Show HN: Should you buy a house and rent it out? - <AUTHOR> https://causal.app/buy-to-rent/ <comment><USER2> Owning a property is work - sudden repairs at an otherwise busy time in your life. Phone calls and customer service for tenants. New tenants. Paperwork. It's partly the time actually worked, but also the unpredictability and out- of-hours nature of the work.

Looking at the model I guess the nearest factor is Annual Costs (maintenance). But it doesn't feel properly measured.

I note that for someone on Hacker News, it needs charging at the day rate for a programmer. Or even as an opportunity cost - charging with a risk-based possibility of the reward of starting a successful technology startup. Or of spending more time with family or in sunlight, amongst trees. At peace.

<comment><USER3> This 1000x. I reflexively said (out loud) "god no!" in answer to the title question.

The only people who ask this question are people who haven't been landlords. Every single one of my friends who has, can commiserate with me as a former landlord.

Maybe buy a vacation home to rent, or an apartment complex. And of course being a part- or full-time landlord is a perfectly reasonable job.

But if you think that being a landlord just means having someone else pay your mortgage, I guarantee you will think differently after a year with even exemplary tenants. And most tenants are far from exemplary.

(still shaking head)

<comment><USER4> It really depends on where you are. In many european countries it's traditional for the tenant to fix the problems. Washing machine broke? Get a replacement yourself. Pipes clogged? Call a plumber.

<comment><USER5> I recommend thinking about this probabilistically:

X% of tenants are reasonable and handle the repairs they are contractually required to handle smoothly.

(1-X)% of tenants are a massive headache, and call the landlord for every lightbulb that needs changing, threaten to sue you all the time, smash your property to pieces etc etc.

Compute the expected value, and compare with other forms of investment. In my experience, renting out a single property is not worth the _expected_ reward, vis-a-vis other forms of investment. This changes if you can reap economies of scale from renting out multiple properties. (Cut-off point depends on ambient legal system, tax, your own background (e.g. if you are a lawyer, you can handle legal disputes yourself) etc.)

<comment><USER3> Hello fellow statistician (whether by training or habit). For everyone else, note that this approach is not limited to landlording.

Excellent exposition!

</comment></comment></comment></comment></comment><comment><USER6> This is pretty cool.

One thing that feels like a serious oversight though is that it isn't factoring in taxes. Rental income is taxable income. If you depreciate the property to avoid or reduce your taxable income you'll end up taking a big hit on the eventual sale as it will all be capital gains.

Another issue I'd take with this is that it's a lot smarter to focus on cashflow then gross income because odds are you aren't going to last 30 years to watch your net worth grow if you are losing cash on a monthly basis, even if you are technically building equity.

I'm currently getting out of being a landlord because while it was overall profitable, the margins are alot tighter after factoring in taxes and it's also a massive headache. That income certainly does not feel passive.

<comment><USER7> Thanks!

Yeah you're totally right about taxes — it does make a big difference. We had to make simplifications somewhere, and taxes are quite country-specific so we didn't want to be too prescriptive. We hoped you could increase "Annual Costs" as a very rough proxy for taxes.

Cashflow is a really good point, and something we hadn't considered much. You can get a rough idea of cashflow in the "Net monthly earnings" section of the output, but it probably deserves more focus for sure.

Operational headache is interesting to account for haha — we'll add these things to the model explanation :)

<comment><USER8> >We hoped you could...

Given you're positioning this app and article as a means to answer the question on buying a home and renting it out, you should disclose these items (liabilities) to the reader and let them figure out the scenario for their local market, rather than hoping for the reader to do something.

Property tax is a large expense, and insurance is also a required expense if you have a mortgage (in the US). Finally, income you generate from the house (Rental Income) is taxed at your effective tax rate, and this will be a Large Liability at the end of each year.

Although there may be deductions you can take to minimize some of the expenses (in the US), you will be required to pay taxes on the income you generate and I suspect that's the case across all countries.

</comment></comment></comment><comment><USER9> Calculations of this model are misleading. One hugely important parameter missing: inflation rate. This would tell us what part of that 2.1 million in 30 years is real return and what part is simply inflation, i.e. depreciated money. Put it differently, it's important to know what the investment will yield in terms of _today's dollars_ \- not depreciated dollars.

For such a long horizon of 30 years modeling without accounting for inflation makes little sense. For instance that 7% stock market return used by the model as a default, which perhaps may be used as proxy for inflation, would return 661% over 30 years.

Default values for other parameters and their _distributions_ also look very optimistic to me. Like 4% annual appreciation which maybe drops to 2% annual appreciation. How about 40% annual _depreciation_ , your mortgage being 30% underwater, and foreclosure? How about the bank that issued your mortgage going bust, then the bank which bought that bank going bust, and then you 30-story building being shut off from public utilities? What am I smoking? Neh, I just bought investment properties in Miami and other places in Florida in 2007. Anyone too young to know what I'm talking about: I urge you read up on the 2008 crisis before you start buying up investment real estate, after 10 years of unprecedented growth of both real estate and stock market.

<comment><USER10> Try using the model with a very high down payment. At 50% of property value, your gains are equivalent to the 7% baseline. Beyond that, the property makes significantly less than the stock market. If you pay 100% up front, you end up making half what the stock market does.

In other words, the gains shown by this model are coming from leverage, not from the underlying asset. Leveraged investments always return more, but with higher risk. That's true in the housing market as well as the stock market.

<comment><USER11> Leveraged assets are not necessarily always more risk than unleveraged ones. You also have to look at the underlying risk/volatility.

That said, I agree with your point in this case that the leverage is the main component of the return, and greatly increases "risk", for some definition of that word. In a non-recourse state where you can default on the mortgage without losing other assets, the risk calculation must also take that into account.

<comment><USER12> In addition to your point about leverage and underlying asset volatility, certain assets are not regularly marked to market (real estate being a prime example) and so you don't experience the true volatility of the asset unless you attempt to sell it.

As a concrete example, a number of commercial real estate investors were technically insolvent in 2008-2009, with assets worth less than the balances of the loans used to buy them. They just pursued the 'hear no evil/see no evil/speak no evil' approach and marked to book (what they paid for the asset) until the market recovered. This approach is aided by the multi-year nature of commercial leases, which protects the cash flows needed for debt service (as long as your tenants stay in business).

In aggregate these factors allow professional real estate investors to consistently earn return by taking on a ton of leverage and with it huge but disguised risk. Back to the original point of the article (buying to rent), most retail investors don't necessarily have the float/access to debt to weather that volatility, and their cash flows are more sensitive which compounds that risk.

</comment></comment></comment></comment><comment><USER13> I live in a 3 room 90m^2 apartment in central Aarhus in the middle of the university. It's worth $350,000, but and you can rent out each room for $700-$800 a month, to an endless stream of students.

The guy who was elected head of our ownership organisation/community (might be a danish construct) bought two apartments when he moved in. He did have $150,000 to make both loans not-bank loans (again this might be a Danish thing, but we have special loan institutions that cover 70-80% of personal house loans at really low rates). Anyway, the one he rents out pays for both loans, taxes and added expenses and after 20 years those loans will both be paid out.

It's really kind of silly how easy life can be if you start out with a little money and use them wisely.

<comment><USER14> "It's really kind of silly how easy life can be if you start out with a little money and use them wisely."

Could you clarify? Is it a comment on the randomness of life? Because at the moment it doesn't read like that at all.

<comment><USER15> I read it as, but I could be wrong, that if you start out in life with money (parents/inheritance/...) and you decide wisely, like buying a house close to uni and putting in a shitload of students, then you have it easy.

I owned a student home which I bought from partly smart and mostly lucky stock investing (I had savings from strawberry picking (yes, really; that made money faster than coding in those days for me) and I put it on Borland before 2000; they went up big time, I sold at the right time and student me could buy a house suddenly); it was in a city with high student housing prices and it was a really good house for it; it was big and could house 8 (to 16 if pairs) students paying 8*400 euros/mo. It was not easy money though; I lived there too for a while and the constant maintenance drove me up the wall. I am (always was) mostly someone who lives in his head and thinking about code and leaking toilets, pipes, flooding etc really is something I cannot deal with. So I sold it after 4 years of getting stressed.

I definitely wouldn't do real estate again; I like virtual assets and the stock market & starting + selling companies treated me a lot better than real estate ever can do. Without the worries of brick & mortar.

<comment><USER14> Possibly, I read it as an ultra free market, right wing, if you've had a little money its your fault if you haven't made a success of yourself.

That's more dots than I'm willing to connect from one passing comment from someone whose first language I don't think is English, so I'm asking for clarification.

<comment> grey-area I think they meant that money begets money, so if you have some to start with, life is easy by default. Not a right wing sentiment.

<comment><USER14> Right wing ideology would say that's a good thing, or at least not bad, whereas left wing ideology would say that's a bad thing.

So as a neutral statement of fact no it isn't either ideology. Its the opinion that goes with it.

