There are cases where renting makes more sense. But they're usually in very short term situations, 1-2 year domiciles or in freakishly weird markets, weirder than SF or NYC markets to be honest.
It can't be said enough in this discussion also, the notion that a renter will have all this extra money that they can invest highly liquid, better than housing, investment options just doesn't work out in general. The post I linked to elsewhere in here goes into that in some depth, even goes over a couple scenarios.
Business property I don't think is a good proxy for housing. Business value can swing wildly up and down and there's far less of a guarantee that your business will even be worth what you put into it than in housing. You can literally pour tens of millions of dollars into a business year after year and have it be worth $0, but I can almost guarantee that I'll be able to sell my house after 30 years for at least what I paid into it (the principle, I agree that interest is harder to recoup). More likely, I'll be able to sell it for something far in excess. Even people who bought at the very peak of the property bubble will likely make a small profit.
But I also do agree that it's not a very liquid asset. It's hard to get money out of your house, but not impossible:
- After it's paid off, all the money you were paying is now liquid
- You can rent out parts of your house, in sometimes non-traditional ways, I know one guy who rents out parts of his unfinished basement as temporary storage for people doing overseas employment. Another rents her property as horse grazing pasture. Another uses their very nicely decorate home as a shoot location for local photographers and charges a small site fee. The list goes on. Not all of these are impossible for renters, but a great many of them are.
- You can use equity in your home for personal loans. It's not the same as liquid capital, but being able to raise a few hundred thousand dollars quickly can be useful and something renters can't do at all.
- if you have lots of land, sometimes you can sell off parcels for other people to build on, or you can repurpose it into business use
- you can sell it outright. One thing my wife and I are considering is retiring to a place with very cheap rent and just converting our home value into a long retirement in Spain or Italy. Basically our mortgage payment will get used twice.
No matter what, after any period of time, the renter still has lost every single dollar they put into their housing. Which typically represents the single largest expense for most people, consuming usually between 30-50% of their net income.
There are cases where renting makes more sense. But they're usually in very short term situations, 1-2 year domiciles or in freakishly weird markets, weirder than SF or NYC markets to be honest.
It can't be said enough in this discussion also, the notion that a renter will have all this extra money that they can invest highly liquid, better than housing, investment options just doesn't work out in general. The post I linked to elsewhere in here goes into that in some depth, even goes over a couple scenarios.
Business property I don't think is a good proxy for housing. Business value can swing wildly up and down and there's far less of a guarantee that your business will even be worth what you put into it than in housing. You can literally pour tens of millions of dollars into a business year after year and have it be worth $0, but I can almost guarantee that I'll be able to sell my house after 30 years for at least what I paid into it (the principle, I agree that interest is harder to recoup). More likely, I'll be able to sell it for something far in excess. Even people who bought at the very peak of the property bubble will likely make a small profit.
But I also do agree that it's not a very liquid asset. It's hard to get money out of your house, but not impossible:
- After it's paid off, all the money you were paying is now liquid
- You can rent out parts of your house, in sometimes non-traditional ways, I know one guy who rents out parts of his unfinished basement as temporary storage for people doing overseas employment. Another rents her property as horse grazing pasture. Another uses their very nicely decorate home as a shoot location for local photographers and charges a small site fee. The list goes on. Not all of these are impossible for renters, but a great many of them are.
- You can use equity in your home for personal loans. It's not the same as liquid capital, but being able to raise a few hundred thousand dollars quickly can be useful and something renters can't do at all.
- if you have lots of land, sometimes you can sell off parcels for other people to build on, or you can repurpose it into business use
- you can sell it outright. One thing my wife and I are considering is retiring to a place with very cheap rent and just converting our home value into a long retirement in Spain or Italy. Basically our mortgage payment will get used twice.
No matter what, after any period of time, the renter still has lost every single dollar they put into their housing. Which typically represents the single largest expense for most people, consuming usually between 30-50% of their net income.