As an older, single female on a limited income, any home maintenance is too much :-) I would need to hire everything out. And in my immediate area the average home price is $750,000, which is well above any budget I could possibly dream of (unless winning the lottery), so private home ownership is out of the question. But monthly rents are still moderate at $1500 or so for a one bedroom. I was fortunate to find a great rental unit attached to a private home for much less (including most utilities paid) and with a garden, so more than happy to rent for the rest of my days :-)

So I think you need to factor in age and ability as well as location in your calculations. In many cases, renting DOES make far more sense than owning.

I did own my own home when married. But since divorce and retirement/reduced income, it is no longer a practical alternative.

Handymac, I'm with you on that. The only time I lost money on a house was the one I owned for less than a year and had to sell at the time the nearby naval base closed. Every 5th house was for sale. I am feeling as I get older that less stress would be desirable, but in many cases, I think owning is better financially, with some exceptions. In fact, one of the ways to build wealth is to buy and rent property. So I too have been baffled by those articles.

It depends to some extent on relative housing costs vs. rental prices, so it's location dependent.

People can’t do math. They think the only cost of home ownership is the purchase price, and that they “make money” if they sell it above that purchase price. Far from true. They forget about the interest that they pay. They forget about home maintenance and improvement. Both renting and owning are incurred expenses long long term. They both cost you money. But renting loses less money and gives you more income to invest, so you come out ahead.

We lived in an apartment and put all of our spare cash into savings. We did the math before we built, and we saved at LEAST as much money as others had supposedly gotten in equity by paying their mortgage. However, if they had to do ANY maintenance, we came out ahead, by far.

We live in a pretty low Cost of Living Area too.

People can’t do math. They think the only cost of home ownership is the purchase price, and that they “make money” if they sell it above that purchase price. Far from true. They forget about the interest that they pay. They forget about home maintenance and improvement. Both renting and owning are incurred expenses long long term. They both cost you money. But renting loses less money and gives you more income to invest, so you come out ahead.

I'm actually very good at math. Let's look at the two houses I've lived in during my adult life:

When we were first married, we bought a modest ranch house. We paid extra on the mortgage every month and paid of off in eleven years (not bad considering I was still in college). Once we had two children, the house wasn't big enough, so we moved -- larger house, still a modest price -- no mortgage. Between the two houses, we have paid just under 200,000 for houses (including mortgage). Sure, we've paid maintenance and a few big-ticket items. When we sell this house, it'll go for about 150,000.

If we'd been renting these 27 years of marriage, our rent would've varied ... but my daughter and her new husband paid about 1300/month in rent for a two-bedroom apartment -- it was an older apartment that was waiting to be renovated, and it was the cheapest place they could find that felt safe. If my husband and I had been renting all this time, we'd probably have been in a one-bedroom for a while ... then would've wanted a three-bedroom while both kids were still at home. Let's assume, though that their 1300/month would've been our average -- that cost x 27 years of marriage x 12 months a year ... we would've paid about 421,200 by now.

The price difference is 221,200. No way we've spent over 200,000 on maintenance, etc. over the years.

Incidentally, our taxes are about 700/year, and our insurance is in the 300/range. (Gotta love the South.)

By owning, we will recoup 150,000. If we'd been renting, we'd be out more than 400,000 and would recoup zero. Admittedly, we have only carried a mortgage for 11 years of our marriage, which is not the choice everyone makes -- but that was by plan, not accident. Yes, home ownership can be very profitable.

Additional thoughts about intangibles when discussing renting vs. buying:

- My daughter and her husband lived in a third-floor apartment (because it was a few dollars cheaper). Helping them move in/out was not fun. They postponed getting a dog because they didn't want to walk the dog up and down all those steps.

- I spent the night at my daughter's college apartment a couple times, and I hated hear the neighbors flushing their toilets, opening their doors, etc.

- When you rent in a complex, parking is often an issue.

- When you live in a complex, you have to walk to the dumpster with your trash instead of just walking outside your door.

- When you rent, you cannot change things to suit yourself.

