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Not sure what the question is..... I’m just opining that the roof over your head should be treated as an expense and that the money saved by renting small should be invested elsewhere. If you choose to buy a bigger space, fine. But this notion of “buy the biggest house you can afford” as the best way to build wealth is laughable.
It’s nothing more than an excuse to buy the house you WANT. Fine....but don’t think it’s the best use of your money, because historically, it is not.
The homeowner equivalent of that path is to buy a house you can afford on a 10 or 15 year mortgage. I paid off my 15 year mortgage in 2008 and was able to do a massive boost in annual investments, during a period that was one of the most profitable in history. True, dumb luck had a lot to do with that, but when you figure in the lower interest rate and the reduced term, payments on a short term mortgage are not that much higher. Once it is paid off, you have the advantage of more discretionary income in perpetuity.
People who buy more house than they need and stick themselves with a 30 year mortgage are speculating. Borrowing money to speculate on real estate is like buying stocks on margin; you risk major losses.
Confiscatory taxes were the demise of many a small business and especially farms... I'm glad this is less the case.
On the flip side I was thinking about some long term planning and wanted to leave a property and include my nieces and nephews... the parents said bad idea and didn't want me doing that... said I could leave a remembrance but the last thing a kid needs is someone leaving them a house...
I agree. I have seen that go bad several times. If they already have a house, the extra money will allow them to upgrade, and they probably will be responsible with it. If they don't have a house, they will probably just **** the money away, but at least they will have fun with it.
All a house does it hit someone with a bunch of unanticipated expenses, primarily property tax and maintenance. A home owner will have a plan in place to deal with a broken furnace, leaking water heater, the roof that has less than 10 years on it, and the annual bill for thousands of dollars in property tax. A renter won't have a clue.
Generally I think it's a bad idea to give anyone something they haven't earned. My dad had a great aunt who put all her assets into trust funds for her heirs. Dad was peeved that he didn't get the money in a lump sum, but he put a down payment on a farm next to one of his farms and the trust fund made the mortgage payments. Great Aunt Minnie was so eccentric a lot of people thought she was crazy, but she was a very smart woman. Dad had to come up with the down payment on his own, then she kicked in the help. His sister just spent the money, and when the fund was exhausted she had nothing to show for it except a bunch of very expensive and outdated clothes and a nice jewelry collection.
The homeowner equivalent of that path is to buy a house you can afford on a 10 or 15 year mortgage. I paid off my 15 year mortgage in 2008 and was able to do a massive boost in annual investments, during a period that was one of the most profitable in history. True, dumb luck had a lot to do with that, but when you figure in the lower interest rate and the reduced term, payments on a short term mortgage are not that much higher. Once it is paid off, you have the advantage of more discretionary income in perpetuity.
People who buy more house than they need and stick themselves with a 30 year mortgage are speculating. Borrowing money to speculate on real estate is like buying stocks on margin; you risk major losses.
there are a few flaws in that thinking .
typically it is time in the market , not timing the market that grows money , so the earlier you start , the greater the time spent compounding as well as you will be buying shares cheaper the younger you start channeling money in and the more the better . time is your best friend when it comes to investing and compounding ..
taking a 30 year and having the difference between a 15 year and 30 year to invest over time is likely the better choice at these rates .
you lost lots of years you could have been accumulating more shares at lower prices by dumping more money in to the house . so starting later to get more money in after you pay off the 15 year loses a big advantage -TIME . the 30 year let you channel the difference in 15 years earlier .
is there a discipline issue involved her to get that difference invested earlier ? there sure is . is everyone going to exhibit good investor behavior ? nope ..
does everyone who isn't smart enough to know how to invest going to seek help ? nope .
so there are advantages to both and disadvantages but a BLANKET statement to the effect of dump more money in to the house early on with a 15 year is likely not the best way to do it . the 30 year would produces better results for those who can pull it off .
Last edited by mathjak107; 01-13-2018 at 03:18 AM..
typically it is time in the market , not timing the market that grows money , so the earlier you start , the greater the time spent compounding as well as you will be buying shares cheaper the younger you start channeling money in and the more the better . time is your best friend when it comes to investing and compounding
Agreed, trying to prove a point by saying hah I paid off my house and had the extra money right at exact bottom of the market so did great isn't really a useful example. It's the average of investing over many decades that is the reason to make a decision one way or the other, not being one of the suspiciously high percentage of people on message boards who happened to time the great recession perfectly.
Even though that post was a joke 15k is the current annual exclusion but if you exceed that you can simply reduce your lifetime exemption and pay no gifting taxes
typically it is time in the market , not timing the market that grows money , so the earlier you start , the greater the time spent compounding as well as you will be buying shares cheaper the younger you start channeling money in and the more the better . time is your best friend when it comes to investing and compounding ..
taking a 30 year and having the difference between a 15 year and 30 year to invest over time is likely the better choice at these rates .
you lost lots of years you could have been accumulating more shares at lower prices by dumping more money in to the house . so starting later to get more money in after you pay off the 15 year loses a big advantage -TIME . the 30 year let you channel the difference in 15 years earlier .
is there a discipline issue involved her to get that difference invested earlier ? there sure is . is everyone going to exhibit good investor behavior ? nope ..
does everyone who isn't smart enough to know how to invest going to seek help ? nope .
so there are advantages to both and disadvantages but a BLANKET statement to the effect of dump more money in to the house early on with a 15 year is likely not the best way to do it . the 30 year would produces better results for those who can pull it off .
Buying the most house they can afford is good advice for many people - the large percentage of people who would otherwise spend on consumer goods.
For those of us disciplined enough to invest and stay the course, keeping every dollar possible out of the homeowner “money pit” is the wiser choice.
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