Speaking from my “N = 1” perspective: Yes, there is the disadvantage that if something bad happens, e.g. some idiots win the election and decide that my country leaves EU, the value of my lifetime savings could drop dramatically overnight. Same thing if there is e.g. a terrorist attack and my lifetime savings become a cloud of smoke and a heap of rubble, in even shorter time interval.
However, if the above described things do not happen, then I live in a middle of a city with job opportunities left and right (since I have moved here my commute means walking on feet), and I am a boss of what happens inside my place. New buildings growing around me increase the value of my property (it makes my place closer to even more job opportunities), while inflation reduces my mortgage payments to peanuts. The rent collected from the other place I own (where I lived previously) increases. At this very moment the rent I collect from one place (much smaller and further away from the city center) equals the mortgage payment at the other place, so this cancels out; I am looking forward to the surplus in the future.
I am not saying this is a proof that owning the place is better. As Moses said, this is a different risk profile; different advantages, different disadvantages, different probability distribution. I am just saying that from inside, for me, having invested in buying my place feels good. I do not regret not renting my place in the past instead.
In theory, the parallel-universe me could have rented the places, and invested the extra money instead. In practice, I shiver when I imagine what kind of investment the 15 years younger me would have made. Because my 15 years younger me actually had some extra money, invested them, and the money just evaporated. In my defense, it was before I ever heard about passively managed index funds. I live in a post-communist country, where people do not know how to handle having extra money, because in the past this kind of problem simply did not exist. All financial advice you can get here, is scam, regardless of the source (the bank I have money in regularly offers me “opportunities” that are obvious shit). Today I understand this; 15 years ago I didn’t. I am really happy that I bought my first place instead. This lesson may not generalize for you; but I think that investing in your place can make sense for people who are not financial experts, because the situation is relatively more legible. (Unlike with various funds, a scammer just cannot sell you a cardboard house pretending it was build from concrete; and the house you bought won’t keep changing its shape and address during the next years.)
When I bought my current place, I learned that “partial reconstruction” means last-minute changes that look pretty when you are inspecting the place, but start falling apart when you actually use it for a few months. Still, the position in the center of the city and the area in square meters remain the same; and those make about 80% of the value.
With funds, the real deal being 80% of what I was promised, would be much better than I ever got.
Speaking from my “N = 1” perspective: Yes, there is the disadvantage that if something bad happens, e.g. some idiots win the election and decide that my country leaves EU, the value of my lifetime savings could drop dramatically overnight. Same thing if there is e.g. a terrorist attack and my lifetime savings become a cloud of smoke and a heap of rubble, in even shorter time interval.
However, if the above described things do not happen, then I live in a middle of a city with job opportunities left and right (since I have moved here my commute means walking on feet), and I am a boss of what happens inside my place. New buildings growing around me increase the value of my property (it makes my place closer to even more job opportunities), while inflation reduces my mortgage payments to peanuts. The rent collected from the other place I own (where I lived previously) increases. At this very moment the rent I collect from one place (much smaller and further away from the city center) equals the mortgage payment at the other place, so this cancels out; I am looking forward to the surplus in the future.
I am not saying this is a proof that owning the place is better. As Moses said, this is a different risk profile; different advantages, different disadvantages, different probability distribution. I am just saying that from inside, for me, having invested in buying my place feels good. I do not regret not renting my place in the past instead.
In theory, the parallel-universe me could have rented the places, and invested the extra money instead. In practice, I shiver when I imagine what kind of investment the 15 years younger me would have made. Because my 15 years younger me actually had some extra money, invested them, and the money just evaporated. In my defense, it was before I ever heard about passively managed index funds. I live in a post-communist country, where people do not know how to handle having extra money, because in the past this kind of problem simply did not exist. All financial advice you can get here, is scam, regardless of the source (the bank I have money in regularly offers me “opportunities” that are obvious shit). Today I understand this; 15 years ago I didn’t. I am really happy that I bought my first place instead. This lesson may not generalize for you; but I think that investing in your place can make sense for people who are not financial experts, because the situation is relatively more legible. (Unlike with various funds, a scammer just cannot sell you a cardboard house pretending it was build from concrete; and the house you bought won’t keep changing its shape and address during the next years.)
I somewhat agree about bad financial advice but people also do get bamboozled by real estate investment all the time.
When I bought my current place, I learned that “partial reconstruction” means last-minute changes that look pretty when you are inspecting the place, but start falling apart when you actually use it for a few months. Still, the position in the center of the city and the area in square meters remain the same; and those make about 80% of the value.
With funds, the real deal being 80% of what I was promised, would be much better than I ever got.