Save Almost Everything, Spend Virtually Nothing

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November 6th, 2018 at 2:29:19 AM permalink
AZDuffman
Member since: Oct 24, 2012
Threads: 135
Posts: 18136
Quote: kenarman
No one has mentioned one of the major costs of owning a home. As you pay down your mortgage the equity increases. If this equity was not tied up in your home you would be able to invest it and have it earn income for you. Most homes rent for less than a full mortgage payment, taxes etc. If your timing is right and you hit a big run up in real estate prices you do good. If you hit a flat stretch or a falling real estate market a renter probably does better if you take in your loss of equity.


This does not compute. Much of the equity is price appreciation. Even if it is tied up, you simply would not have it if you rented. And it is not possible that rent will be less than mortgage plus taxes plus insurance when you do apples to apples. Yes, a 1 bedroom apartment will rent for less than a 3 bedroom mortgage. But no landlord is going to take a loss.

Remember that rents tend to go up year after year, even if only a little. Your mortgage payment stays the same. Taxes and insurance can go up, but a fixed rate means the base payment does not. Renters will do better in some shorter term situations. But real estate equity is one of if not the biggest divider between the haves and have nots in society.
The President is a fink.
November 6th, 2018 at 3:23:01 AM permalink
Aussie
Member since: May 10, 2016
Threads: 2
Posts: 458
More equity also means you will be more likely to be approved for an investment loan. Having your money tied up in a home does not mean you can’t also invest elsewhere.
November 6th, 2018 at 3:25:29 AM permalink
AZDuffman
Member since: Oct 24, 2012
Threads: 135
Posts: 18136
Quote: Aussie
More equity also means you will be more likely to be approved for an investment loan. Having your money tied up in a home does not mean you can’t also invest elsewhere.


Smart people build equity then get a HELOC they only use for investment. I did it for buying a rental. People do it for all kinds of things. When I worked with HELOCS you could tell the smart people using it to have fast capital.
The President is a fink.
November 6th, 2018 at 3:30:44 AM permalink
Aussie
Member since: May 10, 2016
Threads: 2
Posts: 458
Quote: AZDuffman
Smart people build equity then get a HELOC they only use for investment. I did it for buying a rental. People do it for all kinds of things. When I worked with HELOCS you could tell the smart people using it to have fast capital.



Had to look up what HELOC was an acronym for but yes you are exactly right. More equity means you are less of a risk to the bank which means easier access to credit.
November 6th, 2018 at 3:36:17 AM permalink
AZDuffman
Member since: Oct 24, 2012
Threads: 135
Posts: 18136
Quote: Aussie
Had to look up what HELOC was an acronym for but yes you are exactly right. More equity means you are less of a risk to the bank which means easier access to credit.


Sorry, didn't realize you might not use the term over there the same way. HELOCs are a bit like a loaded weapon, handle with care. Some use them as I pointed out. Others use them to pay off credit cards. Many then run the cards right back up again.

But in the end that equity is a good thing for sure.
The President is a fink.
November 6th, 2018 at 8:14:08 AM permalink
kenarman
Member since: Oct 24, 2012
Threads: 14
Posts: 4470
Quote: AZDuffman
This does not compute. Much of the equity is price appreciation. Even if it is tied up, you simply would not have it if you rented. And it is not possible that rent will be less than mortgage plus taxes plus insurance when you do apples to apples. Yes, a 1 bedroom apartment will rent for less than a 3 bedroom mortgage. But no landlord is going to take a loss.

Remember that rents tend to go up year after year, even if only a little. Your mortgage payment stays the same. Taxes and insurance can go up, but a fixed rate means the base payment does not. Renters will do better in some shorter term situations. But real estate equity is one of if not the biggest divider between the haves and have nots in society.


Landlords take losses all the time. Maybe Mike will jump in and tell us how he made out on his investment house when the housing market crashed in 2008.
"but if you make yourselves sheep, the wolves will eat you." Benjamin Franklin
November 6th, 2018 at 8:24:18 AM permalink
AZDuffman
Member since: Oct 24, 2012
Threads: 135
Posts: 18136
Quote: kenarman
Landlords take losses all the time. Maybe Mike will jump in and tell us how he made out on his investment house when the housing market crashed in 2008.


They might time to time. But residential landlording is the best way out there to be a quiet millionaire.
The President is a fink.
November 6th, 2018 at 8:51:51 AM permalink
kenarman
Member since: Oct 24, 2012
Threads: 14
Posts: 4470
Quote: AZDuffman
They might time to time. But residential landlording is the best way out there to be a quiet millionaire.


There was a study of all investment methods which is probably 10 years old now. It looked at real estate, bonds and stock market over a 30 year window. It was surprising to me how close they all were. Stocks were best then real estate and then bonds. They was only about 1% difference.

It only takes one bad tenant to destroy your rental profit for years if they trash the house. Happens all the time.
"but if you make yourselves sheep, the wolves will eat you." Benjamin Franklin
November 6th, 2018 at 9:47:15 AM permalink
AZDuffman
Member since: Oct 24, 2012
Threads: 135
Posts: 18136
Quote: kenarman
There was a study of all investment methods which is probably 10 years old now. It looked at real estate, bonds and stock market over a 30 year window. It was surprising to me how close they all were. Stocks were best then real estate and then bonds. They was only about 1% difference.

It only takes one bad tenant to destroy your rental profit for years if they trash the house. Happens all the time.


My standard, which I picked up from my realtor, is to look for a deal where rent pays the mortgage in 7-8 years. If you do this, in about 20 years you can make enough to live off of. You want B and C neighborhoods. You want neighborhoods of old folks who lived there forever so the place is not gentrified but not a ghetto.

A woman I deal with was saying something about a long-term tenant of hers leaving. I said, "Uh, why are you upset? THEY BOUGHT YOU A HOUSE!"

Way I figure it is you need 4-5 paid off places to retire. I wish I had bought a smaller place younger and gotten more into it then.

In any case, never be house poor. People in these nice neighborhoods so often have no furniture. Nothing but house. Bad way to live.
The President is a fink.
November 6th, 2018 at 10:10:40 AM permalink
Evenbob
Member since: Oct 24, 2012
Threads: 146
Posts: 25010
Quote: AZDuffman
They might time to time. But residential landlording is the best way out there to be a quiet millionaire.


The Church caught onto this early. They
would would go into a town, find the Jews
that owned the most property, forcibly
convert them, then come back is a year
and arrest and confiscate all the Jews
property who had gone back to their old
religion. It's one of the ways the the Church
so got fat and wealthy.

Even now there are constant lawsuits against
the Vatican to recover property stolen by the
Church hundreds of years ago. God is a very
lucrative game if it's played correctly.
If you take a risk, you may lose. If you never take a risk, you will always lose.
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