Quote:
Originally Posted by chassis
@Flacht3 Using the scenario you gave above, can you please outline the "don't rent" scenario, with the primary dwelling as the only property in the discussion? In other words, for the average person that does not invest in real estate, beyond the primary dwelling.
What would be the monthly outlay in the scenario you presented in Post #82?
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Not sure if this answers your specific question, but I'm not opposed to renting. It's a helluva lot easier most times. If renting is substantially cheaper than your monthly ownership costs then keep renting. But I live in a market where my rent (for what I want) would cost me $4500+ a month...so If I rent for 3 years I'm out $160k. That type of blow hurts, and I'd rather that go towards something than nothing.
But the other reason (for me) I strongly prefer owning is because of how I can leverage a down-payment for larger returns, thanks to the fact that even though the bank is covering 80% of ownership your gains are on your full 100%. This is basic stuff but:
Let's say I put 20% down on a $800k condo ($160k down). 2 years later I sell it for $1M. I just made $200k profit on a $160k investment. I'm not looking at it from a "I made $200k profit on $800k" but rather "I made $200k profit on $160k).
Then I can take that net return ($360k) and roll that into a more expensive property (20% down on a $1.8M property). Let's say that $1.8M property appreciates an average of 7% a year, and 3 years in I sell. $2.2M. I just made $400k off that $360k. I now theoretically have a 20% down payment for a $3.8M home.
The above is wildly optimistic but in the bull market we've had for the last 10+ years it was the norm in a few housing markets. I'm not suggesting the average person can expect this today, but if you're always renting then you'll never be in it. And yes, if you're always renting you can't ever lose your investment either but results tend to favor net gains as long as you can tolerate some occasional pain.
I'm also a gluten for punishment and willing to move every 2-3 years when opportunity arises. I don't have kids, and am lucky to have a significant other than is willing to abide.
But my primary reason for owning is my first statement. Over X years in an expensive housing market, you're essentially throwing $XXX,XXX away as a sunk cost. I think about it this way, 4-5 years of renting for me would be the equivalent of throwing a Huracan in the garbage.
I am by no means an expert or trying to preachy. Just answering your question and outlining why I make the choices I make.