First off, not sure where you get the 3% figure. The avg annual real estate appreciation in this country since 1968 is 6.4%.

Second, compare apples to apples. If you're renting a place instead of owning if you're lucky you're going to be paying what the owners mortgage is, most likely a little higher. You cant make your argument by saying I would have a $1200 mortage on a $225,000 home but I'm living in a $100k home so I'm only paying $600 and investing the rest. You have to compare what the mortgage costs would be on owning the $100k home.

Third, you're completely discounting the tremendous tax benefits home owners receive that renters do not.

Real estate for investment purposes (ie 2nd and 3rd rental properties) you might have more of a case as you have to put additional money down and the tax breaks arent as great but there is zero argument or sense in choosing to rent when you could buy. Unless of course you only plan on being in a location for a limited amount of time.

You are right, I was off on my 3%.

New home appreciation is 5.4%, general inflation is 4.4%.

Tax breaks, sure, those are nice... but is it enough to justify the rest? If you want to buy a house, buy a house. Don't buy a house because you think it's something amazing investment. It isn't. The math says the opposite time and time again.

you should buy a house to live in it, nuff said... youre gonna lose your shirt trying to flip shit. thats best left to 'reality' tv

Not saying its a fantastic investment and you should be buying 10 rental properties.

But if you're planning on living in one location for an extended time you should be buying and not renting. The tax break on mortgage interest alone makes it worth it.

For extended living I agree. I just hate the saying "it's the best investment you can ever make." :-)

as in walking into a dealership and paying with bills? some might have a problem with that, which is retarded.

when i went to buy my car, the bank gave me the money in my account and i went to use my amex to buy it and they wouldnt do it because they have to pay the 3% fee. pretty stupid IMO

but say i rent.. assume mortgage/rent same thing..

so i spend 15k/yr on rent,(a little over $1k a month) in 30yrs id have spent $450k in rent..

NOW assume a house with same mortgage, in 30yrs id have spent $450k in mortgage, EXCEPT i still have an asset worth at least $450k assuming 0% appreciation in 30yrs(which is impossible)

so tell me how renting is better..

its like flushing money down a toilet.. you are paying someone every month and you dont own shit.. while buying yeah im paying every month, but its still an asset...

Lets work with easy numbers, lets say you have 20k for a down payment on a 100k house...

option a:
take 20k and invest in stocks for example, get 12% annual return
in 30 years that 20k will turn into close to 600k (20k*1.12^30=599k)

option b:
put 20k down, and buy a 100k house, it appreciates at 6%
in 30 years the house is also worth around 600k (100k*1.06^30=577k)

So your "assets" in 30 years are basically the same...

If you look at the cashflow during those 30 years, without spelling out the details, it actually turns out that you spend about the same whether you buy or rent... (When you own a house you pay mortgage, taxes, maintenance, insurance, etc)

In some cases you may actually end up paying less when renting, in some cases a little more... :2 cents:

When you are read for it, have a family, want to settle down, etc, it probably does make sense to buy a house... but if you are not, and you buy a house just because you think it's a good financial move you will most likely be disappointed... :2 cents:

thats assuming you make 12%/yr on stocks for 30 years in a row..

you are missing a very important part of the math, the fact that the person who DID not buy has to pay rent..

so the guy who basically decided to take the 20k and invest in stocks, will have spent say $500/month on that same house in rent..

so thats $6kyr = $180k in 30 years..

so in 30 years, the guy who bought a house, is paying for it, BUT LIVING in it, hence after 30 years he still has an asset worth a lot more than he paid..

the guy who didnt buy and put the money in stocks, had to pay RENT, so in 30years, he might have made money from stocks, but he also spent a minimum of $200k in rent for that period.. makes sense?

the bottom line is ya im renting now, but when i get cash i'll buy a house...

its simple, everyone has to pay rent.. but at least when im paying mortgage its going towards an asset.. when you are paying rent and u dont own, its basically going nowhere.. so you are dumping your $1k-2k/month rent payment down the drain.. while when you buy you are dumping a large part of your "rent" into an asset..

this is a nice chart.. factors in everything..

http://www.nytimes.com/2007/04/10/bu...T_GRAPHIC.html

for the most part, buying is better, unless you are going to be there for <2yr

i did the math right, and ive spent around $100k in rent since i started renting, maybe a little more.. yet i dont have a house or nada...

the same $100k woulda gotten me a small little house somewhere..

Yea, but buying a house means you have to pay mortgage, taxes, maintenance, insurance, etc.... you think all that will work out to be less than $500/month?

its not that expensive.. my sister has a house in TN, cost her around $135k, her taxes are like $1k/yr, insurance a few hundred a yr.. maintenance $0 so far in a year.. its not like people make it out to be..

Heres my question: if say you work 9-5, and you can afford $1,500 on living.. are you better off getting a house and using that 1.5k for mortgage, or are you better off spending that $1.5k on rent..

This is a good scenario because thats where majority of americans fit in..

in my scenario, you'll see its a much much better idea to buy given those circumstances

at least from your $1.5k mortgage, a good chunk goes towards your house, so lets say $500 is interest, then the other $1000 is "your" money... while in the rental scenario, the $1.5k is going towards nothing, same thing as going into a club and buying 5 bottles and pissing it away.. you dont get anything in the long term

Maintenance is $0 until one day roof needs replacing, and you are out of 5 grand to replace it... or old pipe bursts and it costs you an arm and leg to repair the damage... it's fun to theorize on gfy, but it's a bitch when real world sets in, something breaks and all of a sudden you are stuck with a huge bill...

for you it may make sense, but it's not for everyone, many people underestimate the costs of owning a house... one problem and they spiral downwards into debt...

yeah you are right... never know what could happen

Your sister is lucky, those are very very low taxes.

From the $1500 mortgage, "a good chunk" does not go towards your house. You'll be paying $50 on the principle for many many years. It takes awhile for that to stack up.

If the choice was $1500 on mortgage (and that includes taxes, insurance, maintenance, and long-term maintenance) versus $1500 in rent, sure, go for the $1500 homeownership if that's something you wish to spend time on. But that's pretty lopsided. In many many markets (including the one you are living in right now) renting is going to be quite a bit cheaper than owning.

When I was living in San Diego my rent was $1800 a month, add in the other basic utilities and we are talking around $2100. Now, that house was valued at the time around $400-450k. A mortgage on that would have been around $3000 a month. Property tax was 1.5% I believe, so that's another $200-250 a month. Add utilities and we're already up to $3500 a month and we still haven't figured in homeowners insurance, regular maintenance, and long-term maintenance. Granted the market has changed since I left, you can drop a few of the prices but you will still see it pretty large disparity.

That's an extra $1400 a month that you are spending on basic cost of living. That's $1400 a month you can invest in yourself (school to make more money, vacation, enjoy life, etc.), $1400 a month you can put in your 401(k) or IRA, or $1400 a month you can use to start your own business. Options are limitless.

I think you're ignoring a lot of important numbers, most people do. Like I said, if you are ready and want to buy a house... by all means, go for it. Just don't say it's a great "investment."

What's wrong with spending mass amounts of cash is this:

People will think you are a gangster who sells crack.