Renting vs. buying a home

Post by hhw » Mon, Jan 20, 2014, 7:53 PM UTC

clavalle wrote: post #149

hhw wrote: post #141

Earlier quoted context omitted.

If the carrying costs of ownership are higher than rent (which they are in a lot of markets), it's fair to include that difference as amounts that can be invested. I personally do not think of forced savings as a benefit; if someone cannot exercise enough self-control to put aside part of their income to invest, they should probably think twice whether they're ready for one of if not the most significant, long-term f…

>I personally do not think of forced savings as a benefit; That is true only if the alternative is doing something financially productive. In this case the alternative is spending the money. You are seeing the house as an investment. Your analysis is spot on when talking about a house that is not the primary residence. But it fails when applied to the primary residence because the money is being spent on housing eith…

Post by clavalle » Mon, Jan 20, 2014, 8:27 PM UTC

hhw wrote: post #151

clavalle wrote: post #149

Earlier quoted context omitted.

>I personally do not think of forced savings as a benefit; That is true only if the alternative is doing something financially productive. In this case the alternative is spending the money. You are seeing the house as an investment. Your analysis is spot on when talking about a house that is not the primary residence. But it fails when applied to the primary residence because the money is being spent on housing eith…

Why is the alternative necessarily spending the money? If those funds can be taken to the bank each month to pay off a mortgage, why can those same funds not be taken to the bank to deposit into a retirement/savings/investment account? This analysis is specifically taking into account that money is spent on housing either way. Otherwise, we'd be comparing the ROI of purchasing a house and renting it out as a business…

Post by clavalle » Tue, Jan 21, 2014, 4:01 PM UTC

hhw wrote: post #154

clavalle wrote: post #153

Earlier quoted context omitted.

>If those funds can be taken to the bank each month to pay off a mortgage, why can those same funds not be taken to the bank to deposit into a retirement/savings/investment account? Because you have to live somewhere.

Right. What I'm talking about is the differential between the carrying costs of ownership, and the cost of renting, which is what's often referred to as 'forced savings'. Nowhere am I saying you don't have to pay rent. If renting costs less than the carrying costs of owning (which it often is), you can take those cost savings to the bank to be invested. This should also be factored into the cost comparisons.