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Old 11-16-2018, 08:53 PM
 
25,913 posts, read 28,277,221 times
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Quote:
Originally Posted by ukrkoz View Post
[i] I shut down my 401K and never regretted it. It was doing nothing but losing.
People who say stuff like this are just showing that:

--They have a very short time frame
--They invested badly or inappropriately for their life situation.

Stock / bond market returns for the last 5, 10, 15 years have been positive. It's very easy to look up this information.
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Old 11-16-2018, 08:57 PM
 
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Quote:
Originally Posted by flyingsaucermom View Post
Unless you plan to rent out your condo or use it for a business I don't see it putting more cash into a condo that only serves as your primary residence as an investment. I have never said to myself, "I'm going to invest in paying off my mortgage" or "I"m going to invest in buying a larger home than I really need".

I have heard of people, many times, say that their house (primary residence) is an investment and I suppose for a lot of people this is as close to an investment that they will ever get.

If you want a nicer place to live and can afford it then go ahead and buy yourself the more expensive condo.

Just don't call it investing.
Correct. The place you live is never really an investment and shouldn't be viewed as such. People have a way of justifying buying something they can't really afford by calling it an "investment".
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Old 11-16-2018, 09:00 PM
 
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Quote:
Originally Posted by cfa-ish View Post
As others mentioned, condos don't appreciate like single-family homes.
But, you can't live in your 401K and enjoy it.
Conversely, you can't sell off your house a piece at a time if you need cash.

Quote:
Originally Posted by cfa-ish View Post
So which do you prefer? Spending money to live in a bigger/better place or skimp to save for retirement?
This could also be framed as "buying more house/condo than you can comfortably afford which results in a skimpy retirement and/or a move down in housing in retirement".
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Old 11-17-2018, 12:39 AM
 
Location: California
30,455 posts, read 33,242,202 times
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Why is it either or? I don't know what you do for a living but hopefully you expect your income to increase as your experience does.

The old ideas about a condo vs a sfh don't always hold up today. Not everyone WANTS or NEEDS the yard and picket fence and would prefer urban living for a it's walkability and maintenance free lifestyle.
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Old 11-17-2018, 04:03 AM
 
5,174 posts, read 5,768,055 times
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Quote:
Originally Posted by Aredhel View Post
A property you live in shouldn't be thought of as an investment; it's a consumption item. And condos usually show less appreciation than single family homes do. Put the money in your 401k.
That really depends on the market and sounds like 1980s wisdom. My last condo gained 23% in two years, it outpaced the market at large by a good deal. If youíre talking about a suburban condo thatís mediocre quality, sure, but a luxury downtown high rise condo will appreciate at least as much if not more than houses, which arenít as well built or as close to the action. Location is usually optimal for a condo like that.
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Old 11-17-2018, 08:12 AM
 
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Quote:
Originally Posted by JonathanLB View Post
That really depends on the market and sounds like 1980s wisdom. My last condo gained 23% in two years, it outpaced the market at large by a good deal. If youíre talking about a suburban condo thatís mediocre quality, sure, but a luxury downtown high rise condo will appreciate at least as much if not more than houses, which arenít as well built or as close to the action. Location is usually optimal for a condo like that.
I'm pretty sure most condos in America are of mediocre quality by your standards.
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Old 11-20-2018, 10:44 AM
 
Location: Omaha, Nebraska
7,079 posts, read 4,050,024 times
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Quote:
Originally Posted by JonathanLB View Post
That really depends on the market and sounds like 1980s wisdom. My last condo gained 23% in two years, it outpaced the market at large by a good deal. If youíre talking about a suburban condo thatís mediocre quality, sure, but a luxury downtown high rise condo will appreciate at least as much if not more than houses, which arenít as well built or as close to the action. Location is usually optimal for a condo like that.
And it's still a consumption item, unless you're planning to move or take out a reverse mortgage. What good is 23% appreciation that you can't tap except by selling your home?

The person who owns a $200,000 home and has $500,000 in liquid assets is in a more flexible position than the person who owns a $500,000 home and has $200,000 in liquid assets, even though on paper they both have an identical net worth.

Rental real estate is an investment. Your house is where you live. Unless you're the sort of person who can live happily anywhere and doesn't care about severing ties to a specific community, it is a good idea to not confuse the two.
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Old 11-20-2018, 12:50 PM
 
1,021 posts, read 497,354 times
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Quote:
Originally Posted by JonathanLB View Post
That really depends on the market and sounds like 1980s wisdom. My last condo gained 23% in two years, it outpaced the market at large by a good deal. If youíre talking about a suburban condo thatís mediocre quality, sure, but a luxury downtown high rise condo will appreciate at least as much if not more than houses, which arenít as well built or as close to the action. Location is usually optimal for a condo like that.
Doesn’t even have to be luxury in a place like Boston or NYC.
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Old 11-25-2018, 08:59 PM
 
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Default Should I max out 401k or purchase a slightly more expensive property?

