I have thought about this lately because my wife and I moved to Illinois so I could accept a job managing a machine learning team. I retired and now we are just now moving back to Arizona. I spent five hours yesterday watching our stuff being wrapped and put on a truck. Lots of possessions.
The thing is, I have some stuff that I really like. A teak bookcase I bought in the 1970s when I got my first real job after finishing school. A huge teak desk my wife bought me 20 years ago. My wife has some furniture her grandmother had and that she grew up with. We also have art and things we have bought while traveling around the world.
I see the advantages of not being encumbered by ‘stuff’ but some possessions help define our personal history and are simply a pleasure to own.
This is similar to a realization I had the other day: for many people collecting things is less about the objects and more about the memories and nostalgia and associated with those objects.
I have been having a lot of "identity" problems lately, and it occurred to me that very little of what I own has any substantial story about it nor does it say much about who I am as a person.
The objects we collect exist as affirmations of the identity we've chosen for ourselves.
Ikea has lots of products that are made of solid pine. If you use some wood glue during assembly, their stuff will stay together quite well. I have some stuff I bought 10+ years ago hold together after a half-dozen moves with some basic mods.
I recently furnished my first "adult" house after years of having an Ikea apartment. I was pretty amazed at how up-market you have to go in order to exceed Ikea quality in commercial furniture. Lots of stuff sold in furniture stores is held together with hex-bolts and lock-tite anymore. Meaning you have to move up to Amish furniture if you want something higher quality. But that's like a 3-10x jump in price.
I ended up spending big on couches & dining table, then used Ikea stuff in the bedrooms and offices. I feel like that's a mid-point of cost and quality.
I've observed the price of furniture to run, lowest to highest, something like:
Bad Ikea, Flat-Pack Furniture from Anywhere Else, Beat-Up Antiques, Good Ikea, Unfashionable but Good Antiques, Oversized Overstuffed NFM[1] crap, Actually Good New Furniture, Fashionable Antiques
Not linear, there's a big jump for the last two categories.
While the quality/longevity runs more like:
Flat-Pack Furniture from Anywhere Else, Bad Ikea = Oversized Overstuffed NFM Crap, Good Ikea, Beat-Up Antiques, Unfasionable but Good Antiques = Fashionable Antiques = Actually Good New Furniture.
Basically my conclusion's been I need to either buy good stuff (unfashionable antiques, occasionally good new stuff—fashionable antiques are out of my price range) or just get Ikea. The whole rest of the low-end market's at least as bad, and usually more expensive. Some of it pretends it's part of some non-existent middle tier of quality and is priced to match, making it the worst possible furniture to buy (oversized overstuffed NFM crap—it's also usually in a tasteless faux-antique style).
I also think people who complain about Ikea's directions haven't assembled much shitty furniture from anywhere other than Ikea. It's all much worse.
[1] Nebraska Furniture Mart, here used as a category.
You can get pretty decent solid wood furniture. Often it's "Amish" which doesn't mean hand-made or made with old-timey tools, of course, just made in an air-powered factory, probably, assuming it's not just marketing BS. Gotta watch out, a lot of it's not put together all that well. And you're not gonna find anything trendy (mid-century modern, say) looking in the lower (so, semi-reasonable) end of that price range, it's all Shaker and such. Wood itself may be from inferior (but cheaper) species, and of course there just isn't amazing lumber in any quantity anymore like there was 100+ years ago. Any mechanisms may be kinda crap, mostly just avoid fancy stuff. But quality can be had if you watch out to make sure you're not getting screwed.
I haven't found anything amazing that's upholstered but I assume the good products there are just out of my price range. I've got a couple Flexsteel pieces and they're at least a hell of a lot more durable than your average Ashley Furniture near-future-landfill-fodder, while being similarly priced to the "higher end" (LOL) of that sort of thing. The upholstery itself still sucks but at least the frames and springs may pass the decade mark. Good fabric and good stitching are very expensive (see: any non-terrible clothes) so, again, I probably just can't afford the good stuff there so I've not really seen it.
[EDIT] meanwhile I have my grandparents' couches they bought something like 40 years ago, and despite heavy use they've probably got another 3-5 years left in them (springs starting to go, finally) and no burst seams or rips in the fabric, even on the cushions. Hell, the cushions aren't even getting flat. I guarantee they were just normal ol' furniture when they bought them, nothing fancy. Furniture quality has definitely gone downhill. Then again those couches, though likely on the cheaper end back then, would probably be a lot more expensive than our modern low-end in today's dollars. More so if you factor in wage growth. I don't even know where to find a couch that's likely to last 40+ years, now. It'd probably cost $10,000 if I did find it.
I'll bet that like almost everything throughout history, "good" furniture is far better quality than it's ever been, and "bad" furniture is now more stylish and accessible to more people than ever, albeit less durable than the best stuff. Do people really believe we've forgotten how to make couches?
I suspect there's a "very bad" tier that didn't exist before, is now the most common (because cheapest), and has undermined the "cheap (more expensive than what's cheap now, but formerly cheap) but pretty good" tier, eating its demand and causing it to become more expensive. So yeah, I think OK furniture's more expensive now than it used to be. But now there's even-cheaper crap readily available so... maybe that's better. IDK.
While "good" furniture may be better than it's ever been, it's also more expensive than it's ever been. I don't know how much a good table cost in 1945 but I bet it wasn't the equivalent of $5,000 which is what it would be now.
I buy IKEA furniture. I bought Ikea kitchen. 20 year warranty and I know they will be around for it. Hardware is the best you will get for the money on those cabinets.
Some IKEA furniture is actually decent. I don't want antiques in my house because I remodeled to have a modern look.
My dad bought kitchen cabinets from a small retailer, they gave him shit when he tried to replace one door because it was warped.
Honestly, I would rather deal with a major chain/retailer. I bought stuff at IKEA that wasn't wood but lasted over 10 years and served its purpose, and when it comes time to remodel I can buy something new and still end up paying less than for some "wood" furniture.
>Much rather buy from the Amish furniture store and pay more, than the disposable shit from Ikea.
First of all, the main reason Ikea is so popular is because the stuff is usually packed in small boxes to be assembled, which is easier to move and ship. That's more efficient in shipping logistics and allows for people to live in higher density housing. Have fun moving your hand-made furniture from 100+ years ago down that condominium stairwell.
Second, Ikea has a strong corporate focus on the environment and sustainability:
If you're in the position to afford hand made Amish furniture, you can probably afford movers. OSB is great for inexpensive furniture that doesn't move. The downside is once the wood gets wet or damaged it degrades quickly, unlike solid wood which will warp and split if not properly treated. One of the absolute best furniture products for strength and durability is actually plywood but people see it as a "cheap" product instead of the engineering marvel that it is. I think what it really comes down to is that when you're younger it makes sense to buy cheaper more disposable furniture. It's going to see more wear and tear and you're still finding your own style which is likely to change when you have a partner. When you become an adult and start moving less it makes sense to buy something that is going to be able to last longer with proper care. Solid woods tend to wear better over time because it's not a paper veneer over the OSB. Like most things it's about using the appropriate tool or resource for the task. I recently had to build a behind the sofa table for my wife. There simply didn't exist a product that fit our needs (12 feet long and thin) went with solid oak and while it fit we did indeed have the problem that it wouldn't fit through the stairwell and we had to walk it around the outside of the house. I doubt it would fit in an apartment.
>I see the advantages of not being encumbered by ‘stuff’ but some possessions help define our personal history and are simply a pleasure to own.
Indeed. I have one of those giant wooden spoons you hang on a wall that I got at goodwill for like 3$. Most people would go "that is hideous, stupid and is just taking up space, throw it away" but I go "we carried that thing around all summer one year like a scepter being incredibly goofy with it in public, I'd never throw this thing away, we had a lot of fun that summer, I haven't even seen some of those friends in a few years now".
Then you get the reddit minimalist types that are like "Then take a digital photo of it and throw it away". No humanbot, I'm not like that.
Keep it if it brings you happiness, after all, that's the point.
It's the rest of the stuff that can go. I helped a friend move last month. After we'd been to the 5 places she kept her stuff, we discovered she had 5 coffee machines, 5 cutting boards, 5 juicers, etc. etc.
The things you describe make you happier and are not stuff. The things I described are just stuff.
Storage unit rental, now that's a means of preying on people who can't let go and/or move often.
(It strikes me that there might be startup value in "home inventory management", although it would have to be made as frictionless as possible - wave a camera round your kitchen, inside all the cupboards, get a list of everything you own. Snoop your Amazon webpages so it can remind you not to buy things you already have.)
You say preying, but I'm glad I was able to rent out space to store some things when I moved cities and told myself I'd move back. Turns out I didn't move back, and only went back to pick up a few things and give away the rest. I doubt I would have been able to detach from those things if I took them with me.
Were the rental costs a waste? I suppose I would have saved a few hundred dollars if I could have just gotten rid of the stuff earlier, but it would have felt like a personal loss instead of a natural detachment.
Loss aversion is actually significantly powerful and difficult to overcome, but think about why, it's only very recently that humanity can easily procure anything it needs for survival with relative ease in most countries. While getting something new is exciting losing something is far harder when you never know when/if your going to be able to gain it again. It's helped humans survive throughout our history, so I wouldn't be hard on yourself that it wasn't easy to detach, you were just practicing a survival skill.
