The question should not be whether to buy a house or rent an apartment. The question(s) should be: 1) Should one buy a $375,000 or $750,000 home? 2) Should one buy one or two additional vacation homes? When one makes a decision whether to buy a $375,000 or $750,000 home and/or buy one or more vacation home(s), one needs to think of opportunity cost. What else can one do with one's capital?
A lot of people's 401k's dropped 20% in value since the start of the year. Much of it in the past month. When does your house lose that kind of value? Never.
Wrong comparison wrote:
You should be comparing mortgage payments (which are an investment) to rent (not an investment).
You're looking at it the wrong way.
That is the wrong comparison. You have to compare rent and utility bill with mortgage payments, interest paid, house taxes, utility bill and maintenance. Most people forgot all of it. Just the monthly mortgage is not close to the costs you are actually paying.
jamin wrote:
whateverdude11 wrote:
Twenty years ago I bought my house for 119,000. Today it is worth 800,000. Horrible investment
* The amount of money you put into taxes and maintenance was about $(800,000 + 119,000)/2*0.04*20=$367,660, likely more
* If you sell it, you will have to pay about 6% of its value, or $48,000, in various closing costs
* Your capital gain is therefore $265,000 or just over a 100% return in 20 years
* If you invested that $119,000 in the stock market you would have $1,147,908. That's with $0 carrying cost, sales cost, etc., so your return would be 864%. Now it's true that you would have paid rent for those 20 years, but the cost of renting your house probably would add up to only $200,000. That leaves you with $1,147,908-$200,000=$947,908 or a 696% return.
You’re assuming whateverdude paid cash for his house and would have had that cash available to invest in the market instead of buying the house. This isn’t true for the vast majority of homebuyers. Could he have bought some stock on margin instead of getting a mortgage. Sure, but probably not $120k worth unless he had a lot of collateral, and he certainly couldn’t have kept the loan for 30 years.
Storehouse of wealth wrote:
A lot of people's 401k's dropped 20% in value since the start of the year. Much of it in the past month. When does your house lose that kind of value? Never.
What until next year.
Prices are coming down already.
Buckle up for a huge surprise.
https://www.curbed.com/2018/10/16/17971158/home-prices-west-coast-buyers-markethttps://www.seattletimes.com/business/real-estate/metro-seattle-home-prices-falling-at-fastest-rate-in-u-s/Storehouse of wealth wrote:
A lot of people's 401k's dropped 20% in value since the start of the year. Much of it in the past month. When does your house lose that kind of value? Never.
Your house doesn't have to lose value for you to lose money. You are losing money all the time. If the price stagnates for 10 years, as is common, you are paying 40% of the value of the house during that time. If your house is $1 mil you lose $400k to taxes and maintenance. If your 401k stagnates for 10 years you don't lose any money.
Jamin, you can afford to be selective. wrote:
This one's available and has a nice house too:
http://www.forumdaily.com/en/ukrainka-kupivshaya-v-ssha-osobnyak-za-18-mln-otkrestilas-ot-muzha-milliardera/
The all leather dress is back in fashion.
Reasons why Jamin needs a large house:
Plenty of rooms for all his anxieties.
Plenty of closets for all his fears.
Plenty of rooms for his Ukrainian wife's relatives that she forgot to tell him about until after they married.
Special quiet room needed so he can troll without wife's nagging.
Special room with couch he can sleep on frequently when wife is not in mood.
S.O.S.W.P.
Gordon Gekko wrote:
Wrong comparison wrote:
You should be comparing mortgage payments (which are an investment) to rent (not an investment).
You're looking at it the wrong way.
That is the wrong comparison. You have to compare rent and utility bill with mortgage payments, interest paid, house taxes, utility bill and maintenance. Most people forgot all of it. Just the monthly mortgage is not close to the costs you are actually paying.
Monthly mortgage payment includes real estate taxes and interest. In many states, mortgage interest is a tax write-off. In a home you own, you can do things like upgrade appliances, windows, and HVAC systems to lower your utility bills. I have owned a home for ~15 years now and my maintenance has been nowhere near 3-4% on average. I had one bad year with a hail storm that damaged the roof, a bunch of windows needing replacement, an HVAC system that gave up, and a hot water heater on which the tank rusted. Spread out over 15 years plus other odds and ends, I'd say my maintenance has been 1% or less of the value of my home given that for many years, I was spending maybe a $1000/year.
jamin wrote:
Storehouse of wealth wrote:
A lot of people's 401k's dropped 20% in value since the start of the year. Much of it in the past month. When does your house lose that kind of value? Never.
Your house doesn't have to lose value for you to lose money. You are losing money all the time. If the price stagnates for 10 years, as is common, you are paying 40% of the value of the house during that time. If your house is $1 mil you lose $400k to taxes and maintenance. If your 401k stagnates for 10 years you don't lose any money.
