[tinkerrr]

This is a very common fallacy and I am surprised people still think 'renting is throwing your cash out the window'. It isn't.

With a mortgage, you're essentially leveraging around 1:5, which means you put down your 20%ish and get 100% of an asset. If the asset moves down 20%, your net equity is worth exactly 0. If the asset moves up 20%, you've made a profit of 100% (simplified, not considering the fees and other costs).

The trick to understand this is, if you put your down-payment money somewhere else, like a long-term index fund, what kinds of profits would you have expected? What about the risk, considering you're highly leveraged in a mortgage?

Thus the calculator to do the math for you.

[ocdtrekkie]

What money do you get back out of renting?

[tinkerrr]

You don't get money back from renting. It's an expense, just like any other. However, you don't have to tie in 20% of say $500,000 into a home at 0% return. Over a long period of time, your return on this would be expected to be a little over 8% annual returns, based on S&Ps historic return rates.

[ocdtrekkie]

So, let me give you a practical example. Three years ago I bought a condo for $55,000. Six months ago, I sold it for $70,000. Factoring in various transaction fees, and interest, I made about ten grand.

Why ever would I consider renting? We're still at a relatively low point in the market, and there's a pretty good chance the value of your property is going to go up, not down.

[jakejake]

It would be interesting to see your breakdown. I figure your purchase closing costs to have been around $2k. Your agents selling commission around $3.5k. Then you must have had condo association fee of some kind. Property tax as well. You might have fixed up something or other to sell?

No doubt you can make money on property though, plenty of shows about flipping houses are popular. I was just curious about your math.

I bought a condo in an area that has exploded with gentrification but still after we sell in s couple of months were not expecting a huge profit. We're going to rent and let somebody else deal with all the hassles for a while.

[ocdtrekkie]

Generally I consider taxes/association fees to be more cost of living than part of the property, in honesty (no way to really live anywhere for "free"). I spent a little to make the place nicer for sale, but it's a one bedroom, and we did a lot of stuff ourselves. (I learned to rescreen a screen door!)

I'd have to look at a lot of paperwork I can't bother myself with for an HN comment to get you an exact number, but after the sale of that place, and the purchase of a new place (I moved to get a larger place, wasn't really aiming to make money specifically.), I ended up with about the same amount of money put in towards the new place as I had paid into the old one, and an extra ten grand in my savings.

I'm not trying to say "buying is always better", and you have to do your research on the value of your property, properties in the area, where the housing market is at the time, how the rental market is going. There's no way anyone on this site can conclusively tell you that buying or renting is "better" nationwide.

But it's hard to understand why one would rent in a lot of cases, where you have no chance of getting that money back out.

[jakejake]

Thanks. I guess I personally haven't really made much money on property, I've managed to break even probably if I figured it out. Although our upcoming sale will leave me with mid 6 figures in our bank account, it's not really profit, just equity that we've paid down.

I have enjoyed having our own place to do with as we pleased, but I'm looking forward to renting for a while!

[abakker]

The theory goes that you get a non-leveraged value of having a place to live...

rent is a 1:1 cost:value on living space. Mortgage is leveraged.