Quote:
Originally Posted by Biggd
If you spent your life just paying rent and never bought a primary home, like my oldest daughter, then you would not be better off financially unless you were exceptional at picking stocks. Just sayin!
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So you peaked my interest further so I ran the numbers and here's what I came back with.
If you want to look at the cost comparison of renting vs owning then you have to take the entire cost of owning into consideration, not just taxes. So I did a quick calculation on my primary residence, if I calculate in interest paid on the mortgage over the past 20 years I have paid out 137% of the original purchase price in taxes and 128% in interest.
Had I taken the interest and taxes paid and used that for rent (averages to $2200 per month) and look took the principal and put that into a decent growth mutual fund I would have ended up better off renting. So let me show you -
Owning house value is purchase price - 265% in JUST carrying costs = - 65% in total returns based on -165% of the purchase price + current market value of the house which has increased 100%. I don't calculate principal paid because that is reflected in the value being claimed
Renting + Investing = The total cost of PRINCIPAL only invested in a growth fund dollar cost averaging over 20 years results in total average return of 9.5% leaves me with the current value of the house as it sits now + roughly 200K! Rent was calculated on the total amount of interest paid plus property taxes so that is a wash as in both cases that money is gone either way. Now you may question the 9.5% average return as being a lot, well that is a real number derived from three funds growth funds I have owned over the same period of time. Granted the gains are yet to be taxed as they would be unrealized.
If I am wrong on how I calculated this I'm all ears.