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Originally Posted by wufwugy
As far as I can tell, for the individual*, credit and investment do not necessarily go together. Any kind of investment one could make via credit (like purchasing a home) would be smaller than just renting for cheaper and putting extra cash into investments that gain its own interest or appreciates against inflation.
Yes, you're right when it comes to rate of return. Homes are not investments, really. Homes are liabilities. The old adage "your house is the biggest investment you'll every make"? That's total bullshit. When you figure out the mortgage payment and maintenance, you will have often lost money or "might" make 1% annual interest on your home when you go to sell. Factor in the cost of your time against that 1% and your return is wiped out. And big deal if you do make a slight return, you still need a place to live, a place that likely has appreciated at the same rate your former house did.
There are only two ways houses can be considered quality investments on par with equities:
1) You constantly move from peak markets to growing markets to maximize your return. I don't mean new neighbourhoods. I mean moving to new states and cities with the largest potential.
2) Rental income, as I mentioned above.
Still, I'm a big fan of owning your home. You have to pay to live somewhere anyway and, depending on the market, obviously, a mortgage payment is generally about the same as rent for the same square footage. Your maintenance is an additional cost renters don't pay but as you build equity in a home, borrowing opportunities become more available (for quality investments, not spending) and the forced savings aspect means that one day, your mortgage payments will go down, provided you don't keep upgrade to a McMansion or something. And there's the non-monetary reasons...I don't want to put up with a landlord and if I want to make changes, I can.
Also, I believe in the US you get to write off mortgage interest on your taxes, yes? It's a different situation for everyone, but consider those tax savings when weighing whether or not to rent or buy.
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