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Real Estate
Reply to "Nominal vs Real prices "
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[quote=Anonymous][quote=Anonymous]Real estate generally beats inflation but is still an awful investment. $1 in 1980 would be about $4 today, when factoring in inflation. That $1 invested in real estate in 1980 would have grown to $7 today, on average. That $1 invested in the S&P 500 in 1980 would now be $100.[/quote] Most people buy a house with 80-90% mortgage. In your scenario, if you bought the house with cash., then you have to add in the monthly housing cost you don't pay in rent. If you bought with a mortgage, your return should be calculated based on total equity over the down payment amount. If you bought a house for $50,000 in 1980 and down paid $10,000, and it is worth $350,000 today, then your return is 3500% on $10,000, not 700% on $50,000. You didn't have $50,000 in 1980, you had $10,000. That is median scenario, but depending on the real estate you bought, that $50,000 house from 1980 might be $1,000,000+, not $350,000.[/quote]
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