Older Guys (40+)
#41
https://www.nytimes.com/interactive/2014...lator.html
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#42
(05-12-2021, 12:58 AM)Shifty Wrote:
(05-12-2021, 12:44 AM)k pop Wrote: STOP RENTING. Property is always a solid investment. Renting is throwing your money out both windows.  

It really depends, this isn't true most of the time in my opinion, unless you are buying a house in cash you are still losing money by paying interest + upkeep + taxes, etc and you are locked down to one location, not to mention that you have your entire net worth tied down to a single illiquid asset, much better to pay rent and diversify your investments while young, once you have enough money so that your primary residence wouldn't represent a significant % of your net worth then I would go ahead and buy. Yes, in 20 years real estate prices will be through the roof most likely, so will the market.

There are many inaccuracies in this comment.  That doesn't mean its always better to own, just that there are inaccuracies.

Yes, there is interest, upkeep, and taxes.  But all of those together are less than the cost of renting.  So some people may overlook those, but that doesn't mean that renting is cheaper - its not.

You don't have to pay cash.  In the U.S., most homes are bought with 20% down.  I just bought a mansion for 10% down, and its appreciated 10% since I went under contract.

Finally, it ignores several benefits of ownership:

- the monthly cost of owning is usually less than renting.
- there are many properties that are not available to renters, whether as a market reality or because an HOA or building does not allow it, or because you have a dog
- owning allows you to customize a property to your taste.
-owning allows you to employ substantial leverage.  The gross value of the property I bought less than 6 months ago is up 10%, and I put only 10% down, so I've already doubled my cash investment.
-owning provides substantial tax benefits which become more valuable to you as your marginal tax bracket increases.
-owning provides certainty.  A landlord cannot cancel your lease.  
-owning requires amortization of the principal.  This is akin to forced savings.  Over time, its a substantial nest egg.
-owning is a hedge against inflation.  You lock in an interest rate and a mortgage payment.  Rents could double in 5-10 years but your mortgage payment wont.
-owning is like have a free call option on housing. Over most holding periods, housing has appreciated, sometimes substantially, resulting in large capital gains for the owner.

Of course there are disadvantages too, and some of the advantages above apply less outside the U.S.  Some of the disadvantages can be offset by renting your property on Air BnB.
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#43
(05-13-2021, 06:38 PM)Hypno Wrote: - the monthly cost of owning is usually less than renting.
- there are many properties that are not available to renters, whether as a market reality or because an HOA or building does not allow it, or because you have a dog
- owning allows you to customize a property to your taste.
-owning allows you to employ substantial leverage.
-owning provides substantial tax benefits.
-owning provides certainty.  A landlord cannot cancel your lease.  
-owning requires amortization of the principal.  This is akin to forced savings.  Over time, its a substantial nest egg.
-owning is a hedge against inflation. 

Let me reiterate that Fair Price/Rent  =  1/(Mortgage rate + 3% - Inflation).

If you don't understand this formula, then more complex calculators will just produce more complex errors.  Here is an example.  Suppose that annual rent is $24K, your mortgage rate is 3%, and inflation is 1%.  Then the fair price is $24K/(.03 + .03 - .01)  =  $480,000.  If the price/rent ratio is higher, then you will be better off by renting and investing the money at 3% interest.

-cost of owning is usually less than renting.  Relative cost depends on the price/rent ratio.
-owning allows substantial leverage.  It is much easier to get leverage from a stock or futures broker.
-owning provides tax benefits.  Owners pay substantial property taxes.
-owning requires amortization of the principal.  This is akin to forced savings.  If you need to force yourself to save, then you are too irresponsible to own a house. Besides, there are interest-only mortgages, refinancing, and home-equity lines of credit.
-owning is a hedge against inflation.  Just buy Treasury Inflation Protected Securities.

You should buy a house to live in if it is better, cheaper, and more suitable than your rental alternative.  Home ownership would interfere with the young travel-bum lifestyle.  It is also costly in the event of job changes or divorce.
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#44
We had this debate before and essentially the conclusion was: if you're going to live in the place then it's worth the investment. If you're always on the move then invest elsewhere.
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#45
Of course you factor in maintenance costs and taxes into your expenses and budget appropriately. Ideally you want to cover unexpected maintenance from an emergency fund, if you're gonna need to pay for this stuff on credit then you need to review your finances.
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#46
(05-14-2021, 12:09 AM)Wintermute Wrote: Of course you factor in maintenance costs and taxes into your expenses and budget appropriately. Ideally you want to cover unexpected maintenance from an emergency fund, if you're gonna need to pay for this stuff on credit then you need to review your finances.