<comment><USER13> Oh, I think it's unfair. I probably could have added a little context, but I was stating a fact, not my opinion on it.

The guy I mentioned is 30, and in 20 years when both apartments are paid out, he'll be a multimillionaire (in Danish kroner), as well as having a passive monthly income that exceeds most lower class jobs. Just by having some starting capital from his rich parents.

I'm not particularly against having rich parents helping you, but because real estate taxes are so low and prices so high, it's just extremely hard to catch up if you don't, and I think that's unhealthy for society in general.

</comment></comment></comment></comment></comment></comment></comment><comment><USER16> This definitely is missing property tax and insurance, as well as a bucket for maintenance cost, ex, property management (8-10% monthly estimate), vacancy (5-10% monthly estimate), and repairs (5-10% monthly estimate). These are all coming out of the bottom line. Especially if the assumption is that the property will be held for 30 years. For a lot of states, Texas for example, the property tax inflates with property prices, assessed every 2 years, so you can build in some calculation assumption with that.

Cash on cash yield from rent may not be great for the most part. But with leverage and tax savings, that is where real money is made in the long run in the rental game.

</comment><comment><USER7> Hey HN, I'm one of the makers. Enjoying the discussion about buying to rent!

We're building a tool to let anyone create models like this one — models that incorporate uncertainty in their variables and outputs. This is the kinda stuff people do in Excel right now, with much difficulty.

We're working on a couple more demo models — let us know if you have any suggestions. And if this kind of tool resonates with you, then we'd love to chat — firstname.lastname@example.com. Thanks!

<comment><USER17> Hey! I'm a really big fan of this idea! Well done on tackling something really important.

I think the examples you've chosen are good but not great examples of where you can add significant value. A house being rented where there are a few variables and a good/better/best outcome is not especially gnarly Excel for the Hacker News audience. I think marketing and sales forecasts and stock option pricing and DCF might be more impactful, if more esoteric, in showing the power of what you're building.

BTW, it'd be cool to be able to anchor a variable to a historical base or average. So maybe if you have seven or eight forecasts of CAGR, Casual could accept 'citations' and in its output show a user of the model that this isn't totally speculative.

Love what you're doing and have signed up. Well done again.

<comment><USER7> Thanks - glad you like the idea!

You're totally right that these aren't the best examples to show the real value of the approach. We wanted to keep things super simple to start getting feedback, but are working on a more involved example now. DCF valuations and options pricing sound like great ideas – will look into them!

What do you mean re: citations? Validating Causal models using forecasts from other means?

<comment><USER18> Taimur - Congrats and I signed up as well.

To me, one of the advantages of representing the story in a probabilistic way, similar to how you have shown it, is that I am able to sell an idea to my audience.

If you are looking for use cases to build for a demo, in addition to DCF, as someone suggested before, you might want to consider currency movements and also IRR calculations.

One feature request, if I may, is the ability to manipulate the end result (time horizon in the demo of rent vs buy) and see how it impacts one of the features (rent, market return, etc).

All the best and glad to discuss.

<comment><USER7> Thanks, will email you!

</comment></comment></comment></comment></comment><comment> le-mark I did this back in 2010 or so. I wanted to diversify out of the stock market so I put some money into 20% down on a single family home. My sister was a single mom at the time renting an apartment in a good school district for her daughter. I told her "go find a house you'd like to live in", bought and rented to her. She was agreeable. Our plan has been for her to buy the house at a discount when she's able (a little rent to own) but that hasn't happened yet.

Financially, from principal paydown I estimate about $400 a month profit from the deal. Last year the house required a new roof, which was $5000 after insurance covered less than half, and broken pipe flooded a bathroom and adjoining bedrooms. So that was my profit for the year.

Overall it's been a net gain, but my money would've performed much better in stocks during the this period.

</comment><comment><USER19> The huge advantage of housing is that the government essentially supports infrastructure to get massive leverage. With 1:5 or 1:10 leverage, 10% appreciation with 1:10 leverage means you double your money. The downside is that with a 10% decrease you lose all your money.

Otherwise real estate is not liquid, annoying to manage, and constantly incurs real costs.

The stock market is relatively competitive as an investment and includes REITS which let you get some of the returns of real estate without the hassles.

I had vacation rentals that cost about 50K each and returned about 8K/year after costs (each). But in the end when there was a problem and the maintenance company wasnt available, I was the one that had to drive 3 hours. I really needed to own at least 5 to make them worth owning. But then there would be the hassle of people constantly coming and going.

</comment><comment><USER20> It's a nice app and all, but the rigorous calculation for these kinds of things really needs to consider tax implications (both depreciation deduction & property taxes), liquidity value, and expected outside returns. It's not a simple thing to simulate even without getting into exotic scenarios.

<comment><USER21> On the whole, I think those other factors you named adjust the result a little bit up or down, but don't make a significant difference.

At least as far is house value is concerned (deducting depreciation raises your wealth, but it hardly increases the value of the house).

<comment><USER20> They make a _huge_ difference. Depreciation in a low land-value area gives you an extra (tax bracket * house value / 27.5) per year. For a 200K house that's easily 2900/y extra return, more if you split out internal components of the house - an extra 1.45% return, when your cap rate might be only a bit higher than 4%! Even when it's fully depreciated, you never actually take the hit from the lowered basis on sale if you keep doing 1031 exchanges.

</comment></comment></comment><comment><USER22> It seems the simulation just gives the upper bound and lower bound based on the input ranges. A spreadsheet model can do the same thing by running the model with different input ranges. In fact, that's what a spreadsheet model is for, trying different input to run what-if scenarios.

On the rental investment example itself, it would really help to have a finance person to go over the model. A rental investment needs to be modeled like running a business, not like buying a house to live. Its analysis is usually done using net operating income, CAP rate, cashflow, ROI, and IRR.

BTW there's no magic 1% to 4% annual appreciation in rental investment. Appreciation is purely based on increasing net operating income faster than market rate, or in simpler term improving CAP vs the market CAP rate. Let's say you buy a property with 4% CAP rate and the market CAP rate is 4% now. 10 years from now your NOI still produces the same 4% CAP but the market CAP rate has risen to 6%, your property will depreciate! Market CAP rate is affected by different things that're out of your control and it's hard to model.

</comment><comment><USER23> No. The literal definition of the economic drag on value creation is "rent seeking".

Be a part of the solution and build something. Do not be a part of the problem and become a landlord.

<comment><USER24> > No. The literal definition of the economic drag on value creation is "rent > seeking".

No, that's not the literal definition of "rent-seeking", not even close. I really wish this term had a different name because I see people on HN misusing it on a daily basis. "rent-seeking" is a specific term in economics that refers to entities colluding with the government to distort the market in their favor. The taxi medallion system is a classic example of rent-seeking. Owning property and leasing it out, whether it's land, vehicles, apartments, or machinery, is NOT rent-seeking.

> Be a part of the solution and build something. Do not be a part of the > problem and become a landlord.

Would you prefer a world in which people are not allowed to rent apartments?

<comment><USER25> > I really wish this term had a different name because I see people on HN > misusing it on a daily basis.

I find this mis-use of the term a useful and unambiguous signal that the commenter is not fully versed on the topic. (cf. [https://news.ycombinator.com/item?id=19707924](https://news.ycombinator.com/item?id=19707924) )

<comment><USER23> So Robert Shiller is not fully versed on the topic, in your opinion?

 _> The classic example of rent-seeking, according to Robert Shiller, is that of a feudal lord who installs a chain across a river that flows through his land and then hires a collector to charge passing boats a fee (or rent of the section of the river for a few minutes) to lower the chain._ [1]

[https://en.wikipedia.org/wiki/Rent- seeking](https://en.wikipedia.org/wiki/Rent-seeking)

<comment><USER25> That's not the same thing as building/buying a house and renting it out, in my opinion (and is backed by the introductory paragraph on the URL you cited).

If you dig a canal and charge for passage, _that_ is equivalent to renting a house (and is not "rent seeking" either per economics/public policy discussion).

<comment><USER26> You're twisting the situation now. It's not a canal. It's a free waterway that the land owner has no rights over.

<comment><USER25> I'm updating the situation to _match_ the case of an improvement to land being rented (to wit, a house). I agree that a chain across a natural waterway is rent-seeking. A chain across a man-made canal is not (as the creator of that canal is seeking to increase their own wealth while creating additional wealth in total).

</comment></comment></comment></comment></comment></comment></comment><comment><USER27> This compares against the opportunity cost of investing the initial down payment, but does not seem to factor the opportunity cost of ongoing carry costs.

For example, I was able to easily craft a model where my expected monthly income was negative. (Just bump the expected annual costs to 2.0%, which is actually more realistic since 1.0% = tax and 1.0% = maintenance.)

Surely the couple hundred dollars a month could also be continuously invested and producing returns if they weren't being driven into the real estate asset.

<comment><USER28> I plugged in some reasonable numbers for rent & home prices in my area and found that basically all of the net worth was due to home price appreciation. While houses here are appreciating at rates far higher than the 4% of the model, that's because the stock options of the buyers have been going up at ~25% annually.

