Re: Buying vs renting

if buying a house has the same return as stock market, nobody would be
investing with wall street anymore.

you have to realize that home owners making stock market like returns are
those living in high income areas like SFO, BOS, NYC etc. but whats driving
the economies of those areas are high return companies like high tech,
financials, biotech etc.

so a better peer comparison for buying houses in those areas would be
investing with google, amazon, apple, goldman sachs etc.

On Fri, Mar 2, 2018 at 8:54 PM J. Andrew Rogers <[email protected]> wrote:

>
> Greg, this doesn’t look right.
>
> The “own” side of the equation appears to be assuming capital that was not
> applied to the “rent” side of the equation; the calculation should be
> capital neutral. From your numbers below, the implied rate of return on
> your house investment is <4% and the basic rate of return from renting is
> >12%, so the mortgage being a superior investment immediately looks suspect
> (in truth the actual returns are far complex to model but I’m working off
> the numbers provided). Mortgage service costs vary depending on down
> payment, taxes, HOA, maintenance, etc which renters avoid but have to be
> included in the model.
>
> Interestingly, the expected return on buying a house derived from tax
> benefits is similar to the expected returns from market appreciation. The
> rough implication is that in many markets buying a house can be a
> justifiable investment *if* your expected return on liquid securities is
> <7% annually on average.
>
> To recast the original question, for someone with no inclination to learn
> anything about investing, buying a house probably has similar returns to a
> generic disinterested investment portfolio. For someone inclined toward
> investing, there is significant additional upside available by putting
> capital toward liquid securities instead, in which case renting will
> generally be the wiser choice financially.
>
> Obviously there are also significant non-financial considerations at play,
> otherwise everyone would just buy the cheapest available house in their
> region.
>
>
> > On Feb 28, 2018, at 5:01 PM, Gregory Alan Bolcer <[email protected]>
> wrote:
> >
> > You guys better check my maffs.
> >
> > I wanted to figure out what the actual numbers were.  I took my parent's
> old house in Santa Ana. From zillow:
> >
> > Santa Ana, CA is a single family home that contains 2,245 sq ft and was
> built in 1962. It contains 4 bedrooms and 2.5 bathrooms. The Zestimate for
> this house is $1,067,118, which has increased by $14,726 in the last 30
> days. The Rent Zestimate for this home is $3,764/mo, which has increased by
> $161/mo in the last 30 days.
> >
> > Est. Refi Payment
> > $4,251/mo
> >
> > 4251 - 3764 = $487/month
> > 487/month * 12 months = $5,844 per year
> > The mortgage & property tax deduction caps out at $10k under the new
> laws, so owning, you'd have a $4,156 advantage on tax liabilities.
> >
> > 10 years of house value increase = 57%
> > 10 years of dow increase = 100%
> >
> > Doing a simple savings calculator w/ annual compound interest you would
> have $97,359.64 in value plus a place to live for those 10 years.
> http://www.moneychimp.com/features/rule72.htm
> >
> > For owning, you'd have a place to live, better deductions and a $600,000
> asset? (Paydown + appreciation).
> >
> > Does that sound right?
>
>
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