The Renter’s Manifesto

Big detail missing here: a standard mortgage is the only way for the average person to make an investment with 5x (or more) in leverage. For a 20% down payment, you effectively get to invest 5x your money into a real estate investment of your choice. The real estate market as a whole is certainly less value-producing than something like tech or chemicals, but Joe Salaried can't easily go out and ask his 401(k) plan to leverage him out at 5x his net worth.<p>It's not for everyone, and it's certainly a risk (like all leveraged investments), but it does provide an opportunity that very few other common financial instruments provide.

Every now and then I see articles like these. It always seems to me that the author is simply trying to justify the fact that they rent. Renting vs. buying is a very personal decision and has a lot more to do with lifestyle and personal choices than financial soundness. I bought my house in 2005 at almost the top of housing market in Florida. I paid $145k for my house and told everyone about how smart of a financial decision I was making. I've spent $15k in home improvements and my house is now worth $125k. Oops. However, my mortgage is still very low and I can easily afford it regardless of the current worth.<p>Now the question is, if I could see the future back in 2005, would I still buy this house? If all I could see was the housing crash of 2008-2009, then of course not. But if I could see the great times I've had in this house which includes absolute peace and quiet, friendly neighbors who don't change every other month, and the feeling of a little place by the beach to call my own, I would indeed buy this house. Buying a house has a lot more to do with making it a home than just a shelter for cheap.<p>Nobody knows the future. I could have rented this exact house and instead of benefiting in the long run, I could have ended up losing more money if rent prices skyrocketed. All I know is that for people who can afford to buy and afford to rent, money has very little to do with buying vs. renting.

Felix Salmon on American home ownership attitudes:<p><a href="http://blogs.reuters.com/felix-salmon/2010/04/06/the-national-housing-survey-and-the-real-estate-bear-market/" rel="nofollow">http://blogs.reuters.com/felix-salmon/2010/04/06/the-nationa...</a>

Given a market that is in any way sensible, shouldn't buying wind up cheaper than renting over the long run? Landlords don't buy investment property out of the goodness of their heart, they buy investment property because they think that the money they make in rent, plus the capital gain on the property, minus the various maintenance costs etc, should be sufficient to compensate them for tying up hundreds of thousands of dollars in the asset.

I tend to agree with the article - especially in California it makes no sense to own a home at current prices, rent is a great deal and most landlords with a mortgage have negative cash flow.<p>In some other markets, like Texas, it's possible to own rental real estate that cash flows.<p>So this is the strange position I'm in where I own houses to rent but rent the place I live.

Here's a very useful tool from the NY Times that calculates whether you would be better off renting or buying a house (financially speaking):<p><a href="http://www.nytimes.com/interactive/business/buy-rent-calculator.html" rel="nofollow">http://www.nytimes.com/interactive/business/buy-rent-calcula...</a><p>Takes into account variables such as monthly rent, house price, down payment, property taxes.... and it has a sweet graph that shows over time where you are financially better off renting or buying. Pretty cool.<p>Great for anyone who is between two minds about what to do, or is considering investing into a depressed market.

What about when I pay a lot of my mortgage early? Say, within a few years?

My experience may be useful only for sf, but I live in the city in a nice (by my definition of nice: 100+ years old, solid wood floors, plaster walls, detailed woodwork, thick aged wooden doors, handmade ironwork) apartment. My landlord would like to sell the place to us, but our rent doesn't even cover the mortgage with a $100K downpayment. By the time you add HOA fees, insurance, taxes, and a 3-5% of value annual maintenance investment, my landlord pays me some $800-$1000/month to live in his apartment. Which is fine by me.