Please show me how the small increases in property value multiplies my initial investment. The problem is most people don't move sideways or down... they move up, thus negating any windfall in investment prowess. Timing, once again, can make or break you and timing is a fool's errand.

Renters don't always pay the taxes. There are several rentals in my neighborhood that are less than the mortgage. Once you cross a threshold of monthly rent, the market for available renters shrinks rapidly (Unless we are talking bay area). I mean... there are very few people spending $3000 a month in Phoenix renting.

I agree about the tax system bias toward home ownership... but there are ways to beat that. Starting or having a small business being #1. We could get into many ways to beat the tax system... but lets suffice to say that homeownership isn't really "beating" the tax system.

That "savings" on tax isn't savings... it is rent on top of rent... let that sink in.

It’s not uncommon for someone say in an extensive Northeast community to retire to a warmer climate down south, sell their house, use the proceeds to buy something much nicer (in a low COL area) and cash out a nice payday from their equity.

You're leveraged 5x (say), so you get 5x as much growth. Just pulling numbers out of nowhere, let's imagine you buy a $200k house with 40k down; after ten years the house is worth a nominal $400k which is $300k in today's dollars. You've gained 100k on your initial 40k, whereas if you'd invested the $40k in the stock market at the same rate of return you'd only have made 20k.

You'd achieve the same thing by taking out a loan for $160k and putting it in the stock market (per the article, property and stocks grow at the same rate), but a) you can't - a bank won't lend you that much money to buy stocks, certainly not at the same low rates of interest, and b) if they did you'd be on the hook for the risk, with ordinary loans you don't have the non-recourse protection of a mortgage.

> The problem is most people don't move sideways or down... they move up, thus negating any windfall in investment prowess.

What's the connection? If you plan on buying a $600K house when you're 50 that will consume $600K, but that's true whether you rent or buy your current house.

> Renters don't always pay the taxes. There are several rentals in my neighborhood that are less than the mortgage.

It's pretty rare though, and seems like the market would generally adjust either way. Occasionally in a given market renting will be cheap enough to be worthwhile. But generally renting will be more expensive since you're competing with people who can't afford to buy.

> We could get into many ways to beat the tax system... but lets suffice to say that homeownership isn't really "beating" the tax system.

It's playing the system as intended rather than "beating" it, but the bottom line is: the government is willing to pay you $x (in tax deductions) to buy instead of renting. Tax incentives are one of the few sources of free money out there in investing: when you have the opportunity you jump at it.

> That "savings" on tax isn't savings... it is rent on top of rent... let that sink in.

What are you talking about?

Your numbers work out because you made them up. The obvious problems:

In most of the country, a $200K house going up to $400K in 10 years is very unlikely. I live in a hot market. I compared the inflation adjusted change in value over 20 years, and it's about 1-2% above inflation. It's unlikely your $200K home will be worth $300K in today's dollars.

The rate of return of the stock market is considerably higher than real estate (over, say, 20 years). So assuming the "same rate of return" is a really bad assumption! Even right before the crash in 2008, over a 20 year period, stocks did better than real estate. I wonder if there is any 30 year period where stocks did not do better!

I'm not in the "renting is better" camp. However, for most people, the leverage will not work out (it has for me, but I just got lucky).

You haven't really gained 100k. You have gained 100k multiplied by your percentage of equity, i.e. the amount you have paid so far into your mortgage principal. Assuming it's a 30-year mortgage, that will be around 30%, so around 30k.

(And of course, the house price doubling in 10 years is a bit unrealistic unless you live in a booming area.)

No, you've gained 100k. Your asset is worth $300k, your mortgage liability is $160k minus however much you've paid off; your book value is $140k (plus a bit) where before it was $40k. The bank may "own" the other 70% of your house but they don't get to increase your loan amount because it's gone up; you pocket 100% of the rise in the house's value (unless you end up defaulting on the mortgage).

