Maybe I’m going overboard on this whole renting vs. purchasing thing, but here’s yet another article that hopefully will help drive the point home: Renting Makes More Financial Sense Than Homeownership
I HAVE SOMETHING un-American to confess: I rent an apartment, despite having enough money to buy a house. I plan to keep renting for as long as I can. I’m not just holding out for better prices. Renting will make me richer.
I normally write about stocks for SmartMoney.com, but the boss asked me to explain to readers my reason for renting. Here goes: Businesses are great investments while houses are poor ones, so I’d rather rent the latter and own the former.
Shares of businesses return 7% a year over long time periods. I’m subtracting for inflation…
The average real return for houses over long time periods might surprise you. It’s zero.
…
“You say houses return zero. But I’ve made a fortune on my house in recent years.”
I’m referring to inflation-adjusted returns over long time periods, absent external boosts to demand. You’re referring to gross returns over a short time period that combined lax borrowing standards and ultra-low interest rates.
Remember, I’m not saying “don’t ever buy a house.” I’m saying “don’t ever buy a house as a means to generate a profit.” I’m nowhere near as hard core as this guy, in that I would probably have already bought a house by now if prices were sane. But as long as things are this far out of whack, the financial benefits of renting far outweigh the psychological benefits of purchasing (for me).