Crikey!! If I could find a decent house for $150,000, I'd probably buy instead of rent as well. But that won't even get you a garage here. Not to mention that property taxes on a median value home here run close to $7000 a year and insurance $2-3K a year or more, depending on coverage.

So location will be a serious factor in determining which makes the best sense. As will one's age and the length of time one plans to spend in that residence, owned or rented.

so if i rent, i pay rent for maybe 60 years and if i buy, i pay house payments for 30 years, if i pay for taxes and repairs is that going to add up to a higher amount than the extra 30 years of rent payments? is that what we're saying?

No, I think what is being said is that it will depend on the specifics of the situation. In some cases, owning will make much more financial sense than renting. In other cases, the opposite may be true.

The trouble with the question is that there is no universal answer.

It omits all the crucial variables of what city and what and which time period you're considering. For example, over a 15-year period (!)--1990-2005--home prices here in Toronto were in a long depression. Over the last seven years, they've soared, though they have been receding since the Ontario government and the federal Office of the Superintendent of Financial Institutions introduced so-called "cooling measures", essentially stiffening up lending criteria and moving against foreign ownership.

Toronto Home Prices

Source: Marsha Robinsky, Bosley Real Estate Toronto based on TREB data.

Proponents of ownership over rental usually fail to take into account current income--as opposed to future capital gain--that the homeowners' equity could be earning if it were in passive investments, or even invested in an active business.

zippity - the thing is, many people buy a house for, say $250,000, live in it for ten years, sell it for $500,000, and think they've doubled their money. But the house cost them much more than $250,000 - it cost them that portion of their mortgage payments that went to interest rather than principle (in a long term mortgage that can be the price of the house just in interest), plus insurance, taxes, maintenance and repairs. If it's a condo, there are condo fees as well. Add it all up, and there may be very little real profit at all.

So the question then becomes, is the homeowners spending the same or less than he would pay in rent. If so, fine, he has a place to live and an asset at the end which he can sell. But if he's paying more for his house than for rent, then he's lost the opportunity to invest the difference in something that would have greater growth in value than his house.

That happened to me, actually. I bought a condo, had it for 7 years, paid off the mortgage, and sold for sbout 50% more than my purchase price, but made almost nothing on it. I had mutual funds which earned much more over the same period.

bry-The problem with your investment scenario is that by investing the mortgage amount in the stock market, you now have no funds left over each month for rent. Rents over the long run tend to rise, whereas principal+interest remains the same.

The smartest is to buy a house and stay there for 60 years.

bry-The problem with your investment scenario is that by investing the mortgage amount in the stock market, you now have no funds left over each month for rent.

No that isn't the problem with my investment scenario... In fact, I specifically addressed that, I will copy that below so you don't have to go back up and read it.

"You must understand that houses are great because they have a modest benefit but for almost no additional cost. In other words, if you are paying $1,200 per month in rent then buying a house with a payment of $1,000 (allowing $200 per month in maintenance) might be a great idea. But that is all it means! That doesn't mean that it, or any other house, is a great investment."

So if you stay in a modest house that avoids a comparable amount of rent then that can be a smart financial move. If it allows for money to be put in actual liquid investments that have decent returns it is a brilliant financial move. But to do that you are looking at a house as a net savings calculator rather than an investment. Using a coupon at the grocery store is a smart financial decision, but clipping coupons isn't an investment strategy.

Homes are bad vehicles for savings.

Edit: Fat fingered the submit prematurely...apologies for the initial roughness.

There are a few ways that you can look at the rent vs. buy to determine the one that is right for you and in your area.

The easiest is simply cash flows and it has some solid information. Look at the cash out from renting vs. the cash out from buying (adjust for the likelihood of rents increasing).

Alternatively you can look at net position. It adds in the value that you are getting for buying vs. renting and starts with all the cash outflows of buying but then reduces that amount by the likely cash appreciation of the property and principal reduction.

