BTC down 26% in the past year, S&P up 6.9%, home prices grew an average of 18%
Yep. And the inflation rate jumped 7.5%
Renting and reinvesting the savings from renting, will outperform owning and building equity
- Thread starter Robbie3000
- Start date
Yep. And the inflation rate jumped 7.5%
I agree...but 40-50% isn't the norm over the long-term, more an outlier. If you can get 7-8% over a 10 year period that's considered incredible.
PXD, EOG, DRI, AXP, HAL and I’m a conservative long term investor.
The day traders in the HL Boiler room made a killing.
10% is average over the long term. Doesn’t sound like much until compound interest begins to do its thing in time.
dora_da_destroyer
Master Baker
ehh, the point of my post is there's always a start point for your investing...if people had put money into BTC or all the high-flying small caps that defined 2020 at the start of last year when everyone was trying to jump into every play, they'd be worse off than if they would've bought a house at that same time. it's not as simple as your post stating "you can also put that money in the market and get better returns"
You don’t know if this is the bottom
and there’s no next bull cycle if people are over crypto
Black_Jesus
Superstar
If you paying over $1600 in rent you might as well try to find some property n a decent neighborhood and just get a mortgage
BTC down 26% in the past year, S&P up 6.9%, home prices grew an average of 18%
Looking at this over 1 year is pointless unless you believe homes will appreciate at 18% going forward.
Historical averages over a period of 30 years (the average mortgage length), only 1 winner
And if people bought Bitcoin in March 2020 when it was 3k then they’d be better off than if they bought a house at that same time. What’s your point? It’s a circular argument.
Absolut
Legal Bookie
Did I miss the law that passed saying only renters can invest? You pay less for the same space owning it than renting. You can simply invest that difference just the same as some renter, meanwhile you are also paying yourself equity each month
dora_da_destroyer
Master Baker
i'm glad you realize it's a circular argument as that's the whole reason the statement made no sense in the first place
plenty of metros where $1600 aint getting you an apartment nor a house...
the bossman
Superstar
Now zoom out to 5 year time-frame. How did btc perform vs avg home pricesBTC down 26% in the past year, S&P up 6.9%, home prices grew an average of 18%
the bossman
Superstar
No idea why many on thecoli seem to always think in absolutes when it comes to investing. Find the strategies that work for you and call it a day.
Real estate, stocks, and crypto can all help generate lots of wealth.
Real estate, stocks, and crypto can all help generate lots of wealth.
What made no sense? That you could get better returns in the market vs a home?
Yeah... That's debatable, not absolute fact
And yes, you can own a house and invest. But the same applies to renting so that point is moot. The question is what is better strictly from a financial pov.
When people look at the rent vs buy debate, they only look at the monthly rental payment vs the monthly mortgage payment. The latter might be less, but what is not considered, and baked into the former, is:
1. Higher utility costs. Sewer, water, trash, usually isn't paid for by the renter. Unless the renter is renting a big ass house, the home owner will usually pay more for electric and heat. HOA fees. Landscaping. Clearing snow.
2. Maintenance. It's not a monthly bill but average out the cost of that new heater, roof, pipes bursting, the kids wrecking havoc... Conservative estimates of maintenance costs place it at 1-1.5% of home value per year. Renting eliminates that, and before you say that gets baked into rent, try passing $10,000 worth of repairs onto your tenant over 1 year
3. Opportunity cost of down payment and closing costs. That 20% you put down to buy a house is condemned to appreciate at an average rate of 4.1% (based on real estate prices over the past 30 years). That 6% in closing costs? Gone. You'll never see it again. Same thing when you sell. Imagine you take that 26% and throw it into index funds that track the market at historical rates of 9.5%. That's a lot after 30 years.
"Oh, I'll just put less down then." But then you pay more interest over the life of the loan, plus PMI which is a gift to the bank.
Now there are two advantages home owners have:
1. Mortgage interest is tax deductible.
2. Over the course of a mortgage, the payment to the bank (principal + interest) stays constant. Taxes and home insurance may go up but later in life the bank payment will become less than what you would pay to rent.
But here's the key point: it is very likely that for the first years, the cost of renting will be less than the cost of owning a home. And compound interest of an index fund where the difference is invested, will grow to a huge amount in 20-30 years. Investing the savings from home ownership later near the end of the mortgage, won't have as much time to compound.
It takes a spreadsheet to really do this breakdown justice, but if anyone is interested, google "rent vs buy opportunity cost".
Finally, I'm not saying that one should never buy a house. And if you want a house for sentimental reasons, go for it, whatever makes you happy. But from a purely financial decision, anyone who says it's better to buy than rent absolutely without crunching the numbers is a damned fool and math illiterate. Depending on the location, budget, and other factors, the smart decision may be to buy. Sometimes it may be to rent. The bolded is all I'm pushing against.