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This is the right answer. As far as I can tell, the only reason to buy a home is to lock in a particular home for your family over time at a stable price, which

by natrius 10y ago

This is the right answer. As far as I can tell, the only reason to buy a home is to lock in a particular home for your family over time at a stable price, which this equity structure does not address. Otherwise, you can just invest in real estate in financial markets. (Tax incentives skew these incentives towards ownership.)

st3v3r 10y ago
There is also the ability to do what you want with it (more or less, within reason anyway) that you don't have while renting.
billmalarky 10y ago
>Otherwise, you can just invest in real estate in financial markets. Most of the gains from active REI don't come from RE appreciation (which generally tracks the inflation rate nationally). The growth from REI comes from using a TON of leverage to purchase the assets (ie a mortgage) then getting someone else to build your equity for you (the renter). Additionally real estate investors pursue extremely favorable deals, generally where the seller is motivated to use their built up equity to sell at a significant discount to what the remaining cost of their mortgage is. These distressed sellers are usually going through a divorce or potential bankruptcy (where getting a small amount of their equity value back is preferable to losing everything and destroying their credit via bankruptcy). As you alluded to, this of course relates to real estate as a business. Not to standard home ownership (where you buy a property because you want it as a home, not because it is a good business investment).
- natrius 10y ago
  Leverage is important, but leveraged bets can be made with financial assets too. Our laws make leveraged bets on owner-occupied housing attractive, but I don't think there's an inherent financial advantage to other kinds of investments.
  - billmalarky 10y ago
    Mortgages allow for 80-95% leverage though. Getting that amount of leverage other ways is much more difficult.

by natrius 10y ago

st3v3r 10y ago

There is also the ability to do what you want with it (more or less, within reason anyway) that you don't have while renting.

billmalarky 10y ago

>Otherwise, you can just invest in real estate in financial markets. Most of the gains from active REI don't come from RE appreciation (which generally tracks the inflation rate nationally). The growth from REI comes from using a TON of leverage to purchase the assets (ie a mortgage) then getting someone else to build your equity for you (the renter). Additionally real estate investors pursue extremely favorable deals, generally where the seller is motivated to use their built up equity to sell at a significant discount to what the remaining cost of their mortgage is. These distressed sellers are usually going through a divorce or potential bankruptcy (where getting a small amount of their equity value back is preferable to losing everything and destroying their credit via bankruptcy). As you alluded to, this of course relates to real estate as a business. Not to standard home ownership (where you buy a property because you want it as a home, not because it is a good business investment).

natrius 10y ago
Leverage is important, but leveraged bets can be made with financial assets too. Our laws make leveraged bets on owner-occupied housing attractive, but I don't think there's an inherent financial advantage to other kinds of investments.
- billmalarky 10y ago
  Mortgages allow for 80-95% leverage though. Getting that amount of leverage other ways is much more difficult.