Adding a room to my house where I live would add about $4k/year in mortgage costs. If you have your family staying over often, you'd easily exceed that in AirBnb's, sure. For me, my family is a 2 hours international flight away, so they're around rarely enough that $4k exceeds what I spend. The point is not that this is always the right choice, but that you should do the maths for your specific circumstances before you decide.
Similarly, with respect to a car, if the only alternative was a smaller car maybe I'd have chosen that, but my average total transport costs over the last 10 years is about 1/10th of the average UK car costs when factoring in occasional months with hundreds spent on Uber. That works for me, because I live somewhere with excellent public transport and don't need to use even that much. It won't work for someone who don't have my life or my transport options. That's fine.
That was my entire point: Do the numbers. And that also includes for people who think they're saving by holding back.
It's also critical to remember in this discussion that that $4K is not gone. Generally speaking, you'll pay less in mortgage costs than the value of the house by the time the mortgage is paid off. That means that you benefit from both the option to host people and the added equity which you could release later in life if you need that cash, or you can leave for your descendents.
At least, as a rule of thumb, property value gains tend to exceed mortgage interest paid. It's not universally true, but generally you'll at least recoup a significant proportion of what you paid.
That's true, but most places you need to spend fairly close to the full mortgage cost not to get a better return if you're able to put even a small proportion of the cost increase in an index fund. It's worth taking into account, but if you do, you should also take into account whether the other option will leave you money left over and if so how you'll spend or invest that.
> Across the country's 35 largest metro areas, homes that boast of a formal dining room ask a median of $325 500, 23% more than the national median home price[0]
I didn't find specifically the median house price, but reversing the 23% increase puts the median at $265 000.
This suggests a median 'dollar value difference' from adding a dining room of around $60 000.
With a median down payment of 13%[1], and an average interest rate of around 7%[2], you'll pay back around $550 000 over a thirty year mortgage[3].
In order to pay back less than $610 000 (i.e. the $60 000 value difference), the mortgage shouldn't exceed $293 000, leaving you with only $28 000 to build your dining room and come off better off at the end of the mortgage term.
Obviously if you can do better than the median rates, down payments, and values, then the maths changes, but on average, it looks like I might be wrong about you recouping the full amount you spend on adding a dining room.
> Adding a room to my house where I live would add about $4k/year in mortgage costs.
You can't compare that to an AirBib bill dollar for dollar. The money you give to AirBnb is gone forever. The money you pay in mortgage partially goes to your equity and may partially be a tax deduction.
It's tax deductable extremely few places (US and Norway are the only generous ones I'm aware of; I'm sure there are more, but it's not all that common) and decidedly not in the UK. And you're right the money I give to AirBnB is gone forever, so I do need to take that into account.
However there are other issues to take into account: 1) it's not a given the added value of a room will be as high as the cost of adding it, and it can severely prolong the time before you're in the black. E.g. my house is one of the largest on my street already, and that typically results in a lower return for adding additional space, 2) you need to also consider whether the cost to cover the needs you otherwise would meet by adding a room is met by more, the same or less than the amount adding the room adds to your mortgage payments. If it is less, then it takes fairly little less before you're able to increase your capital faster by putting the difference in an index fund at the point in time when most of your mortgage payments still go towards interest.
By all means, it can pay off to build, and odds are I in fact will add a room to my house over the coming year whether or not it will be profitable. I'm not saying you shouldn't. Just that it's worth doing the numbers and figuring out what actually works best for you (and, yes, that does include factoring in equity) and sometimes the right choice for you might not be what is financially most prudent anyway. But it's worth going into it having run the numbers.
Similarly, with respect to a car, if the only alternative was a smaller car maybe I'd have chosen that, but my average total transport costs over the last 10 years is about 1/10th of the average UK car costs when factoring in occasional months with hundreds spent on Uber. That works for me, because I live somewhere with excellent public transport and don't need to use even that much. It won't work for someone who don't have my life or my transport options. That's fine.
That was my entire point: Do the numbers. And that also includes for people who think they're saving by holding back.