My takeaway: bubbles rule. As long as you're in a region eating the rest of the world, owning property will let you share in that windfall. As soon as that economic engine sputters, they will be ruined, and so will you. Better watch for that next big thing, and then hop on something else once it's no longer the next big thing.

Also, it seems wrong to assume 4% annual appreciation of an asset whose discounted cash flows are negative. At some point that gets unsustainable, and nobody will bother to buy the asset.

<comment><USER14> So your investment is basically a proxy for stock prices? Why not invest in those stocks directly?

Although if all the net worth was due to house price appreciation, stock options don't seem to be making up much of net worth, or weren't included, either of which seems to undermine your argument?

<comment><USER25> It's impossible to get the same amount of leverage and the same low interest rates on the loan in equities that is commonplace on real estate.

<comment><USER14> Perhaps, but there are plenty of downsides also. Lower liquidity, having to find tenants, the possibility that your investment may burn down.

</comment></comment></comment></comment></comment><comment><USER29> I think this is supposed to be more about demonstrating the simulation modelling tool than about houses and rent.

The tool looks like a copy of getguesstimate.com. What's new or different?

<comment><USER7> We're big fans of Guesstimate, and chatted to those guys a fair bit about this! They've sadly stopped working on it but there's a few differences:

\- We're moving away from a spreadsheet-y UI (e.g separate sections for inputs, model, output vs all homogenous cells/nodes). UI might seem like a trivial differentiator, but I think it significantly affects use-cases for the product. \- Guesstimate doesn't handle certain things very well, like time dependent models, conditioning on variables, etc \- Building for enterprises requires certain bells and whistles (e.g integrations with data sources)

The first version of Causal won't be a million miles away from Guesstimate, but the vision is to build a general tool that lets non technical people work seriously with data. Specifically, right now we're working on letting models learn from data ("machine learning") via Bayesian inference, and letting people build causal models.

Probability and random variables are a great unifying framework for dealing with data. We're trying to make this more accessible, so there's a lot to do beyond what the demo model shows :)

</comment></comment><comment><USER30> What a horrible idea

Buy-to-let is causing immense social and economic problems in the UK.

It's a nice way for the rich to tax the poor.

Atlas shrugged.

<comment><USER4> Who are renters supposed to rent from then?

<comment><USER31> Corporations (while I don't think it is necessary better or worse) but there is a professional rental market too.

<comment><USER4> So if a person incorporates and buys an apartment to rent, then it somehow changes everything?

<comment><USER32> It is different. Corporations can then go and list their holdings as a REIT on a Stock Exchange, thus allowing the general public to benefit from their arrangement. When private ownership is renting housing, you have either Banks (in the case of servicing debt) or individuals profiting at the expense of the general public.

</comment></comment></comment></comment></comment><comment><USER33> This is not about buying or renting, it's about an alternative to Spreadsheet for model building. But not much info on the process itself.. can creators expand on this.

<comment><USER7> Haha yes — glad that came across :) It's still very early days for the product, but the basic "building block" for models will be these nodes that you see on the demo. They can be fixed constants, inputs, functions of other nodes, etc. You can create these nodes and define how they related to one- another — this is the "model". Then you can decide what kind of outputs you care about and how you want to show them.

Probably sounds quite abstract! If you leave your email on the site then I'll drop you a line as soon as we're ready to show the product :)

</comment></comment><comment><USER34> For a single property it usually won't be worth it. But if you can build a portfolio of properties in a reasonably small geographic area, then you can gain economic scale benefits (which especially will allow you to outsource more of the management/maintenance).

Of course, you need a good source of credit or great people skills to get that started (or wealthy parents to loan you a million or so).

<comment><USER35> Did I hear a that a million dollars is a small loan?

:P

</comment></comment><comment><USER36> As others have pointed out this model is oversimplified and doesn't break out maintenance and taxes. 1% is unreasonably low for both considering that 1% is a low property tax rate first of all and second because rental income itself is taxable.

Another point in actual real estate proformas is expected vacancy and leasing costs. Ie. you will have tenants leave and when you do it isn't always easy or fast to find good tenants to replace them.

There's also the significant consideration of transaction costs missing. Conservatively you should budget 8% to sell and 4% to buy.

The asset is also highly illiquid compared to stocks, and also has ups and downs just like the stock market but in slow motion. If you happen to want to cash out your equity during a downturn it can be years before you get back to where you'd be with your "long term expected appreciation."

And one last bit: since a house isn't fungible you need to accumulate the entire downpayment all at once, and to liquidate you must sell it all at once, whereas stocks you can accumulate and release incrementally.

TLDR; this model makes it look a lot more attractive than it really is to be a single-property landlord.

</comment><comment><USER37> Any data supporting the appreciation of 4% a year?

This seems socially much more acceptable to taking a loan and then invest the money in stocks for example, but to me is not _that_ different.

True the volatility is much lower, but so is the liquidity if you have to dispose of the propery in a short time due to life circumstances.

If this is a single property and plan is to be the bulk of one's net worth it seems risky to me.

Then there's the "dealing with tenants" variable which can be none to a ton of work/hassle.

REITs are imho an interesting way to get rental income with less hassle and much more diversification if you can stomach the stock price moving up and down.

Look at Vanguard VNQ for example.

</comment><comment><USER38> Pretty cool demo for causal.app.

Feedback on the framework itself:

* I found the interface to widen/narrow the variance of ranges painful to use. Why not just let me plug in an exact number?

* I assume the output for the variance is 95% interval? This should be stated.

* There's major math problems with respect to how you are handling variance on compounding rates and reporting it. Most importantly, the distribution should almost certainly not be normal (lognormal makes more sense). If you don't use lognormal distributions, your confidence interval after N years makes no sense as the product of two normal distributions is not normal (nor even symmetric) - I'm actually not even sure how to interpret your confidence interval after 30 years because of this fact!

* The line becomes impossible to see if it has no variance!

Feedback on the calculation:

* I'm guessing all these numbers are real rates, as there is no inflation?

* Monthly rent is really "rent realized" as you are ignoring vacancy.

* I'm not following how you are calculating accumulated rental earnings. It is more than the sum of historical rental earnings, but less than your rental earnings being re-invested in the market

* "We assume that these cover at least the cost of your monthly mortgage payment" -> including interest + principal? I'm not sure if your calculator per se relies on this assumption, but this would not hold in many markets (e.g. SF Bay Area)

BTW, for those who want to do a simple buy/rent trade-off: I have a google sheet here:

[https://medium.com/@usaar33/an-up-to-date-buy-or-rent- calcul...](https://medium.com/@usaar33/an-up-to-date-buy-or-rent- calculator-22d0bf9bbbb5)

<comment><USER7> Thanks for the super detailed feedback!

* Yeah the "scrubbing" interface is a little experimental. We originally had it for the mean values too, but that was a bit too crazy so we got rid of it. May well get rid of it altogether.

* It's a 2 standard deviation range, so a little more than 95%, but you're right - we should be clear about this!

* The entire model runs via simulation, so we're not analytically calculating products of distributions etc. I don't think we're reporting the distribution of compounded returns after N years anywhere, but there may well be something misleading somewhere — what specifically are you referring to?

* Thanks for raising the invisible line issue!

\---

* Yup

* Yup

* I believe we are just taking the sum of historical earnings! What suggests otherwise?

* Yeah including interest and principal. And fair point! In the UK I think it's a reasonable assumption but probably not so in other places.

Thanks again — really appreciate your feedback. Happy to chat more here or via email: email@example.com :)

<comment><USER38> > I don't think we're reporting the distribution of compounded returns after N > years anywhere, but there may well be something misleading somewhere — what > specifically are you referring to?

The output, e.g. after 21 years. You'll write something like property value is X +/\- Y. The problem is that the distribution isn't symmetric. In particular, being at X - Y is far likelier than X + Y, at least if I interpret X as a mean. In addition, the median is less than the mean, which is X?

> I believe we are just taking the sum of historical earnings! What suggests > otherwise?

As I scroll over years, the net rental earnings are clearly not linearly proportionate to the year.

</comment></comment></comment><comment><USER39> It can be a good way to finance a vacation home that you eventually want to live in. There are other more niche cases such as student housing, corporate furnished, Airbnb, etc, that can be interesting, but you need to know the specifics of each case. For ex, in student housing, everything needs to be thought of in terms of durability and security (steel cased doors, durable surfaces). It also pays to be handy - when you turnover an apartment plan on a repaint. You can hire this at $750-$1000 or you can put on your face mask, rent a sprayer, and knock it out. We've been lucky not to have extreme maintainable issues but there are usually minor issues that you'd expect to see. In my view, stocks are entirely more liquid and it's not that difficult to find high yielding companies where you don't have the complexities of tenant relations, marketing, repairs and fixed expenses like property taxes.

