people who say this are talking about markets where the spread between renting and the finance cost of a similar bought property are huge. San Francisco, New York, LA...
Let's say you're a couple years out of school and you work at Snapchat. Somehow you have a lot of money saved up and you can buy a little house near your office in Venice. A small house in Venice runs about $2m. So let's say you borrow 1.8m to pay for it, your monthly payment is about $8,500 on a 30 year fixed and thats before maintenance and insurance.
That same house in Venice probably rents for somewhere between $3k and $4k/mo net of everything.
So what those people are saying is to live in a rental and invest _the saved money_ in the market.
Remember, in both cases you are renting: in one, you are renting real estate. In the other, you are renting money. But they have different tax treatments, and renting money allows you to lever yourself into eventually owning an asset who's value you might expect to rise.
Renting is cheaper than buying? That really doesn't make sense, and I don't think that's the case in most markets. In California, it might because of the funny way they do property taxes there, where new buyers get stuck with huge property tax bills but long-time owners are grandfathered at far lower rates, so the landlords are likely people who've owned the house for ages. Other states just aren't like this.
Renting can be cheaper or about the same as buying. And I mean a comparable property. You have to add it all up.
My landlord has probably shelled out $10k in repairs ( the house is at that magic 20 year point where everything fails ) in five years.
I've done the "buy cheap and spend the rest at Home Depot" thing. It's not bad, but it's not ideal. Unless I'm categorically certain of living in the house at least five years, I'll continue to rent.
I've done the math - I'd have less equity in a house of the same value than I have in raw cash freed up just from renting. And that's really not counting fees and closing costs.
Renting is vastly cheaper than buying in many of the most expensive markets in the USA, if your only assumptions are like "borrows 30 year fixed at good credit rating current rates at 80% of the value of the property".
Vastly. Fancy parts of LA. SF. All of New York. Pretty much anywhere in the train-serviced urban/suburban Northeast.
It might not "make sense" but it is true. I'm also sure it's not the case in most markets in the USA, but in the large metropolitan markets, it is true, and that's the point people are making when they say "you know, it might make more sense to invest your investment money in a different asset class and rent rather than pay the ownership premium here in Santa Monica/Pacific Heights/Williamsburg"
