I think you guys are missing the typical leveraging factor of a house. Let’s say you purchase a house for 200k and put 40k down or 20%. Now the house increases 5% or 10k. You have just made 25% on your money. So, the leveraging factor is very important when figuring rate of return.
Now, as you pay of your property, the year over year rate of return on your cash investment diminishes and approaches the 5%-6% return Steve mentioned (I am just taking these returns at face value.)
As for carry costs, maintenance, taxes and insurance; you would be paying these indirectly if you rented. Or I should say a landlord would attempt to minimize their negative cash flows as much as possible. Maximizing rent to cover the costs of the property as well as a profit.
So, for the same house the rent and mortgage plus escrow should be comparable. The only time I would see the rent being less would be if the landlord held the property for an extended period of time and hence the mortgage payments the landlord was paying would be less. But then I don’t think that would be an apple to apples comparision. I think you would also need to find an example where the underlying finance was the same too. And in that event, I think rents would be greater then home costs because the landlord would not only have the same costs but would also try to make a profit or keep some sort of retained earnings.
And a house is not like a car. A car continues to decrease in value while a house general does not (in the long term).
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