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Rent vs Buy Modelling: Is it better to buy or rent a home?
Topic Started: 1 Dec 2011, 05:54 PM (4,299 Views)
micnugget
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Catweasel
2 Dec 2011, 11:47 AM
micnugget
2 Dec 2011, 11:27 AM


The added complexity wouldn't actually provide much more accuracy or information than picking average numbers for everything in my opinion.
Catweasel say there lie the problem. If it live by law of average, it totally do the ignore of a impact of what it leave out. That exactly why financial crisis continue to be miss the by my well-meaning expert. How on a earth does it think mouse can think? By playing "average", mouse excepting even greater than the risk. Three blind mice.

Problem the be when it explain it to mouse all it can see in its eyes is back of skull. It so the brainwashed by education system and master that it cannot even the consider to be a wrong, despite it waltzing through mindfield in its slippers. More it think about it, more mad as batshit it become.

By "in its opinion" without any the understanding is no the more than a self-delusion.
I'm not sure what you want me to say Catweasel? Sorry I'm not clever enough to determine what interest rates will look like in 10 years time?

I think I've gotten your point - making assumptions based on averages is dodgy but you seem to have missed mine? I agree, but what would you suggest as an alternative that would improve the model markedly?

It's very easy to sit back and critique but without any real suggestions beyond 'averages are bad' you aren't really helping us mice.

The reason 'in my opinion' that ranging the variables wouldn't add any additional accuracy is that to put a number on those ranges would require more assumptions and thus we are back where we started.
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Catweasel
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micnugget
2 Dec 2011, 02:20 PM
I'm not sure what you want me to say Catweasel? Sorry I'm not clever enough to determine what interest rates will look like in 10 years time?

I think I've gotten your point - making assumptions based on averages is dodgy but you seem to have missed mine? I agree, but what would you suggest as an alternative that would improve the model markedly?

It's very easy to sit back and critique but without any real suggestions beyond 'averages are bad' you aren't really helping us mice.

The reason 'in my opinion' that ranging the variables wouldn't add any additional accuracy is that to put a number on those ranges would require more assumptions and thus we are back where we started.
Catweasel say it understand its dilemna: if it cannot live by law of average, then how does it do a live at a all? Catweasel say the best place to start with its model. Build a three the model: one with all a assumption that it think is the "average" (base a on historic and master promise to it about future); build a model with a assumption that it want to a believe (7-year prophecy, etc); then a build a model that bear cult might a like. Then look at a variance. Then think about what a potentially miss out of its model. Then a wonder about about its fundamental belief system.

After that it will start to a wonder more about its model and its reflect of a reality.

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micnugget
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Catweasel
2 Dec 2011, 03:40 PM
micnugget
2 Dec 2011, 02:20 PM
I'm not sure what you want me to say Catweasel? Sorry I'm not clever enough to determine what interest rates will look like in 10 years time?

I think I've gotten your point - making assumptions based on averages is dodgy but you seem to have missed mine? I agree, but what would you suggest as an alternative that would improve the model markedly?

It's very easy to sit back and critique but without any real suggestions beyond 'averages are bad' you aren't really helping us mice.

The reason 'in my opinion' that ranging the variables wouldn't add any additional accuracy is that to put a number on those ranges would require more assumptions and thus we are back where we started.
Catweasel say it understand its dilemna: if it cannot live by law of average, then how does it do a live at a all? Catweasel say the best place to start with its model. Build a three the model: one with all a assumption that it think is the "average" (base a on historic and master promise to it about future); build a model with a assumption that it want to a believe (7-year prophecy, etc); then a build a model that bear cult might a like. Then look at a variance. Then think about what a potentially miss out of its model. Then a wonder about about its fundamental belief system.

After that it will start to a wonder more about its model and its reflect of a reality.

Haha that makes more sense to me than you probably realise - P10, P50, P90.

You're not a reservoir engineer are you?
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Catweasel
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micnugget
2 Dec 2011, 04:28 PM
Catweasel
2 Dec 2011, 03:40 PM
micnugget
2 Dec 2011, 02:20 PM
I'm not sure what you want me to say Catweasel? Sorry I'm not clever enough to determine what interest rates will look like in 10 years time?

I think I've gotten your point - making assumptions based on averages is dodgy but you seem to have missed mine? I agree, but what would you suggest as an alternative that would improve the model markedly?

It's very easy to sit back and critique but without any real suggestions beyond 'averages are bad' you aren't really helping us mice.

The reason 'in my opinion' that ranging the variables wouldn't add any additional accuracy is that to put a number on those ranges would require more assumptions and thus we are back where we started.
Catweasel say it understand its dilemna: if it cannot live by law of average, then how does it do a live at a all? Catweasel say the best place to start with its model. Build a three the model: one with all a assumption that it think is the "average" (base a on historic and master promise to it about future); build a model with a assumption that it want to a believe (7-year prophecy, etc); then a build a model that bear cult might a like. Then look at a variance. Then think about what a potentially miss out of its model. Then a wonder about about its fundamental belief system.

After that it will start to a wonder more about its model and its reflect of a reality.

Haha that makes more sense to me than you probably realise - P10, P50, P90.

You're not a reservoir engineer are you?
Catweasel say though it need to think about a difference a reservoir and a asset market. Catweasel prefer a probability on a resrvoir becuase a more influence by a nature than asset market by a man-made, mouse-emotion and artifical manipulate.
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Joseph
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efy6rph
1 Dec 2011, 07:56 PM
With compounded Interest the renter has $1.25M in the bank (assuming no tax????).
Also if the renter is a saver their contribution will increase with CPI each year so this is the worst case result.