The net position calculation is the method that houses build up some wealth. However, it is important to remember that wealth isn't edible, you can't eat the shingles on your house no matter how much more they are worth today than the day you bought them. Most personal financial crisis do not occur because of a lack of wealth, they occur because of a lack of cash.

A big home that you expect to appreciate faster can seem a great investment, but if you don't have other well established more liquid investments much of that gain isn't durable. If you lose your job, then you can easily get into a fire-sale situation that loses most or all of the gain your house has had. On the other hand a smaller house balanced with good liquid investments will whether hardships much better.

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You must also understand that houses occasionally go bad. We are adding the cost of regular repairs and maintenance but sometimes things hidden at purchase add significant costs and remove all gains. This is not an infrequent occurrence. It is likely that every home owner will at some point in their life have some situation that causes a large unexpected expense.

Also you are unlikely to live in a house for 60 years without capital injections. It doesn't take many bathroom and kitchen remodels to completely wipe out a gain. Today a kitchen remodel is easily $30,000, and in 60 years I would suspect a house would have kitchen remodels, bathroom remodels, plumbing updates, electrical updates, etc.

Yes, the answer is always, "It depends". When my son was married, they bought a 6400 sq ft house on a 2.5 acre piece of land. It was the two of them plus two small children. Unfortunately, they bought in early 2008 at the top of the market. A divorce 5 years later cost them over $800,000 in loss if value . In this HCOL area, buying a house was out of the question for my son. He also leaves for work before 6AM and gets home between 8:30-9PM. What free time he has, he wants to spend with his children and on their activities, not mowing, shoveling snow, fixing things. He rented a 1 BR apt with a true full loft - real stairs, full height ceiling; perfect for his children when they're with him. He has a nice kitchen, dining area, nice sized LR, bedroom and bath, plus a covered porch. And he has an extra length garage - storage - no shoveling out the car early in the AM. It's expensive - $2800 a month, but a 3BR house would be at least $1million and would be old and in need of updating - totally unaffordable.

Yes, it's a lot of money and nothing left in the end, but unless he relocated to a far lower COL area, which would mean not seeing his children, it's the only option open to him. And he would never leave his children.

Often, decisions end up being the lesser of two evils.

“Investing the exact same amount into the broadest market mutual fund would return us $419,462.“

In theory, this is great. Put $36,000 into a mutual fund and another $1,000+ per month and you’ll have $419,462 in 13 years. BUT by investing your mortgage payment each month, you now do not have money for rent. Now, the initial $36,000 could be worth about $100,000 after 13 years. But your rent may no longer be at $1,200/month.

I get that you are trying to say that you would have more money by investing in the stock market. But when we get into a rent versus own debate, we need to figure that each individual is going to have some housing costs.

The reality is that a very few percentage of people who have wealth also have not owned homes. While I agree that few live in their homes for 60 years, saving 30 years of principal+interest payments and not having closing costs on a buy/sell of homes every 5-15 years is far more advantageous financially. When doing a true comparison, we would also want to either invest or pay down additional on the mortgage as rents increase. Locking in a payment now (even though it does increase with taxes and insurance) generally puts a person further ahead than facing increasing rents for the next 59 years.

I've been both an owner and a renter, currently an owner. There are pros and cons to both, money being only one factor. IMO, the biggest advantage of renting is that maintenance is someone else's headache. The cons include unpredictable rent hikes, tightwad landlords, no-cause evictions, and the inability to choose improvements. Home ownership offers terrific tax advantages and substantial control over your environment. The downsides are the never-ending maintenance and risk of a falling market.

Like most other things in life, there are trade-offs no matter what you choose.

“A big home that you expect to appreciate faster can seem a great investment, but if you don't have other well established more liquid investments much of that gain isn't durable. If you lose your job, then you can easily get into a fire-sale situation that loses most or all of the gain your house has had. On the other hand a smaller house balanced with good liquid investments will whether hardships much better.”

Agreed. However, I think the question generally assumes you would be renting an equivalent home. To say I am saving a bunch of money renting a 1 bedroom apartment versus having a farm on 80 acres is not a similar comparison. Whether owing or renting, most people have very little savings. I am amazed how many don’t even have retirement accounts. I have no idea what these 30/40 year olds are going to do when social security really does dry up.

