By his own admission, purchasing a condo and riding it up to the very top of the largest real estate bubble in history netted him only a 1% return. Any other market at any other time would likely have netted him a loss on that purchase.
In a non-bubble market, I wonder how much more he would have gained by renting that very same condo and investing the difference instead?
Renting is just like insurance, you pay a premium so that others take the greater financial risk: You're not tied down, you can move anytime, and you don't have to care about the housing market or interest rates. For some people this is worth it, for some it's not. Your mileage may wary.
The only other problem I have with his text is that he seems to suffer from analysis paralysis by not buying a computer for years since they drop off in value so fast. There's also a value in having a computer, or whatever other item, in that time.
Yes, if you wait one year you'll get a faster computer than what you can buy now, but you'll also be stuck with your current computer for one more year. How much does that cost? Sometimes you just have to suck it up.
This is why I still enjoy, and buy games for, my (refurbished) PlayStation 2 (actually, I still play games on my SNES too). My workstation was dated, so I built a new machine with parts just below top-of-the-line (Core2Quad rather than i7, 600 GB instead of 1.5 TB hard drives, for example).
The advice in the article about new cars is valid; new cars depreciate as soon as you drive them off the lot, because then they're "used." You might get a nice warranty package with it, but you can get extended warranties for used cars from certain dealerships.
Spent the money saved on high quality Power supply, case and motherboard.
The next upgrade is a top-of-the-line Core2Quad when local distributors slash prices on those to dump their old stock.
I'm aware there is a trade-off in Electricity consumption Edit: technical typo
More seriously I have a PS2 and a printout of the top 25 games for the PS2. Whenever I think of a new game system I can just look at that list, buy any one of those games for extremely cheap and have a ton of fun. (The good SNES games on ebay are a more expensive, but still $10-$20, Chrono Trigger was a bit more...)
Your scenario assumes that (1) he could rent the same or an equivalent property for much less of cash outflow than buying and (2) he could have invested the difference in some other asset that had a much higher return than appreciation of the condo.
If the amount the rental amount is about the same amount as the mortage payments then you are almost certainly going to be worse off renting than buying under average market conditions.
Of course he could. If your rent is paying your landlord's mortgage, you're overpaying.
> and (2) he could have invested the difference in some other asset that had a much higher return than appreciation of the condo.
Finding an asset with a better than 1% return is not difficult.
> If the amount the rental amount is about the same amount as the mortage payments then you are almost certainly going to be worse off renting than buying under average market conditions.
If you're wasting your money by paying your landlord's mortgage, you're going to be worse off than if you refuse to waste money and pay a reasonable rent. Renting is cheaper than home ownership; if it's not, you're doing it wrong.
When I'm going to be somewhere long-term, or at least have a flexible schedule for moving away, I'll want to buy.
Over here (Uruguay), rents are way more expensive than an equivalent mortgage... simply put, people (myself included) don't have capital for the down payment (and the mortgage process is expensive in itself, at least U$D 1000 which is not a small sum here), so they don't have an option - it's renting, or the street/slums.
And no, there are no "no capital down" mortgages.
I'm not sure how long you have to stay somewhere to hit the break even point.
http://www.nytimes.com/interactive/business/buy-rent-calcula...
Right now an average sized house is about as much to rent as it is to buy with a mortgage (at least here in the UK anyway). There is no sane way anyone should be renting a whole house.
I should have mentioned; my calculations included most of those extras. To be honest, though, the only important thing is what you are paying out in total each month.