[blahshaw]

S&P 500 might have been a better return, but I can't borrow hundreds of thousands of dollars at < 5% interest invest in the stock market.

Also, do you think property taxes and maintenance expenses aren't passed on to renters in the form of higher rent?

[SilasX]

Well, there are a number of things that complicate the comparison:

1) Mutual funds get hit with a lot more taxable events (any rebalance or dividend), and only a small fraction of that can be shielded.

2) Even if you could borrow to invest, stocks fluctuate a lot more and you would be subject to margin calls.

3) You are implicitly paying maintenance/insurance costs as a renter, true, but only as a renter do you benefit from division of labor and tax-deductibility of such expenses.

4) For the specific time history: It would have been difficult in the 70s to buy something like an S&P index mutual fund; Vanguard started then but you're unlikely to have heard of them. Then again, you wouldn't be borrowing at 5% either!

[nasalgoat]

In Canada there is the "Smith Maneuver" which involves a Home Equity Line of Credit (HELOC) where you borrow against your equity and invest it, and write off the interest payment on the HELOC.

So technically you're using low-cost mortgage lending (2.15% rates are possible) to invest and get 5-7% returns on average, plus writing off the interest payments.

[conanbatt]

Sounds very safe.

[sokoloff]

Of course they are, but they are excluded from the "so and so bought for $70-100K in the 70s and just sold for more than a million" calculus. The latter was my point about needing to include them in the comparison.

[yesiamyourdad]

One interesting thing I learned: as a homeowner, your home doesn't depreciate. As a landlord, the home you own is an asset and you take depreciation on it. That's a massive tax benefit.

[sokoloff]

> That's a massive tax benefit.

Which is subject to depreciation recapture upon sale, so it's more of an immediate cashflow benefit than a long-term structural benefit. (It can also be seen as a form of "hand-out" to renters, but it's unpopular to complain about that, so few people do as compared to those who object to mortgage interest deduction.)

[aianus]

> I can't borrow hundreds of thousands of dollars at < 5% interest invest in the stock market

Of course you can [0], and it's even cheaper than mortgage interest (because it's much easier to margin call a stock a portfolio than a house!).

[0] https://www.interactivebrokers.com/en/index.php?f=1595

[sokoloff]

He can only do that if he has 6-figures of net equity in his IB account.

[jandrese]

It's easy to make money if you are already rich. The parent post is an excellent example of that. If all of those poor plebes who bought homes in the 70s had instead inherited their home and invested millions of their own dollars in the stock market just like those smart rich people they would be way better off today.