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Where I live houses are extremely expensive average around 900k USD. Condos can go around 300k to 400k USD for the cheaper end. However the HOA fee often runs $600 at least and combining with property tax and other fees it's at least $700 a month. I can get a cheap rental for $1300 a month so I only save $600 to $700 a month assuming the condo is paid off.

At this rate is it pointless to buy a condo and just invest the 300k in stocks and get my 10% return?

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    Are you considering an investment property or a primary residence? Also, where are you? In different countries (or even different parts of the same country) different laws may affect how you analyze a property purchase.
    – littleadv
    Commented Dec 26, 2023 at 21:08
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    When you're buying a house to live in, it's not an investment, you shouldn't look at it as an alternative to the stock market. You can't shelter from rain in the stock market.
    – littleadv
    Commented Dec 26, 2023 at 21:18
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    Im saying it's alternate to renting and investing in stocks.
    – Lightsout
    Commented Dec 26, 2023 at 22:28
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    See past answers about the risk of misleading yourself by trying to count a house or condo simultaneously as residence and investment, with the possible exception of buying a distressed property and putting sweat equity into rehabbing it while also living in it... and in that case the investment is really your hours and time; the property is just a vehicle for selling the results. (But remember that most renovations are a net cost, which is why I say this has to start with distressed/underpriced property.)
    – keshlam
    Commented Dec 27, 2023 at 0:44
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    "You can't shelter from rain in the stock market." - No, but you can shelter from rain in an apartment you rent from stock market gains. Not necessarily saying you should, but the question "put money in apartment or in stocks" remains a valid one.
    – marcelm
    Commented Dec 27, 2023 at 13:24

2 Answers 2

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There are some decent rent vs buy calculators that can help you weigh the options. There are regions where renting is favorable to buying (they are mostly major metropolitan areas).

The decision is always going to require some assumptions/guesses, you've got your 10% investment assumption, but how much do you estimate your rent will increase year over year?

The costs associated with buying/selling are substantial, so you also have to make some predictions about how long you are likely to stay in the area to see if buying makes any sense.

Many people are banking on interest rates decreasing so that they can refinance, but no guarantees, so take that into account if financing a purchase.

Use the rent vs buy calculators/articles but also make sure you're factoring in quality of life/personal preferences. Some people prefer renting because they feel more free and don't have to worry about maintenance. Some people prefer owning because they feel more free to do what they want with the property and don't have to worry about a landlord changing prices or deciding not to renew lease, etc.

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    re "Some people prefer owning because" — another major reason is so that you're not at a landlord's whim every year when your lease is up for renewal, either for a rent increase or to kick you out because they're selling the place. This is especially a concern in hot housing markets, like the major metro areas you mention. When my partner and I finally bought a place, a big part of it was just that: after a few cycles of "live in a place for a couple years, and then the owner sell the place and rent goes up 50%", we decided that buying was the only way to stop moving.
    – yshavit
    Commented Dec 27, 2023 at 21:12
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Assuming you do in fact gain 10% per year on your 300K portfolio, you are gaining 30K a year. With 1300/month rent, you're paying 15.6K/year in rent, reducing your gain to 14.4K, which is actually 4.8%. You'll pay taxes on the full 30K gain though, since rent is not tax deductible in most jurisdictions.

While the remaining 5-8K (after taxes) can be reinvested to achieve some compounding effect, you should also consider that real estate appreciates over time.

So even before the discussion if you should consider primary residence as an investment, your numbers don't really add up.

There are "rent vs buy" calculators tailored to different localities, search for yours to see a more detailed break-down and comparison.

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    Remember that all other property in the vicinity is appreciating at about the same rate yours is. You can't really cash out those paper gains until you are moving to something/somewhere significantly cheaper or until end of life when you're planning for a time when residence will no longer be an issue. Having equity in property may make borrowing easier, but that isn't the same as spendable profit.
    – keshlam
    Commented Dec 27, 2023 at 15:51
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    @keshlam Why is it relevant that other properties are also appreciating? Unless they're trying to sell at the same time as you, they're not competition.
    – Barmar
    Commented Dec 27, 2023 at 15:59
  • @Barmar because of opportunity cost, presumably. Commented Dec 27, 2023 at 16:34
  • @keshlam the same is true for shares, mostly. So no much difference.
    – littleadv
    Commented Dec 27, 2023 at 18:30
  • Except that you can sell shares without having to buy replacements. It's harder to sell part of a condo or house.
    – keshlam
    Commented Dec 27, 2023 at 19:13

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