Fortunately(?) I have a fair bit of storage space at home. It's definitely a battle to pull out and get rid of stuff in storage after I haven't looked or used it for a few years. It's really tempting to throw things in storage rather than make the decision to get rid of them--especially when there's some effort associated with disposing of an item.
I wonder to what extent this influences what is known as the "endowment effect" in economics. The particular chair I am sitting in and have for months, is it really a more valuable one because it helps me remember?
Now before we are quick to agree on a 'yes' -- to what extent do memories hold us back? Your teak bookcase for example reminds you of a positive accomplishment, and its loss would untether you, generally speaking not wanting to intrude. Now imagine someone who objectively should change, perhaps because your industry is dying. Too many mementos, a sign of reluctance, resistance even to change?
Yet change, wanted or not, is the one constant in our life.
I realize the article is about renting to save up (-- how's that going to work, btw? After all, someone needs to charge on top of the cost of owning). But a home of one's own like in the last century, really another cradle of identity, or mistaken materialism?
I have to say, this whole trend screams of cognitive dissonance.
"I can't afford to buy so I don't want to anyways..." sounds like one of the primary motivators. Renting expensive items? How's this different from leasing or renting a supercar you can't afford to show off to friends or clients? It's not.
There's for sure some cases where this is a practical solution, like moving to another city for a year or two and getting some temporary furniture. But in most other cases in screams of sour grapes and businesses seeking to profit from people bad at math.
Rent a coffee table for $50 a month for a few years and then be happy you don't have to move it when you change apartments? Run the math on those numbers and you'll realize you're likely a fool. Sure, if you're buying things like cheap ikea furniture it's not likely to appreciate in value but most real hardwood furniture is generational and something of an investment.
Regarding the dissonance, the this all has the side "if I don't own it, I won't feel the pain of loss" to it. Survival strategy in a precarious situation.
Renting an apartment vs owning a house is not necessarily a bad financial move. Depends on a number of factors. For instance, if you anticipate moving within a certain time frame, between closing costs, mortgage fees, commission, etc...it can cost more to own in the first 3-5 years, especially if prices are stagnant. Also, there are hidden costs of home ownership not necessarily factored in for, like repairs, maintenance, etc that are just implicitly included in rent. Finally, one can use the savings from paying rent to invest in the stock market and generally get a higher return than real estate.
> Finally, one can use the savings from paying rent
What savings?
Rent as you stated already includes anticipated maintenance costs, property taxes, the landlord's mortgage costs, often an agency fee, plus a margin for the landlord.
I don't think I've seen rental rates ever cheaper than a personal mortgage. The main advantage of renting is avoiding long-term commitment but you'll pay a premium for that flexibility. Otherwise there wouldn't be an incentive for landlords.
Renting is absolutely cheaper in some cities, San Francisco included. Just look at the rent to price ratio. A ratio of 15 is breakeven, anything higher means it’s cheaper to rent. SF is in the high 20s.
The rental market and housing market are two separate markets. Just because it costs $X to own a home doesn’t mean rent has to be $X or higher.
Well they typically don’t make 500 ft^2 homes for $1M, but you can find 500 ft^2 apartments for $3k/month. I think a house has a minimum size, thus a minimum price over that of rent.
The same holds true for houses. As someone who has been following the SF market closely, an 1100 sq ft house that's worth $1.1M would cost $5,300 in cash flow per month (mortgage, taxes, insurance) plus another $925 in opportunity cost (down payment @ 5%) for a grand total of $6225. And that's not including maintenance costs.
The same home could be rented for ~$4500 per month.
Keep in mind that most rented houses were purchased a while ago. If you bought the same house when it was $700K, you could still make a profit on a rent of $4500.
The reason why owning costs more is because buyers are also assuming appreciation. If you sell the same house for $1.5M 5 years later, you still make a nice profit even if your monthly cash flow is negative.
Don’t forget that part of that $6225 is paying down principal, which will be recouped when selling or simply disappear from monthly costs after the mortgage is paid off. Also, most ownership costs move less with inflation than rents do, so in 10 years the comparison is $6225 2019 dollars vs $4500 2029 dollars.
Also, once you hit 20% ownership, you no longer have to pay mortgage insurance.
I haven’t run the numbers lately to figure out which side wins, but the analysis is significantly more complicated than comparing monthly outlays in the first year.
That assumes that you can sell the house for more than what you bought it at.
You are correct that principle may be recouped and in addition, you get a mortgage interest tax deduction. However, you also pay 6% when you sell the place and maintenance costs (~1% per year) need to be accounted for.
There are several assumptions you need to make for owning to be cheaper than renting - that usually involves owning for a longer period of time (>5 years) and some modest appreciation (~3%+).
Of course, my numbers were from the SF market. There are many cities in the US where owning is cheaper than renting from day 1. SF just isn't one of those.
> That assumes that you can sell the house for more than what you bought it at.
Not necessarily; as long as the value of the house[1] doesn’t fall more than the principal you’ve paid, you’ll get more cash from the sale than you put up as a down payment. The trouble with buying on margin, though, is that it amplifies losses— the worst single day in the stock market[2] was about a 20% drop, but you get the same effect from a 1% drop in your house value if you hold the 95% mortgage that you described.
[1] Folding transaction fees into the effective value
[2] https://en.m.wikipedia.org/wiki/Black_Monday_(1987)
I live in the UK. It's cheaper to buy than rent almost everywhere but I never minded that. The main thing that moved me to buy was because the protection for renters is nowhere near as good. I moved on average every 18 months for 10 years because the landlord decided they wanted to sell the place or just wanted me out so they could increase the rent. One landlord didn't even bother with that and just asked if I'd be willing to pay 2x the current rent. If you complain about something being broken, they might fix it or just evict you with 2 months notice.
Now I own my own place and I finally actually have rights and I will choose when I move on.
I live in Germany. We have crazy-strong renter protection.
You cannot evict people because you want to sell (the new owner is your new landlord) or because you want to increase the rent. Unless you do something really wrong (like break things on purpose) you cannot be evicted.
About the only time to get rid of tenants is when you want to move in yourself, and then there is a longer protection time (3-9 months depending on the time you lived there). (Or I guess you can pay the renters to move out which I've seen sometimes.)
The rent can only be increased up to 15-20% in 3 years (without amenities), and can only be increased every 15 months. If you do renovations that improve the place you can demand 8% of the costs per year, but only up to 3€/sqm (or 2€/sqm if the place was cheap).
Still, prices in the cities have been going up a lot in the last few years (you can increase the rent when new tenants move in), but the prices to buy have gone up even more.
> If you complain about something being broken, they might fix it or just evict you with 2 months notice.
This is why you shouldn't agree to a rolling tenancy. When the initial tenancy period is over, negotiate for a year or two. Most landlords, in my experience, don't want their houses sitting empty so they're happy to have you on the hook for a year. Although, it depends where you live: I work remotely so I tend to rent in less expensive parts of the country like Devon where there isn't so much volatility in the market.
Yes but often you have no choice but to agree. When I've tried to negotiate in the past the response was for them to say "thanks but no thanks" and wait for someone else. Given this is London it moves very quickly and another tenant will be along soon.
Unless rents are going up (and in London they are not) I don't see how longer tenancies help you. It certainly doesn't give the landlord an incentive to fix.
They already have an incentive to fix. In the UK they're legally obligated to and tenants can take them to Small Claims Court if they don't.
Periodic (rolling) tenancies can be ended with two-month's notice, so the landlord might decide to evict rather than repair. With longer tenancy agreements, the landlord can't evict until the tenancy expires, and so tenants can use their legal rights to compel the landlord to make repairs.
In short, the landlord can't kick people out as an alternative to spending money on repairs.
>They already have an incentive to fix. In the UK they're legally obligated to and tenants can take them to Small Claims Court if they don't.
Yes, they're technically "obligated" but only real recourse is to pay somebody to fix it yourself and deduct that from the rent. While doing that you have to be 100% reasonable though (no overcharging, get multiple quotes and landlord must be kept informed).
If you stop paying rent because repairs aren't made you can be evicted.
Yes, ultimately you don’t own the property you rent. The landlord has rights over the property too, and you have to factor that in when choosing whether to rent or buy.
In many ways I'd prefer to rent (in the UK as well) but won't because the rental market is so poor. We have been in the same location for over 20 years, I would have moved twice in that time if it weren't for the upheaval of buying and selling.
No? In San Francisco median rent is much lower than equivalent monthly cost would be on median home.
You are correct that rent includes all the costs plus markup. But a big factor is that housing costs (esp in california) remain pretty steady once you buy. So that rent does include the housing cost...from 10, 20, x years ago.
Alternatively a developer builds a building and rents out the unit instead of marking up and selling units. So the cost isn’t as high as market price. An example: I recently rented a 1 bedroom in a desirable neighborhood for $3500 per month. Equivalent condos are over $1m dollars in that area. But it certainly didn’t cost the developer of my building $1m to build my unit.
Isn't SF an outlier in literally every financial question though? I'm currently in the process of buying a house in the UK and our mortgage payments are going to be a lot less than we were paying for rent in the same area. Like, 40% less. If you have any kind of stability and are not planning to move in 2-3 years it's crazy not to buy.
