If you had $10,000 laying around...

[Topless]

Originally Posted by Perfectlap

If Warren Buffett put the $31K he used to buy his first home into shares of his own company instead, he'd have $42 million today... That house is not worth $42 million...

Another fallacious strawman argument PL. He has to live somewhere and the total costs associated with owning his home were lower over time than the total costs associated with renting an equivalent property over the same period. This freed up more cash to invest wisely in Berkshire.

So unless your mom is willing to take care of your housing by giving your old room back, buying beats renting long term. Renting beats buying short term. It really is that simple. Only the time window changes based on market fluctuations.

[stephen wilson]

Also, the odds of an investor picking a stock with that kind or return, except in hindsite, is about nil.

[Perfectlap]

Originally Posted by stephen wilson

Also, the odds of an investor picking a stock with that kind or return, except in hindsite, is about nil.

Agreed. On matching Berkshire.... But I used Berkshire because it just happens to be his company! Even if Buffett invested in a simple index fund he's still up massively since that home purchase was made. And that's even with a bear market that lasted well over a decade until the high flying 80's and 90's.

And I don't know anyone who advocates stock-picking for 99% of the country...

From John Bogle to the Hedge Fund manager of the month, they all beg the average income investor to buy the total stock market through an index. Why? Because the data is more than ample that over any extended period the total stock market beats owning real estate or any other asset class. 99.6% of multi-millionaire mutual fund managers can't beat you the S&P 500 investor sitting at home in his lounge chair and slippers. Yet the average U.S. worker passes up more of this oppourtunity than they should for the privilege of being a home owner/owing the bank. The major benefit of investing in different asset classes comes from doing so over a long period. You can't expect a good result if you wait until your in your 50's because most of your money was tied up keeping up with home-related expenses.

You should not base your decision to buy RE just on how much you saved vs. renting, you should also factor in what owning is costing your investment portfolio over the course of 30 years. That's my point.

[Perfectlap]

Originally Posted by Topless

Another fallacious strawman argument PL. He has to live somewhere and the total costs associated with owning his home were lower over time than the total costs associated with renting an equivalent property over the same period. This freed up more cash to invest wisely in Berkshire.
.

...an equivalent property. That's right. There is no rule that says you can only rent the equivalent property you intend to buy. I'm not sure why folks in the rent vs. buy debate always frame the comparison in this way, 'equivalent property' is the only situation where costs are lower. There is such a thing called down-sizing: In all other situations you can rent a dwelling that is 2/3's the cost of the home you intend to purchase. And often, that's still renting a much bigger property than the one you would be living in as a home ower err I mean home owner, usually when the rental owner has long paid off the property or simply inherited it -- they aren't passing down all the costs straight to the renter. Or in other more recent cases, the rental owner purchased a foreclosure, paid it off in barely 10 years (or less) and can charge below market to secure a good, reliable, well-employed tennant.

Also, the total costs to rent was indeed higher in the long term for Mr. Buffett.
Now what about the return Mr. Buffett would have made had he simply rented a less-expensive-to-live-in property and invested the savings over 30 years into the S&P if not Berkshire? Since '65 he would have made 38X's as much with that savings in the S&P or 10,300x's as much in Berkshire. The point is what you saved on renting in being a home owner (and only in the 'equivalent home context') has cost you dearly as saver/investor in that time horizon. Home ownership forces too many to divert far too much of their income into their bank's coffers and not into their own net-worth. You will will always have more time under the belts of your investments if you rent because you'll have more wiggle room after expenses. And time is the the crucial make or break for maximum performance in most asset classes.