To respond line by line:
Fair point that I used an antedoctal example (and even cherry picked the time period). But who faired better in nyc: buyers in 2007 and held to today or those who rented throughout? One had fixed payments for 7 years and saw their asset appreciate and the other only saw their cost of living substantially appreciate.
Houses can lose money but you don't get margin called on them when they do. Remember I am saying that you need to hold the house for the long term. If you are unable to do that (life stage or career choice) then you shouldn't own.
Different areas have different pricing dynamics. When I lived in nyc annual rent to asset price was between 4-6percent. The annual cashflow buying on an after tax basis was a little higher than renting on day 1. Over time (and inflation), it would be more favorable to own. Unfortunately in NYC at that time, it took 10 years for the economics to work out and I didn't have that far of a horizon (both life stage and volatile career choice). In my new location, annual rents for houses run between 7-12% of the real estate value and maintenance expenses are much less. The economics are favorable on day 1 (that is my pre-tax monthly payments are less than I can rent my house for).
Check out the ROB function. It has 4 calculations: monthly payment, total cash outlay, NAV pre-tax, NAV post-tax. The first is your cash flow today. The second represents your nominal dollars over the period you enter, the other two represent a DCF valuation. I don't understand how basic NPV math is "mere statement and opinion of" mine.
Final point. Outside of unique shocks (911 attacks in NYC, 2009 crisis): real estate prices generally reflect a term bond based on rents today. Over time rents go up asset prices go up (inflation is generally positive), but mortgages stay the same.
Your original point was that no one should take a mortgage and instead pay cash for a house and rent until they have the cash. I am contesting that saying that taking a mortgage (even if you have the cash to pay for a house) is not a bad idea. If you don't believe in taking debt, that's your choice. I personally believe its a suboptimal one and there's basic math to support me.
Fair point that I used an antedoctal example (and even cherry picked the time period). But who faired better in nyc: buyers in 2007 and held to today or those who rented throughout? One had fixed payments for 7 years and saw their asset appreciate and the other only saw their cost of living substantially appreciate.
Houses can lose money but you don't get margin called on them when they do. Remember I am saying that you need to hold the house for the long term. If you are unable to do that (life stage or career choice) then you shouldn't own.
Different areas have different pricing dynamics. When I lived in nyc annual rent to asset price was between 4-6percent. The annual cashflow buying on an after tax basis was a little higher than renting on day 1. Over time (and inflation), it would be more favorable to own. Unfortunately in NYC at that time, it took 10 years for the economics to work out and I didn't have that far of a horizon (both life stage and volatile career choice). In my new location, annual rents for houses run between 7-12% of the real estate value and maintenance expenses are much less. The economics are favorable on day 1 (that is my pre-tax monthly payments are less than I can rent my house for).
Check out the ROB function. It has 4 calculations: monthly payment, total cash outlay, NAV pre-tax, NAV post-tax. The first is your cash flow today. The second represents your nominal dollars over the period you enter, the other two represent a DCF valuation. I don't understand how basic NPV math is "mere statement and opinion of" mine.
Final point. Outside of unique shocks (911 attacks in NYC, 2009 crisis): real estate prices generally reflect a term bond based on rents today. Over time rents go up asset prices go up (inflation is generally positive), but mortgages stay the same.
Your original point was that no one should take a mortgage and instead pay cash for a house and rent until they have the cash. I am contesting that saying that taking a mortgage (even if you have the cash to pay for a house) is not a bad idea. If you don't believe in taking debt, that's your choice. I personally believe its a suboptimal one and there's basic math to support me.