London is similar to SF, as an example I rent a relatively nice 2-bed flat for £1850/m, but after looking at what it would cost me to buy my mortgage would be at least in the region of £2500 + the maintenance fee from the building + repairs which I don't have to pay for as a renter.
This pattern is really common in high cost of living cities.
> London is similar to SF, as an example I rent a relatively nice 2-bed flat for £1850/m
But what will the price be in 10 years? The mortgage will go down, especially if you pay above minimum repayments, your wages will go up (theoretically) helping you make those payments. The mortgage price will go down, bottoming out at $0 while the rent will always increase.
It's about the same here (Netherlands, excluding Amsterdam). Rent is about 30-50% more than mortgage payments before taxes and after taxes it's even cheaper (due to weird rules giving tax breaks to home owners). You definitely pay a premium.
London's also a bit of an odd one in that regard. You either need half a million+ for a shoebox or to live way out of town, and run the risk that the foreign-investment-fueled housing bubble collapses off the back of Brexit, leaving you with more mortgage than equity.
You could work backwards by looking at how the "Brexit party" managed to split and regenerate from UKIP to run a campaign across all the Euro election seats in a matter of months. Where did that come from? They claim to have raised ""£750,000 in donations online, all in small sums of less than £500" in their first ten days"; given that Farage is currently under investigation for his funding https://www.theguardian.com/politics/2019/may/21/eu-investig... , it might be worth considering alternative explanations.
People like me who live in the UK but work remotely for US companies benefit from a weak pound. But I don't think people like me are pulling the strings: it's just a political mess.
The current situation is perfectly comprehensible without recourse to conspiracy theories. Brexit hasn't happened because there is no Parliamentary majority for any specific form of Brexit. Meanwhile, one of the main architects of Brexit doesn't appear to be too worried about the financial implications: https://www.theguardian.com/politics/2019/may/29/matt-hancoc...
Specifics, specifics. The rent vs buy debate will not be answered with finality, it always comes down to specifics. You're wrong about renting, I save a lot and invest much of it, while renting.
Many buyers often neglect that they put $50k into their kitchen remodel, bought a new roof, and repaired the water heater/AC/washer along the way. So that $100k check feels like pure profit, but often is just reimbursement for past expenses.
Whether you see rental rates cheaper than a personal mortgage is extremely dependent on where you live. Many 'hot' housing markets have a big anticipation of future capital gains already priced in (rationally or otherwise) and house prices are not remotely in line with rental returns (Sydney, Australia is an example of this).
I would imagine things would be quite different and more like you say in more normal markets.
In many high cost of living markets rent for a modest apartment is much cheaper than the cost of a mortgage on even the smallest house you can find.
For example, you can rent an apartment on the peninsula in the Bay Area for less than $3,000 a month, but buying the smallest house you can find on the peninsula will cost you at least $4,500 a month for just the mortgage.
If you rent in this case you can take the $1,500 in savings (plus the savings from no property tax, maintenance, homeowners insurance, etc.), and save/invest it.
In the GTA (Toronto area) it costs around $2500 for a SFH, or $1M+ to buy. Around Ottawa, a house rents for similar prices, perhaps a couple hundred less, but the same house can be bought for half the price. It absolutely makes sense to rent in the GTA but less so around Ottawa. Landlords in the GTA are banking on ever escalating real estate prices to make a profit when they finally sell. Rent doesn't always scale with land-value.
I don't know what it's like in the US, but in Sweden you can get a much better deal on your mortgage if you only have to borrow 80% of the cost of the house than if you have to borrow 95+%, even when borrowing the same amount. If you have a good job and can afford $1500/month but don't have any savings to use as a down payment on a house you're not going to able to get as nice a place buying as you will renting.
They recently changed the lower limit of the down payment to 15% in Sweden. But yes, you'll generally get a better interest rate if you put more of your own money into the purchase.
As a Swede in the middle of buying a house in the U.S. I have to say it's surprisingly similar.
The big differences between Sweden and the U.S. is the loan terms. Here in the U.S. the terms are extremely long, you'll typically get 10, 15 or 30 years with a locked interest rate. In Sweden you'd normally lock your rate for 1-5 years up to 10 years depending on your financial situation. When I owned a condo in Sweden I went for 1 year locked rate and then month-to-month once that first year passed. What you have instead of a fixed term is a fixed amortization. By law you have to pay back 2%/year until your principle is down to 70%, 1% until it's down to 50% and after that you can just pay interest if that's what you want to do.
The math might not work out as poorly as you imagine. I don't know the exact numbers for Sweden, but in Canada (where insurance is required for downpayment less than 20%), putting 5% is actually not a bad move, even if you have 20% down ready, because, similar to the arguments for rent, you can invest the difference and make similar returns to the extra costs for the mortgage.
It’s similar in the US. If contributing less then 20% you have to pay PMI (mortgage insurance). This may add a few $100s per month to your payment but in no way contributes to the principal. It works against you in other ways because it limits your upper price limit as banks want your payments to be within 30% of your AGI
There is also a tendency to "invest" in your house in a way you wouldn't bother with if you didn't own it. We just bought a new oven, if a landlord was paying for it I'm sure they would have spent half of what we did.
In very hot housing markets the cost of owning exceeds the cost of renting, because buyers are gambling that prices will keep skyrocketing and they will make up for it in capital gains. If prices fail to increase for some reason (e.g. tech bubble bursts in SF) then buying will cost them hundreds of thousands or millions.
Buying a house has all sorts of costs that need to be paid upfront. If you're only staying somewhere for a year, those costs need to be accounted for in that year. Yes in the long term buying works out cheaper, not in the short term though.
rental rates ever cheaper than a personal mortgage.
This comparison is usually apples to oranges. For example, in Austin, a 20s-30s homebuyer may have a budget of 300-400k for a property. This amount pretty much limits the options to homes on the edge of town or in suburbs. The same person may prefer renting in or near downtown, if they aren’t buying, and that could cost just as much as a mortgage on a much larger house (in a much less expensive location).
That's because Austin (and Denver and Seattle for that matter) are basically SF Lite. Pick any city that isn't having it's housing market turned upside down by California monopoly money (well, tech monopoly money) and you statement does not apply.
>Pick a city where there aren't many jobs, there isn't much to do, and young people aren't interested in moving their and my antiquated ideas about what the housing market should look like hold. FTFY
I suspect people, especially people considering buying their first home, have a specific profile of locations that behave in this new way because of that interest.
There are cities up and down the east coast and throughout the Midwest that have plenty of jobs and stuff to do. The only thing they don't have is a freight train full of tech startups barreling out of control down a mountain while VCs shovel more coal into the boiler.
Basically just strike SF, NYC, Boston and Seattle of your list. Then strike off every city that lots of people from SF, NYC, Boston and Seattle are cashing out their inflated home values and moving to to raise their families off your list. The US is a big country. You're left with a very long list.
My sample size is <10 but 100% of the first time home buyers I know opted for a 2nd tier city or an exurb that's just barely within commuting range of wherever the big fat salaries are. The nature of the city other than physical location had approximately nothing to do with it. The techies who can drop a quarter mil on a 800ft^2 condo that's within biking distance of work and walking distance of a bunch of overpriced bars are in the minority and not indicative of overall trends. Take your narrow world view and even narrower assumptions of what young people want and shove it somewhere.
Left with a long list of cities maybe, but not many (any?) population centers. Im sure for small N you can find people that want to live an hour deep from the Baltimore suburbs, but the size of the cities you insist on excluding compared to the population of the US would indicate the majority don't hold that position (if they did you'd be complaining about other mega centers since capital tends to follow people).
In Denmark where I live you can loan 1 million Danish kroner at around 5k each month. A decent downtown apartment in a bigger city or a house in the suburbs is 2-4 million. Renting the equivalent is 10-15k, and with renting you obviously skip a lot of the maintenance cost and taxes. On the flip side loans are tax-deductible, meaning you actually don’t pay 20k to borrow 4 million, you pay 12k.
It can still be cheaper to rent, at least if you look at the small scale. Because in 30 years, those 4 million will be yours while people who rent will still have nothing. It’s also risky, because maybe those 4 million will really be 1 million.
Over all, owning real estate in a safe location is always going to be much better than renting. At least in Denmark. Hell, if you can manage to buy around 15-30 lower-cost apartments in a university city and rent them out, you’ll be able to pay your loans and have enough spare in passive income that you never have to work again.
I doubt that the house would be 4 million. Thanks to reducing population, increased building and housing. Plus who knows how the weather will be, I'm not sure that owning a house is the right thing in 20 years.
When I lived on Amager about six years ago, the prices were definitely around the 3-4 million mark in the suburbs. Prices fell somewhat once you got out of Copenhagen, but it was still ludicrously expensive.
Are you saying the prices droppped sharply the last 5-6 years?
But I probably should have been more clear. I mean, first of all, there are more cities than Copenhagen. I have a 3 room 92m^2 apartment that is 15 minute walking distance from Aarhus H that cost us 2.2 million. Secondly, I’d personally call a place like Valby “downtown” Copenhagen even though it would probably be more correct to label it surburbia like you do.
I wouldn't call Valby suburbia, although it'd definitely a suburb. The real Copenhagen suburbian hell start out at Kastrup, Glostrup, Ballerup, Lyngby and thereabouts.