I get that you are trying to say that you would have more money by investing in the stock market. But when we get into a rent versus own debate, we need to figure that each individual is going to have some housing costs.

Here is the root of the problem. We are not in a rent vs. own debate, and nowhere have I been in a rent vs. own debate. I am noting that when the OP says, "Have always been puzzled by claims home ownership is not a good investment and renting can be advantageous."

This is a false dilemma, a house can be a bad investment and still be a better decision than renting.

Viewing one's home as an investment is a dangerous line of reasoning and yet it is a popular line of reasoning as we saw in the tiny house thread. In America, houses are the major source of wealth and that shouldn't be the case.

I see people all the time who are 50 years old, have a paid off house with no significant savings at all and little retirement beyond social security, who think they are in great financial shape. I have to break the bad news to them that they need to leverage that house, get into a mix of investments and start managing their retirement expectations, because they don't get to quit work in 15 years.

It is astounding how many people believe the equity in their house is a ticket to a better life, when in reality, it very rarely is.

The problem is that at the end of the 'investment term' when you sell the house, the only way to profit is to downsize or move to a cheaper area. So what if your house has tripled in value- so have most of the others in your area, so selling and moving nearby is a lateral move. You can use the accumulated equity as a down-payment on a bigger house. Many people do this as they go along and their income (and needs) increase.

We sold our FL house for double what we paid for it, and used the equity to move to a much cheaper area in SC. I never considered it an investment, though. It was shelter, as is our current home. When we move from this home, it will likely be to a retirement home... or a coffin.

I think what people forget in this discussion is that originally, this question was posed when children didn’t move away from the towns they were born in and when families didn’t move every five years. My great grandparents built a house for my grandfather when he got married. They lived in that house, having 4 kids, until they died and one of those kids then lived in that house until her son got married and she gave it to him. So that one house, paid in full by great grandparents, was lived in by three family units who didn’t have to pay rent or a mortgage. Now imagine 20 years of your salary history where you were able to save the money everyone else was spending on rent/mortgage.

I agree with what Bry is saying absolutely as do most advisers. The problem with our current thinking is that we build and buy very expensive houses and we do this because we still think of them as investments. It is a rational argument (that is poor) to justify an emotional decision. Obviously not everyone does this but lots of people (myself included) do.

Comparing renting an apartment of course is not the right comparison.

The better way to think about this is - I have some money and I want to live in a big fancy house. Not that I am going to make more money because it is big and fancy, I just want to do it. It is not as bad as buying a car but it is close.

I have this hit home for me as we rent now and are also looking at buying a property to rent. Looking at $300k homes that we could absolutely be happy in. Property taxes are $3000 and mortgage would be about $1000.

Now our build - I am budgeting a $10,000 property tax and a $2500 mortgage. The latest tax bill I am pretty sure makes it worse.

Another thing that would be nice about renting, my work changes locations in town from time to time. I could save time and commuting expense by moving more. But even more of an issue is my son's school. It is private and he will have 2 locations (most likely) for his 12 years and they aren't that close to each other.

I’m a jeweler; people ask us all the time if they can buy diamonds as ‘an investment’, a hard asset. The answer? Only as an investment in your happiness. I’m not a financial or real estate expert, but dealing with very expensive things has taught me a few things about reselling very expensive things:

1) they have to be nice enough to begin with that someone else will want it when you are selling it, so no 0.25 ct diamonds or double wide trailers.

2) it takes TIME for inflation/market values to catch up to the depreciation, you will not recoup your buying retail market value in a year. You might in ten, better if you wait 20.

3) wear and tear is real and it detracts from the value. You can chip a diamond, so if you plan on reselling it put it the the safe and never wear it. Likewise, don’t have kids or pets, or natural disasters in your home.

4) it doesn’t have to ‘make money’ to still be beneficial financially; you may not actually be coming out ahead in dollars and cents but selling an asset gives you cash you didn’t have to upgrade to a larger diamond or equity in a property that lets you buy another.