</comment><comment><USER40> I've been thinking about buying a house recently (I am in a ultra-fast growing area Nashville, TN) but not sure the risks and frankly annual returns can beat the stock market (specifically S&P $SPY). S&P average annual returns are 8%, it seems unlikely to beat that long term with real-estate.

<comment><USER41> If you're buying a house to live in and you plan on living there for awhile, buying a house, especially in a fast growing area should be considered an inflation hedge.

We moved into a three bedroom apartment (1652 square feet) in 2012 and we were paying $1200 a month. When we left in 2016, rent was $1700. Now rent is $1925.

Our mortgage three exits up is less than $2100 for a 3000 square foot house. Besides slight changes in property taxes and insurance, our house payments are not going to increase. This is in the suburbs of Atlanta.

<comment><USER42> True but if you need to replace the roof tomorrow you suddenly have an unexpected expense of $20K+.

But in general I agree with your point. Buying a place is about stability and control. Especially no one can kick you out as long as you make your payments. I don't think it's a better investment option out there but it's safer for most people than investing in things they don't understand. And if you happen to buy a place in an area that is booming in the next few years then it can really be worth it. But that's the same like buying early a stock of a company that makes it big.

<comment><USER41> I wouldn't go that far. If that place is "booming" likely so is all the other places that are similar that you would like to live. Unless you sell and move to a much lower cost of living area, the equity in your house doesn't help you.

If you go by the popularly accepted rule of thumb, you should put 1% of your house's value in savings for unexpected home repairs per year. Feels a little high to me.

</comment></comment></comment></comment><comment><USER43> Great visualizations and simple clean presentation. I tried to use a number of these simple tools to evaluate investment properties but they were usually too high level. I ended up building my own very detailed spreadsheet where the inputs can be tailored very specifically. I know it's not "software" in the HN since, but I made the Google Sheet available online [0] here if any one wants to use it. Note that this is a shared demo so your data will be overwritten by other users.

[0] [https://docs.google.com/spreadsheets/d/1i6xNZiNVn53_bnibfEvK...](https://docs.google.com/spreadsheets/d/1i6xNZiNVn53_bnibfEvKeMQi52ueFYMWFjUDUTprFqs/edit#gid=1180945299)

</comment><comment><USER44> The math on appreciation rate is a bit off because of how risk adds up to itself over time.

For example, if you assumed 3 +/\- 3% appreciation, then the calculator applies that range to every single future year, whether 1 year or 20 years, e.g. 20 years later, the realized appreciation seems to be 3% +/\- 3%.

However the normal way this is done in economics and finance is to assume independent increments of return volatility (let's say 3% per annum). This gets you:

\- 1 year out: 3% +/\- 3%

\- 10 years out: 3% +/\- 3% / sqrt(10)

\- N years out: 3% +/\- 3% / sqrt(N)

Intuitively, imagine if having a 'good year' were simply a coin flip, e.g. either you get 6% in a year or 0%. Over N years, the sum of your total return is a binomial distribution with standard deviation that grows with sqrt(N). Since your annualized return is approximately total / N, the standard deviation of realized annualized return scales at total / sqrt(N).

Probability cones should always look like sideways parabolas:

[https://sixfigureinvesting.com/wp- content/uploads/2018/11/Mo...](https://sixfigureinvesting.com/wp- content/uploads/2018/11/MonteCarlo-vs-theor-simple.jpg)

More here:

[https://sixfigureinvesting.com/2018/11/predicting-price- rang...](https://sixfigureinvesting.com/2018/11/predicting-price-ranges-with- historic-volatility/)

One more thing: the chart has no provision for inputing stock market volatility, which (historically) is quite a bit higher than real estate volatility. You're comparing a 'risky' bet to an assumed 7% riskless bet when stocks are also at an all-time high. The better thing to do would be to model the volatility of the stock market (historically ~15% per year), then show the distribution of (real estate return - stock market return) (with some correlation assumption).

<comment><USER7> Hey, thanks for taking the time to write a detailed comment!

Everything in the model runs by simulation, so we don't do any maths on appreciation rates. Since it's a simulation, I believe the combinatorics sort themselves out!

However... it's possible that something we are miscommunicating something — what gave you the impression that the appreciation maths was off?

You're right about the chart — we wanted the baseline model to be an extremely rough guide to compare the buy-to-rent scenario with, so didn't want to add volatility there.

<comment><USER44> > we don't do any maths on appreciation rates. Since it's a simulation, I > believe the combinatorics sort themselves out!

That is never a valid inference. At the risk of sounding harsh, you cannot simply throw up your hands and say 'the simulation said so!' without understanding what is actually being simulated, or else you will get nonsense results.

> what gave you the impression that the appreciation maths was off

The 'probability cone' is clearly the wrong shape.

> so didn't want to add volatility there

Many fields the calculator, such as appreciation, have distributions attached to them. The way returns in real life get a distribution is via volatility, so it's highly misleading to both have a distribution width and say that you don't want to add volatility.

This is what your simulation is actually doing:

1\. Pick a _single_ normally distributed number

2\. Pretend that is the return of your investment, linearly applied over many years. E.g. if the number I drew in step 1 is 4%, then I assume I got 4% return every single year until year N.

3\. Repeat a number of times and graph the boundaries

By contrast, this is the norm in finance and financial economics:

1\. Actually simulate a financial return process over a number of years. E.g. in year one, I returned between 0-6%, repeat for year 2 ... N, and keep track of the entire history

2\. Repeat many times

3\. Draw the distribution

Note that the 'correct' simulation procedure draws paths that go up and down, just like asset prices do in real life, while your simulation procedure only ever creates asset price paths that grow or shrink at a constant rate.

I strongly recommend either you give up on simulating returns entirely and make it a single point estimate, or do the simulation properly, otherwise your results are badly misleading. Here's a (very simplified) simulation approach:

[https://www.investopedia.com/articles/07/montecarlo.asp](https://www.investopedia.com/articles/07/montecarlo.asp)

<comment><USER7> Hey, maybe we haven't communicated this well, but we are actually doing exactly what you've described as "the norm in finance and financial economics". We run 1,000 simulations to produce the model output. In each simulation, there are 30 years. Each year, we sample a new "Annual Appreciation" rate. So each simulation does indeed have paths that go up or down.

I didn't mean to suggest that simulations are always correct. Just that I believe ours is, in this case :)

Can you help me understand your point about the "probability cone" please?

<comment><USER44> I think you're right, just did some careful testing and it looks like the 'probability cone' (basically, the shape you see if you only look at the shape drawn out by the 1 std dev / 2 std dev lines) does have the right shape. My apologies for jumping to conclusions there :)

However, I can't replicate the numbers that you create for a simple test case:

[https://imgur.com/a/ogP1ucY](https://imgur.com/a/ogP1ucY) [https://imgur.com/a/dHQ5WyJ](https://imgur.com/a/dHQ5WyJ)

Here we've basically zeroed out rent, mortgage, and everything else, in order to purely isolate the appreciation factor, and your calculator shows a year-30 range of $1m +/\- 285k at 95% confidence.

However, if you take 30 independent draws using a 0% +/\- 3.2% range @ 95% confidence, that implies each draw has 1.63% std deviation (3.2% / 1.96).

The 95% CI for the sum of 30 independent draws with 1.63% stddev is given by (1.63% * sqrt(30) * 1.96) = +/\- 17.5% return.

Applied to your initial amount, I'd expect to see a $1m +/\- $1m * e^(17.5%) = ~$190k range for the 95% CI, not the +/\- $285k range that you show.

Note the power of just using basic stats and identifying edge cases to validate whether your simulation is giving reasonable results -- here I think either an input or output might be mislabeled (is the input really 3.2% at 95% CI, or is a different confidence?).

</comment></comment></comment></comment></comment><comment><USER45> Hey, I really like the app and have signed up. One thing I would add is multi- family units. Even better would be the concept of "house hacking" or buying a multi-family and moving into one of the units. This may just be a US thing, but this allows you to have a low down payment and cash flow and live for free. This is a pretty popular thing to do in the US, and I haven't seen any tools that account for it. I am currently doing this and use excel for all my calculations. Also, maybe add a remodel calculator, I. E. If I do a remodel for 10,000 and the rent goes up by 500 my yoy roi is like 60%. This number goes up even more of you get a loan and use leverage.

</comment><comment><USER46> Nice. Some questions:

\- How are you modeling property tax payments?

\- Would be nice to show the annual return for the investment. You have a chart, I can read it so see whether I'd do better than the market, but would be nice to show '13.4% return', vs. a dollar amount after some time period.

\- Are you modeling tax benefits at all? Mortgage interest, property taxes, maintenance costs and depreciation all impact the net return for the investor. This would be hard to model since the tax situation changes by individual investor and local tax rates.

\- Have you contemplated whether the investor is self-managing or hires a property manager (perhaps included in the annual 1% expenses?)

</comment><comment><USER47> I love scrubbing calculators like these that help make complex decision making easier. A year ago I was interested in comparing buying vs renting, the other demo calculator on the Causal app homepage. If anyone is interested in playing around with real code to produce similar charts here is the source: [https://github.com/radekstepan/buy-vs- rent](https://github.com/radekstepan/buy-vs-rent)

It's Toronto/Ontario/Canada specific, but you can plug in your own taxes, fees and estimates.

