Renting and reinvesting the savings from renting, will outperform owning and building equity

[CBalla]

Once again, we’re not talking about liquidity. Some investments are more liquid than others. That doesn’t mean they’re not investments. You’re making up requirements for something to be an investment. If you buy something (be it a house, artwork, a rare gem, whatever) with the intent on selling it later at a higher price it is an investment.

And your dismal look at the housing market is not backed by any real historical data. Both the housing market and the stock market have ups and downs. I already illustrated in here how investing your down payment in your home 1989 would have given a higher return 30 years later than putting it in the stock market, do you want me to bump that?

hell even if you dont have any intent on selling it later, its still an investment


that cat has no clue what hes discussing

 

[R.E.N. Spells Ren]

@Deuterion and @At30wecashout y’all seem fixated on the fact that you have to pay monthly for the house, but that’s just confusing you....It doesn’t negate the fact that it’s an investment. The beauty of investing in your residence is you’re taking an expense you’re going to have anyways (housing yourself) and getting a return for it.

*sigh*

I'm always very leery when I see folks advising people, especially Black people not to buy homes....have y'all been paying attention???

Putting aside investment properties because it seems that the OP is comparing dropping a down payment on a house vs investing that money and continuing to rent.
The median house sale in September 1989 was $120,000 per the US Census so 20% of that would be $24,000. People always look at how much more than that purchase price you end up paying the bank, but that's faulty, so let's play this out. With a 5% fixed rate 30 year mortgage, your monthly principal+interest payments would be $515.35. Over the course of the 30 years you would've paid the bank $185k to borrow that initial $96k. But you also have taxes, the median per this site is 1.2% of the home's value (escalating monthly per the US Census data, so yes your taxes will increase over time), and maintenance, which I'll assume is 1% of the home's value, again escalating (1% is probably way to high too, but it's about $61k over the 30 years, so maybe not if you include a major kitchen or bathroom upgrade in that timeframe). Over the course of those 30 years, you would have spent $346k (including the downpayment). If instead, you chose to rent, following this escalation in median rents in the US, you would have spent about $342k over those 30 years. Note that the 1989 rent is $600 while the 1989 Mortgage + taxes is about $640, so comparable with the home being a little more expensive monthly....at first. The costs of living expenses in each scenario is pretty much a wash over these 30 years.

Now, the rental spend doesn't include the $24k, cuz the OP is saying invest that. From Sep 1989 to Sep 2019, the S&P 500 rose by 315% (11% ARR turning your $24k to about $100k)) per this site while the DOW Jones rose by 387% (13% ARR turning your $24k to about $117k) per this site and the NASDAQ rose by a whopping 724% per this site (which is a very healthy 24% ARR over 30 years). So let's say you had the foresight to invest heavy in tech in 1989 (i.e. the NASDAQ) and saw your $24k investment blossom to about $198k in 30 years.

The buying route saw you spend $345k including the $24k downpayment. The house you bought in 1989 for $120k is now worth $299k (again using the US Census data for the median house in September 2019). $299k from an initial investment of $24,000 is a 38% ARR. Then when you consider the tax implication (you're not taxed on the first $250k of profit from selling your official residence; $500k if you're married vs paying ~15% capital gains taxes) and it's clear that the home buying route is the winner.

Of course there are a lot of variables, but you would've needed a damn good investment prospect to beat out the long term returns associated with owning your home.

 

[R.E.N. Spells Ren]

hell even if you dont have any intent on selling it later, its still an investment


that cat has no clue what hes discussing

Yea he sounds like someone who doesn’t understand the difference between one’s net worth and their income.

 

[CBalla]

Define “own”. And $200k, even if you paid cash, is the beginning. A home never will be free of ongoing expenses, and your home is affected by a lot of factors not under your control e.g. crime, taxes, job market, infrastructure upkeep, the upkeep of neighboring homes, construction of projects that can positively or negatively affect values, weather events, quality of schools, etc.

Homes “can” be an investment if they are treated as such, but there are many factors that go into it that leaves it as universally a money pit. Don’t make a point to call cats out unless you out all the factors onto the table as to why single family homes are awful investments for the majority of people. Its merely a place they live that they hope will make more money than upkeep, insurance, closing costs, etc.

a house is an appreciating asset and thus, an investment

anyone who says otherwise shouldn't talk finances, period

 

[At30wecashout]

Once again, we’re not talking about liquidity. Some investments are more liquid than others. That doesn’t mean they’re not investments. You’re making up requirements for something to be an investment. If you buy something (be it a house, artwork, a rare gem, whatever) with the intent on selling it later at a higher price it is an investment.

