huh? You mean as opposed to freeing up that lump sum or extra principle payment from day #1 and letting the time value of money work for you. Face it, it's all about comparative rates of return vs loan rate and since most mortgage interest is tax deductible the hurdle rate is much lower.
Maybe I should have worded that different. I probably should have said, "I could live for under $2500/mo". The truth is we spend a boatload more than that. Yes, we live a pretty nice life, but if the income wasn't there for some reason we could still live pretty well for next to nothing really. Thats more what I meant.
4-5% a year appreciation, yes agreed. Now subtract the 3% property tax and insurance(2.5% after the tax writeoff). Then you have the house upkeep and maintenance for another 1% per year for new houses and 2% for older houses. There is not much long term return left on the house as an investment. But you save on the rent and probably live a better life than renting. This is where the return of the house comes from.
we moved from seattle to midwest-bought a bank owned with cash 32K no more mortgage! better quality of life-surfing lake MI-more than i was in the PACNW-life is good -banks only selling to folks with cash-god was good to us
wait til the people in new york and san francisco find out they're not worth 3x as much as the rest of the country
The return on the house is also that, after you pay off the debt, you are done. When you rent, that goes right into the time of your funeral.
For ownership by a person who is an employee, how does the risk of needing to relocate for a job play into this discussion? I'm thinking that unless becoming a landlord is part of the plan, someone who has to relocate may become a trader rather than a buy and hold to death homeowner. I've relocated five times in a 25 year career. Assuming I could have bought a home each time, I wonder how I would have done? I think probably pretty well, but adverse events happen.
It depends... don't forget real estate commissions (if you use a realtor) and other closing costs - title co fees, etc.... Title Cos are the biggest ripoff - title insurance is a scam, or at least how they price it.