Yes. My point was that most people do not budget properly for maintenance, especially for the types of properties that North Americans prefer. And also that when calculated properly, maintenance is probably a lot more expensive than people believe. This is a key reason that I don't think owning is a slam dunk over renting -- whatever you're gaining in equity, you're pissing away in maintenance and other expenses.

I think buying is fine and renting is fine -- it's a lifestyle decision more than a financial decision. Most Americans are going to thoroughly fuck up their finances no matter which direction they go. And if you're wise with your finances, you can make either route work well.

I saw this quote from Columbia University economist Edmund Phelps: If you rent, that’s it. You don’t have to pay any interest to anybody. You don’t have to pay any maintenance costs to anybody. You don’t have to worry about whether the boiler is going to break down. While if you own your own home, you have a hundred aggravations. Maybe the roof will leak while you’re overseas. In strict money terms, there is no reason to think there is a systematic, long-run, sustainable, durable difference between the two.
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#47
That is true, the core of it is don't be a drooling idiot with money. Renting or buying.

Had a long post about this ready but i don't wanna derail the old man thread
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#48
(05-13-2021, 10:51 PM)churros Wrote: if you're going to live in the place then it's worth the investment.

Some of you guys don't get it.  Home prices are astronomical in San Francisco.   You can rent an equivalent place much cheaper.

But houses are cheap in Baltimore, and it is cheaper to own than to rent.

Price-to-Rent Across Cities
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#49
(05-14-2021, 02:03 AM)klh Wrote:
(05-13-2021, 10:51 PM)churros Wrote: if you're going to live in the place then it's worth the investment.

Some of you guys don't get it.  Home prices are astronomical in San Francisco.   You can rent an equivalent place much cheaper.

But houses are cheap in Baltimore, and it is cheaper to own than to rent.

Price-to-Rent Across Cities

Those two cities are outliers in the real estate market in the US.  There are quite a few reasons why Baltimore has cheap homes, and ironically the same reasons as to why Detriot has very affordable homes for sale.  Likewise quite a few reasons why San Francisco have astronomically high home prices.  I think that churros inferred more of a long-term arrangment on the quoted text.  Such as, if you were going to live in a neighborhood for more than a few years, then buy a property.  If you were only going to stay there for one year or less, then rent.
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#50
(05-14-2021, 12:49 AM)WombRaider Wrote:
(05-14-2021, 12:09 AM)Wintermute Wrote: Of course you factor in maintenance costs and taxes into your expenses and budget appropriately. Ideally you want to cover unexpected maintenance from an emergency fund, if you're gonna need to pay for this stuff on credit then you need to review your finances.

Yes. My point was that most people do not budget properly for maintenance, especially for the types of properties that North Americans prefer. And also that when calculated properly, maintenance is probably a lot more expensive than people believe. This is a key reason that I don't think owning is a slam dunk over renting -- whatever you're gaining in equity, you're pissing away in maintenance and other expenses.

When you say most people do not budget properly for maintainance, do you mean just owners that occupy their property, but not owners who act as landlords?  

A renter doesn't pay for maintainance because the landlord does.  The landlord is an owner.  They don't stay in business unless they pass their costs on to renters.

So if landlord-owners properly account for maintainance, then why wouldn't other owners?
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#51
Someone who buys a property as an investment is more likely to take an analytical view of the expenses vs the gains. Most people don't have this outlook when buying a residence IME.
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#52
Quote:When you say most people do not budget properly for maintainance, do you mean just owners that occupy their property, but not owners who act as landlords?  

A renter doesn't pay for maintainance because the landlord does.  The landlord is an owner.  They don't stay in business unless they pass their costs on to renters.

So if landlord-owners properly account for maintainance, then why wouldn't other owners?

I was talking about owner-occupants.

As Wintermute said, landlords take a more analytical view. In my experience, small-time landlords typically wing it. They either run into a lot of maintenance "surprises" that hurt profitability, or they barely maintain the property.