You have also not accounted for capital losses , or at least provided the "option",
From a bearish perspective, assuming it is 30% overvalued, you'd be looking at 315K now, if that keeps up with CPI it will sell for around $600K in 25 years.

So from a Bears perspective you could have a minimum $1.25M in the bank, or a house worth $600K.

From a Bulls perspective you could have $1.25M in the bank or a $942K house.

If the renter increases their contribution by CPI they will have around $1.5M after 25 years.

Either way renting wins hands down.
What's your point? If the home buyer also increases his/her repayments by CPI every year they will have the property paid off 10 years sooner.
Edited by Joseph, 3 Dec 2011, 01:30 PM.
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Trojan
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Joseph
3 Dec 2011, 01:26 PM
What's your point? If the home buyer also increases his/her repayments by CPI every year they will have the property paid off 10 years sooner.
I don't efy6rph realises if you start increasing available money on both sides by CPI, its actually the renter in that scenario will be worse off.

Simple reason:
Each extra dollar the renter puts in is earning 3.9% (6.5% with 40% tax)
Each extra dollar the home buyer puts in is earning 7.5% with no tax
I put trolls on my ignore list so if I don't respond, you are probably on it ....
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Alex Barton
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Quote:
 
It's time to buy, renters

Courtney Trenwith
March 20, 2012 - 10:04AM

After 11 years of paying to live in someone else's property, Blair Coatesworth is turning his back on the rental industry and buying his first home. He had preferred renting. Being responsible for a multi-decade long mortgage was scary. But when the rent for his one-bedroom apartment in Wembley soared by $50 per week at the last lease renewal, on top of relentless increases since he moved in four years ago, enough was enough.

"The rental prices are so huge ... chuck in another $60-70 and I have my own home," Mr Coatesworth said.

Perth rents have become so expensive - soaring by about 4 per cent each quarter, with some areas as high as 8 per cent - that in many areas they are now on par with weekly mortgage payments. Countless agents have told stories of renters living in dire circumstances because it is the only property they can score in a market where the vacancy rate is just 1.6 per cent and prospective tenants are immediately offering 10 per cent above the asking price. The median rent is now $390 for an apartment or townhouse and $420 for a house - slightly more than the repayments on a $300,000 home loan. Economists and real estate agents alike are now suggesting it is just as viable to buy, let alone the prospect of equity.

"Given that rents have increased and [property] prices have come down, and interest rates are down 0.5 per cent, that stacks up better than it used to," Saul Eslake, veteran economist and deputy chair of the federal government's National Housing Supply Council, said.

"Home ownership has become more affordable than it was 18 months ago, and especially in Perth."

Professionals Real Estate Group WA/NT director Ian Cornell said rents were likely to climb another 5 per cent over the next six months, making them so unsustainable renters will be tipped into the buyers' market.

"There is a time when rents will get to a point where renters will say 'why am I paying rent at this rate when it equates to a possible apartment mortgage'," he said.

"If you're paying $450-650 a week in rent, that's starting to support a sizable mortgage in a regime of interest rates coming down, if not stabilising."

Renters are already realising the figures don't add up.

Read more: http://www.watoday.com.au/business/property/its-time-to-buy-renters-20120319-1vfzi.html#ixzz1pcD8ZAOb
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stinkbug
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Trojan
3 Dec 2011, 04:42 PM
I don't efy6rph realises if you start increasing available money on both sides by CPI, its actually the renter in that scenario will be worse off.

Simple reason:
Each extra dollar the renter puts in is earning 3.9% (6.5% with 40% tax)
Each extra dollar the home buyer puts in is earning 7.5% with no tax
This is where things really start to change.

My opinion is that some people are good with money, and do well regardless of whether they buy or rent. Others who are less goodfinancially do poorly. I would think that renting (non-financial issues aside) may work better if you are good with money, and invest consistently and successfully, but if you can't do this (and 90+% of the population don't seem to be able to) then you're probably better of buying as the banks will force you to hold a minimum equity proportion going forward.

Edited by stinkbug, 20 Mar 2012, 01:35 PM.
---------------------------------------------------------------

I'm a successful property investor, but what worked for me may not work for you, so do your own thinking and manage your own risks.
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raveswei
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stinkbug
20 Mar 2012, 01:33 PM

My opinion is that some people are good with money, and do well regardless of whether they buy or rent. Others who are less goodfinancially do poorly. I would think that renting (non-financial issues aside) may work better if you are good with money, and invest consistently and successfully, but if you can't do this (and 90+% of the population don't seem to be able to) then you're probably better of buying as the banks will force you to hold a minimum equity proportion going forward.

So, you are saying that property owners and investors are people who are “bad with money, and not able to invest consistently and successfully”?!

This is quite bad opinion about your fellow speculators. Even I do not think thay are that stupid, mostly greedy and evil.
Edited by raveswei, 20 Mar 2012, 02:51 PM.
http://popping-bubble.blogspot.com/

Thinking of an Australian property speculator (PI):
Inaction = missing opportunities.
Missing opportunities = losing.
Too much thinking = inaction.
Thinking = missing opportunities.
Therefore thinking = losing.

disgraceful little man Frank Castle owes a house to Salvation Army

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stinkbug
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raveswei
20 Mar 2012, 02:50 PM
So, you are saying that property owners and investors are people who are “bad with money, and not able to invest consistently and successfully”?!

This is quite bad opinion about your fellow speculators. Even I do not think thay are that stupid, mostly greedy and evil.
Incorrect, and you know it.

It would be really nice if you could:
a) actually think about the topic being discussed; and
b) write posts that actually contribute to the discussion.
---------------------------------------------------------------

I'm a successful property investor, but what worked for me may not work for you, so do your own thinking and manage your own risks.
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