Of course, there are other Danish cities than Copenhagen, and prices do vary. The parent comment I replied to simply stated that there are no 4M DKK houses, which simply isn't true.
That is interesting loans are tax deductible in Denmark, I always thought that was just a US thing! From my understanding of the new federal tax law though, the higher standard deduction makes the mortgage tax credit less feasible for most people.
Renting anything really isn't a bad move. There's not much upside to owning something that depreciates in value. Instead of buying a sofa for 2000$ renting one for 50 and putting the rest of your money into some productive financial asset is actually perfectly reasonable.
Technically you're right but the reality is that most people who choose to rent things other than a place to live are doing so because they want to use something that's better than what they can afford to buy on credit or outright. It's much more often about living a luxury lifestyle rathe than pragmatic financial sense.
> There's not much upside to owning something that depreciates in value.
Sure, so why is the sofa rental company in the business of owning sofas?
You've got to ask the question from the other side. You're paying someone else's cost of ownership and interest and overhead and profit margin.
In practice what consumer goods rental competes with is consumer credit. People don't sit on the floor for months while they save up the $2000 for the sofa, they buy it on credit. Lots of places offer interest free credit too! e.g. https://www.dfs.co.uk/content/finance
After 4 years you paid for the sofa 2400$, "rest of your money" is -400$, sofa doesn't belong to you, and in case of scummy renter you own money for damage repairs and cleaning. Ready for legal litigation?
The point of the exercise is to invest the money you didn't pay into something that earns you money. If you put the 1950 bucks you didn't spend into stock, you're making money.
And in case of damages and repairs, if you own the sofa, you're always sitting on the damages. Homeowners for example routinely spend thousands of dollars per year on their houses, whereas renters (generally), have repairs covered by the landlord.
this is a basic situation of opportunity cost. You can't just tally up the renting costs while ignoring the freed up capital, this is the exact mistake people make when they prematurely buy.
> You can't just tally up the renting costs while ignoring the freed up capital, this is the exact mistake people make when they prematurely buy.
And you're deliberately oversimplifying the calculation, which is just as bad. You're assuming a guaranteed return of 7%, and that the capital isn't touched for the years. If withdraw $50 from your investment capital per month to pay the rental, the numbers don't come out as favourably. similarly, if you reduce the returns (7-8% is an average return, but it's not a guaranteed return, especialy on smaller sums where you may have to pay $25 per trade, or 1+% fees in fund management every year, or tax on the returns).
Your point about renting being a viable option is valid though, your numbers are just inflated.
index funds, they've averaged about 7-8% over the last 20 years and cost you basically nothing.
mind you renting your toothbrush probably isn't worth it, but if you're thinking about spending thousands of dollars and compare that to the compound interest you earn in a passive fund over a few years, you'd be surprised how much you lose out on.
In fact that's one of the drivers between middle class and upper class inequality. The upper class invests primarily in capital.
compare that to the compound interest you earn in a passive fund over a few years
So I did. Remember you've still got pay the $50/month out of that savings. Even with 7% guaranteed annual interest on your initial investment you're still losing money after month 46 with renting at $50/month compared to paying $2000 up front.
$1950 invested and pulling out $50 every month. If you get 10% interest, at the end of four years you have... negative thirty dollars.
And you still don't own the couch.
$50 a month for a $2000 couch is equivalent to a debt at 26%. You can't overcome that with investment. It only makes sense if you're planning to throw it away very soon.
I was under the impression that putting money in stock market is basically gambling and you should be ready to lose that money.
Putting money in a property especially if you can do your own upgrades can really pay off. Example, bought a house for $280k,I invested about $50k, its worth about $400k now.
Yeah 2008 happened, however, the prices at least in my area are back to 2007 levels. Short term real estate can be risky but long term it is a relatively safe investment.
Very good point even if only because I was too lazy to do the math in my head.
$2000 is a lot for a sofa, and if I understand correctly is what people spend if they want a sofa for a long time and not just a cheap IKEA sofa to throw out after the dog / kids ruin it in 2 years. If someone’s spending this much on a sofa, I hope they expect to keep it 10 years and should be buying not making payments!
A $2000(!!!) sofa should last you a major phase of your life. If you have three newborns then it should take everything they can throw at it for the next ~20yr. If your kids just moved out for good it should be the last sofa you ever buy.
That said, you don't get what you pay for, you never get more than you pay for. Not being an expert in evaluating sofa quality I'll take the cheap Ikea sofas that last half as long.
Using your example, renting the sofa only makes sense if you expect to only need a sofa for about 40 months. I say about because if you're super diligent, and most aren't, and put the extra 1500 in some investment you're still only going to stretch out the break even point to something like four years. Most people have sofa's more than four years.
Also if you pay off the mortgage let's say $2k/m then you are $2k/m better off after tax. Otoh if you rent and invest you need to make $2k/m after tax (so maybe $4k/m before tax, depending on where you live etc.) from the investment to be in the same position.
This is totally true and something a lot of people seem to forget about when they want to move out of their apartments to buy a house! I think the most important thing is to wait until you know your living situation is relatively stable (married, family, job, etc) so you can stay in your place 10+ years hopefully. Moving sucks!
Especially in Germany, where there is a new law coming out every five to ten years where you need to isolate your house or build solar or replace your old gas heater etc etc etc. Its all in the name of environment protection. But makes owning a house more of a risk then anything else..
I wish such laws existed in Germany, but I never heard of them. It's still legal to build new houses that depend on fossil fuel for heating and are poorly insulated, even though we need to become carbon neutral in the next fifteen to twenty years if we want to stay below 2° of warming. The Denkmalschutzbehörde can still prevent you from upgrading your windows and adding insulation to your home.
In return you get a road to your house I suppose. That seems pretty useful. You can also do your research when purchasing a home and check how old the road is and what the local regulations are. That roads need to be redone every twenty five to forty years shouldn't come as a surprise.
I live in Germany and I never heard of this "need". Nobody forces you. Yes, you may want to change your old heating (that's what I do), but you get a lot of subvention from the state. You do this, then you also get some good terms on taxing etc.
Same with electricity. You get a better insurance policy if you have it new.
Here in the US steam boilers routinely last that long as long as your water quality isn't too terrible and you do some teeny tiny bit of maintenance. The natural gas ones tend to last longer than the oil ones but both often have a many decade service life. The radiators and pipes themselves last upwards of a century.
Wood stoves last basically indefinitely (i.e they are only taken out of service when the building owner decides they're sick of using wood) but you're probably gonna have to do something to make the seams seal better every several decades.
Fireplaces last as long as the masonry they're made from (~250yr and counting) as long as you don't let them fall apart and leak CO everywhere. I know some people who live in a house built in the 1700s and while they have forced hot air for "base load" they use the fireplaces to make the downstairs rooms extra warm almost daily in the winter. That said, this is only one step above your "open fire".
Just checked the paragraph,on the site I found they list related laws .. Jesus,it's worse than I thought.its like a stack of cards.it can happen if you touch one thing,you are forced to renew other things...
Germany is special in more ways than one, as I understand owning isn't so heavily subsidized vs. renting there compared to other western countries. It's at least far more common to rent in Germany.
You also ran pretty clear of the housing bubble. I wonder if there's a connection there.
I'd argue that the connection is that owning real estate here is not as heavily supported by the overall tax and financial framework. Two examples: Mortgage payments are not tax-deductible and and you are personally on the hook for the mortgage, as in you cannot send the keys to the bank and simply walk away without debt.
If you establish regular communication with your Gemeindeverwaltung, and simply get approval for all changes and renovations, you will never be surprised.
If you are actually moving a lot this might be true. Otherwise probably not and most people renting aren't moving anywhere and just need to get by.
Paying rent isn't that much lower than pay off a loan. And in one case you actually end up with property. Additionally, people invest much more in their own homes than rented property.
I am not in the US with a high property tax, but I believe this to be true almost universally.
Of course, you always pay a price if you commit to anything.
Only in very specific, unusual market conditions. Less than 3 years it makes sense to rent, but even then it’s difficult to time it so you align with the lease end.
I live in a national average housing market, bought a house in 2006, and save about 30% on a monthly basis as compared to a much smaller two-bedroom apartment. I include mortgage, tax, insurance and a 7% holdback for repairs.
Long term, renting is always losing proposition given the low cost of capital.
Except in NYC, SF, Seattle, and maybe a few other HCOL metro areas. HOA fees usually make it a losing financial proposition even on an infinite timeline. There is literally (and not figuratively) no benefit, financial or otherwise, to buying unless you get a really good deal. I know because I'm in the market to buy something and there's not much out there that will "beat" my current renting situation long term.
The housing boom of the last few decades is a 'very specific unusual market condition'. Is it realistic for housing prices to keep rising at their current rate?
Also in your cost calculation did you include the rate of return you would've made of your principal by putting it into equities? I imagine if you bought in 2006 and held you would be very happy right now.
I'm talking about living in a stupid place, like in the 75 mile radius from San Francisco as an unusual market condition.
From a cash flow perspective, I'm spending about $20k in housing related costs annually. Given that it was 2006, I did a 15 year 105% ltv fixed mortgage. Renting, I would have saved a few bucks for a few years. Right now, renting a 3 bedroom in a neighborhood acceptable to me would add about $750/mo in costs. Total cash in hand with market returns would be around $10k.
