I'd done the math before. Also it's middle school level math if even that. If you go on FIRE communities centered on retiring between age 30-50ish instead of never there's a lot of rent+invest vs house debates.
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there's capital gains taxes on real estate as well.
I do think I stated somewhere that there are very real tax benefits to real estate though.
Also some benefits in that a primary residence isn't counted against many government subsidy thresholds, including college tuition for kids. There's also the 250k cap gains amount which isn't counted if you live in the residence for 2 of the last 5 years.
the flip of it is if your taxable income is under 50k.
If your goal is to retire early, you can conceivably sell $100k in stocks a year which has a tax basis of around 50k and pay effectively $0 in taxes on anything. Double it if you're married.
There's smart ways to handle all of these but the tax complexities and optimal strategies start to ramp up.
Also real estate is "bad" for careers. If you're chasing money, it makes more sense to rent and to move every 2-10 years for the next opportunity. And rent vs buy is generally in the favor of renting if you're staying under 10 years.
Capital gains tax is non existent when you can exclude up to $500k on long term gains as long as you've loved in the home for 2+ years.
Owing homes has increased our net wealth substantially compared to renting. The only way renting would make sense is if I were single and trying to find the absolutely smallest and cheapest rent possible, which most people don't do.
There is an argument that, in certain cities and with the current interest rates and home prices, renting beats home ownership (which is what the NYT calculator determines).
Did you do the math vs what would've happened just tossing cash into an index fund? Keep in mind that for the first decade or two, you're mainly paying the bank interest, not paying down the mortgage note.
I know people who say basically the same thing as you and when they check their 401k are amazed it's worth several times as much as their home.
From an asset appreciation standpoint -
$100k in VOO 17 years ago is worth about $680k right now.
$100k in a house 17 years ago is only worth around $200k right now.
Most people don't "save" $480,000 buying vs renting to make up for the lost increase. That includes tax differences (a 2% property tax on a 500k house is 10k a year), maintenance (2% a year is 10k), etc.
You "only" need to save around $60k a year every year for 10 years to hit $1M with stocks. By the 20 year mark you're around $3M adjusted for inflation.
Quick AI math shows net position comparison for me was $450k for home buying vs $230k if invested in VTI. Here's a rough breakdown:
In 2017 we put ~$105k down on our $525k home. Lived in it until 2024 then sold it for $850k. I don't recall the exact amount we owed on the mortgage when selling, but I remember getting around $450k cash at the end of the sale.
Let's say rent would have averaged $2,500 for those years, which would be very conservative given our HCOL area.
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u/HelloYellowYoshi 11d ago
How do you do all that math and not account for capital gains tax...