In our situation, rent is $805 monthly. This equates exactly to a 5% fixed rate loan on a $150,000 home. But there are many other expenses that we would incur, including
Property tax ($250)
Homeowners Insurance ($100)
Water Sewage ($75)
Lawn Maintenance ($50)
Increases in electricity expenses
Purchasing items (furniture appliance etc)
Repairs and upkeep

Aprox. $700+ a month in NEW expenses. (Well that’s much more than our rent)

Conclusion: Since we rent, we are able to instead INVEST those additional costs ($700+ a month) into Roth IRAs which grow tax free. Over a 30yr period of time (same time as the average mortgage) our investment would be $1,050,206 with an 8% return….or….$2,470,938 with a 12% return.

You never really truly own a home till the day its paid for in full. The average annual price increase of a home according to the USA Real Estate Median Sales Prices of Existing Homes since 1968 is 6.4%(before the bubble burst) Therefore a $150,000 home purchased today would be worth $850,000 in 30 years. (best case senerio) That sounds great however it is not really since we would have paid
$252,000 (mortgage with interest) plus
$700 a month we were unable to invest since it went to the above listed maintenance items..look at the cost over the 30 year period!

$90,000 in property taxes,
$30,000 in homeowners insurance,
$45,000 in home repair upkeep,
$27,000 in lawn/maintenance services
$36,000 for water, sewage and additional utilities and repairs

Conclusion:
Although the home would be worth $850,000, the expense to purchase and maintain the home would be aprox. $353,715 which leaves a “true profit of ONLY a 2.8% profit. So many people forget to include ALL the cost associated with a house its not just the mortgage. And a home is worth only what you sell it for. And there is another house on every block.

Never listen to the closed minded people who claim YOU’RE THROWING AWAY YOUR MONEY PAYING RENT. These people are brainwashed into the ideal that you must own a home. Many have debt beyond belief.

No, it enables us to invest so that we can live our retirement with dignity. We will never become house poor and always be debt free.

We can take advantage of our most powerful wealth building tool, our income. With that power we have compounding interest that will work FOR us and not Against us in ALL our financial decisions.

Buy buying a home we would have thrown away our retirement and would have lost a million dollars or more! With our investments we will always be able to find a place to live, or even get this buy a home with cash when we retire.

We believe that you are throwing you money away by having a mortgage! Imagine loosing $1,595,527 in investments for a $850,000 house…who thru their money away? Correct answer NOT US!

We were shocked when one day we thought what if by some miracle poof we were the owners of a PAID for house. Our first thought was we would be rich, NOT so fast my friend.. Even with a paid for house we would only save about $250 a month after all the new expenses. We were floored! Again with a paid off house we would only save $250 a month!!! So if we spend an extra $500,000 the cost of a mortgage and expenses over 30 years, then 30 years from now we can save $250 a month…(Approx $550 in new expenses less the $800 rent) No worth it at all.

Yes rent will go up, but so will insurance, repairs & utilities, so its close to a wash. In addition by RENTING we able to keep our expenses low and will continue to add to our investments and saving plans over time all with compounding interest already established.

A HOME PROVIDES SECURITY….IT’S THE AMERICAN DREAM.

This is a fallacy that has been pressed upon us all. Yes, the paid for house has replaced the BMW as the stasis symbol of choice. The only way paying off a mortgage saves you money is if you already HAVE a mortgage. However one very important part of this “dream” is not often thought of…Introducing RISK

Sorry but over 30 years RISK is an indisputable fact. 100% of all foreclosures have a mortgage on them. I repeat 100% of all foreclosures have a mortgage on them. Over the time of a 30 year mortgage so many things can happen…illness, accidents, loss of jobs, or even death. By carrying a mortgage and all those NEW expenses mentioned earlier, many mortgage holders have little savings period let alone any retirement accounts.

Personally this would not be a blessing it would be a curse! I’d be worried all the time “what would break next?” or damn I’ve got to do the lawn this weekend” or “damn I have to take off work (not paid) to meet the plumber…or an unexpected assessment fee.

We may not OWN a home but we OWN our lives and live a resort lifestyle. A beautiful lake view setting, swimming pools, fitness centers, and every walk with our dog is just like being at a private park. We are able to be DEBT FREE! WORRY FREE! And are investing with gazelle intensity for our future. It’s the best felling in the world and that my friends is priceless.

If happiness is truly where the heart is we’re already there. A wise man (that Dave Ramsey again) says that be weird, normal is broke. We’ll these are our beliefs.

Other than that, good article.

What you are overlooking, it seems to me, is that the equity you build up in “some other investment” may fizzle out on you, say if you had invested in what may have seemed like sure-fire investment bets at the time you made them, such as with someone like Bernie Madoff, who has indeed lived up to his name and “made off” with his investors’ money. Think of all the people whose “hundreds of thousands of dollars in equity,” to use your words, have gone up in smoke — and not only with frauds like Madoff. Almost everyone has lost big time on their investment portfolios. Who would have thought that a blockbuster stock like GM, for example, would fizzle as well. And now you’re really cooked because not only don’t you have any real property to show for your investment, but your trusty “renting self” can no longer afford to pay the rent either. At least when you buy a house it becomes a *tangible* asset, so all the talk here about the intangible benefits of owning miss the fundamental point that homeownership is a “real” asset beyond its present calculable worth in hard currency; other investments, by contrast, are for the most part virtual assets that can “virtually” disappear overnight.

Bottom line, your paradigm only works if your investments are winners and not losers. Especially in light of the recent financial meltdown, you must see that building equity in other investments — especially stock — is even riskier than investing in real estate.