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The main question for any investment, ever, should be: you have some amount of money...what will net you the highest return on that money. You can modify this with considerations for risk and diversification, but the name of the game is always opportunity cost. People stop thinking about opportunity cost when it comes to housing for some reason because they just can't stop thinking of paying rent as "throwing away money," without understanding that you're always throwing away money. To take a simple example, let's say that you have $500k in cash. Scenario 1: you pay $50k per year in rent from salary, park that $500k in a $2M investment property that returns $85k in rental returns. In this scenario, your returns are property appreciation and rental income. Your costs are mortgage, property tax, home insurance, home repair, and the rent you pay. Scenario 2: you pay $0 per year in rent from salary, park that $500k in a $2M property that you live in that returns $0 in rental returns (because you live there). In this scenario, your returns are property appreciation. Your costs are mortgage, property tax, home insurance, home repair. It's entirely possible, and common, for these scenarios to work out to be exactly the same. If you prioritize the purchase of properties that yield very high rents compared to the property value, it's very common for the numbers to work out in favor of owning investment property. And that can include "throwing away" money on rent. TL;DR: you're never not renting. Even if you pay $0 in rent, the price you pay is the opportunity cost of not renting your house, and not maximizing returns on the money you've parked in it. |