If you're renting, you most certainly _are_ losing money on the deal vs. what you'd pay if you owned _exactly_ the same property.

Maybe there is a business model in lending out houses so people can short the housing market? Again, not sure how that would work since houses aren't fungible in the same way that securities are.

I own a stock. You think the price will go down. To make this bet, you borrow the stock from me. You then immediately sell it at the current price. Later, if the stock is down, you can buy it back at the new (lower) price, give it back to be, and pocket the difference. If, unfortunately for you, the stock's price has actually gone up, you have to either continue to pay for the carry on the position (essentially paying me rent for my stock), or else take the hit by buying the stock at a higher price, giving it back to me, and eating the difference.

The analogy doesn't quite work with houses, because they're not fungible. I don't care which specific share of stock I get back, because they're all the same. I DO care which specific house I get back if I rent it out to you. Furthermore, I would be REALLY mad if I rented you a house and you then sold it to someone else, since that is just flatly illegal.

Still, I wonder if a lot of the structural problem with housing markets is that there is insufficient short pressure. In other words, there is an obvious way to make the bet that prices will go up (buy one), but no obvious way of making the opposite bet, unless you already have a house, and decide to sell it and begin renting, which hardly anybody does.

How can we let ordinary people short housing in their area?

Assuming you could have made the same down-payment and gotten the same deal on a mortgage as the landlord.

The rent being paid also includes other expenses that the landlord has, like marketing of the property, that the owners don't have.

With the implication that the ONLY costs of a house are PITI, insurance, and taxes. However, if you add in reasonable, even cheap values for yardwork/lawncare, roof depreciation and replacement, HVAC depreciation and replacement, and general refurbishment remodeling and replacement of interior surfaces, OP is losing a large amount of money per month. The gamble is, will OPs house appreciate in value more than OP is losing per month, or will OPs other investments made with 380 be able to keep up? OP can always walk away and mail the keys to the lender, of course, if it comes to that, so maybe extracting $400/month with the intent to foreclose when eventually necessary is a legit plan.

A lot of people treat normal household expenses as an unfair accident, as if replacing the old fashioned tank water heater every decade is some totally unpredictable meteor strike that should never be accounted for in the cost of ownership.

In general most models of home ownership hold water if the only expenses accounted for are annual or shorter term, but I spend roughly the same amount, maybe more, on average, of expenses of longer than annual duration. $15K every 15 years for a roof is not unpredictable meteor strike but is actually about $85/month. Built in dishwashers are designed to break down requiring replacement every three years, which isn't a disaster but is thirty bucks per month on average. A new 5K asphalt driveway every twenty years is not an unpredictable accident but is about $20/month. True, none of these are small bleeds are over $100/month or so, but the average house has well over a dozen of them. Figure about $1K to $2K per month of longer than annual term expenses.

Then there are remodeling costs. Its very difficult to sell a house with a 1970s kitchen. Most house kitchens seem to get remodeled every two decades for perhaps $25K each time. You can pretend that was an unpredictable uninsured natural disaster, but more realistically you need to save $105/month for the periodic kitchen remodel. Of course a stylish avocado color bathroom or shag carpet era living room will require similar amounts of money... The expense of "fashion" is around $500 per month for a typical house. You can do the elderly WWII or boomer thing and refuse to remodel your house, but the cost is coming out of the sales price eventually. Wood paneled shag carpet rec room in the basement ... people are going to make fun of stainless steel appliances and especially granite countertops the same way in 2030 or so, if not sooner.

There do exist weird pseudo-accidental problems. Planting a fast growing inappropriate tree in a dangerous location is the same thing as committing to spending $1K for a bonded insured tree service to chop it down and grind the stump. You can try to hand wave away that nobody could have known that cute little pine sprig on the property line could be a kilobuck liability a decade later, but uh, yeah, many people could tell that a big dead tree overhanging the neighbors house is going to be an expensive and entirely predictable problem, eventually.

https://betterdwelling.com/cibc-over-44-of-toronto-condo-inv...