Meanwhile, the house will be free and clear in a few years. When we move in 5-7 years, we'll be recovering the original equity, plus capital gains, which will likely be in the $50-150k range depending on the market timing.
If the choice was between have near zero housing costs and living on property my family owns or buying a house as an investment, I would agree you that the market is a lower cost, likely higher return investment. Unfortunately, I don't have that choice!
When you are owning a house or apartment - each payment of mortgage builds your own equity. This is not the case with renting, plus when you actually own it and have to move - you can also rent it.
Also, rent over here costs almost as much as mortgage(or in some cases - even more) - the only issue is the down payment - so the investment bit is very off.
When I was a kid in the 80’s renting home furnishings, driving a taxi on the side, and renting out spare rooms in your house were all very common activities too.
They were generally things people did because they didn’t have stable well paying jobs.
That’s still the reason. All this disruptive new economy rebranding notwithstanding.
If they don't, you can be sure that Techcrunch will profile a scrappy startup doing exactly this, closing multi-million funding rounds on the promise of being "WeWork for furnishings".
I didn't realize it had gotten this bad until that moment, but we've been creeping toward installment plans and subscription services over ownership for a few years now and it's absolutely wild that it's not a warning sign that no one can actually afford to own anything upfront anymore.
This article describes a minor (but real) trend among a small group of wealthy young people. While some of the services described have a bit wider reach (particularly clothing companies), there's nothing THAT concerning about people with lots of disposable income doing what people with disposable income have always done -- spend it.
This has been NYT’s schtick for as long as I’ve been reading it: pick up some trend among the young trust fund class of New York and breathlessly report it as a generational shift. It’s a decent ad-mover.
Not sure about furniture and clothing, but Joymode sounds interesting - kitchen gadgets, game consoles, VR headsets etc. Things someone might want to try, but could just sit around unused once the initial excitement is over. REI also, for outdoor gear - I've got backpacking stuff that sits in the basement doing nothing most of the year.
It's much easier to acquire things than unacquire them - selling on craigslist, carting things off to goodwill, or lugging them around during a move is a hassle. Being able to just tell a company you're done, and they'll come pick it up, has a definite appeal. Guess it comes down to doing the math on actual costs and disposal/move/recycle effort.
One of my random interests last year was stargazing and astronomy - I bought a cheap telescope because I wasn't sure how long-term interested I'd be, and after a few weeks of heavy use it's been mostly sitting around. Might have been better value to rent a more expensive one while my time & interest were high.
> It's much easier to acquire things than unacquire them
That's a good point. I wish it was easier. I have a lot of things in my home I'd like to get rid of and which still could be of use to someone else. I'd gladly sell them for a dollar or two each, but at that price point it isn't even worth the time I'm spending writing this HN comment, much less putting it up on an auction, paying the processing fee, and mailing it to someone. I could give them away for free on one of the local giveaway/exchange groups, but the very thought of getting someone to drive a couple kilometers to pick up a dollar-item makes me cringe - it's a ridiculously anti-environmental practice.
It's one of the reasons I tend to put not-completely-destroyed things on a side of a trash container in our neighbourhood - a local dumpster diver may appreciate it and get extra mileage from things I no longer need.
> I could give them away for free on one of the local giveaway/exchange groups, but the very thought of getting someone to drive a couple kilometers to pick up a dollar-item makes me cringe - it's a ridiculously anti-environmental practice.
Well, it beats driving a couple kilometers to buy a new widget.
> I wish it was easier. I have a lot of things in my home I'd like to get rid of and which still could be of use to someone else.
But wasn't it like this some years ago? I think I sold so much stuff I didn't need anymore on eBay and sometimes made good money from it. Nowadays eBay is not very user-friendly for private people and therefore unusable for this.
"eBay Kleinanzeigen" (not sure if this exists outside of Germany) is there, but it's lacking the auction features which made selling stuff so much fun...
I sold some things on eBay back in the day. Perhaps younger me would have found it worth the hassle. But taking photos, putting together a listing, dealing with buyer questions, shipping, etc. was all way too much trouble for anything but the odd relatively high value item like a camera lens.
And that's not even counting the bulky things which are what I really want to get rid of.
It's much easier to acquire things than unacquire them - selling on craigslist, carting things off to goodwill, or lugging them around during a move is a hassle.
Do you have local charities that will come and pick things up? Last time I moved and wanted to get rid of a kitchen table, some bookshelves a bunch of kids toys I just called the people running the local homeless shelter and two dudes with a truck showed up the next day a carted everything away.
Goodwill, Salvation Army, and the like tend to be pretty picky about the furniture they accept. If you're moving and have some good furniture to get rid of, that might work. But just about no one is going to want furniture that is used to the point where I just don't want it anymore.
Conversely, all of craigslist I bought a leather recliner couch for $50, a 40 inch TV for $250, and a dining table for $125. That's $425/yr vs $1440/yr, and I bought those 3 years ago - which would be $4320 @ $120 * 36 months.
It's a good option for certain lifestyles, but can equally become surprisingly expensive if not manged.
Sorry but do you find this ends up being wasteful at all? I don't know how many of/how much these items can be reused, but it feels like it would promote far faster consumption than ownership.
How did you come to that conclusion? The effect is the complete opposite...instead of a lot of people that move frequently (i.e. younger people) and buy/toss a lot of cheap Ikea furniture every year, you rent high end, long-lasting furniture that is delivered/removed for reuse.
Well that's one reason why I said I'm not sure how many of/how much these items can be reused. For something like a wooden table/chair, and a TV/monitor/etc., sure, it might get reuse. But for a sofa or mattress? I don't know about you, but unlike with a desk or chair, I wouldn't just buy any random 2-year-old sofa or mattress a stranger throws out... whereas I'd keep using the ones I've had for the past couple years in a heartbeat.
The other reason is, if everyone just "updates" stuff for no other reason than "because they want to", then that's obviously going to tend to cycle through products more rapidly than if people didn't just "update" on a whim, even if the second-hand-ness wasn't an issue.
I think the answer is there are different options for different people - some people (like yourself) are happy buying an inflatable bed and sleeping on that. Others would prefer to rent a king sized bed. I don't think one is necessarily right or wrong. Choice is a good thing!
I think the distinction of interest in the parent comment wasn't inflatable vs. king sized, the distinction was throwing away king sized every 2 years vs., well, not doing that.
These days I tend to buy big furniture items — sofas and the like — second hand. I can't afford really high-end quality furniture new, but, if you're careful, you can find well-made furniture at low prices in charity stores. My house is furnished with a mix of crappy Ikea stuff and very nice second-hand furniture; I much prefer the latter.
> if you're careful, you can find well-made furniture at low prices in charity stores. My house is furnished with a mix of crappy Ikea stuff and very nice second-hand furniture; I much prefer the latter.
But this illustrates exactly the problem. "If you're careful" -- meaning you wouldn't want the average one you see. Meaning there's going to be considerably more waste when people have to buy second-hand than if they just kept their own that much longer.
I wouldn't want the "average" new sofa either, especially not in a price bracket I consider reasonable.
I agree that it would be more efficient if people kept their sofas for a decade, but they don't, and me buying the sofas they don't want is a better option than them ending up on a trash heap. Plus, I'll probably keep them for ten years. I buy high-end furniture second-hand so I can do exactly that, rather than getting a new Ikea piece of junk that falls apart in a couple of years.
I suppose the ideal scenario would be for manufacturers not to make rubbish and for people to be able to afford good furniture that lasts for decades, but we don't live in that world.
I think you misunderstood the point of my comment. I wasn't criticizing your approach or debating buying first- vs. second-hand. That's not what the discussion was about at all. The question was about renting and "updating" every couple years "because you want to" vs. actually owning your stuff, and how much additional waste that generates. I was pointing out that even if people like you exist who buy second-hand, they (naturally) won't necessarily be interested in doing that for most items, so that still results in a ton of waste instead of increasing re-use as someone else claimed. That's what this discussion was about.
"If you're careful" is reasonable. You wouldn't blindly buy a second hand car, you need to make sure the engine actually works etc. I suspect the careful in this case is avoiding said crappy Ikea stuff. That's not to say you shouldn't buy it 2nd hand, just make sure you pay an appropriate price.
Its not an either or, you can buy second hand and keep your stuff longer.
I never said you shouldn't buy it second-hand either. Try reading the full discussion again from the top comment. It's about a different question entirely.
The early comments were about renting, and you making the reasonable point that renting furniture that can be replaced at any time promotes waste.
This is about purchasing, if you're purchasing 2nd hand you do have to be careful because you don't have the same rights etc. The "average" may be perfectly fine, just like the average second hand car is fine. I think you're reading too much into "being careful", that's all.
Sleeping in an inflatable bed for two years is what’s insane. When I crash on a friend’s air mattress for a weekend I feel like death afterwards, but two years? I’d rather buy and throw away 10 beds and then withdraw the equivalent amount of cash from by checking account and set it on fire than sleep on an air mattress for 2 years.
My main objection to this sort of thing is the logistical overhead of living with it and dealing with the eventual returns.
You have to keep track, mentally or otherwise, of what's rented and what's not. You will treat the rented things differently, even if only subconsciously.
When the time comes to return it, you have to deal with a website or a flurry of emails. Probably there is some boxing and taping and printing and packing and mailing. You have to verify the return is received and monies are refunded.