</comment><comment><USER48> very cool. Please make your next demo about retirement planning.. or kids' college fund planning...

</comment><comment><USER49> Buying a rental property a very simple form of startup for the unskilled, requiring a very high startup cost for a small return.

I bought a house one year ago, spent $200k and then another $50k in repairs, and now I'm renting it at $1500 a month ($1200 profit after property taxes and miscellaneous)

On the other hand, I also started a new company about a year ago, spent $0 upfront investment, $50 in monthly hosting costs, and it is earning a monthly profit of $2000 currently.

<comment><USER50> If you don't mind me asking, what does your company do?

</comment></comment><comment><USER51> I've been looking on Redfin for potential investment properties in SF but I cannot find a single home on the market where rent would remotely cover the mortgage.

<comment><USER52> That's because massive expected appreciation is baked into SF prices.

</comment></comment><comment><USER53> Having a higher end ($350+/night) house on AirBnB was pretty fun. The higher price plus AirBnB screening kept out the rifraf so we had very few problems.

<comment><USER54> Still have it or what happened to it?

</comment></comment><comment><USER55> Agree with much of the commentary here. Investment returns on real estate ownership (whether as primary residence or as income property) often ignore externalities and the time investment by the owner. Having the freedom to not worry about or arrange resolution of leaking toilets, gophers in the lawn, broken fences, etc is a great return on non-ownership!

</comment><comment> alok-g Here's the most complete buy vs. rent calculator that I have come across:

[https://michaelbluejay.com/house/rentvsbuy.html](https://michaelbluejay.com/house/rentvsbuy.html)

His other articles are also often worth reading.

</comment><comment><USER56> I suggest considering REIT stocks that actually own real estate instead. They push through 90% of their income as dividends and enjoy a tax shelter because of it. It's a liquid and passive proxy for real estate investing.

Also, the RE market is just lousy for buyers right now all around.

</comment><comment><USER57> Four percent and higher residential real estate appreciation over that long of a period without massive inflation is mind boggling. I don't think I make that investment just because if it is successful, the inequality in society at the end of the loan is soul crushing.

</comment><comment><USER58> It does not seem to take either inflation or lost growth on the down-payment. These two factors have a huge impact on evaluating property against other investments. It would be nice to factor in an interest-only mortgage rather than a repayment mortgage.

<comment><USER59> Its a job to maintain property too.

Real Estate is not passive income.

</comment></comment><comment><USER60> See also: [https://www.nytimes.com/interactive/2014/upshot/buy-rent- cal...](https://www.nytimes.com/interactive/2014/upshot/buy-rent- calculator.html)

</comment><comment><USER61> Note that these models are created in an era of great inequality. You can expect that if at any point a correction is made to this disparity these numbers will also be effected.

</comment><comment><USER62> Is it just me or is it automatically doubling the rent you input??

<comment><USER7> Hey, sorry for the confusion. The rent you set is at year 0, and your rent increases each year according to "Annual Appreciation" (in reality this isn't quite what goes on!). The "net monthly earnings" in the output section tells you the numbers for the year you selected, so if you're looking 10 years down the line then the rent number will be significantly more than what you set it to be.

This is pretty opaque and we should have explained where the numbers were coming from. Had intended to add a tooltip there explaining this but looks like we forgot!

</comment></comment><comment><USER63> Entering 60 for loan term crashes the whole app

<comment><USER7> Thanks for raising - will fix!

</comment></comment><comment><USER64> No support for not getting a mortgage?

<comment><USER7> You could simulate this by setting the down-payment equal to the property value, so it's essentially a cash purchase :)

</comment></comment><comment><USER65> Where's inflation in this model?

</comment><comment><USER66> No. Let other people buy it. Buy-to-rent should be a crime.

<comment><USER4> That doesn't make sense. Renting your property should be a crime? How do you propose people get housing when they can't buy?

<comment><USER67> I don't know of any country that does this, but it's not completely unreasonable for all tenants to be accumulating equity in their residence, so that living in the same place continuously for a long time will eventually result in them owning it.

<comment><USER32> The future of housing IMHO. Equity based rental models, modeled on REITs. You earn shares in the operation as you pay rent, eventually owning your share of the house in a time period that is similar to a traditional mortgage. End the inflation of the monetary base caused by property speculation. As time progresses, and larger housing loans from Banks is required, we are being robbed of our savings.

<comment><USER68> What's in it for the landlord? They'd only agree to this scheme if they get a lot more rent, perhaps double. Also no bank would loan to the landlord for such an arrangement. Governments could provide such a scheme if they are the builder.

</comment></comment></comment></comment></comment><comment><USER69> just take the loan out of the equation. don't borrow money trying to make money. that's like having a margin account with etrade! You don't pay interest on a loan and use the money from that loan to buy stocks do you? Just saying, real estate is a fine thing to buy, with all cash! hashtag [https://en.m.wikipedia.org/wiki/Dave_Ramsey](https://en.m.wikipedia.org/wiki/Dave_Ramsey)

<comment><USER70> > don't borrow money trying to make money. that's like having a margin account > with etrade! You don't pay interest on a loan and use the money from that > loan to buy stocks do you?

The difference is that interest rates on margin accounts are far higher than they are on real-estate. A margin loan may be 8% or more. So you have to invest in something that grows faster than that to make any money. However real estate loans are 3-4%/year, and in addition they generate rental revenue which is also roughly 3-5%/year.

Taking out a loan on real-estate makes far more sense than taking out a margin loan.</comment></comment>


Why you should read academic papers - <AUTHOR> http://blog.rafaelcorrales.com/2011/01/all-you-have-to-do-is-consume-and.html

<comment><USER2> A positive side effect of regularly reading good academic papers (or books) is that fluffy blog posts etc. are, in contrast, readily perceived as vacuous, and are thus easily ignored. [To be clear, the present blog post is a good one: it makes a good point, and is no longer than it ought to be.]

<comment><USER3> The problem is in finding the good academic papers. For someone like me who is not affiliated with a university, the best papers are often behind paywalls.

<comment><USER4> For recent stuff in computer science this is somewhat less of a problem, because most people post PDFs of their own papers on their websites. Citeseer (<http://citeseerx.ist.psu.edu/>) indexes and caches the self-hosted PDFs as well.

<comment><USER5> CiteseerX is _fantastic._

Once you find a good paper or two (and/or the academic literature's relevant buzzwords for your issue), you can span out through the citations for quite a while. "Introduction / Survey of ..." papers (e.g. [http://archives.cs.iastate.edu/documents/disk0/00/00/02/04/0...](http://archives.cs.iastate.edu/documents/disk0/00/00/02/04/00000204-01/TR93-01c.pdf)) exist _mainly_ for the bibliography. Also, when you find someone whose name keeps coming up, look for their faculty page, e.g. Andrew Appel's (<http://www.cs.princeton.edu/~appel/papers/>).

For papers that don't have .pdf or .ps files cached on Citeseer (due to primary hosting behind the ACM's paywall) try searching on Google Scholar and clicking "X other versions". Typically, the ACM is the _first_ result, but faculty pages have publicly visible copies.

</comment></comment></comment></comment><comment><USER6> You can't just 'consume and digest' any paper that you come across. It's like trying to drink from a firehose. Assuming you already have a field of interest, I recommend looking at the last few years of the top conferences and journals in that field. That will give you what's trendy right now, of course. To find 'landmark papers' in a field, one way is looking at suggested readings from (possibly graduate) course websites (e.g. from OCW) in the topic of interest.

<comment><USER7> I do agree with you here, trying to consume and digest everything that comes out in one's field of interrest is not only pretty hard but also extensively time consuming.

I guess the point of the article is more to, induce people into considering more academic papers when they do research -- that is, either for their own non-academic or academic research.

I always find it interesting to read those, when they're closely related to what I'm trying to do or what I am currently doing / researching.

And as far, as trying to catch-up with a whole field of interest, often enough, there are books -- written by the same researchers that wrote the papers you missed -- that presents you the latest advancement in the field over the past years ; all the while presenting you the way of thought that accompanies these discoveries... A good example of that would be "Burst" by A.-L. Barabási, a personal favorite :)

</comment></comment><comment><USER8> There's another reason to read their papers, which I describe in "How to get your Professors' Attention — along with Coaching or Mentoring" ([http://jseliger.com/2010/10/02/how-to-get-your- professors%E2...](http://jseliger.com/2010/10/02/how-to-get-your- professors%E2%80%99-attention-or-how-to-get-the-coaching-and-mentorship-you- need)): you want to signal to your professors that you're worth investing in. Most people aren't, and one way to distinguish yourself is to read their work, since the majority of students—even those who say they will—won't.