You still had to put a downpayment that didn't go somewhere else for the whole length of your mortgage.

Also, if your rent covers your mortgage, I will assume that you were simply lucky enough that in your particular area the housing market rose more rapidly than in others (for example the bay area). But you didn't know this in advance and it could very well have gone the other way around.

I've also rented a house where my rent payment did not even cover the mortgage (I knew the landlords - they had bought in 2006 and were still waiting on the market to rebound so they could cash out and move on).

So as the article says - it all depends.

Been there. Done that.

It only takes one bad tenant who doesn't pay for 3 months over 3 or four years and repair costs to wipe out all of your profit.

But it still only takes one bad tenant or one good tenant that comes on hard times to cause you to lose all of the profit.

But the investment is what allows moving up, no?

The best argument for owning in a given market over the long term is that if you rent you’re only winning if the landlord is losing money. The whole reason the landlord is renting to you is that you more than cover the cost of owning the property.

The best argument I've heard is that one thing owning property does do is focus you on saving towards something in a way that saving towards 'the future' doesn't.

This is absolutely true, though it is also hard to account for that risk, which also leveraged the down side:

Toronto is experiencing a 30% drop right now which probably means that for the last 3 years of home buyers, they are all having a mortgage higher then their property value. They actually have lost a lot of money and paid interest for it.

> - “I don’t want to pay those high real estate taxes.” Renters still pay the same real estate taxes, it’s just baked into the rent and can’t be deducted from taxes.

This is a nuanced economic topic: property taxes don't transfer to rent quite right. Rent is not that elastic to tax changes, while property values are. The rest of the comments you mention about tax exemption for being a homeowner is true and pretty ridiculous.

EDIT: looking into toronto's case, it seems to particular about restrictions or otherwise. The point in general is that the leverage works both ways, so there is exposure.

It's quite common to rent a house when it is worth X, and for that rent to remain nearly the same even if the house becomes worth X+Y. Due to common restrictions on how much rent can be increased year to year, the taxes on the house can (and often do) grow considerably for the owner, while the rent stays nearly the same. In this very common scenario, the taxes are not at all baked into the rent and the owner starts to lose out until you move and they can raise the rent considerably for a new renter.

In other words, renting does in fact protect renters from a rise in property values when real estate tax enters the equation.

The flip side, of course, is when property loses value, the renters potentially lose out since they continue to pay based on prior taxes.

I should add that the pros and cons are often local to the country you live. In many places, Germany for example, mortgage tax is not deducted from income tax. Which is perhaps why half the population in Germany rents a house for most of their lives.

But don’t forget that leverage works both ways. Small declines can wipe you out.

With the recent tax changes including increased standard deduction, SALT cap and mortgage deduction cap, this bias is greatly reduced.

Also, it's a trade-off. In some markets, buying wins. In others, renting wins. I personally found it hard to justify buying in expensive parts of the Bay Area: https://medium.com/@usaar33/why-you-shouldnt-buy-a-home-in-t...

That's the difference between stocks and properties, at least property is real.

Why do drug dealers, foreign nationals, and the ultra wealthy park their money in big city properties? Tangible value.

Notably, all the people you're listing got wealthy, then bought property to diversity their investments. It's a very different situation than buying property in hopes of gaining wealth.

My neighbor lives in Europe most the year, just comes back a few times to check on houses. Has 2 homes in Europe too. That money was built by judiciously buying and maintaining the properties over ~4 decades while trying to minimize costs. This was as a self funded real estate agent. Not someone born with money.

There's a healthy mix of people I've known that have built almost all their net worth in real estate. In fact, most my programming friends that bought after the .com bust in SF and the great recession in 2008-2010 have more than doubled their single home investments.

The real answer: because real estate is an extremely convenient money laundering tool.