An anecdote for an anecdote: I made up and plugged in some numbers that roughly corresponded to buying my last (rented) apartment, and the calculator said it’d be cheaper than my rent by ~10%.
Tl;dr if buying vs renting was an obvious win the market would arbitrage that.
As I understand it, lots of the win comes from limit-one-per-person tax advantages, so “the market” can’t straightforwardly arbitrage it away.
In any case, along the lines of the OP’s section 4 above, the typical person should probably, ceteris paribus, prefer some investment in some real estate over additional investment in whatever market portfolio they already have, because not-perfectly-correlated assets add expectations but less-than-add volatilities. I think the calculator you linked is getting this wrong.
A single house in a single market levered up 5x isn’t the good kind of diversification and will make your expected portfolio performance worse. Lot’s of people diversify into a reit index, don’t know if that’s optimal or not.
A single house in a single market levered up 5x isn’t the good kind of diversification
Hm, I can see your point. Are you saying because you’ve worked through a back-of-the-envelope calculation, or are you just guessing? (Me, I was just guessing.)
and will make your expected portfolio performance worse.
Do you mean “will make the expected dollar-returns of your portfolio worse”, or are you making a claim about the expected utility-adjusted returns?
An anecdote for an anecdote: I made up and plugged in some numbers that roughly corresponded to buying my last (rented) apartment, and the calculator said it’d be cheaper than my rent by ~10%.
As I understand it, lots of the win comes from limit-one-per-person tax advantages, so “the market” can’t straightforwardly arbitrage it away.
In any case, along the lines of the OP’s section 4 above, the typical person should probably, ceteris paribus, prefer some investment in some real estate over additional investment in whatever market portfolio they already have, because not-perfectly-correlated assets add expectations but less-than-add volatilities. I think the calculator you linked is getting this wrong.
A single house in a single market levered up 5x isn’t the good kind of diversification and will make your expected portfolio performance worse. Lot’s of people diversify into a reit index, don’t know if that’s optimal or not.
Hm, I can see your point. Are you saying because you’ve worked through a back-of-the-envelope calculation, or are you just guessing? (Me, I was just guessing.)
Do you mean “will make the expected dollar-returns of your portfolio worse”, or are you making a claim about the expected utility-adjusted returns?