And your dismal look at the housing market is not backed by any real historical data. Both the housing market and the stock market have ups and downs. I already illustrated in here how investing your down payment in your home 1989 would have given a higher return 30 years later than putting it in the stock market, do you want me to bump that?

Look, I see we are gonna go in circles on this one so Im not going to go too deep in the woods, but compare real wages and its relation to housing costs in 89 to wages and housing costs 30 years later and you will have a great difference in why “investing” in a single family home in the unquestioned economic power that is America worked out then. Real Estate like economies change with the times, and unless wage growth suddenly explodes, the majority of people “investing” in homes will either spend more than they will get in return or make worse returns than investing and reinvesting returns over the same period, and we just talking index funds. Not that I am advocating for stocks, just saying the housing market has variables you cannot hope to control for, so much so that actually there were unquestionably a lot of people who lost if they did anything other than sit on that house that they bought in 89. But is that really an investment or are they just living there? If you leave and buy another home, did you gain enough to make up for the opportunity cost of not investing in something that actually produces a return and doesn't require constantly paying into it?

 

[At30wecashout]

a house is an appreciating asset and thus, an investment

anyone who says otherwise shouldn't talk finances, period

Alright, in reality it is an investment of sorts, but what is the expectation of said investment?

I am not conceding a point, just realizing that calling it not an investment is a little over the top. What is the expectation of said investment?

 

[CBalla]

Imagine going in a room full of investors, business class teachers, financial advisors, shaking their hand, looking them in the eye, and saying

“a house you own is not an investment”


the looks people would give you

 

[CBalla]

Alright, in reality it is an investment of sorts

alright i think we are done here then

 

[Deuterion]

Imagine going in a room full of investors, business class teachers, financial advisors, shaking their hand, looking them in the eye, and saying

“a house you own is not an investment”


the looks people would give you

Oh the same muhfukkaz that in 2007 said real estate will always appreciate?

 

[CBalla]

Oh the same muhfukkaz that in 2007 said real estate will always appreciate?

you do realize that investments go up and down in the short term right
go read a book on the subject

the value of homes now are higher than they were 20 , 40, 60 years ago

 

[Deuterion]

you do realize that investments go up and down in the short term right
go read a book on the subject

the value of homes now are higher than they were 20 , 40, 60 years ago

We’ll agree to disagree. You can invest for appreciation, I’ll invest for cash flow...have a great Christmas night.

 

[CBalla]

We’ll agree to disagree. You can invest for appreciation, I’ll invest for cash flow...have a great Christmas night.

So it is an investment, thanks for playing

 

[R.E.N. Spells Ren]

Look, I see we are gonna go in circles on this one so Im not going to go too deep in the woods, but compare real wages and its relation to housing costs in 89 to wages and housing costs 30 years later and you will have a great difference in why “investing” in a single family home in the unquestioned economic power that is America worked out then. Real Estate like economies change with the times, and unless wage growth suddenly explodes, the majority of people “investing” in homes will either spend more than they will get in return or make worse returns than investing and reinvesting returns over the same period, and we just talking index funds. Not that I am advocating for stocks, just saying the housing market has variables you cannot hope to control for, so much so that actually there were unquestionably a lot of people who lost if they did anything other than sit on that house that they bought in 89. But is that really an investment or are they just living there? If you leave and buy another home, did you gain enough to make up for the opportunity cost of not investing in something that actually produces a return and doesn't require constantly paying into it?

again you’re fixated on “constantly paying into” a mortgage....I already laid out how that is a silly thing to be fixated on when you’ll have housing costs no matter which route you take. feel free to read that post, broken down with real actual numbers.

Oh the same muhfukkaz that in 2007 said real estate will always appreciate?

Hilariously bad take. Housing is a long term investment. Only way you lost in the 2007 “crash” is if you were trying to sell during that brief period.

And I put the word crash in quotes because if you look at the data I linked about the median house prices over the years you’ll see that the “crash” in the housing market was not nearly the same magnitude as the hit stocks took during that time.

 

[BigMan]

Telling (Black) people Not to buy homes and rent and “invest” is terrible advice especially since no one ITT has explained what the alternative should be except vague references to stock and buying commercially/multi family properties (which require much more income/effort/time than a home)

if you’re going to say don’t buy home you should at least detail what people should do instead

 

[At30wecashout]

alright i think we are done here then

I was conceding that point so we could go deeper. What is the expectation of an investment?

Or dont answer. Whateva, its Christmas.