I guess some money is saved, and perhaps reuse is encouraged, but at the expense of cognitive cycles and time.
I'd rather just buy. The ecological wastefulness argument strikes me as, like recycling, operating on very, very thin margins.
you can buy all of that on craigslist for ~$700 ... $100 for each bed, $100 (or free) for sofa, $200 for fridge $100 for tv, ac for $50 and dining table for $50.. If you plan on relocating in six months to another city, that might make sense...
I wouldn't buy or accept a free couch or bed from Craigslist. There's the potential for bed bugs. Anything with non-porous surfaces (outdoor furniture) is fine.
I'm sure Craigslist has a wide range of quality; the challenge however is figuring out which is which and base it on people reporting about it themselves.
If the business model for CaaStle does not work out, but I can accurately predict when they will go out of business, should I sign up to rent a bunch of stuff that month and hope I get to keep it after the shutdown?
i was evicting some tenants who had a brand new bed from rent-a-center, and the guys came to pick it up.... one of them forgot his hex screw driver, and called into the manager to say he "saw bed bugs" and then they gave the guy the bed for free -- actually i wound up taking it, but i think if u say "bed bugs" when it comes to those beds, all of a sudden they dont want it back (no it didnt have bed bugs)
I returned a mattress under one of those 90 day "no questions asked" return policies, and when they came to pick it up they said because it wasn't in the plastic wrapping that they wouldn't lift it, but they'd deliver my new mattress and mark the old one as disposed.
I personally like buying used, keeping it in good shape or even improving on the bought condition, and re-selling when I no longer need it/am moving.
My aunt's mother-in-law just moved back to England from Canada. She spent thousands to ship back junk. She could have sold or donated most of it and used the money to buy all new stuff back home and been way better off for it.
“It is quite likely that, when you lived in America, you leased everything. You never owned anything, but someone else did and you had to pay for every single thing you used. That's another form of resource ownership that concentrates wealth.”
I'm still not convinced this is good for companies. They think everyone will stick around and keeping paying, unwavering loyalty month-after-month, when in reality, many people cancelled their HBO subscription after Game of Thrones was over. It doesn't really solve the volatility problem for business income. When the next downturn hits, guess what will be the first thing to go? Frivolous subscriptions.
Not all subscriptions are frivolous. I use a car subscription for example. As a startup founder I can't afford a car, still want access to one for hiking trips, and my entire monthly subscription fee including insurance is cheaper than renting twice a month from Enterprise and cheaper than renting for 3 days from Zipcar. (Also I don't believe in a long term future of car ownership -- I think one day it will be unnecessary -- just not yet.)
Not all subscriptions are frivolous, but some are less essential to fulfilling your everyday life than others. The company you're renting the car from is keenly aware the value of cars may diminish with time-- the risk is built into the cost.
Subscription furniture has actually been around for decades. The market is mostly corporate. It's useful for relocation packages or something and the customers aren't very price sensitive. For example: https://www.cort.com/
I'm sure businesses will experiment with renting all sort of things and see what sticks. The market for less serious rentals (such as entertainment) is probably much bigger than furniture.
Knowing I'm renting a sofa, and that if I spill something on it, I'd be responsible sounds far too stressful (maybe I'm not, but I'd have to find the answer to that). Also, do they deliver and pick up the furniture when I'm done with it? Do I pay extra for that? I have questions about the model. Consumers tend to steer away from things they can't understand.
It’s not that simple. I choose to rent even though I have the savings to buy a house because I prefer putting my money in more liquid assets like stocks. People can choose to lease certain categories of assets and “own” others (e.g. public stock).
There are tons of hidden costs with ownership like insurance, property taxes, HOA, repairs/maintenance I don’t have to deal with. Plus the opportunity cost of locking $200k+ in an illiquid asset with high transaction fees to eventually liquidate years later isn’t appealing unless you’re buying a home firstly as a permanent home for raising a family and not as an investment.
Not really. Manna is about minimum wage workers suddenly losing all law’s protections and safety nets; and this article focuses on people like “founder of a holistic wellness-focused tech start-up in Los Angeles”
These companies don't want to be seen as secondhand shops for poor millennials, they want to be seen as trendy lifestyle outlets for rich people that poor millennials want to emulate. That's branding 101. The reality is something else...
That's exactly right. Rentals of furniture and appliances have been around for years - Rent-a-Center.
It's just like the new 'trend' of Van-Dwellers or tiny homes. Sure, you open up your travel opportunities, but this isn't new. It just used to be called homelessness and low-income housing.
> The items that are being offered for temporary ownership to this cohort are a far cry from the Rent-A-Centers of the world, which target cash-strapped consumers who often lack access to credit. Fernish, for example, is geared toward young people whose design sense comes straight from Instagram, Pinterest and West Elm’s catalog. The company, founded in 2017, trades in imitation Eames shell chairs, midcentury-style wooden dressers and Art Deco-inspired bar carts, offering brands like Crate & Barrel and more boutique names like Campaign.
So they're basically high end rent-a-centers? Apart from the exact products I'm not really seeing what's new, the business model goes back to at least 1930 (https://en.wikipedia.org/wiki/Radio_Rentals) and has all the legitimacy of the payday loan industry.
Its hard to wrap my head around renting furniture and cloths. Most of the pieces in my house are gifts from family, many are antiques and very functional. Getting married and buying a house was all the excuse our families needed to set us up. I know not everyone has this but many do. Saved a ton of money vs buying new or renting.
When my wife and I bought a house we had to almost barricade the driveway to prevent our families from dumping all their old 'junk' on us. While we do have a bunch of stuff from our families, for us buying our furniture for our place to make it like we wanted was an important part of making the house ours.
Understand! We lived by the motto "don't look a gift horse in the mouth". We were quite cash poor after getting married and buying a house in the same year :-)
I don’t rent furniture but I see the appeal - I myself am not in a stable living situation (nor do I want one at the moment), I like living in different places and don’t want to deal with moving, reselling or disposing furniture every time I make a move.
Some people’s solution to that is renting everything, mine is just to live lean (small place, minimal furniture, just for sleeping and simple cooking really).
I love not having money and therefore paying extra for the convenience of having the items required for basic dignity in decent condition in the richest country on earth.
This seems dangerous, like people are going to spend 100% of their paycheck every month and get everything taken away from them if they go a week without a job.
Or on the flipside, I've got some contractor/consulting buddies who regularly pull down $200/hr bouncing between Tech companies in the Bay Area and Seattle and big banks in NYC.
Not owning anything allows you to go where the work is and keep your net worth in assets that produce actual income (like index funds and bonds), instead of sitting around collecting unemployment during a dry spell because you're encumbered by your depreciating assets.
I'm sure some people will use this as a way to temporarily live beyond their means...but it's not like Credit Cards don't enable this behavior already. The US is the land of the free of course, where we allow the weak to be preyed upon.
I agree that many people already lived on a financial knife edge before all these rental services.
However the example of a contractor who lives an unencumbered life and saves a lot of money is not at all typical. It's similar to using the example of an investment banking associate or corporate attorney who pay high rent in Manhattan for some years and invest the rest, as an argument against buying a home and having a mortgage.
In reality, many/most people are better off with a mortgage because it forces them to save money, which they behaviorally wouldn't be able to do otherwise. Likewise, buying something and keeping it around probably prevents a lot of needless repurchases and upgrades of the same item. If you are rational the rental lifestyle can make sense in some cases. But for most it just facilitates impulsive behavior. Hence the rush to capitalize on it.
> better off with a mortgage because it forces them to save money
I'm going to go ahead and guess you don't have a large peer group who were buying houses in the late-2000s. A mortgage in no way forces you to save money, added to which it has a tendency to decrease savings due to the moral licensing of exactly your train of thought. "I'm already saving with my sweet ARM, I can afford to lease that car!"
People who are financially illiterate are going to be bad with money, regardless of the system.
This is a lot different if you're making $140,000/year gross vs the typical "rent to own" market of Aaron's and Rent-a-center for household furnishings, where the consumers make significantly less than that.
There are lots of stories (and also some info) on engineers working at FAANG making ~$400k a year or up. Granted these are not your typical engineering jobs, but they do exist and in not so insignificant numbers; say it's 1% of engineers (made up number).
I am curious though as to the distribution of freelance / contract rates. Is $200 / hour also 1% of engineers? More? Less? Financially for the same person what's actually a better route? For someone that can get $400k a year at google, is that better or worse than the contract route on average?
$200/hour definitely isn't the top 1%. On the other hand you could work at FAANG and run a company as a side project, you could use some of your connections there to get interesting contracts.
Renting things is a financial tool and it can save you money. The calculation is simple. You estimate the difference between how much something costs and how much you can sell it for once you're done using it. That's your real cost to own it. Compare that number to the cost of renting it for the same time period. If the cost to rent is lower, renting is a better deal.
For larger and more involved transactions (especially homes) things get more complex, but that's still the basic arithmetic.
Making more things rentable isn't a big problem. The big problem is that many people don't understand this arithmetic so they end up shooting themselves in the foot when you start giving them options. And unfortunately the people who need this knowledge the most are often the least likely to have it.
There's a simple solution which is to just teach a great personal finance curriculum in high schools nationwide. (Well, as simple as solving a problem for hundreds of millions of people is going to get.) Of course this being HN we can probably dream up fancier solutions like incentivizing people to take some personal finance training online.
