fivecentnickel brought up a good point. When you buy a home, your payment is always the same (if you have a conventional fixed-rate mortgage) which means that 15 years down the line, your mortgage payment of $1500/mo is still $1500/mo. But those dollars 15 years from now aren’t worth the dollars of now. Your rent, on the other hand, will be the same rent 15 years from now, in real dollar terms. It has to be that way, otherwise your landlord is nuts or very altruistic.

And, as bil and others have said, using an “average” appreciation of non-real estate investments is a fallacy. Your ability to pay $750 of rent is completely dependent on your realization of your investment income, while your ability to pay a $750 mortgage payment has nothing to do with anything except what your ability was when you entered into the mortgage contract in the first place. What happens if your investment income goes away for a period of 3 years due to a financial crisis? How will you pay your rent, unless your draw down your initial investment? So when the market finally upticks, you’ve got far less invested than your originally did. Granted, over a time period of 20 years, a 10% average looks sound, but year by year and even month by month, there can be huge swings. 3 months of negative growth will kill you.

You also brought up homeowner insurance vs. renter insurance. Apples and Oranges. Renter insurance only covers the crap in your rented unit. It does NOT cover the cost to replace that rental unit. Homeowners insurance does cover the cost to replace your house. So you can’t really compare them.

All in all, your suggestion is not a good one. Well intended but not well thought-out.

I think a lot depends on the market you’re in. In Vancouver BC for example, the market has gone through the roof, so it is possible to rent a lovely house in a great neighborhood for significantly less than the carrying costs of ownership (with house prices at averaging 500K).

What if there was a way that you could have the best of both worlds?

Yet renting an apartment versus owning a home are two very different experiences. It would be very hard for me to have a large garage to work on my cars and a large patio and backyard to host bbqs on if I was renting an apartment. If I wanted the “best of both worlds” I’d have to rent an equivalent house and the cost would be nearly the same as paying a mortgage. My monthly savings would be fairly slim and as others have pointed out, over the long term, my rent would go up while my mortgage payment will stay the same.

Also, I am not a huge supporter of the “primary residence as an investment” school. Renting or buying a home should not be about which saves you more money. It should be about your current needs, wants, and means. When my wife and I were younger and poorer, renting was all we could afford. Now that we are farther along in our careers and have a baby, I’d rather have the bonuses that come with owning a house. I could care less if it is the most lucrative “investment”, financial speaking, but I feel it is a good investment for my family’s happiness.

In the end, money isn’t everything.

I think the main difficulty is in not having $100,000 cash to start off with.

This doesn’t really hold up to reality, because what you’re implying is:

“The stock market has averaged 12% over long periods of time, so we can reasonably withdraw 9% yearly and still gain 3% for inflation.”

If the market has a down year (or even a flat year), then withdrawing 9% will leave you with a lower amount for growth than you started with at the beginning of the year.

If you have a couple down years in a row at the beginning of this plan, then your entire investment plan just went out the window.

Of course, a few exceptionally good years in the beginning and you’re set for a long time, but of course you never know what the market’s going to do.