What’s the reason for not just renting housing till the end of time and dumping my excess savings into REITs? Is there a big difference in outcomes vs buying a home?
In: Economics
In addition to what else has been mentioned, remember that in the US, personal home ownership is *heavily* subsidized at the federal level (and sometimes also the state level). This subsidy takes on a variety of forms, but the most significant is the existence of the 30 year fixed rate mortgage, which only exists because of FHA backstopping. This is a multi-trillion dollar per year wealth transfer from the country to homeowners, skewed heavily towards primary residences.
You miss out on that wealth transfer if all you’re doing is renting and investing in REITs. This manifests in the form of rent being effectively much more expensive (in terms of real wealth cost) than owning a comparable property over the medium- and long-term.
Also remember that REITs get absolutely hammered by the fact that dividends are taxed as regular income. They’re not actually as good of an investment as they seem unless you happen to be in a very low tax bracket, and even then, you have better options.
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