</comment><comment><USER9> Like others are mentioning, I've always found it curious how difficult it is for people outside of academia to access good journals and articles. It's even more puzzling because in academia we're always trying to shout to the world that this knowledge ought to be utilized. That said, I think some fields have a much better relationship with industry than others. In my field of education, it's a rather big problem disseminating findings to the front line. As for tips, I've found that a good way to stay on top of knowledge broadly is to read edited handbooks and reviews. These sources might not be the newest but they certainly condense a lot of good empirical findings that have been tested over time and highlight the most important branches and directions. It's also kind of interesting to find who the grad students of the most prominent figures are and read their papers, proceedings. A) They're dying to talk about their stuff, B) They have the guidance of an experienced scholar, and C) They have that energy to drive into quite interesting and new territory.

</comment><comment><USER10> If my employer didn't provide access to the ACM online library, I would pay for the dues myself.

It would be nicer if access were free, but even at 'prox $200 / year it's a great deal.

I daresay that keeping up with the ACM papers has extended my career by at least a decade.

<comment><USER11> Your last statement is very interesting. Frequently, one hears about the divide between academia and the real world, and how much research---even in CS ---is unlikely to ever have practical benefits. Could you give an example or two of the ACM subscription being the key element for a step forward in your career?

</comment></comment><comment><USER12> While I agree that many scientific articles are worth reading, I think that it's almost impossible to read everything even in your field of interest. The point is to get the most interesting and important ones.

So I suggest reading what is called Review articles following the references if necessary.

</comment><comment><USER13> A semi-cool place for finding interesting papers to read is here:

<http://www.reddit.com/r/compscipapers>

</comment><comment><USER14> also: textbooks are cheap (anything behind the latest edition has high supply and low demand as all of last year's students dump them).

you can receive tomes that cover vast swathes of human knowledge for the price of a sandwich. trying to educate yourself online usually doesn't compare to a really excellent textbook.

<comment><USER15> Math textbooks are not cheap.

<comment><USER16> "Math textbooks are not cheap."

Actually, they are _free_. I am a graduate student in Mathematics and there is no book, on any level of mathematics that I have been unable to find for free download.

Places like www.avaxhome.ws and old.pdfchm.net are chock-full of math textbooks not to mention the torrents which can be found on isohunt.com and thepiratebay.org that consist of collections of thousands upon thousands of graduate level mainstream and esoteric mathematics texts, all high quality scans.

In total, I have many thousands of dollars worth of mathematics books, all of which I have obtained for free (and I feel justified; there's simply no cost- effective way to obtain those books on my side of the planet).

</comment></comment></comment><comment><USER17> [http://www.ausindustry.gov.au/AboutAusIndustry/Pages/AboutAu...](http://www.ausindustry.gov.au/AboutAusIndustry/Pages/AboutAusIndustry.aspx)

<http://www.enterpriseconnect.gov.au>

<http://www.commercialisationaustralia.gov.au></comment>


Automated Monopoly hasn't figured out that people just don't like Monopoly - <AUTHOR> http://www.wired.com/geekdad/2011/02/geekdad-rant-mono-puh-leeze/ <comment><USER3> I'm sick of people trying to promote the boardgame scene by bashing one of the games that I've watched people enjoy the shit out of, and is the perennial whipping boy around some nerdy quarters. The main barriers keeping modern games like Carcassone and Settlers from general appeal are the medieval trappings like knights, kings, castles, and dragons, and when those are missing, spaceships. At least, that's major barrier I have to overcome when I pull out one of the things. I have better luck getting people to play Acquire, even though bookkeeping is a barrier.

>Approach your average American and say you enjoy board games. I guarantee you, nine times out of ten, you'll get a response something like: "You mean like Monopoly?" (And the other ten percent will challenge you to a game of Ticket to Ride or Carcassonne.)

He's got this wrong by at least two orders of magnitude. I can find 1000 people who LOVE Monopoly before one that has even heard of Carcassone.

It's a Mensa/BoardGameGeek delusion that people are as disgusted with games of chance as they are. _People LOVE dice. Remember, people LOVE casinos._ People may not love being dominated during an entire game, but people sure love dominating for an entire game, and if you play enough games, you get your turn. And contrary to popular Mensa/BGG belief, more people have completed a dozen games of Monopoly than have ever seen the front of a Settlers box.

</comment><comment><USER4> Monopoly is a great game if you play by the rules. Nobody does, however, and then they complain that it's boring and takes too long.

It's not, unless you ruin the game with the $500 every time you land on Free Parking rule.

A great way to speed things up is to use calculators. Instead of paper money changing hands, we'll typically give each player a pocket calculator to add and subtract from their cash total.

<comment><USER5> When you play online, it limits you to X rolls or Y times past GO, and then whoever has the highest net worth wins. It is a much faster game, and it makes betting on it a lot of fun. Of course, the game is solved so it's almost pure gambling unless your opponent doesn't know how to play.

Risk was my favourite board game though, ainec.

</comment></comment><comment><USER6> Isn't one of the big problems with Monopoloy that no-one plays it by the actual rules?

Since out-bidding for properties seems to aggressive and likely to lead to family fallouts, that part just gets dropped from the game. This makes it more boring _and_ take much longer to finish.

I wonder how that works out with an automated version. Does it have rule variants built-in?

Though there is a train of thought that it's lack of enjoyment is the best thing about it:

<http://www.downtimetown.com/2009/06/06/defending-monopoly/>

<comment><USER7> Played by the rules, Monopoly is a nice guys finish last game. But the payoff is that winning entails total victory.

[http://www.youtube.com/watch?v=6PQ6335puOc&feature=relat...](http://www.youtube.com/watch?v=6PQ6335puOc&feature=related)

</comment></comment><comment><USER8> The London-based is widespread in the commonwealth (other than Canada), less now than twenty years ago when they begun to emphasise regional versions. When I got to London, I knew correct pronunciation for several of those places where with odd spelling-to-pronounciation. If I designed a new version now, I'd do it just with those places. Leicester Square. Holborn. Beauchamp Street ("Perhaps you were hoping to go to beach'em street, sir"), Pall Mall, Maryleborne Station, Marlborough Street. Those names stick in your mind as navigation points in the early days when you don't know much else.

That quirk aside, it's a stupid game. It communicates that wealth is a zero- sum game, and encourages a mindset whereby ideas about wealth are oriented around ownership of real-estate. These are both brain viruses in the anglosphere, although causation is unclear. And it's laborious.

A better wealth game is Pit/Billionaire. It's zero-sum, but that reflects the reality of the setting (commodity trading) and has interesting social dynamics. Consider this valid tactic: make a deal with someone not to pass taxman across, and you both aim to stick with that principle over several rounds.

Settlers is great because when played between nice people or with children, it can be played as a non-zero sum game that everyone gets something out of.

Scotland Yard has a better take on central London geography, and has team dynamics, lateral thinking and requires risk judgements. Flexible on the number of people you have to play.

The likes of Monopoly give board games a bad name. There's other awful mainstream board games though - I thought of Ludo.

<comment><USER9> > It communicates that wealth is a zero-sum game, and encourages a mindset > whereby ideas about wealth are oriented around ownership of real-estate.

I think you're probably reading to much into this. It's just a _game_. I don't think it's particularly promoting anything.

> A better wealth game is Pit/Billionaire. It's zero-sum, but that reflects > the reality of the setting (commodity trading)

How is commodities zero-sum and property not?

> The likes of Monopoly give board games a bad name.

That's like saying Star Wars gives movies a bad name. It might not have the best script, it might not have the best acting, but it's a movie that has and continues to appeal to young and old alike, that is still watched like a gazillion times a year.

Edit: the original star wars trilogy obviously, not the recent triple travesty of video game-esque inanity.

<comment><USER10> > I think you're probably reading to much into this. It's just a game. I don't > think it's particularly promoting anything.

The original game was purposefully designed to be anti-capitalist and in particular an attack on landlords who exploited tenants. I think it was called The Landlord's Game and the game mechanic was deliberate.

Monopoly changed a few elements but it's game mechanic is essentially the same.

<comment><USER7> > _"purposefully designed to be anti-capitalist"_

I believe it is technically incorrect to classify Monopoly as "anti- capitalist" in the sense implied. Because of the nature of real-property, landlord tenant relationships are not inherently capitalist. They can exist even in communist economic systems in which people are tenants on government property. Lest we forget, the origin of much of our current landlord tenant system is in feudalism.

<comment><USER10> You're right, its more about landlord-tenant power imbalance, although the mechanic allows players to be in both roles at once

</comment></comment></comment></comment></comment><comment><USER11> Monopoly is a terrible game, but the fact that it keeps selling is a testament to the power of branding and sales channels.

The average game store in the U.S. is a Toyrsus. Toysrus carries dozens of board games from exactly two different companies: Hasbro and Mattel. Toyrsus carries basically zero board games from any other companies. Hasbro and Mattel have figured out that if you offer parents the same games they knew as a kid, they'll buy them; and if you offer games with the same characters as TV shows, the kids will want them. And so that is what is in the stores.