A rational/efficient example of where renting might be a better deal for you is if you don't have access to wholesale prices and someone else does. They buy at a discount and then they rent out to you at a price which makes it cheaper for you than buying at retail.
A classic scenario is renting a movie. Let's use DVDs as an example--even though they're falling out of favor, they're a little simpler to talk about, and the economics of online aren't that much different.
Studios like big numbers and would like to sell movie media/rights/access/whatever (it's complicated) to someone who can drive lots of demand. So the rental outlet will get a steep discount on those things for buying in bulk.
Meanwhile, you're not even sure if you'll want to watch that movie more than once, and the resale value of a used DVD after a couple years is basically zero. So renting the DVD at least the first time, and maybe every time you want to watch it, is a pretty good deal.
Case in point, Redbox's "markup" over whatever they're paying the studios is large, but it's still a pretty good deal for you and me.
I doubt studios want to give Redbox a discount, because rentals cut into sales, which the studios care about more than rentals. Redbox operates because of first-sale doctrine. I assume Redbox pays the same as stores pay, which is indeed cheaper than what a consumer pays, but there's no discount especially for Redbox. Why do digital rentals cost more than physical rentals? Because first-sale doctrine doesn't apply to digital so studios can charge more. First-sale doctrine prevents studios from charging more for physical rentals, and they won't be eager to pile on any extra discounts for Redbox.
I think the real benefit to the consumer of renting from Redbox instead of buying is that Redbox has economies of scale on exchanging movies between consumers and distributing them geographically. If a consumer buys a movie, watches it, and resells it, that's a lot of hassle, whereas Redbox has managed that redistribution by building automation.
Studios used to give discounts to movie rental companies. An old girlfriend of mine managed one about $15 years ago and I seem to remember the prices for new DVDs being $4-6 on the order form. This was for movies that retailed in the $15-20 range.
I think what happened is they started selling to Walmart et al for the same price.
That seems strange. I don't know what their motivation for that is, given I assume it would lose them money, and it's contrary to digital rentals being so expensive.
This article (admittedly from 2008) says studios hate Redbox. And that Redbox gets its DVDs from regular movie wholesalers (I assume where Walmart gets them too).
First sale doctrine protects your right to rent out a copy that you own to one person at a time. Since movies are in high demand when they first come out and the demand tapers off quickly, this alone doesn't create a very appealing economic model for rentals. At $20 per DVD it's hard to make back your cost. So the studios have offered rental outlets deals in the past.
I actually don't know the details of Redbox. The specific example I remember is Blockbuster video, which used to get copies of movies for virtually free, in exchange for sharing a portion of their profits with the studios: https://www.quora.com/How-much-do-movie-rental-stores-e-g-Bl...
I think the studios agreed to this because of market segmentation, for any given movie there are people who have no interest in paying $20 to own it, but will pay a few bucks to rent it once or twice. If the studios didn't support this model they'd be leaving money on the table.
It makes sense that rental stores would get cheap copies if they're also doing profit sharing. But it's unclear to me who's getting a better deal there compared to the rental place just buying at normal price and keeping all profits.
I just remember reading (or hearing) that it was a tough business because demand for new releases was very high, and then tapered off quickly. So a lot of DVDs would only get rented out 2-3 times and then would never be needed again, if you're paying $20 per DVD it's tough to come out ahead.
It's all ancient history at this point so my memory is fuzzy, but I think hobbyist stores actually had the better business model by that measure (they'd focus on a limited selection of classics that people would rent again and again). Then Blockbuster came along with these studio deals they were able to negotiate based on their volume, allowing them to offer practically unlimited copies of new releases. In conjunction with a decent selection of classics this enabled them to lure customers away from the hobbyists. A combination of pressure from the studios and the emergence of competitors with lower operating cost (Redbox, Netflix etc.) later crushed Blockbuster. And watching the studios raise their fees until Blockbuster collapsed surely contributed to Netflix's decision to produce a lot of original content. And now we're caught up to the present day.
No, because of the time value of money. Money now is worth more than money later. Having all of your toys today vs saving for a couple years to buy a home. [1] has a somewhat explanation but the same conclusion.
If I rent everything, and put my short-terms savings from renting (as opposed to buying) in the S&P 500, would I end up with more wealth in the long term, when compared to buying outright?
If the subscription economy has the effect of being a low-interest loan on anything, it's not a bad deal. One would be unwise to turn down a 0% car loan-- save your money, and grow it, instead of paying up front for the entire car. Same idea, but applied to the subscription economy.
Side note: There's a financing-related cost to a 0% car loan. It's whatever the surplus on the insurance that you're required to carry (because you have a loan) over what the true value of that insurance is to you.
I have a 0% loan right now on my LEAF. I'm likely to pay off that loan pretty soon as the value of that insurance (to me) is decreasing as the car ages, but I can't dump it unless the loan is paid off.
For you to be able to rent something, someone has to own it. And since that someone will want to make a profit, the rental fee reflects that.
I think a better option is shared ownership, such as several neighbors sharing a lawnmower, or similar things that see regular use, but also have significant idle intervals between uses.
Communal spaces and tools save money and foster collaboration.
Depends how much risk you are transferring onto the asset owner when renting. At a minimum they are taking risk on the useful life of the asset - they might also be taking risk on maintenance costs etc. An asset owner will want to be compensated for taking that risk (over and above expecting to break even on average ie in the form of a margin) whereas if you take the risk yourself as an owner then that doesn’t factor into your cash costs.
Logically yes I think it would be close, depending on how you objectively define close. Humans aren't always logical though and that low monthly repayment without requiring you to save up can look really tempting.
At least with something desirable like a car, where some parts of the world have seen a significant shift towards renting.
No idea how well it works for beds, but it wouldn't surprise me if there's margin there too.
The idea that everyone will go for the cheaper option is predicated on the fact that human beings have literally no motivation other than to be perfect wealth accumulators.
In that model they wouldn't rent _or_ buy a bed, because they could just sleep on the floor. Or more accurately, they'd rent or buy whatever they think would maximize income including the cost of it; e.g. if having a bed maximized overall health over life or something then they'd buy or rent the most basic bed that fulfills the criteria of keeping their back healthy or whatever.
I own loads of furniture that's like, mine. It has value to me in the fact that it's my object, unencumbered by financialization.
Personally I seek to minimize financialization wherever possible. I'll pay slightly more up front for things to just delete the monetary stuff from my brain. I don't want to think about it, I want my life to work and money to exist at the side of it not in the forefront.
It seems like you'd see the same kinds of problems with this as you would with predatory lending: even if the cost of a loan (or renting in this case) were much higher in even the medium term, if you're poor enough, it still makes sense because the alternative is not having enough money to live on, right now. Loans and renting are IMO potentially the same thing in this context.
It seems to me there's a fairly straightforward regulatory solution to this issue: require tighter financial checks, or reduce the protections given lenders in case of default.
I could make a case for the opposite -- consumers tend to buy something new at the store then throw it out a couple of years later. I can imagine these types of companies buying more durable goods so they can rent them out to multiple people back to back instead. I see it as almost automating the craigslist model.
They can calculate how long rented equipment lasts, and at least for electric scooters, the time they last is pretty short. 28.8 days and 92 trips. I don't know how long the average non-shared scooter lasts but if I paid $300+ for my own electric scooter I'd want it to last much longer and go on more trips than that. https://qz.com/1561654/how-long-does-a-scooter-last-less-tha...
You might be right... but I’m pessimistic here. Renters and leasees take less good care of the items they let or rent. The clothes will have a faster velocity to the waste dump, etc. manufacturers and purveyors will cater to this increased velocity...
People are worried about drinking straws. Imagine all the new plastic items to cater to this new usage pattern...
As someone who just recently stopped being a "landlord"...I very much agree that renters put a magnitude more wear and tear on things. The wear and tear people put on things when they don't own them...and without even being consciously aware of it.
I know now that anything rented should maximize durability while minimizing cost. Time will tell which one weighs heavier, but I'm pessimistic also, and guess that minimizing cost is overall cheaper than durability.
Indeed, and the difference with the "craigslist" model is I'm incentivized to keep the value of my goods as high as possible to maximize my return. Rental, I'm incentivized only to keep it in "good enough" shape the owner will take it back. Maybe some sort of value-share program where you get a rebate on your rental fees the better condition you keep your stuff? Aligned interests, and still automated.
Considering the way people often abuse rentals I think the extra durability will mostly cancel out and there are other costs like energy efficiency that I doubt they will optimize for the end user.
It may be a boon for repair-ability though if they see it's economical to have in house fixers.
Welcome to modern serfdom, implemented by app. Your boss is an app, your job is classified as an "independent contractor", you own nothing. You can never get off the treadmill of wage slavery.
Sure. Even then though, if they ever decide to stop living that way they can pay off their debt without borrowing more, and keep the stuff they bought.
re-sell things they've bought at a loss
Only a loss compared to the price at the start. If you account for the utility they got from the item and depreciation it's probably just the current market value.
That's kind of like asking "who says they have to get student loans," great advice for any individual but not so great as a prediction for what we'll be reading about in the NYT 20 years from now.
This is just another move from mega corps to tricking us in to paying a subscription for everything and never owning anything. Owning pretty much always ends up cheaper if you will have the item for a long time.
