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My play wasn't so much on a appreciating asset. I wanted to get out of rental market as rent keeps skyrocketing in my area. I bought a multi-family townhouse, I rent the other units for the cash flow that pays off the mortgage. I wanted to secure my place in the city as I worried I would be pushed to the outer limits of the city if the current trend in urban areas continues. I am also operating on the assumption of not to expect much from social security and pension when I retire in 30-40 years from now.
Calling the direction of the market correctly is useless if you can't act on it. I've long regarded owning a home as a crucial defensive move for any low earner, but I'm not aware of any affordable "options" on the housing market.
Someone here - I think it was Larry Caldwell - said something to the effect that - as I recall and probably mangle it - renting is equivalent to shorting the housing market. I don't want to short the housing market but I'm unclear about what alternatives I might have.
??? ??? show me a poor person who can get a mortgage.
It is a reference to rich dad, poor dad book. Even though I think the author is a bit of a phony the lesson on what a asset vs liability was very valuable to me.
Many poor people got mortgages before the financial crisis as the underwriting standards were low. Most did not understand how a house could be a liability to them.
Calling the direction of the market correctly is useless if you can't act on it. I've long regarded owning a home as a crucial defensive move for any low earner, but I'm not aware of any affordable "options" on the housing market.
Someone here - I think it was Larry Caldwell - said something to the effect that - as I recall and probably mangle it - renting is equivalent to shorting the housing market. I don't want to short the housing market but I'm unclear about what alternatives I might have.
FHA loan requires only 3.5% down payment. I know of people who bought multi-family townhouse in the bad area of the city and rent the property out. They hope the area improves so they can either sell or move in. In the meantime the tenants pay the property off. They rent to section 8 tenants and the property cost them $10k in upront money and they listed it under LLC in case the deal goes bad.
It is a reference to rich dad, poor dad book. Even though I think the author is a bit of a phony the lesson on what a asset vs liability was very valuable to me.
Many poor people got mortgages before the financial crisis as the underwriting standards were low. Most did not understand how a house could be a liability to them.
I know a bunch of people who got mortgages so they could buy a house, rent out the extra bedrooms, and live in the house for free. RK didn't account for that one.
Many lenders were hauled in for not lending in certain areas... I know it was a factor where I live in Oakland...
Seems after the consent agreement spurred first time home buyers and 3% down mortgages people would have been satisfied... they strong armed the lenders and won.
I know two families that were totally and completely shocked when the tax bills started coming in... they had just bought 1920's 1100 square foot homes and finding almost 10k property tax bills... one woman I know was in tears...
I believe many didn't comprehend or didn't care all that goes into ownership... all they knew is people are making money and they were left on the sidelines.
I lost two families of renters... ironically, they both bought in the same neighborhood... we kept in touch.
Jose told me when he was renting from me he had money in the bank, a nice car and no worries about maintenance... he was paying me $1200...
Jose and his family traded their $1200 rent for $3400 to be owners... plus they put in a new kitchen, bath, double pane windows, refinished the hardwood and a new roof... which as owners they were free to do...
So they almost quadrupled their housing costs which included $600 a month in property tax... or half the rent they were paying me.
in 2011 they walked away with nothing and came back renting the same home they had left in 2007 for $1350... it was a disaster for them and eventually the marriage ended in divorce...
There were a lot of people like them.. swept up with house fever and the aftermath was at least one bank owned property on each block... someone bought their home they were into for 400k for 150k...
I know a bunch of people who got mortgages so they could buy a house, rent out the extra bedrooms, and live in the house for free. RK didn't account for that one.
RK makes a lot of great points but your right.
A house is an asset.
It is just how you use your asset that determines whether it generates positive or negative income.
The loan on the house is a liability.
Difference between the asset value and loan value is your equity.
Calling the direction of the market correctly is useless if you can't act on it. I've long regarded owning a home as a crucial defensive move for any low earner, but I'm not aware of any affordable "options" on the housing market.
Someone here - I think it was Larry Caldwell - said something to the effect that - as I recall and probably mangle it - renting is equivalent to shorting the housing market. I don't want to short the housing market but I'm unclear about what alternatives I might have.
If renting is shorting the housing market, then buying electric power is shorting the power company market, and buying food is shorting the farm market.
If I used that $4K to pay the loan, I would have had no emergency fund and would have been homeless if I had lost my job.
OK, so you use half that, and still maintain an emergency fund. Now you have more disposable income and you are able to save again, replenishing that fund quickly.
If renting is shorting the housing market, then buying electric power is shorting the power company market, and buying food is shorting the farm market.
Living at home is really shorting the housing market.
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