I understand the advice to rent rather than own, but I don't agree that this necessarily works for your situation.
The fact is that there may be a crash, but maybe not. The US had some unusual lending practices and economic circumstances that were not mirrored in Canada or Australia and did, imo, lead to a bubble/crash situation. What arebelspy has done during the crash in the US was a very smart move and he will exceed my returns - but it is not an opportunity we may get in Canada or Australia. Your life is time limited and you have only so many opportunities to buy depending on savings/income/credit and stage of life.
In Canada and the US there may also be a long period of low rates with low growth to balance the past run up. Where I live, the flat scenario now appears more likely and has, in fact, been occurring for four years now. In addition, if you are just starting out and have a smaller down payment and rates rise you are in situation in which you will be paying a lot more interest because the mortgage is so large. You may not be able to qualify for a mortgage.
In this environment buying a smart rental property can work and, in any situation but a crash where you have lots of cash (assuming the crash is correlated with a rise in interest rates as your cash gives you a huge advantage), seems to be an okay move.
Rental income acts as a hedge against all the risks. In a high value market you are going to make a lot of money on one property provided you can hold through a down or flat period and you have a longer-term low-rate mortgage. This is where modelling is your friends. Run the numbers through all scenarios.
In our case, our mortgage and expenses are paid by rental income on a property we purchased for approx $720,000 plus reno costs. The purchase prices was more than for a single family house, but we are in a very good financial position because of this - we are actually put into the position of having a house fully paid for ie. no monthly housing cost. This frees up other income to invest.
In ten years, we will have saved the equivalent rental cost of the unit we are in ($1700 a month). In our case we have an extra $20,400 a year after tax to invest. Compounded at 6% over ten years (assuming we are at average returns for the stock market), this is $321,554.80. It would actually be more because rents go up over time and because this money will be used to make RRSP contributions and reduce other taxable income.
Now we need to deduct the lost opportunity costs of our $180,000 initial investment (assuming again 6% over ten years compounded) of $147,000, and we get about $174,554 more as a result of owning this property.
Then add the principal pay down of an additional $160,000 and in ten years you have $334,554 more than you would have had as a renter, assuming no home appreciation whatsoever.
In ten years our house would have to be worth about half what we purchased it for for renting to have been better than buying. However, we know that historically houses have appreciated at 5% annually. Given the run up, if we reduce this to 3% the house might be worth $967,619 in ten years. That is an additional $247,619 in equity. That said, we will have to pay capital gains tax on part of it due to renting part of the property. However, we won't sell in a year of high income, if ever, so I expect we will pay little in capital gains taxes on it.
If you add up those numbers you will see that you get to about $540,000 in the black in ten years - deduct $30,000 for costs of sale and you get $510,000. This is a rough example of what a good spreadsheet can do for you. It will be much more accurate with real numbers and all variables accounted for, but I believe that there is a large advantage to buying in this situation.
Also, will continue to receive rental income in increasing amounts as the mortgage is paid off. This means we will be put into a better situation than a paid-off SFH eventually. It will be housing and retirement income in one.
If you are in a low-cost low-rent area like the US I would not use this strategy as there are other options and buying a SFH might be reasonable. In high value area this works imo. What is too risky for me in a high value area is a SFH with no rental income. I would not do this. I like value my free time too much to spend it paying for a very expensive house.