Quote:
Originally Posted by mysticaltyger View Post
Most people need to save a minimum of 15% of their income for a decent retirement in their 60s.
Not really sure what to do about this... I can't do 15%. If I go to 15% I'm over the maximum ($18K/yr).

Also, when I hear recommendations of contributing 10-15%, should that be just my contribution, or should mine and my employers match add up to 10-15%?



Quote:
Originally Posted by mysticaltyger View Post
Most people stretch themselves too much when it comes to housing and undersave by a big margin for retirement.
What you're saying is true... and it's my biggest problem. Most people are under-saving so they end up spending more on a mortgage and drive prices up. It leaves me with somewhat limited options of what I can afford.


Quote:
Originally Posted by mysticaltyger View Post
Correct. The place you live is never really an investment and shouldn't be viewed as such. People have a way of justifying buying something they can't really afford by calling it an "investment".
Hmmm, so the alternative to buying a place to live is to continue to rent. Renting is not an investment. Putting your money into something that you can eventually sell and hopefully see returns on the money you put in is an investment.
I intend to live in this condo until I retire, and then I'm probably going to move somewhere else. Even if I decide to stay in the same city/metro area, I'll probably move to a cheaper area. I won't have to commute every day, so I don't need to be living in the higher cost area that is closer to the city. I can move further out where prices are cheaper, or possibly move to a different city where housing is a fraction of where I live now.



Since I'm here, I might as well just ask this... what is everyone's opinion on not buying a property at all? Because the truth is, I honestly don't want to own. I'm dreading owning a property. The only reason I'm looking to buy is because I feel like paying rising rents during retirement would be a huge financial burden. I had just assumed that having a home that is paid for, or nearly paid for, by the time you retire is a key goal to make your money last during retirement. But I've read articles that said that many retirees choose to sell and then rent during retirement, and there are also people later in retirement who are not able to live in their homes and have to move to assisted living.

So when I read things like that, it makes me wonder, why the hell am buying a home that I don't want, if the odds are good that I may end up renting during retirement anyway? I mean, I realize there's the whole "you're throwing your rent away" thing, and I understand that... but if I'm not putting money toward a mortgage I could put it into retirement accounts.
I might feel differently if my rent payment was close to what I would be paying for a mortgage, but it's not. To get a 1 bedroom condo comparable to the apartment that I'm renting I would have to pay almost double what my current rent is.

So, if I didn't ever buy a property would that be a recipe for retirement disaster, or is it a reasonable option?
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Old 11-25-2018, 11:21 PM
 
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Quote:
Originally Posted by lmh182 View Post
Not really sure what to do about this... I can't do 15%. If I go to 15% I'm over the maximum ($18K/yr).
So that's good that you're maxing out. FYI, it's 18,500, and I think next year it goes to 19K. However, you can still save for retirement. That's why they invented the Roth IRA. You can open a Roth IRA at Vanguard, Fidelity, T. Rowe Price, etc. If your income is too high to qualify for a Roth, you can still have a regular taxable account. Something like Fidelity Zero Total Stock Market Index might work. Or Vanguard Balanced Index (60% stocks & 40% bonds) if you're more conservative.

Quote:
Originally Posted by lmh182 View Post
Also, when I hear recommendations of contributing 10-15%, should that be just my contribution, or should mine and my employers match add up to 10-15%?
You can count the employer match. But remember, a 15% savings rate for retirement still means it's likely to take you until your early 60s before you can financially afford to retire. That means that a lot of stuff can't go wrong over several decades (you never lose a job, never get sick, etc.). I, personally, would err on the side of saving more. Life happens. You don't want to live on the financial edge like most people do, unless you like setting yourself up to be a sitting duck.

Quote:
Originally Posted by lmh182 View Post
What you're saying is true... and it's my biggest problem. Most people are under-saving so they end up spending more on a mortgage and drive prices up. It leaves me with somewhat limited options of what I can afford.
Yep, welcome to humanity. If you're waiting for it to be easy to be different from the herd, it never will be. Financially successful people are the oddballs in our society. That means you can't do what passes for 'normal' and be financially successful. You have to learn to revel in being a rebel.

Quote:
Originally Posted by lmh182 View Post
Hmmm, so the alternative to buying a place to live is to continue to rent. Renting is not an investment.
You make it sound like this is FOREVER. It's not. As you said, you also have the option of buying a cheaper place. You DO have options. You just don't like them. If you think it's hard to be flexible now, just wait until you get older. I promise, it won't get easier. Be flexible now so you won't have to be when you get older.

