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If you're purely trying to optimize for accumulating wealth, you'd live in a tiny studio apartment, cook all your own meals using inexpensive bulk ingredients, borrow books from the library and surf the internet on free WiFi hotspots, and use public transportation rather than driving a car. You'd save and invest every penny. Over the long run, the stock market out-performs everything but you might diversify your portfolio.
Using leverage regardless of where increases your risk on that particular investment. It magnifies gains and losses and it also typically comes with some covenants via the lender who allowed the leverage. To argue it doesn't change the risk is a bit shortsighted
If you're purely trying to optimize for accumulating wealth, you'd live in a tiny studio apartment, cook all your own meals using inexpensive bulk ingredients, borrow books from the library and surf the internet on free WiFi hotspots, and use public transportation rather than driving a car. You'd save and invest every penny. Over the long run, the stock market out-performs everything but you might diversify your portfolio.
Ugh, or you could just invest in a few mansions and fill them with toys and rent rooms to pretentious life consumers. With the CRAZY rents and the CRAZY appreciation and the leverage you'll blow the doors off the stock market. Remember, you are tapping into the salaries of many people that are paying 30-40% of that for housing!
Other than sacrificing a little privacy you'll be living like a King.
Using leverage regardless of where increases your risk on that particular investment. It magnifies gains and losses and it also typically comes with some covenants via the lender who allowed the leverage. To argue it doesn't change the risk is a bit shortsighted
Please explain exactly how my risk is magnified using leverage vs not. As I pointed out earlier the risk is to the lender. That's why there is PMI and higher rates.
Also buying isn't some big money maker that so many make it out to be. Few people would ever see 100% appreciation in 2 years as an example was given in this thread and even more most homeowners won't see 100% over the entire time they own a residence. Additionally the tax benefit is often over played as nearly half of mortgage holders don't itemize so they receive no benefit there and people most often buy more than they rent it really throws off these comparisons. Buying ties you up a good deal due to transaction cost and it shouldn't be pushed as much as it is
Buy vs. rent is a ceaseless discussion. My belief is that the myriad factors devolve ultimately to one: in the local market, will the given piece of residential real-estate appreciate over the long term? If it does, then there's good reason to consider ownership favorably, despite the taxes and maintenance and hassles. But in some markets, the very long-term trend (50 years?) is stark and unrelenting depreciation. There, the nod probably goes to renting.
That makes sense overall, but again is situational. I have acquaintances who in retirement pursued the "hobby" of becoming landlords, both of single-family houses and apartment-buildings. Many have found that even if paying cash for the rental-property, maintenance costs outstrip the market-rate for rent.
In my own case, I own a house, but really only need the space of a studio-apartment. My property taxes and insurance, annual, are roughly commensurate with the cost of apartment-rent. But I can't bring myself to sell, since that admits failure and starkly realizes the financial loss.
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Yep, it's all situational. I pretty much use my whole house. I have a relative who lives with and I gave her two of the bedrooms. I take care of her for the family, but I do get a little bit of money to help cover her costs (doesn't cover everything, but I don't do it for the money). I also have a dog. So I need the space. It's also nice to have a garage for my car. It's 12 years old now and I think being garage kept is adding to its longevity.
Housing is in short supply in my area. That's what leads to high rents and high home values. I'm really hoping to move someplace more rural and cheaper. It will all depend on my ability to telecommute with my job (currently I can do about half of it remotely). When I do, I can probably buy a house for cash with what I have in equity now. But if that doesn't work out, I should have the mortgage paid off in 20 years and will be mortgage free by my age 55 goal (sooner if my move to rural works out!)
Please explain exactly how my risk is magnified using leverage vs not. As I pointed out earlier the risk is to the lender. That's why there is PMI and higher rates.
If you considered the worst case scenario of losing a mortgage property only a risk to the debt holder you are foolish. Myself I recognize the impact to a business or personal situation of a credit hit, the loss of capital and so forth. If you think leverage does zero to change the risk of an investment you are foolish despite your claimed experience
depends . like i say , very few of us rent the same amount of house or quality of a house we would buy . we always tend to buy more house likely in a better area then we usually rent .
that means our housing costs and cash flow can actually be better renting many times since it is likely not an apples to apples comparison .
we can spend 800k for a house in our area as a starting price . we instead rent for 2k a month in a luxury building and that includes many expenses we would have on top of the house like heat , water ,sewer , landscaping , snow plowing ,maintenance , taxes , renovations ,insurances , etc
i have done both but have been more successful renting and investing .
just think of that retiree that goes from a 3 bedroom apartment with the whole family to a one bedroom apartment once the kids are out . odds are their cash flow is far improved from someone still trying to support a big ole house.
things are never black and white comparisons of one expense vs another expense . there is so much involved so there can never be a rule as to one being better than the other .
Yea, anti-house people always try to do a direct fiscal comparason of shared walls to free standing houses.
Here's a clue:
You can't.
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