The parameters of owing property like house rent or truck rent is part of savings.
House owning has been part of every body’s dream for thousands of years. It was a sign of attaining a certain level of wealth, and the stability that comes with it. And for many, it was a great investment.
But the realization of that dream is more an aberration now. As housing costs rise to unattainable levels across the country, an increasing number of people under the age of 30-55 have to come to terms with the fact that they’ll never secure a home of their own at all. Instead, they continue to rent well past the time their parents were home owners, spending more than half of their monthly incomes on a place they’ll never own. And while that’s used as an (appropriate) example of so many countries of their average youth finances, a new working paper from the National Bureau of Economic Research argues that, “actually, renting is a good investment” in its own right. It makes a tremendous point. As the authors of the paper, Esteban Rossi-Hansberg and Adrien Bilal, an economics professor at Princeton University and PhD student, respectively, argue, “the location of individuals determines their job opportunities, living amenities, and housing costs.” Rather than investing in a property to flip in a few decades, tenants are investing in a location asset. And like any asset, you need to think in terms of the rate of return—what are you getting out of living there? Many people rent in places with a high cost of living for the job opportunities, good schools, cultural offerings, etc. (On a personal note, as I wrote yesterday, living in New York not only puts me at the epicenter of the media world, but in close proximity to any number of classes and workshops hosted by experts in every profession imaginable.) “Buying more of the asset involves moving to better locations that cost more today but give better returns tomorrow, while selling the asset implies moving to cheaper locations with little opportunities,” the authors write. CityLab breaks down the paper’s argument: [W]hen you choose to move to a pricier and amenity-laden city, you’re transferring resources into the future that is., saving! by establishing yourself near opportunities for higher pay and human capital, Rossi-Hansberg and Bilal argue. On the flipside, when you relocate to a community with a lower cost of living but fewer economic advantages, you’re pulling resources into the present that you might have gained in the future—i.e., borrowing. It should be noted, of course, that not everyone can afford to “save” in this sense, with the fact that all can not afford to set aside money each month for their emergency fund. But as CityLab writes, it could be a nice psychological trick for the perennial renter out there: Think of your rent as an investment gain in your own and your children’s future opportunities, rather than a loss because you’ll never own the property. Moreover, rent could be called life investment in the sense that it only serve as asset for you and the entire family members. Furthermore, house or truck rental is income generating property which is too essential for family support.