[quote=matt-waiting]Keeping it as a rental may work (or maybe just rent to the baby mamas), but I imagine that on the macro level, most people will need the equity to purchase the larger house.
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I agree with your overall logic, but the assumption is wrong. People need equity to purchase the larger house because they cannot save enough down payment. That unable-to-save mentality is wrong.
We have almost the lowest mortgage-payment/income ratio in history right now. And the mortgage is likely even lower than the rent. So you should be able to save for a larger house and be ready to come up with new down payment when you are ready to buy.
You are worried about higher rates due to inflation. Rental property is a good hedge against inflation. It is likely better than housing price itself. So I am afraid that is going to be the best answer that you can get.
Also, I completely agree with sdr earlier. Now is probably the best time for upgrade. So if you can afford it, go buy your dream house now and forget about trading up later.
