Quote:
Originally Posted by LouisVanDerWright
tell me how leverage can make negative returns positive again?
The blue line looks great, too bad the orange line is the only one that matters. |
I'm not arguing with you, but pointing out for discussion's sake that you're conflating investment property with home ownership. From
the perspective of an investor, the orange line doesn't account for rents received, which of course might be significant! And rent inflates year-over-year, which makes inflation less of a concern. Accounting for that would make the blue line go up at some fractional multiplier of the orange line's increase.
From the
perspective of a homeowner, the orange line doesn't account for the cost of rent that would be paying if they didn't own the property. And, of course, rents increase each year which also is an automatic adjustor for inflation.
There are also non-trivial tax advantages in many circumstances which aren't accounted for by the orange line. Not a reason to invest in real estate by itself, of course, but back of the envelope I figure I "earn" about 1.5% a year on my equity due to tax advantages of owning a rental property and that's not accounted for in the orange line.
I'm not someone who says that home ownership is a path to wealth or it's a wealth building tool. But it's probably a good idea and I'd expect it to contribute to wealth in a similar way to investing in the broader equity market after accounting for the absent expense of rent.