Comment by bombcar
6 days ago
It’s actually quite hard to definitively quantify if renting or owning is better in a given area/scenario.
Obviously the case near me where the mortgage payment on a house would be $2600/mo but the rent for the identical one next door is $2000 is going to swing heavily toward renting, but there’s more to it than just that.
Maintenance is huge and real and people just seem to ignore it on the “own” side, but 5-10% of the value of the house a year in maintenance isn’t unheard of.
> where the mortgage payment on a house would be $2600/mo but the rent for the identical one next door is $2000 is going to swing heavily toward renting
I think those figures point towards buying being favored, especially if the mortgage payment is PITI, but even if it's principal and interest only, I think buying is likely to be better in the long-term if the spread is that small.
Maintenance is not going to run 5% of the purchase price on average, except in the most extreme low-cost housing situations. A house that sold for ~$500K (as would be implied by a $2600 mortgage payment) is not going to cost $500K in maintenance over the next 20 years (as 5% would imply) and certainly not over the next 10 (as 10% would).
You may have an individual year that's over 10%, but that's a cashflow issue not an overall cost issue.
The advantage of renting is the flexibility, lack of commitment to a specific house or area, and the lack of need for a large upfront sum (in this example, renting might need $6K upfront [$2K of which is the first month's rent], while buying might need traditionally $100K to avoid PMI or ~$20K on an FHA first-time buyer mortgage and associated transaction costs).
> but 5-10% of the value of the house a year in maintenance isn’t unheard of.
I assure you I am not paying ~$30k in maintenance on my ~$400k house every year... that would be comical
Add it up and work it out; factor out the land if you must (e.g., pretend it’s a landlord business and you’re renting to yourself).
Maintenance items add up, and some only happen every 20-30 years, it can hit hard. A new roof every 30 years at $10k is already noticeable.
> A new roof every 30 years at $10k is already noticeable
That'd be $333/year averaged out, two orders of magnitude away from 30K/year example of OP.
The $10K roof is noticeable precisely because it's an outlier that pulls the average up towards the 1-2% per year range for all but the least expensive houses.
If houses really consumed 5-10% of the purchase price on average per year, people wouldn't worry or talk so much about roof replacements; they'd be just other drops in the bucket.
I could replace my roof, literally the most expensive regular maintenance, for $10k a pop twice a year and still come out way under your estimate lol
> 5-10% of the value of the house a year in maintenance isn’t unheard of
That's actually pretty much unheard-of (unless you specifically bought a very cheap fixer-upper with the intent of remodeling).
I've owned current house for over 25 years and I have not spent 10% of its value in maintenance even if I add up everything over the 25+ years! Let alone every year!
Also, a lot of the loan payments go towards your own equity, whereas all of the rent goes to someone else's.