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‘Should I buy a house/apartment now’ or ‘should I continue to stay in a rented accommodation?’  I am sure you would agree that this is a common dilemma faced by many youngsters.

In fact, although there are several decent ‘rent’ vs. ‘buy’ calculators available, I continue to receive requests to make one.  For a variety of reasons, I am not motivated to make one although from a mathematical point of view it is reasonably interesting.

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Here are five reasons why I will never invest in real estate.  This is me taking sides on the equity vs. real estate debate. There is more to investing than returns. So instead of comparing past returns of both asset classes and claiming equity won or real estate won, I would like to consider other important aspects.

So here goes. I will never invest in real estate because,

1. It will skew my asset allocation perhaps forever

Personal finance has two components: insurance (or fortification) and investment.

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There is  a strong buzz that real estate prices are going to crash. I can count three types of people who are contributing to this buzz:

1) Presstitute-portals - they don't know need a rhyme or reason. All they want is traffic.

2) Those who sell equity products - what better chance to remind their clients that equity is a much better asset class.

3) Equity investors - driven by a delectable sense of 'I told you so', they would like to share articles that portend a real estate crash among their friends and relatives.

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Use this calculator to  analyze if you should  pre-pay your home loan asap or invest instead. This is now republished after correcting a bug pointed out by Ankush.

I had posted an illustration of prepay vs invest in June  but did not post the associated sheet. I have now modified the sheet to include new tax rules. Future changes in rules can also be easily accommodated with user entry.

The money that is free for investments (inevstible surplus) is assumed to grow at some interest rate (can be modified). Whenever there is a need, withdrawals are made from the corpus.  This will work best if you use only long-term goals.

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When should I buy a house? Should I buy it as soon as possible, or should I wait for property prices to ease? Should I invest and then buy with it after some years? How important is it to have a property that we can call our own? Why can't I stay in rent forever?

A look at some of these issues sourced out of my comments from a thread at Facebook group Asan Ideas for Wealth.

I have received suggestions to make a rent vs. buy calculator.  I believe such calculations are problematic  since the only input that makes a difference is the rate at which property prices appreciate.

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