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If you have $145,000, you can do other things with it, such as buy mutual funds. I just don't know how to put it any more simply than that. You don't save for down payments in some kind of special ”house-buying money” that can only be used for that purpose.
Using your very own example, if I put that $145,000 in the stock market instead of using it as a down payment, and it returned only 5% annually, at the end of the 30 years, I'd have earned ~$625,000. In other words, my net cost would be only $95,000 (total rent-return on asset). With your total payments of $432,000, you would have to sell your house for ~$337,000 to come out even with me. In other words, the cost of your house would have to more than double over the years. And you are understating your costs, because even if we let you hold property taxes/maintenance constant to compensate for my rent not going up, you will have had to invest quite a bit in renovations and repairs over that 30 years, and I will not. I'm guessing your real number to equal my costs would be more like $400,000.
Now that's not an exact calculation because there are other factors at play, especially taxes. But if you can't understand that comparing the value of assets over time has to include the potential returns on those assets, you can't even get to square one.
If you have $145,000, you can do other things with it, such as buy mutual funds. I just don't know how to put it any more simply than that. You don't save for down payments in some kind of special ”house-buying money” that can only be used for that purpose.
Using your very own example, if I put that $145,000 in the stock market instead of using it as a down payment, and it returned only 5% annually, at the end of the 30 years, I'd have earned ~$625,000. In other words, my net cost would be only $95,000 (total rent-return on asset). With your total payments of $432,000, you would have to sell your house for ~$337,000 to come out even with me. In other words, the cost of your house would have to more than double over the years. And you are understating your costs, because even if we let you hold property taxes/maintenance constant to compensate for my rent not going up, you will have had to invest quite a bit in renovations and repairs over that 30 years, and I will not. I'm guessing your real number to equal my costs would be more like $400,000.
Now that's not an exact calculation because there are other factors at play, especially taxes. But if you can't understand that comparing the value of assets over time has to include the potential returns on those assets, you can't even get to square one.
If you look at the math I did in my post, the you would see that in the course of 30 years, you would save a total of $287,500 by buying a co-op. So you would have $287.5k to put into a mutual fund!
If you look at the math I did in my post, the you would see that in the course of 30 years, you would save a total of $287,500 by buying a co-op. So you would have $287.5k to put into a mutual fund!
Studios might be the best case scenario in all instances but studios also carry the lowest premiums. How many people can/will actually live in a studio long term?
Studios might be the best case scenario in all instances but studios also carry the lowest premiums. How many people can/will actually live in a studio long term?
I’m single, so a studio works well for me. Why do I need to spend the extra money for one or two bedrooms that I don’t need? I’m only one person!
Studios might be the best case scenario in all instances but studios also carry the lowest premiums. How many people can/will actually live in a studio long term?
What could be better then cooking , entertaining guests and sitting on the toilet all at the same time
What could be better then cooking , entertaining guests and sitting on the toilet all at the same time
Lol, how small do you think studio apartments are? I have a kitchen, dining room, living room, dressing room and bathroom. It’s a pretty nice size. The only difference is I don’t have an separate room for a bedroom. But my living room is quite spacious that it fits both a bed and couch, so I really don’t need the extra room.
If you look at the math I did in my post, the you would see that in the course of 30 years, you would save a total of $287,500 by buying a co-op. So you would have $287.5k to put into a mutual fund!
I had sold my coop in the 1980s and bought a house in kew garden hills for 169k after selling a coop we bought .
we sold the house in 2003 for 350k and today it is 900k …
Not bad right ?
Except had i plunked that 169k in to the same portfolio I used for decades that same 169k is now 8.5 million using plain old fidelity funds . Even the s&p 500 is pretty close in results .
You can subtract decades of rent and taxes and still have enough to buy multiple homes today
.
So we all have different resources at different times of our lives .
Early on Our kids could pay rent and basically save little if they lived where we do , or they could live in Howard beach and buy a coop .
So they bought in Howard beach . While first starting out buying was the best choice since they would have little left to invest elsewhere if they didn’t .
So as one develops equity over time the options change because now you can have lump sums to invest if you rent .
So the resources you have at different times determine the options .
But every one needs some kindling to start so buying when you don’t have the option of paying mostly cash is a good idea .
But later on , when you have choices , buying may leave you pretty far behind vs putting that money to work in more lucrative investments and renting.
It is not about renting and getting no equity as much as it is renting and deploying the money not sitting in a house elsewhere.
It is the combination of housing costs plus the investment aspect that determines how one did .
If I sat with our Coop or house our financial lives now that we are retired would be very different because we would not have gained what we did by investing elsewhere.
Our building here in bay terrace has lots of professionals who rent and deploy their money into medical or law practices or they buy a business ….they generate far more by deploying their money elsewhere while renting despite the rent.
That same money tied up in a house would not produce the same results for them
Last edited by mathjak107; 10-09-2021 at 03:17 AM..
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