Renting only makes sense for short term needs. I don't need to buy expensive equipment I only use once a year so renting that makes sense but for a couch it makes far more sense to buy it outright and use it for 10+ years rather than pay constantly for it.
I suspect that even this article itself is a hidden marketing move to change social norms so people think renting is the cool new thing to show off.
Well most of these companies are startups, not megacorps.
Just like everything you should do the math...if you only plan to live in a city or apartment for 1-2 years then renting a furnished apartment (either officially furnished or DIY with one of these startups) could make sense. The alternative in my experience is buying a lot of cheap Ikea furniture that's a pain to buy/put together/toss that may or may not come out to what you'd pay renting much nicer furniture with assembly/delivery included both ways.
This article pushes the idea that this is not just for people planing to leave soon but for anyone who wants to live the luxury life which is just ridiculous. Also megacorps have been pushing for this as well, for example the trend to pay a huge monthly fee for your phone and plan which forces you to essentially buy a new phone every 2 years.
What definition of “force” are you using? What is stopping someone from finishing paying the monthly cost of the phone after 2 years and then not signing a new contract to lease a new phone?
Every single mobile provider in the US makes it clear how much mobile service is if you want to pay for just the mobile network, or to lease the phone and the mobile network. Apple offers a monthly payment plan that is equivalent in cost to paying upfront for the same phone and AppleCare+.
All of the information is clearly available for the lease vs pay upfront, and mobile network vs mobile network + phone calculation.
The one that people who make poor financial decisions use.
The service providers didn't automatically drop your monthly rate after you the subsidized phone was paid off, so people felt like they might as well get a new phone since they were paying for it anyway.
> What is stopping...
Nothing except that people don't know any better.
Tell everyone you know (without being annoying) how much you pay for unlimited by using a prepaid plan on your top-of-the-line phone. Maybe they'll start to learn. I've already switched a few people, you can too.
That situation is pretty far from any useful definition of force, in my opinion. If people are too lazy to do some basic arithmetic, that’s their problem.
I spent like 2 months going couch shopping every other weekend. I couldn’t decide. Whatever I bought I’d own, and be tied to forever, it feels like. Selling shit is time consuming and annoying. Moving it later or donating it is annoying and maybe been expensive. And the damn couch itself was expensive too. It felt like this big decision that I had to get right.
I didn’t end up buying anything.
I’d have much rather just picked out something interesting to rent for a while, see if I like it. If I do do, great. If not, it’s easy to change it.
I think the trick is only owning assets that might appreciate in value.
I wouldn't want to own a car because the value of cars drops as soon as you take the car out of the lot. But owning a house /apartment might be a good idea if the market is relatively stable and you can actually afford it.
It also depends on lifestyle. For a person like me, who moves around a lot, owning furniture for example doesn't make sense. The moving costs, maintenance costs and so on are just a pain. I'd rather rent the furniture, or rent a furnished place.
The house doesn't appreciate in value. You can tell because they do _make_ houses which don't appreciate in value. They're often called "mobile" homes although in practice moving them is tremendously expensive and they'll most likely be put up in one place and never leave. They don't appreciate because the materials they are made from decay, needing ongoing maintenance or reducing the value.
What actually does appreciate is _real property_ aka land. Because there will only ever be a finite amount of that, and each parcel is in a particular place and can't be moved. If everybody wants to live in Brisbane, or Guernsey, the price of land there explodes because it simply isn't possible.
And even then, appreciation is driven by population. In a world where population stops growing or even shrinks, prices for real property may fall in most places.
This is a really interesting trend - and one that brings out some really fascinating psychology in people and how they relate to money.
I am personally uncomfortable with the idea of renting clothing, and don't like the idea of renting a bed or furniture, but am a big fan of renting a car (Zipcar) and will probably rent ski gear for next years season.
Like most things, some people go all in, and decide to rent everything. But my hunch would be that most people will find 1-2 things they don't want to necessarily shell out full price for, and will rent for a bit, before probably buying the gear themselves at some point.
This doesn’t sound like the worst idea ever. If you lose your income, just say “come and get it” and you’ve significantly lowered the cost of moving/finding storage, etc. while you search for a new job.
I kinda wish I’d thought of this before a couple of bad years of the Universe deciding it didn’t much like me much. I’m sort of back on my feet (employed) but I don’t own much more than some minimal furniture, clothes, car and computer gear. The rest could easily be filled by renting.
Most of the other things wouldn’t have much resale value anyway, if I bought it outright.
Sure, I mean if you're unemployed, what's the use for furniture or a bed? And it's inconceivable that you might remain unemployed for any extended duration or not have savings (or sufficiently affluent relatives) to fall back on.
Pardon the sarcasm but I sincerely doubt you know what you're talking about if your biggest worry was moving/storing/selling your furniture.
My biggest worry was trying to find a job followed by what do I do with all this stuff when I got evicted. By that point, I didn’t have savings left and no family to fall back on. I slept on an air mattress for the best part of a year in a borrowed room of a very kind (mostly) stranger.
I got through it, but I do not want to ever be in a position again where I have to watch my stuff get given away because it’s old crappy stuff that can’t be sold for food money.
By renting, I can have a few nice things and when I can’t, we’ll, too bad, but I need that money for something else, like food or medecine.
Then your mistake is just thinking you'll end up in a financially better position by renting. Companies do things because they are profitable.
Also, I don't see how "being unable to sell your stuff because it's crappy and old and having to give it away for free" is worse than "being unable to sell your stuff because it didn't belong to you in the first place and is taken away as soon as you lapse a payment". Except of course in the former case some other poor person might still get some use out of the old and crappy stuff and in the other case some company is taking the (relatively new) thing and likely just shredding it.
Honestly, at the time I was concerned with surviving the next weeks, rather than worrying if some poor person could have used it. From where I sat, merely being poor would have been an improvement.
Renting means being potentially being able to ditch payments while you still have at least some money to survive on, if you can recognize that is a possibility.
I’m skittish now. The moment the paycheck stops, for some reason beyond my control, I’m dropping everything unnecessary to survival and paring down to being able to live in a closet, if necessary.
A decent couch from crate and barrel probably goes for 800-1200 or so. At 50/month for a couch, you’d pay the cost to buy it outright in two years. It would also be interesting to see what they charge for any stains/damage. Is “normal wear and tear” a thing or do they use the landlords definition of “anything I think I can get away with”.
Math looks a bit better if you do long distance moves constantly.
Not a frugal option in any sense, but if you have plenty of disposable income and value minimalism and simple moves, sure, why not.
Edit - Couch pricing a bit off (looks like they’re around 1500-2000, but I doubt they’re renting things at that quality and I’m sure furniture has some fantastic bulk pricing) Probably paid off in 2.5/3 years of renting.
The cost can not be inline with purchasing because the store still has to purchase it, have all the overhead of running a store and then over the lifespan of the item, make up all of those costs as well as making some profit on it.
I want to rent, not own. And that includes a home, at least until I have a family.
Why? Besides the optionality of moving, or not worrying about flooding etc. Lots of things are not necessary to be exclusively owned by you, anyway, like a car that you park every day to collectively take up tons of space on city roads.
It’s because every time you buy something you invest in it. That’s money you could have invested elsewhere (opportunity cost).
Say you had $100K in 2011. You could either:
A) Make a down payment on a house, live in it, and keep buildng equity in it
B) Do that, but rent out the house to another person and use the money to rent anywhere else
C) Rent the house you live in and invest in Bitcoin instead
Guess which strategy would have had you far far ahead.
C is better than B which is better than A.
And that’s why I prefer to rent. Decouple orthogonal things: using and investing.
After successfully implementing the illusion of control, we want to implement the illusion of wealth now. A good way to make more money!
I'm not against the concept. But I'm not fully sold. The subscription model is great for many things but not everything. Companies are seeing this as a new opportunity and they're driving their marketing strategies around it by selling a subscription model to everything.
Capitalist Utopia: Work your whole life, to own nothing. So you will continue to work for us because of the fear of losing everything (we rented to you).
Capitalism can't work without consumers, and consumerism can't work unless you can convince consumers they're better off as a cog in a machine. What capitalism degrades into when this doesn't happen isn't communism but rather mercantilism, or, if there isn't enough economic activity for even that, feudalism. And no one wants that.
I didn't realize how this could work until I looked at my own life and realized I would rather be an IC than a manager.
I still want to own my own means of production and earn economic freedom, but on my own terms. If I can't get it on my own terms, being a cog in someone else's machine isn't really all that bad.
Reframed this way, it's less a battle of haves vs have nots and more a cooperative project to make more for all. Ultimately capitalism has to find a way to incorporate the best parts of communism.
Renting everything means you go from managing dozens of objects to dozens of contracts. Imagine managing acceptable use, wear and tear, cost depreciation, return dates, rate increases, and of course your time to manage this is counted as zero in the cost model. Sounds like a nightmare.
The thing is, I have some stuff that I really like. A teak bookcase I bought in the 1970s when I got my first real job after finishing school. A huge teak desk my wife bought me 20 years ago. My wife has some furniture her grandmother had and that she grew up with. We also have art and things we have bought while traveling around the world.
I see the advantages of not being encumbered by ‘stuff’ but some possessions help define our personal history and are simply a pleasure to own.