> When you rent, you might as well be lighting that money on fire.
OK, try lighting that money on fire. Then go live under a bridge because your rent money is ashes.
Rent gets you a roof over your head and it's completely ridiculous when people claim it's "lighting money on fire" or "throwing money out the window". Obviously it's not because if it were "lighting money on fire" people wouldn't do it.
Ownership also comes with expenses--maintenance, insurance--and with the substantial risk that your property will decrease in value or that you will need to move and take a loss on the sale. Also, the transaction costs when buying and selling are considerable--agent commissions and taxes are thousands of dollars.
That doesn't necessarily make buying a bad idea but renting is certainly nothing remotely close to "lighting money on fire".
A good portion of what you pay for in mortgage, you retain in equity. Zero of rent does. Insofar as you pay more in rent, than the non-equity part of your mortgage, the difference is 'money set on fire'.
Even if you ignore the fact that your capital is at risk (or do you think house prices never drop?) you also forget the opportunity cost of all that money sunk into the down payment.
I own property and only a fraction of what I pay each month goes to reduce loan principal. By this logic everything else I pay is "lit on fire". This is ridiculous logic. It buys me a place to live.
It also turns out that when I buy and eat a pizza, I built no equity either. Did I just light money on fire?
Property also goes up. I sold a quarter acre in downtown San Jose and bought a farm in Iowa. Which has since appreciated by a multiple. So, do that with rent.
> It also turns out that when I buy and eat a pizza, I built no equity either. Did I just light money on fire?
Obviously. If you would just buy a pizza restaurant instead, your payments would go towards your pizza equity. You'd get pizza, but you would also get returns from your mortgage payments on the pizza restaurant.
The first 5 or so years of 30 year mortgage you don't really pay off that much at all, it pretty much is interest, plus other holding costs and depreciation - money on fire. I was lucky with my place my last place and gain some significant equity in the first few years, but the value has been flat since the GFC. I haven't been living in my place for a few years either, I've moved around to where ever suits at the time.
OK, try lighting that money on fire. Then go live under a bridge because your rent money is ashes.
Rent gets you a roof over your head and it's completely ridiculous when people claim it's "lighting money on fire" or "throwing money out the window". Obviously it's not because if it were "lighting money on fire" people wouldn't do it.
Ownership also comes with expenses--maintenance, insurance--and with the substantial risk that your property will decrease in value or that you will need to move and take a loss on the sale. Also, the transaction costs when buying and selling are considerable--agent commissions and taxes are thousands of dollars.
That doesn't necessarily make buying a bad idea but renting is certainly nothing remotely close to "lighting money on fire".