Buying real estate property doesn't make financial sense

[Rich Chen]

Just a simple math:

Let's say I buy a home for a million dollars, with 20% down and 30-year term

    interest rate = 5% 
    +
    property tax = 1%
    +
    maintenance = 1%
    -------------------------------------------------
    = Total 7% annual costs of owning a house 

Now, during the 30 years of owning the house

    Average homes in American appreciate 5% annually
    - 
    Inflation runs 3% annually
    ----------------------------------------------------------
    = 2% gain annually


Those are just rough numbers. In real life, of course interest rates and inflations are much higher. For the sake of this exercise, let's keep it simple. 

Also don't forgot there is tax on capital gain for over $500,000 when house is sold, andclosing costs typical goes around 5%-6%.

So unless home appreciates A LOT, it doesn't seem to make sense to own a property as long as you are paying mortgage with interest, unless one can pay it all back in much shorter term (10 years or less). The only upside I see is that family get to live in it for "free". 

Even the house is fully paid off, the 1% property tax + 1% maintenance offsets 2% annual gain. It only about makes even. At current rate of inflation (7% roughly), it loses money owning real estate properties.

In 30 years, one would be paying over 1 million dollars for just interest and tax, let alone other costs such as maintenance. 

Calculator link: https://www.mortgagecalculator.org/?q=cy8pc-1KW

Am I missing anything?