I have wanted to put this into words for a while and then I came across this book excerpt with pretty much encases the points I wanted to make. I found this author from this post. I was originally trying to find an article I had seen before where a study found that home maintenance costs 3-5% of the value of your home every year. Many people don’t really consider this cost when buying a home.
An important point to take from this excerpt is that you aren’t throwing away money by renting, assuming you aren’t paying a ridiculous rent. That is something that is often repeated over and over by many, not just Realtors.
One thing that did surprise me was his quote from Consumer Reports that said instead of paying an extra $100 to pay down your mortgage, you were better off investing in an index fund over any 20 year period. But because few people will take that extra money and pay towards their mortgage or invest, a home can be the best investment because it is a forced savings account. Shiller, famous for the Case-Shiller found that from 1890-1990 the return on residential real estate was zero. Unless you make a great purchase or are a competent remodeler, in the end a house purchase is a forced savings plan.
