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No it's not. In many cases it can be beneficial to rent and invest your money instead, as stocks have a higher longterm ROI than property.

by Aulig 5y ago

mandeepj 5y ago
Does it have to be mutually exclusive? My current mortgage and previous rent are almost the same. A friend of mine bought his house in 2011-2012 for $200k. Now, it's worth ~$500k. >stocks have a higher longterm ROI than property. That's debatable. And, it depends at what point you were in and for how long you can stay as there'll be set backs during the ride. Unfortunately, if you have to cash out due to emergency during a dip then ROI would not be favorable.
- Aulig 5y ago
  Selling your house in an emergency would be similarly bad as exiting the stock market at an unfortunate time. The long-term ROI after costs and inflation of stocks (global) is about 3% higher p.a. than of property (global). Unfortunately this source is in german, but it cites research papers too, you can check those for further investigation: https://www.gerd-kommer-invest.de/die-rendite-von-direktinvestments-in-wohnimmobilien-besser-verstehen/ https://www.gerd-kommer-invest.de/die-rendite-von-direktinve...
  - alach11 5y ago
    Buying a house can have an advantage over stocks in the leverage you get with a mortgage, and in certain cases tax incentives. Whether that’s enough to compensate for the better returns of stocks is the hundred thousand dollar question.
    - Aulig 5y ago
      Tax incentives depend on your legislation, but they can make a difference, yes. Leverage also comes with higher risk, which makes it a bit of an unfair comparison in my opinion. If you really wanted, you could also use leverage on your stock investments, but I personally would never do that.
- Domenic_S 5y ago
  Assume he paid cash. If he had instead invested $200k in the S&P 500 in 2011, his account would be worth ~$756k today. So he essentially paid $256k, or roughly $2k/month, for housing over 10 years. If he could have gotten a similar place for an average over 10 years of $2k/mo, it's breakeven. That's before paying property tax but also before writing off interest & tax. Although this ignores the fact that you can make what's essentially a $200k investment with only $40k, and you still have to find a place to live - and the rent is virtually guaranteed to go up -- if you go the S&P route.

No it's not. In many cases it can be beneficial to rent and invest your money instead, as stocks have a higher longterm ROI than property.

by Aulig 5y ago

No it's not. In many cases it can be beneficial to rent and invest your money instead, as stocks have a higher longterm ROI than property.

mandeepj 5y ago

Does it have to be mutually exclusive? My current mortgage and previous rent are almost the same. A friend of mine bought his house in 2011-2012 for $200k. Now, it's worth ~$500k. >stocks have a higher longterm ROI than property. That's debatable. And, it depends at what point you were in and for how long you can stay as there'll be set backs during the ride. Unfortunately, if you have to cash out due to emergency during a dip then ROI would not be favorable.

Aulig 5y ago
Selling your house in an emergency would be similarly bad as exiting the stock market at an unfortunate time. The long-term ROI after costs and inflation of stocks (global) is about 3% higher p.a. than of property (global). Unfortunately this source is in german, but it cites research papers too, you can check those for further investigation: https://www.gerd-kommer-invest.de/die-rendite-von-direktinvestments-in-wohnimmobilien-besser-verstehen/ https://www.gerd-kommer-invest.de/die-rendite-von-direktinve...
- alach11 5y ago
  Buying a house can have an advantage over stocks in the leverage you get with a mortgage, and in certain cases tax incentives. Whether that’s enough to compensate for the better returns of stocks is the hundred thousand dollar question.
  - Aulig 5y ago
    Tax incentives depend on your legislation, but they can make a difference, yes. Leverage also comes with higher risk, which makes it a bit of an unfair comparison in my opinion. If you really wanted, you could also use leverage on your stock investments, but I personally would never do that.
Domenic_S 5y ago
Assume he paid cash. If he had instead invested $200k in the S&P 500 in 2011, his account would be worth ~$756k today. So he essentially paid $256k, or roughly $2k/month, for housing over 10 years. If he could have gotten a similar place for an average over 10 years of $2k/mo, it's breakeven. That's before paying property tax but also before writing off interest & tax. Although this ignores the fact that you can make what's essentially a $200k investment with only $40k, and you still have to find a place to live - and the rent is virtually guaranteed to go up -- if you go the S&P route.