There are a tremendous number of good board games in the world. These are not offered for sale at Toysrus, and therefore do not have any significant sales in the USA.

The existence of Monopoly and the fact that this crummy game continues to be offered for sale is a demonstration of the power of monopoly in the board games industry.

<comment><USER12> my sister managed to find a copy of settlers of catan in a toys'r'us in Ottawa, Canada. we were both extremely shocked by that, as were the employees at the store itself.

</comment></comment><comment><USER13> I love board games. And I used to play Monopoly too as a kid, then stopped.

In retrospect I know why: it has a self-enforcing feedback loop that leads to the rich getting richer, and the poor getting poorer. Thus the outcome of the game is often determined very early, but the game still drags on for long, being not much fun for most players.

The same feedback loop can be found in "The Settlers of Catan", though less (the poor don't get poorer, it's just that the rich grow ever faster). I liked it too, but it's not fun for too long.

An example where it's done differently is Dominion, where resources for development and resources for winning are distinct, but mixed into the same heap. During your turn you take a fixed number of cards from that heap, so if you have many winning resources, your progress actually slows down.

And of course there are also lots of games where the current position doesn't really affect your chances to progress. In the long run I like those (and the ones with negative feedback loops) better than the ones with positive feedback loops.

<comment><USER14> We've had this debate about "catchup mechanisms" or negative feedback loops with my boardgames friends countless times. I personally tend to prefer games with a minimal amount of luck rather than a strong negative feedback loop. I dislike settlers of catan as much as as dislike monopoly. As long as luck is under control, I have no problem losing -- because I can understand where I made my mistakes and be better next time :)

<comment><USER10> In Settlers the catch-up mechanism is meant to be provided by the other players stopping trade with the leader. In the two-player version this is somewhat explicit (there's a trading cost to be winning)

</comment></comment></comment><comment><USER15> The problem is that it's 99 percent luck. A game of monopoly is fairly straightforward:

      1 hour of randomly acquiring properties.
      30 seconds of trading between other players.
      4 hours of randomly resolving the winner with odds established by the last steps.

If you could expand that (fun) 30 seconds of trading to the whole game, it would be a good game.

<comment><USER16> If you play monopoly by the rules written on the box, it only lasts 30-45 minutes, with intense interaction between players. It's much more exciting, but it's also a really miserable game because of its brutal zero-sum nature. (Bear in mind: the game's creator intended it to be unpleasant to play.)

"House rules" like free parking, non-compulsory property purchase, non- auction-mortgage etc seem like very small changes, but they really terribly break the game balance. Putting money under free parking is all it takes to turn a 30 minute shouting match into a tedious three hour snooze-fest.

In short: Monopoly is never "fun," but it can be very exciting. It's the house rules that seek less painful gameplay that make the game so very, very dull.

</comment></comment><comment><USER17> I freaking _love_ Monopoly. And yes, I've finished many games of it.

The reason that nobody ever finishes is that they're far too nice. You're supposed to be destroying everyone, not floating them loans to keep them in the game. Every time I play a 'casual' game, that kind of junk happens, and it's incredibly dumb.

<comment><USER18> My favorite part about it was the agonizingly slow & painful death of my opponent. (my little brother) Thirty minutes of my brothers despair was totally worth the 1.5 hr build up. I love Monopoly and had a blast playing it as a kid.

But then again, I don't play it anymore and I don't know any adults/kids that play it anymore. It's clear that times have changed, and the entertainment expectations are drastically different than they were 100 years ago.

Hasbro does not need gimmicks to make monopoly fun, they need to make monopoly fun for this generation. You can spend $60 on a video game with great graphics that sucks, or $10 on a game, that might have lower production value, that will keep you entertained for hours. At the end of the day fun is fun.

They need to offer kids what this video game generation is truly looking for, which is instant gratification.

<comment><USER19> I have some good memories of playing monopoly with the family as a kid of about 10. I think it appeals to a kid that age; much younger and they don't really have the attention span or maturity to understand what is going on, and much older and it's just boring. As an adult, I find it to be a pretty tedious game, but like me, my son went through a period of about a year where he really enjoyed playing it.

</comment></comment></comment><comment><USER20> "Sure, there are some folks who really love Monopoly—but personally I've only known a few that have actually completed an entire game of it." --- WTF? Is this guy from a mathematically inept family or something? I've played Monopoly hundreds of times in my life with dozens of different people, we always completed the games, sometimes with free parking rules sometimes without. I never even imagined that somebody would stop playing without finishing a game, what would the point of that be? What's next, claim that people don't finish games of Risk also?

</comment><comment><USER21> Monopoly on the surface looks fun, but even when all the rules are followed there are very few mechanisms in the game where someone can actually use skill to outwit their opponents, far to much luck involved with a little bit of basic principles in the trading and deciding when to put down houses and how many.

I've got into it a few times with family but been left frustrated when it seems as if you can play perfectly and still lose regularly.

</comment><comment><USER22> In my family,

Games we tend to like: those where _everyone_ is actively playing most of the time: Boggle, Scategories, Pictionary, poker, chess.

Games we tend to dislike: those where 1 or 2 people are actively playing and everyone else is doing nothing: Monopoly, Risk, Trivial Pursuit, Scrabble, Dominos.

<comment><USER21> Depends how serious you get with scrabble, in a game against half decent opponents unless your abnormally good at forming words your probably going to need to concentrate when it isn't your turn also to come up with options for your next turn.

<comment><USER23> if you don't spend time considering your options when it's _not_ your turn, you waste other people's time when it is your turn.

</comment></comment></comment><comment><USER24> A decent board game often gives you a difficult choice on each move. In Monopoly, it is nearly always a foregone conclusion, so it is not much different to playing ludo. A really good game will have you anticipating other players moves, negotiating, misdirecting and betraying them, and forming and breaking alliances.

It feels like Monopoly could be a better game if only it had better rules. There should definitely be a trading and negotiation phase in there, and some way for players to stop a player who's getting too far ahead.

Maybe a decent, well-known, alternate set of rules for Monopoly would make all of those monopoly sets out there less useless.

<comment><USER25> The auction phase that's already in the official rules, but that most people skip, goes a long way towards answering most of your critiques.

<comment><USER24> It's amusing that people remove this mechanic and manage make the game even duller but my critique is based on playing the game according to the official rules.

</comment></comment></comment><comment><USER26> Apart from discussing whether Monopoly is a great game (which I think it is not, Funkenschlag, You're Bluffing, Werewolves and Tichu, for example are much better) I do think that automating the transactions, and some of the other more administrative sides of board-games, is a real improvement...

<comment><USER27> Presumably Apple will bring out a giant iPad at some point, or Microsoft will bring out a cheaper Surface.

</comment></comment><comment><USER28> Obligatory board game link: <http://boardgamegeek.com>

For those that don't know.

<comment><USER29> If you like board games, this site will change your life.

<comment><USER30> It's a great resource, but for the casual player, there's plenty of room for improvement (startup opportunity? :) ).

I wanted to find some kind of summary for each game - I bought Puerto Rico as it is one of the top rated games there, and it was far too boring for my playgroup (mostly casual and looking for shortish games).

</comment></comment></comment><comment><USER7> Monopoly is like poker. It's a winner take all game with a simple set of rules where luck of the draw helps, but people reading skills, the ability to calculate odds, and manage your cash greatly increase one's chances of winning. The theme of real-estate development is a good match for the way in which it balances ruthlessness and cooperation.

I recently played a few games of U-Build Monopoly which despite its abundance of board gimmicks is a great improvement because of the abundance of complex strategic options at every turn and the flexibility of sound short game options.

[http://www.amazon.com/Hasbro-18361-U-Build- Monopoly/dp/B0036...](http://www.amazon.com/Hasbro-18361-U-Build- Monopoly/dp/B0036RKHE8)

</comment><comment><USER31> > A well-designed game has rules simple enough for everyone to follow without > arguments, keeps everyone engaged to the end, and encourages positive rather > than negative social interaction. Such games exist.

Could anyone name a few?

<comment><USER10> Pandemic - co-operative yet challenging board game about trying to cure disease on a Risk-like board

Scribblish - it's like pictionary but it doesn't matter how badly you draw and everyone is always involved

Carcassonne (if the 'farmers' rule confuses anyone, don't use it) - <USER2> chance of negative interaction.

<comment><USER32> As an aside, if negative interactions concern you, it's probably a good idea to keep away from Diplomacy. There have been fist fights in my group of friends over that game.

</comment></comment></comment><comment><USER33> Monopoly is certainly not my idea of a good time. The monotony comes from the number of times you have to see the same board state. It's not even that I don't like long games. In fact, I adore them - as long as they're interesting.

I would highly recommend the following over Monopoly: Carcassonne, Medici, Taj Mahal, Tigris and Euphrates, Mensa Connection, The Confrontation, Civilisation, Age of Steam, Dampfross (Railway Rivals), The Lord of the Rings board game.

</comment><comment><USER34> I believe the fun-factor - or lack thereof :) - might have something to do with the fact that Monopoly's origins are supposedly as a warning of the perils of capitalism.

