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If you have $1million in assets that includes 30-40% as your home's value, you have no where near the lifestyle potential that someone with $1million in equities possesses.
That would depend on what the non-owners would need to pay in rent. Since the 2008 recession the rental market has been really high in my area. I can buy for less than the cost of renting. As a home buyer I also have way more choices. In addition to the cost, it is hard to find a suitable rental.
They pointed out that the house was a cost and not an asset and you conveniently neglected to address that point.
Earlier, you wrote:
Not true. A house is a deteriorating asset. Without upkeep ( not free ), it goes down in value.
Any other increase in price is not the same as an increase in value like an equity tends to do.
If you have $1million in assets that includes 30-40% as your home's value, you have no where near the lifestyle potential that someone with $1million in equities possesses.
you obviously did not read my original post in reply to petch, where i said the 60-70% of $1m assets would be in stocks. this is called a diversified retirement plan. real estate is one component of the overall asset holdings.
many other investment vehicles incur upkeep as well, including management fees up to 20% in hedge funds, and general mgmt fees and expenses in general stock mutual funds. there is nothing in this world that does not incur some expense besides hoarding antiques or gold underground.
Assuming you buy market price, there has never been a 30 year period where a real estate purchase has not doubled.
That would be incorrect. The starter houses I bought as rentals did double over a 30 year period. My house that I purchased new in 1983 for $250K at 16.5% interest and a $75K remodel is currently valued between $350K and $400K. This is in excellent shape in a very desirable area, however it's in Texas where land is cheap.
you obviously did not read my original post in reply to petch... real estate is one component ...
Actually we did. The problem is that the RE portion does not spin-off cash that one can use to live.
( Equities can spin off cash by increasing in value. You can sell a portion of your equities, but not a portion of your house. )
Quote:
Originally Posted by ControlJohnsons
many other investment vehicles incur upkeep as well, including management fees up to 20% in hedge funds, and general mgmt fees and expenses in general stock mutual funds. there is nothing in this world that does not incur some expense besides hoarding antiques or gold underground. ...
Really? You are using 20% hedge fund fees as a cost for a $1M portfolio? Let's both pretend you didn't just say that.
It costs me nothing to hold a number of rollover IRAs and taxable brokerage accounts as long as I rebalance and/or trade. Mutual fund costs? Way too high, but under 2%. My transaction fees in my brokerage accounts amount to < 0.1% of the assets in there ( annually ).
Gold? I can store $1M in the empty space in my safe deposit box. I'm willing to store any gold up to that $1M you want in there. For another $40 I'll store another $million of your gold. ( $40 x however many millions ... )
jrkliny brought up the point that in some RE markets it might be cheaper to buy than rent, but I bet when making these calculations people only look at the rent check and conveniently ignore the HOA fees ( if applicable ), and all the maintenance required to keep the house in, at least, the same condition it was when purchased.
I really wonder how many people consider someone who lives in a $1M house with no other assets and no debts to be the financial equivalent of someone who just rents a flat somewhere who has a $1M portfolio similar to mathjak's balanced/buckets portfolio? The $1M house guy has to scrounge the local dumpsters for food. He survives only until the city/county comes and seizes his house for unpaid taxes.
How much, realistically, does a person have to earn before they can become a millionaire? Many burger flippers don't earn a million dollars over their entire lifetime.
How much, realistically, does a person have to earn before they can become a millionaire? Many burger flippers don't earn a million dollars over their entire lifetime.
Saving 300.00 a month for 40 years with an 8% annual return gives you a million bucks. If you take into account possible employer matching in your 401k it could substantially cut down how much you needed to save
If you don't make a million gross in your lifetime you either are a stay at home, disabled, died early or never really applied yourself. 25k a year for 40 years of work gets you to 1mm
Actually we did. The problem is that the RE portion does not spin-off cash that one can use to live.
( Equities can spin off cash by increasing in value. You can sell a portion of your equities, but not a portion of your house. )Really? You are using 20% hedge fund fees as a cost for a $1M portfolio? Let's both pretend you didn't just say that.
sure you can, it's called a reverse mortgage. millions of elderly americans do this.
no, you obviously know nothing about the asset management business.. hf's charge 20% of the profits they make, not on your contribution.
most standard mutual funds charge 1-2% DIRECTLY off your contribution amount on yearly basis
If you invest $1million into an avg mutual fund, you're being shaved $10-$20k/year on management/marketing fees.
sure you can, it's called a reverse mortgage. millions of elderly americans do this.
no, you obviously know nothing about the asset management business.. hf's charge 20% of the profits they make, not on your contribution.
most standard mutual funds charge 1-2% DIRECTLY off your contribution amount on yearly basis
If you invest $1million into an avg mutual fund, you're being shaved $10-$20k/year on management/marketing fees.
I'm not sure why you are bringing up hedge funds. It's a pretty limited of how many clients participate in them and those that do are typically fully aware of the 2+20 fee structure 2% fee annually of AUM and 20% of trading profits
Also the average fund charges 1.25% in annual expense so I'm not sure where you are coming up with "most charge 1-2%" most don't charge anywhere near 2
Saving 300.00 a month for 40 years with an 8% annual return gives you a million bucks. If you take into account possible employer matching in your 401k it could substantially cut down how much you needed to save
If you don't make a million gross in your lifetime you either are a stay at home, disabled, died early or never really applied yourself. 25k a year for 40 years of work gets you to 1mm
You are assuming that salary’s have always been high and that $25K annually is the norm. In 1968, I earned $1.95 per hour including a $.15 cent shift premium. That would be around $4,000 annually. This was working for a large corporation after almost nine years in the military and not flipping burgers. Granted, it was a starting salary, and I did reach the million mark in stocks, cash and bonds many years ago. It took much more than just saving, it's making your investments work for you.
You are assuming that salary’s have always been high and that $25K annually is the norm. In 1968, I earned $1.95 per hour including a $.15 cent shift premium. That would be around $4,000 annually. This was working for a large corporation after almost nine years in the military and not flipping burgers. Granted, it was a starting salary, and I did reach the million mark in stocks, cash and bonds many years ago. It took much more than just saving, it's making your investments work for you.
I didn't assume any historical income
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