Ben Felix
6 HN recommenders · recommended in 7 months, 2020–2026
10:36 · 5.3M views · May 11, 2019
Ben Felix explains how to compare renting and buying a home by looking at unrecoverable costs, and distills it into the 5% rule of thumb. It is framed for a Canadian audience but broadly applicable.
HN points to it for a clean first-order framework for the rent versus buy decision.
9 comments from Hacker News
The borrowed money isn't free from interest. There's no numerical sense in borrowing money at 5%+ interest to fund an investment appreciating at 3%. Some schemes might advantage it further (such as leveraging your mortgage with your retirement funds) but then we might as well also discuss further disadvantages compared to renting, such as upkeep and property taxes. Back around 2020 when mortgage rates very briefly dipped below 3%, there could have been an argument. But such is no longer the case and not likely to return soon. This guy breaks down the analysis very cleanly to a first-order approximation, using 2019 figures: this video > It's a choice between $1m in housing appreciating at 3% or $100k in stocks appreciating at 9%. Just to drive the point home: It would be $100k in stocks appreciating at 9% and monthly rent subtracted, or $1m in housing appreciating at 3% and a $900k debt growing at 5%+ interest.
> You don't need to purchase a home - but historically - if you did - you've been much better off financially. [citation needed] Per the The Credit Suisse Global Investment Returns Yearbook 2018 , the global return for real estate from 1900 to 2017 was 1.3%, while stocks returns 5.2%: * [LINK] Rent is often cheaper than mortgage payments, and is very more often cheaper than mortgage payments plus the cost of maintaining a home. If you take the difference and investment you can have just as must equity in a few decades. Preet Banerjee goes over the math in this ten minute video: * [LINK] He rents: * [LINK] If you want to know when it makes financial sense, the "5% Rule" by Ben Felix is a decent place to start: * [LINK] * this video Until recently he was a renter, but purchased a house 1-2 years ago. Not exactly happy with the decision though: * [LINK]
Ben Felix, a Canadian portfolio manager that does personal finance videos and podcast, has been arguing for years that rent versus buy is often a wash financially, and that you should make the decision for non-financial resasons. * recent 2026 video: [LINK] * 2025a: [LINK] * 2025b: [LINK] * 2021: [LINK] * 2019: this video The 2019 video goes over a handy "5% rule of thumb": start with the purchase price of home, take 5% of that: if your rent is less than that, better numbers-wise to continue renting (and investing the difference); if your rent is more, probably better numbers-wise to buy/own. The company he works for created a tool to examine the numbers: * [LINK]
This video explains the concept really well: this video but TLDW; the unrecoverable cost of rent is just the rent money, and a lot of people compare it with a mortgage incorrectly. A mortgage is not 100% unrecoverable, but some portions of it is unrecoverable (the interest). The other unrecoverable cost of owning is the initial downpayment. The 3% capital cost is the combination of the above interest payment and the lost income opportunity from the downpayment. Whether you buy out right with cash, or get a mortgage, you still end up paying a price either way (via interest, or via lost opportunity to deploy the cash downpayment).
Hi, Australian here living in Sydney. I'm a very happy renter. Renting in Sydney annually is way under 5% of the cost of owning a house. Even if I could afford to buy a house in Sydney, I wouldn't dream of it. It's much more economically sensible to rent. The money I save in opportunity costs from renting is huge. I can invest the difference between rent and mortgage repayments and don't need to be concerned with maintenance and other costs of owning. Check out this video for more info.