schmidtjas
Recycles dryer sheets
A friend and I have been talking about renting vs owning and which is "riskier". On the renting side you have, effectively, price risk (rents could go up, maybe due to real estate appreciation). On the owning side you have asset risk (in the short term your home could drop in value, require a significant repair, etc).
We came to the agreement that owning is usually riskier in the short term, and renting is usually riskier in the long term. Quite often both balance out in the end.
My thoughts then turned to, ok, you choose one or the other. Say you decided to rent. How do you effectively hedge the price increase risk? Again, by price risk I'm referring to rents going up due to significant real estate appreciation in your area. My thoughts are that you could invest in REITs, but I'm not sure how much you would need to allocate to them to hedge.
On the other hand, my thoughts on hedging asset risk (mainly, falling prices) would be to short REITs. Does that make sense?
We came to the agreement that owning is usually riskier in the short term, and renting is usually riskier in the long term. Quite often both balance out in the end.
My thoughts then turned to, ok, you choose one or the other. Say you decided to rent. How do you effectively hedge the price increase risk? Again, by price risk I'm referring to rents going up due to significant real estate appreciation in your area. My thoughts are that you could invest in REITs, but I'm not sure how much you would need to allocate to them to hedge.
On the other hand, my thoughts on hedging asset risk (mainly, falling prices) would be to short REITs. Does that make sense?