So, we view owning our home, which we do, like owning our diamonds- we plan to 1) buy what we can afford. 2) buy what makes us happy. 3) live here forever 4) let our children reap the fnacial benefits of our home and diamond ownership. It’s an investment in our happiness and our children’s futures.

P.S. Us 30/40 year olds are never going to retire; that’s how we’ll deal with no social security.

My home is an investment in my happiness, my family, and my ability to age as gracefully as possible. Somewhat financial - because when all that is going well, I am more able to excel at my work and my personal life. I don't plan on selling it, so it's not that kind of investment, but it does have tremendous value.

We own 5 properties outright. Out of those 2 are for our personal use, one is our primary residence and one is a beach home. The other three we rent out. This is in addition to a diversified stock / bond portfolio. I have no desire to have my entire investment portfolio in the stock market (and I worked on Wall Street) and believe that diversifying with real estate is the way to go. Is it a more conservative strategy? Absolutely, but it's one we are very comfortable with. We are also in NJ and lucky that our property values here have recovered and we never bought a property at the height of the market.

Investing in real estate is not the same thing as considering your home an investment. I have several rental properties and right now I am developing another multi-unit project. Most of my money in the stock market came from real estate investments, but that is not the same thing as using your house as a savings plan.

Furthermore, how do you consider property a "more conservative" investment strategy? Property has higher risk and lower returns than almost any other investment type.

In other words, houses lose money more often than most other properly diversified investments, and have a lower return than most. That is what makes them a bad investment. A conservative investment has low risk and low return.

Right now I have a guy at a rental property putting in a new AC and furnace. Since buying the house 18 months ago I have to replace the roof because of a hidden defect, had to redo the electric in the house because of a meter inspection that detected an aluminum wire connection problem, they believe that problem blew the compressor and board on the central air. I am currently setting at a cash-in price of $162,000 on a $150,000 property, and I have 30 years experience in the rental business.

ETA: This property was bought to rent for only a few years while a new school and upscale shopping center are being constructed nearby. My real estate investment strategy is to look for value investments in great school districts and buy as many of the houses in the neighborhood as I can. Sometimes I will do 4 or 5 closing a month until I can corner and elevate the rentals in that area.

One of the factors I always considered was that owners of rental properties have somewhat the same upkeep and maintenance costs as do home owners. Rentals have that amount figured in the rent amount.

So, own or rent, the occupant pays the upkeep/maintenance.

Locally, there is an increase in apartment/condo construction. The rent amounts for these 400 unit(or more) units are hurting the folks who rent out less than 10 units. Because the large complexes actually make more money and can absorb a spot loss like bry911 experienced.

There are a lot of factors to consider, this question cannot be answered by a simple answer. It really depends on who will be the one to purchase/rent, then the location is also a factor since prices vary drastically depending on locations. The best thing to do is to gather a few advice from different experienced individuals and base your decision off of that group of answers.

Bry911 you are misunderstanding my use of the term conservative. I consider it conservative bc we have no mortgages on any of the properties. I fully understand the power of leverage. We chose not to use it.

My house is not paid for - it could have been multiple times. But I have used the equity in it to make major upgrades that I could never have made out of my income, and with the first refinance, pay of a ton of credit card debt that was accumulated when we had two children in college - plane tickets, car repairs - you name it. It all added up, and yes, we were living beyond our means in some ways.

I've always been able to refinance and actually LOWER my monthly payment as interest rates were falling. My very first mortgage was not a fixed rate, and it was for 30 years. Luckily for us, interest rates continued to fall and when the time was right about 12 years later, we refinanced with a fixed rate 15 yr mortgage. We paid off every single penny of credit card debt and have never again had any. Multiple refinancing later, all were fixed rate 15 yr mortgages, and all made good improvements to the house.