Large-scale landlords will be more organized about the whole deal, as will any large organization that owns and maintains property, such as a company or a university.
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#53
Well the same arguments apply on the flip side of the coin. Renters typically underestimate the impact of inflaction, compound interest, leverage, and tax deductions.
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#54
Do what you can afford
Spend less than you earn
Put a little aside for later

Fit your property decisions within those parameters

I really think it's that simple
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#55
It is, but a complication can arise in terms of figuring out what you can afford. I see young couples who "got a great deal on a fixer upper." Unless somebody's dad is a contractor, there's a good chance they'll lose their ass. I'd rather pay a little more for a less impressive property (maybe smaller, or a townhouse, or in a boring suburb rather than a cool neighborhood) and get something that's in decent shape.
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#56
Sorry guys, I am not over 40, but found the thread interesting.

I am currently in a phase where I have saved around 20k € and want to start investing this or the latest next year.

I have informed myself in the past weeks a lot about property taxes, maintenance, etc. and it made my desire to buy an apartment somewhere less strong for sure.

What kind of other investments have you guys taken in your life and are you happy with it?

I am looking for alternatives. Many people would start talking about buying shares, but I am not sure if I'm a bourse/fond person as I am quite risk averse when it comes to money.
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#57
I mean it generally comes down to either stocks or real estate. I'd just invest in index funds. Or if you want to invest in property but not a specific property, you could try Fundrise.

Stocks can be volatile, but I've found them to be a great way to invest over the long run. Good growth, no effort.
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#58
(05-21-2021, 07:13 PM)lika91 Wrote: What kind of other investments have you guys taken in your life and are you happy with it?

I am looking for alternatives.
I am an adherent to the FIRE movement (Financially Independent, Retired-Early).  I've been very pleased with how my portfolio has turned out over the years.  For younger guys in the 20s and 30s, I would recommend asset allocation along the lines of the following:

30% S&P 500 Index fund or ETF.
30% Real Estate via Fundrise and/or a rental property with positive cash flow.
20% Crypto currency basket of Bitcoin, Ethereum, and maybe Litecoin).

10% Precious Metals (I recommend the Sprott closed end funds like PHYS, CEF, PSLV, SPPP).
10% Cash Reserve to deploy as down payment for more real estate or to buy up bear market bargains.

These are all relatively non-correlated investment classes which don't tend to go up and down in tandem which is a very good thing.
Have you ever noticed it is your haters who obsessively read your every post, comment on them with the most emotion, and expend so much energy desperately trying to engage you?  It's because haters are your greatest, most loyal, and dedicated fans; they just have not come to terms with it yet.  Enjoy them because they are the surest sign that you're slaying it in life!  Big Grin
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#59
P2P credit investments could be another pillar. Worked well for me so far. Around and over 10 % annually. Proved quite stable during corona as well. PM me for invitation links where we both get a bonus.
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#60
(05-21-2021, 07:13 PM)lika91 Wrote: Sorry guys, I am not over 40, but found the thread interesting.

I am currently in a phase where I have saved around 20k € and want to start investing this or the latest next year.

I have informed myself in the past weeks a lot about property taxes, maintenance, etc. and it made my desire to buy an apartment somewhere less strong for sure.

What kind of other investments have you guys taken in your life and are you happy with it?

I am looking for alternatives. Many people would start talking about buying shares, but I am not sure if I'm a bourse/fond person as I am quite risk averse when it comes to money.

I have invested in myself through education, various side projects, real estate, stocks, precious metals, and bullion.

I am U.S., and there are various tax rules that favor certain investments, so this will skew investment choise and results.

In the U.S., you can buy a house with as little at 10% down if you have good credit, sometimes less.  I did this when I was in my 20s.  I think I put down $10,000 on a $100K house, and sold it in 2001 for $177,000.  The financing and tax laws in the U.S. allowed me to lever my $10,000 10-to-1.  This was a lot safer than it sounds because I had to live somewhere, so I knew I was gong to be there to pay the mortgage payment.  I also received a tax deduction for the interest and tax portion of my payments during my holding period.  By the time I sold the house, I had made additional principal payments and cleared over  $100,000, which set me up for other things.  

In the U.S., there are powerful tax deferral schemes such IRAs and 401(k)s which can make investing in the stock market or bond market advantageous.
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