recommends that you buy instead of rent in the commenter's (and your) scenario:
How Long Do You Plan to Stay: Max this.
Investment Rate of Return: Zero this. Because you seem to assume that the renter isn't investing the downpayment, principle payments and any other net savings and won't be able to trade the proceeds for 100% ownership in the home at the end of what would have been the mortgage period. Or set it to -10% (the max negative the calculator allows) if you assume the renter will squander rather than invest the money, with no commensurate happiness return.
The result with be buying is better than renting unless you can rent that home at an impossibly low price.
If you're disciplined enough to have actually invested what would otherwise be the down payment, and kept it invested, and reinvested the proceeds, you'd own one house's worth of money after the 30 years and could proceed to buy a house using cash.
(Subject to the assumptions of returns and interest rates, etc etc.)