Quote:
Originally Posted by lmh182 View Post
Putting your money into something that you can eventually sell and hopefully see returns on the money you put in is an investment.
WRONG. Neither one is an investment. Some people can actually do better by renting and investing the difference between rent and mortgage in the stock market. A lot of times it pretty much comes out the same over time. The problem most renters have is they don't invest the difference between the generally lower rent vs. the higher mortgage and taxes (and other assorted lower housing costs that go along with renting. I.E. usually lower utility costs, no maintenance costs, typically spend less on furnishings, etc.). Eventually the person who owns the house has lower housing costs (assuming they don't use the house as an ATM--not always a safe bet). But the lower housing costs come at the expense of investing less.

Quote:
Originally Posted by lmh182 View Post
I intend to live in this condo until I retire, and then I'm probably going to move somewhere else. Even if I decide to stay in the same city/metro area, I'll probably move to a cheaper area. I won't have to commute every day, so I don't need to be living in the higher cost area that is closer to the city. I can move further out where prices are cheaper, or possibly move to a different city where housing is a fraction of where I live now.
It's good to intend to live in a place for a long time. But you still have to be able to comfortably afford it.

Quote:
Originally Posted by lmh182 View Post
Since I'm here, I might as well just ask this... what is everyone's opinion on not buying a property at all? Because the truth is, I honestly don't want to own. I'm dreading owning a property. The only reason I'm looking to buy is because I feel like paying rising rents during retirement would be a huge financial burden. I had just assumed that having a home that is paid for, or nearly paid for, by the time you retire is a key goal to make your money last during retirement. But I've read articles that said that many retirees choose to sell and then rent during retirement, and there are also people later in retirement who are not able to live in their homes and have to move to assisted living.
As a perma-renter, I admit my bias. But if you really don't want to be a homeowner, I don't know if it's a good idea to take the plunge. I will say I think these arguments are totally framed WRONG. The real issue is people simply don't save or invest enough of their income. Like I said, 15% should be viewed as a minimum, not some wildly aspirational percentage. If you live in an expensive metro area in a place with no rent control, then I see your point. I admit I am lucky to have a rent controlled place where the landlord hasn't raised the rent as much as the law allowed (even though they easily could have). Not everyone is in that situation. Personally, I think I'll be taking my investment portfolio and moving to a cheaper cost of living area at some point.


Quote:
Originally Posted by lmh182 View Post
So when I read things like that, it makes me wonder, why the hell am buying a home that I don't want, if the odds are good that I may end up renting during retirement anyway? I mean, I realize there's the whole "you're throwing your rent away" thing, and I understand that... but if I'm not putting money toward a mortgage I could put it into retirement accounts.
I kinda wonder why you'd want to this, too, based on the info you've given. Bottom line is you can't base your decisions on what "everyone else" is going. You have to look at your own life situation, decide what's most important to you, and then--this is important--DO THE MATH to see if it works.

Quote:
Originally Posted by lmh182 View Post
I might feel differently if my rent payment was close to what I would be paying for a mortgage, but it's not. To get a 1 bedroom condo comparable to the apartment that I'm renting I would have to pay almost double what my current rent is.
Like I said, take the difference between your rent payment and what a mortgage would be and invest it in the stock market in a Roth IRA and/or taxable accounts. If you actually DO save the difference, you'll probably come out about the same, or even possibly better, by renting. The problem is renters don't save the difference. You have to be a diligent saver. If not, you're kinda screwed no matter what you do.

The one factor that really matters is your total housing cost as a percentage of your income. If your total housing costs start getting above 25% of your gross income, then that's a problem IMO. With renting, this is easy to calculate because it's one line item. With home ownership, you've got mortgage, interest, insurance, taxes, and maintenance. People tend to ignore or underestimate the cost of repairs. Home ownership is also a lifestyle--and usually a more expensive one. You're probably going to spend more on home furnishings, etc. as a homeowner than you would as a renter--so that's another thing people don't factor in.

If your total housing cost as a % of income is too high, you're screwed either way. Arguably, people who spend too much (most of America), are better off owning homes, because it tends to force people to build equity in something--their house. But motivated savers/investors don't need a low return, illiquid asset like a house to force them to save. For financially well off people, the equity they have in their homes is a relatively low percentage of their total assets. For less well off people, the value of their house is all or most of what they have. Regardless of what you choose, you don't want to set yourself up to be house poor. Just because that's what most people do doesn't mean it's a good idea.

Quote:
Originally Posted by lmh182 View Post
So, if I didn't ever buy a property would that be a recipe for retirement disaster, or is it a reasonable option?
It's not automatically a disaster. Some people are flexible and take on new responsibilities, even ones they don't like, and make the most of them. It really depends on how flexible and willing to learn you are.

But I don't think owning is a must to be in a financially good position. The key, if you're going to be a perma renter, is that you need to save / invest MORE than the recommended 15%. It probably needs to be at least 25%. If you can invest at least 25% of your income for at least a decade, you can start to save a little bit less (but still at least 15%) if the rent increases start biting.
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