As prices will very across the nation, we can only use general figures. Keep in mind, selling and renting and rehabbing property is what I do for a living so I think I have a pretty good backround on this subject. I'm just not seeing much basis for the argument renting will provide all this extra savings that you can invest and get more return on that capital via investment. Now this is speaking in general, because there are markets and situations where renting would probably be the better option, but those are situation where the stay will be short, or in a market with huge prices like NY or CA, or a situation like 2007 where the housing prices are falling in an unstable market.
The example you appear to be looking at is an average house in an average residential market in today's housing climate. Just double checking current listings in my area, the rental prices are about $1 a foot for common residential houses in average neighborhood. There are condos in the city at many times that rate, but it seems we are targeting a suburban house in normal neighborhood.
To use some real numbers, the house I last lived in was 3bedroom house that I sold for right at $300k, about $90k over my purchase price minus around $60k in improvements. I financed 150k about 4% rate, and didn't make extra payments. At the end of 4 years, I cashed out about $30k appreciation, but I also paid about $23k in interest, but that cost is further reduced as that interest is deductible and reduced my tax payment. Add to the cost about $5k in taxes over the 4 years, and $8k total in insurance. So roughly after 4 years of ownership, I cashed out only about $5k, yet I also lived in the house for 4 years and that has value.
On flip side, if I would have rented a comparable house, the current lease rate of the house on next street that was built by same builder and exactly the same size is $2,300. Even if I were able to talk them down to a $2k a month 4 year lease, that $96k spent over 4 years, plus insurance, plus most house rentals don't include maintenance and grass cutting so there would be additions monthly costs of maybe another $1k to $1,500, meaning a total 4 year cost of $144k minimum, all lost money.
So in 4 years
Purchasing led to about $5k made
Renting would have resulted in $144k or more loss
It's almost seems like you're trying to work backwards and make renting look like the better financial decision based on perceived liquid financial differences, but looking at an actual property, as opposed to spending $2,300 a month plus renters insurance a month, the purchase cost me a monthly mortgage payment around $1,400 a month including insurance and taxes escrow payment. So monthly the payment is cheaper. The only difference is the $50k downpayment I made that renting doesn't require, but, on the other hand, you would need to turn that extra liquid $50k into an amazing investment to make up the $144k + you will pay out to rent.
Edited by Big A, 08 August 2014 - 01:18 PM.