▶ Full Post Text
I have discovered this philosophy not long ago, and am very eager to learn. There is one question in particular, that I cannot grasp. I suspect that it appears regularly on the sub in one form or the other. But I could not find something that covers my thoughts on the subject precisely. I would greatly appreciate if you could help me understand why is buying a house does not "save" some part of your money, as in you'd be still getting some of it back upon selling the house, right?
I understand why real estate is considered a poor **investment**: low or uncertain real returns, high transaction costs, taxes, maintenance, opportunity cost versus index funds, etc. I’m not trying to argue that property is a good investment. What I’m struggling to fully understand is the logic of why it’s still discouraged even as a way to preserve money, given that housing expenses are unavoidable anyway.
I know the common argument "mortgage = rent" is very flawed. But suppose the mortgage payment is *lower* than local rent, and the difference (plus expected maintenance and other ownership costs) is fully accounted for. In other words, the total monthly cost of ownership is roughly comparable to renting, after being conservative about all hidden and ongoing expenses. And suppose the money being saved for the down payment was invested in index funds, i.e. was working for you up until the moment of the purchase.
So what I struggle with is the following. With renting, all housing payments are gone forever. While with ownership, even if the property does not outperform inflation and even if I sell before paying off the mortgage, I can still recover \*some\* portion of the money upon sale. Yes, there are large transaction costs on both purchase and sale, but I am still getting some of my money back, no? Intuintively it seems like ownership allows partial capital recovery, whereas renting allows none. Would it still be considered inferior even as a way to not completely “burn” housing expenses? What is the key flaw in this line of thinking?