While the story is disappearing into time, and is perhaps an over-egged story of folk woman vs. corporate greed; there is a marked similarity between Elizabeth Maggie's "The Landlord Game" and what became Monopoly <http://en.wikipedia.org/wiki/The_Landlords_Game> (it appears an apostrophe is parsed out... it should be The_Landlord's_Game).

Its intent was to demonstrate how monopolies grow, and how once they exist they are hard to overcome. I.e. not fun. Which might explain something about Monopoly today :)

There's more at <http://www.antimonopoly.com/original_boardgame.html>

</comment><comment><USER35> I really want to disagree that Monopoly = Monotony, but then I realised how long it has been since I played this socially. My beautiful wife and I are equally competitive and have played it maybe 6 times in eight years; I do like playing 8-player Monopoly with myself (you have to ignore the auction rule, lest you compartmentalise your brain too much), but I would _never_ suggest it as a dinner party game.

As for Monopoly = Ubiquity, it's probably the first game that comes to mind. But in the past 3 years I've played plenty of others (Cranium, Risk, Balderdash, Trivial Pursuit, Scrabble) in social settings and had lots of fun. Batteries not required.

</comment><comment><USER36> Monopoly is good game to learn how to negotiate deals. You can work out a deal to exchange properties, or buy someone else's properties.

</comment><comment><USER27> I agree that Monopoly isn't a particularly good game, but people are still buying it.

The point of Automated Monopoly is probably all the free media coverage Monopoly gets as a result.

<comment><USER10> Maybe not attention but just trying to add a gizmo to sell the same lemon every year.

It seems like every six months they bring out a new Monopoly :there was one with sewerage and skyscrapers recently, before that the ATM, and that's not including the 1000 different brandings like Simpsons, Manchester U, etc

</comment></comment><comment><USER37> I'm sorry... What's wrong with Monopoly?

</comment><comment><USER38> What are the better board games?</comment>


Ask HN: quickest way to earn some hacker news points? - <AUTHOR>

Ask HN: quickest way to earn some hacker news points? <comment><USER2> Roughly twice as many points come from comments as stories

        > (with (s 0 c 0)
            (for n (- maxid* 10000) maxid*
              (let i (item n)
                (if (astory i)   (++ s (realscore i))
                    (acomment i) (++ c (realscore i)))))
            (list s c))
        (14501 28488)

so the way to get lots of karma would seem to be to post good comments. But that assumes comments and stories take equal work, which may not be true.

Why do you need to get karma fast, though?

<comment><USER3> It would be great if there were a karma market:-) Having accumulated a bit of the stuff, it's evident that it's entirely useless outside of comment threads, where it indicates popular comments.

</comment></comment><comment><USER4> Why? I never look at other people's karma anyway. Really it's a silly concept because it can only, really, go UP (except in odd cases) and there is no easy way to judge 2 people next to each other (because they will have joined at different times and commented in different places).

And besides 68 Karma does not make you (for me at least) any less "important" than those with thousands of Karma...

(of course, this topic _does_ put me off slightly)

Forget the Karma - get involved in the sub-culture and you will gain respect.

</comment><comment><USER5> 1) Create an irrelevant post asking how to get karma.

</comment><comment><USER6> Be the first to post a new pg essay :)

</comment><comment><USER7> Post an article about xyz company rumored to be in late-stage talks to acquire Twitter.

</comment><comment><USER8> Say smart things and find interesting things.

</comment><comment><USER9> Flame PHP.

</comment><comment><USER10> contribute relevant information and/or clearly labeled opinion.

</comment><comment><USER11> Submit an interesting page on Erlang.

<comment><USER12> Or reply to comments with more links to Erlang.

<http://www.reddit.com/r/erlang></comment></comment>


Ask HN: How to make sure I get this job - <AUTHOR>

In one of my recent posts I asked about pricing for iOS development. Well I set a price and wrote a proposal and presented to this company. I am only 15 but they were impressed I think. They told me a few changes they would like to see and wanted me to revise the proposal and also create a 5 minute video explaining the proposal. I really would like to get this job and I think it could open many more doors for me. Does anyone have any tips, mainly for the video so that I could really sell them on the idea? Thank you very much! <comment><USER2> from a recent major website re-programming / redesign (now 11 months in development now) i would say the following:

1: don't mix business and pleasure; i know the client personally (my wife works for them) so it gets sticky at times

2: make sure the contract properly outlines the work that needs to be done in DETAIL - and don't deviate from it without changing the contract

3: watch out for feature creep - this ties into 1 and 2. they will ask for more. Minor changes aside (color, text size, etc...) is ok; major changes (adding a wholesale section) is NOT ok

4: stick to your deadlines; at one point, they wanted a person in house to design the website. I said ok and stopped programming until she was done with the designs. I've had nothing but problems ever since. designs have been late; they've given me the design only to turn around and make more changes to them. SAY NO TO THIS unless the contract is revised and everyone agree's on new deadlines.

5: make sure what you need up front, you get. I always ask for 50% down. I got this, but as deadlines were broken, I never got 50% of the remainder at each additional stage. As a freelancer, this hurts.

6: Contracts usually don't take into account time you need to figure things out. One of the things I needed to figure out was how to store a file on a CDN with a link expiration so that even if someone viewed the source of the website, the files I was linking to would be invalid after 2 seconds (the best security i could offer and it was accepted by the client). But, it took 1 week to figure out how to do that even with talking directly to support staff at Rackspace. 1 week doesn't sound like a lot over 11 months, but its a lot when every week that passes is another week you don't get paid.

these are my personal views obviously and not all my freelance work goes this way. This was the biggest project I ever took on by myself and it ended up requiring a lot of engineering. Thank god, it's almost done but it was for sure a learning experience.

<comment><USER2> oh yeah - #7: don't bite off more than you can chew. When this project started, it was the only project on my plate. After they pulled the "we want our designer to design the site" switch on me, this was no longer the only thing on my plate. Now I have 3 other projects i'm working on at the same time. Sounds great, but when you're now working 80 hours a week just to get them all done, it kinda sucks.

<comment><AUTHOR> Thank you! This all looks like great advice! Especially the feature creep, my client is already showing signs of that. I</comment></comment></comment>


Billers, Players, and Income Inequality - <AUTHOR> http://econlog.econlib.org/archives/2008/06/billers_players_1.html

<comment><USER2> Bryan Caplan was my adviser at Mason. Interesting guy. He thinks we inefficiently overeducate.

<comment><USER3> > He thinks we inefficiently overeducate.

Maybe from a purely economic perspective, but in any society in which people elect their leaders, every citizen ought to have a firm grounding in civics, numeracy, critical thinking, history, and science.</comment></comment>


My first three days with a data plan - <AUTHOR> http://www.jeanhsu.com/?p=259

<comment><USER3> So, question: do you think that having a data plan makes you more or less efficient? When I used to have a data plan, I found that I could stay up to date with real-time information on the go. So, at first I thought it was a productivity tool. But over time, I found that I spent more time checking email, because I was checking it more frequently. Instead of just going to my inbox once every couple of hours and cleaning everything in one-fell swoop quickly, with a data plan, I would be checking my email all the time, and on a mobile device it's a much slower process to clean up an inbox. I've since gotten rid of my data plan, and honestly, given the inefficiencies of my constant email/twitter/fb-checking, I don't think it's worth my time to go back for the purpose of staying on top of things. That said, what I do miss is the ability to effectively have a GPS on the go. Thoughts?

<comment><USER4> It might be worth noting that unless you travel widely, you don't need a data plan for GPS. Cache maps when on wifi then use your device's GPS/A-GPS/tower triangulation functionality.

<comment><USER5> Caching maps is actually incredibly difficult. I just took a weekend trip to Death Valley (no cell coverage) and wanted to do this on my Android Evo.

Google Maps doesn't cache more than a few tiles so it's totally useless. There are a number of apps in the Market that will download maps locally - <USER2> downloads Google Map tiles illegally (with mixed success) and the rest I couldn't get to work.

Do you have any advice or experience you can share?

<comment><USER6> Look under "Cache Settings" in Maps. There's a checkbox for "Prefetch on Mobile". If it's off and you're not using Maps while on Wi-Fi then I wouldn't expect much caching to happen. You can also see how much data Maps has cached.

I don't have a data plan and I find caching works well on my Nexus One when I ask for directions before leaving the house. I haven't tried it on a long road trip though. For comparison, the cache size on my phone is 37M now.

<comment><USER3> Hmm...great idea! I hadn't thought of that to be honest.

</comment></comment></comment></comment></comment><comment><USER7> In my recent experience with my new Android phone, it's best to get an unlimited plan for the first few weeks or months, when you're playing the most with the App store, downloading and trying lots of apps.

But once that inevitably tapers off, and you find the few you use most often and uninstall the rest, then you should check your data usage again to see if your normal email/etc checking habits use less than the lower tier data plans with quotas, and switch back to one of those if so.</comment>