I could not possibly rent a 3 bedroom house in as nice a neighborhood as I now live, for anywhere close to my my monthly mortgage payment, plus property taxes and insurance. BUT..I bought this house 33 years ago when prices were way lower than today in this neighborhood, and I still have a very low mortgage - about 20% of the value of my house.

When the time comes (and it will come one day in the near future) that I can no longer live in this house, it will be sold and the money left after paying off the mortgage/real estate fees etc should pay for about 5 years in a very good assisted living facility. After that, I will have to dig into my IRA and other savings, if I'm still living.

But I'm not like most people. Most don't buy and stay in a house for 30+ years. They buy a house that is more than they truly can afford, and they move every few years, usually when the house starts needing expensive repairs. And they just keep moving.

While building up equity in a house is not a sure thing, neither is investing in any financial product. They key is not buying at the top of the market, buying what one can truly afford, and staying where one is. That is not always possible for home buyers today.

For me, owning a house is a no-brainer unless mortgage payments were way more than rent. It's important to me that I own it; I can do what I want with it. If I want to upgrade the kitchen, I can. If I want to add an outbuilding, I can. If I want to raise goats, I can. I know a woman in big trouble right now because she raises farm animals at a house she rents, and she lost her lease. Now what? It's hard to find an affordable rental with acreage and a landlord that will let you raise livestock. Unfortunately, she can't afford to buy, either. I've been fortunate in that I've only had to rent for a few brief times in my life. I don't sit down and add up whether I'm losing money or making money; I'm happy, and can afford what we have.

I suppose in the grand scheme of things, we're all just 'renting' until we move or pass away. I just like having more control over my destiny.

Handymac - that statement about owners factoring in maintenance in the rent isn't always true. The rental market is what it is, regardless of how much the landlord needs or wants. In a hot market, the landlord can set his price;in a slow one, he may have to suck up a loss just to get a tenant.

My grandfather built the home he lived in until he could no longer live alone (and moved in with my parents). My parents owned two home, the first was purchased in 1942, the second one somewhere around 1990 (and they paid cash for the second one). Kept that one until my Mom died, Dad moved into independent living and sold house #2.

Oldest daughter lives in house purchased around 1990 also, been mortgage free for several years - planning to sell home in 2018 and build on acreage purchased several years ago, paying cash from proceeds of home sale. Both her sons (in their early 30's) own paid for homes.

Youngest daughter lives in home purchased several years ago, second home she and current spouse have owned. She has two children (also in early 30's) - son lives in DW mobile home on 5 acres, has a second single wide home (paid for) he rents out that pays the mortgage on the 5 acres. He, wife and 2 kids are in good enough financial shape they can soon purchase nice home in next town over and rent out the DW to almost pay a mortgage on the 'nice home'.

Not too sure how my grand-daughter will make out - she is married with 2 kids, SAHM, hubby has lots of physical/health problems. They rent.

Home ownership is pretty much ingrained in our family.

While building up equity in a house is not a sure thing, neither is investing in any financial product. They key is not buying at the top of the market, buying what one can truly afford, and staying where one is. That is not always possible for home buyers today.

While conceptually this is true, you must understand that in practice it is not true. The stock market does occasionally go down, but the losses are usually a bit more manageable than with houses.

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Since the inception of the regulated stock market, the Dow Jones Industrial Average has been down in a five year period only 3 times. The largest drop came after the Japanese attacked Pearl Harbor in 1941, so if you had invested in 1936 you would have lost 19.99% of your money by December of 1941. However, If you bought a house in 1936 it would have lost 21%.

People who invested in 1964 lost 5.75% by 1969, houses in that same period only lost 3.3%. If you were in the market 2003 you lost 4.99% of your value by 2008, and we know what happened with houses in 2008...

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Since the inception of the regulated stock market, the Dow Jones Industrial Average has never been down over a 10 year period. During that same time period houses have been down over a 10 year period 27 times.

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I own a house, I bought my first house a few days after my 18th birthday and I have owned at least one house my entire adult life, I am a huge fan of home ownership especially for families with children, as there are other benefits to owning a home.

I just like to caution people away from looking at their house as a paycheck.