Originally Posted by
Buck Rogers
You and Trip get it, I'll bet I can understand if you just flesh it out a bit more. I'd love to explain it to my kids
There are plenty of great YouTube videos or articles that explain it better than I type out. WRT to buying investment properties, not all class of investment properties are created equal. A triplex may cash flow nicely while the SFH breaks even. Also remember that many of landlords bought at much better terms and thus their rent isn't as high. If you look at the data, many of the small-time landlords have rents well under market because they either don't know the market or are scared of a vacancy washing out their profits. Anyway, if your kids are looking to buy a house that they plan to spend less than 10-15 years, it's worth exploring both options.
Originally Posted by
FangsF15
We're going way down a rabbit trail here but... Like I said, there are times, individual circumstances, and/or locations where renting is the wiser choice. But if you exclude the outliers, and look in the aggregate over the long term, there is no question that owning is the clear winner for the (vast?) majority of folks over time. And again, for most people, their home is their largest single investment.
Like many former military, I've owned a lot of houses over the years. I've made a solid return on every single one of them except one, and that was due to the 2008 housing crash that was unlucky timing with a set of PCS orders, where I had to come up with some cash to close. Suck... After 30+ years of home ownership (and a few 80/10/10 mortgages), I've got well over half a mil equity in my 'forever' home. My Dad was also career military, and did the exact same thing - my widowed mom owns her upper middle class home outright as a result. And that's across 60+ years and coast-to-coast housing markets...
So while I agree there are individual circumstances where renting might be the better choice, exceptions (like nutty CA market) don't disprove the 'rule'.
I'm 100% with you on the long-term aspect, I just see too many people who listen to the old adage that buying is better and that's just not always true, especially in today’s market. Depending on who you believe, the average American moves every 8 to 13 years. In that case, which isn't so uncommon for airline pilots, it's not so cut and dry. WRT your properties that had solid returns, did you account for your mortgage interest paid to that point, real estate taxes, insurance, repairs, closing costs, inflation, etc...? On a 3-year hold your down payment money being in the market is admittedly small, but it's not nothing and something worth considering. Clearly this is a bigger factor the longer you stay.
I'm not saying this is you, but so many people just go, I bought it for $350k and sold it for $450k... I killed it! That's just not the whole story. Never mind that with inflation, $350k in 2021, is $421k in today’s dollars. With the interest rates of 2021 (assuming 2.5%), they spent $20k on interest, so they're back to break even. Now add taxes, insurance and repairs. This is best case with 2.5% interest, which we'll be lucky to ever see again. Let’s look at a more relevant example of today...
Since you brought up military, I went and looked in the neighborhoods that I've seen some of my AF buddies have lived in while based at Nellis. I found a nice 3bd/3ba house renting for $2300/month. A comparable house just down the street recently sold for $430k. A mortgage on that is about $2700/month (guessing low on re tax/insurance). With current interest rates, in a 3-year assignment, they'll have spent $70k, just in interest. That's a lot of appreciation to overcome and this doesn't factor in RE taxes, insurance, mx, closing costs on both ends, realtors, etc... The cost to rent over the same 3 years...$83k and your spouse didn't have to deal with that hot water heater failure as you boarded the charter plane, headed out on a deployment (true story lol). Is this an extreme scenario, maybe, but we're in really odd times in the housing markets. All I'm saying, is do the math.