For someone that has bragged about being good with numbers, you are horrifically bad at simple math.
People aren't paying 400k for taxes and maintenance over ten years. Maybe you would be, but seem especially incompetent at life.
Housing prices have doubled in many places in the last few years...you really think the price of fixing the gutters has doubled in that time? You really think they have reappraised most houses for tax purposes in that time?
Home ownership is a slighty worse investment that it is made out to be, and about 10 times better than you are making it out to be. But acciracy isn't the goal of the post is it. You remind me of The Gimp from Pulp Fiction.
You get the attention you needed for the night yet or are you going to start another thread?
It's not a house, it's a home.
Beats raising a family in an apartment
It's a horrible investment when you will never have a family and you are already suffering from multiple organ failure at 30.
jamin wrote:
Just using common sense. A house comes with a carrying cost of 1-2% property taxes and 1-2% maintenance. So if you own your house outright it needs to appreciate 2-4% per year just for you to break even. There are very few zip codes where a house worth $1,000,000 can be rented out for more than $40k/yr. So it is almost impossible to generate income by renting a house that you own outright. And very few people ever own a house outright. If you have an outstanding mortgage then you simply cannot rent a profit.
If you have $1,000,00 you can put it in the stock market and get a return of $120,000/yr. With that income you can rent a million-dollar house for $30k/yr and reinvest the other $90k/yr.
Someone doesn't understand (1) leverage and (2) inflation protection
jamin wrote:
whateverdude11 wrote:
Twenty years ago I bought my house for 119,000. Today it is worth 800,000. Horrible investment
* The amount of money you put into taxes and maintenance was about $(800,000 + 119,000)/2*0.04*20=$367,660, likely more
* If you sell it, you will have to pay about 6% of its value, or $48,000, in various closing costs
* Your capital gain is therefore $265,000 or just over a 100% return in 20 years
* If you invested that $119,000 in the stock market you would have $1,147,908. That's with $0 carrying cost, sales cost, etc., so your return would be 864%. Now it's true that you would have paid rent for those 20 years, but the cost of renting your house probably would add up to only $200,000. That leaves you with $1,147,908-$200,000=$947,908 or a 696% return.
- The taxes are low in the town I live in and they have been deductible so I have recovered 1/3 of the cost. The house value is where it is located. You really think I have paid 367,000 in maintenance and taxes. That's hilarious!
- So, not a big deal. Cost of a transaction. Keep in mind that the house value increase over that time is not actual money I had to work for like the money you burn on rent.
- Sure, right. When you sell off stock you pay major taxes on the capital gain. When I sell my house I can exempt 500,000 federally and all of it on the state level.
You're out of your league kid
"I just spent $60k replacing the roof on my AT&T stock," said no one ever
jamin wrote:
"I just spent $60k replacing the roof on my AT&T stock," said no one ever
60k on a roof? What on a 10,000 sq. ft. house?
I had my roof replaced about 8 years ago. 4k.
jamin wrote:
"I just spent $60k replacing the roof on my AT&T stock," said no one ever
What good is a stock when sh!t hits the fan? Than that goes out the window. In reality, we need shelter i.e. house, food i.e. garden, livestock and wild game, precious metals to use for trade when the sh!t hits the fan, and weapons for protection for when sh!t hits the fan. Jamin, he need to be thinking about when sh!t hits the fan, what are you going do when doomsday hits? If I was you I would buy a house out in the country with plenty of land, buy lots of guns and ammo, and become self efficient i.e. be able to produce all the food you need i.e. hunt, garden and raise animals. Think about it, if you are the one with all one needs to survive when doomsday hit, you'll be getting all the chicks. This is your chance yo become a CHAD.
Jamin, look at it like this, you've just met the woman of your dreams and you're making a play for her (I'm assuming she'll be mid/late twenties/early thirties), what do you think would win her over best, you owning shares, or owning a nice comfortable house.
Shares make you come across as an unreliable risk taker, no good to a woman looking to settle down and have kiddies, a house on the other hand, is in her mind, as someone with maternal hormones raging, reassurance and something just waiting for a nesting woman looking for security.
OK, so you don't quite come up to scratch in the looks and personality department, we accept that and so will she as the house will be super compensation in her mind.
Friendly tip, keep it in your name.
jamin wrote:
Storehouse of wealth wrote:
A lot of people's 401k's dropped 20% in value since the start of the year. Much of it in the past month. When does your house lose that kind of value? Never.
Your house doesn't have to lose value for you to lose money. You are losing money all the time. If the price stagnates for 10 years, as is common, you are paying 40% of the value of the house during that time. If your house is $1 mil you lose $400k to taxes and maintenance. If your 401k stagnates for 10 years you don't lose any money.
Look, we understand you are making up excuses for not being able to buy a house, that's ok, you like to pay rent and have someone else in control of your roof, fine. Losers will always be losers. Happy holidays, enjoy your RENTED FLAT.