[artosispylon]

I think you should mention the higher risk exposure from having so much liability tied up in a single asset if the house loses value.

Also, why is option 2 @2%? If you're investing the $360k at 7%, you should compare it to the same investment at 7%.

[arcticbull]

Option 1 is a 20% down payment on a $450K mortgage, so a $90K down-payment (10% yield) and a $360K investment in the market (7%) and a $360K mortgage (0.53%).

Option 2 is a $450K cash purchase of a house, which, on average, appreciates at the fed target inflation rate of 2%.

Indeed although in both cases you own the home and are subject to the same depreciation risk right? Although if you're willing to take a credit hit, I suppose you're shifting that depreciation onto the bank.