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I don’t think so. In each case the person “ invested” $250k. One 100% in the house and 2 100% in the market. In 2, the house depreciated $25k and so did the market-independent of the monthly mortgage payments, which total approximately $36k in my example. So why is the $36k not added to the losses? In scenario 1, there have been two years of making no house payments, so the loss in that case is just the $25k drop in home value. What am I missing?
No, because his house is paid for. There are still taxes and insurance, but those should be minimal in comparison and are owed whether or not one has a mortgage payment.
I am 65 years old and own a modest home that I bought for $145k in 2004. My goal is to have it paid off when I am 72. It opens so many options for my kids if/when they have to sell it if I go into a nursing home or die. Carrying costs will be minimal.
I save in other ways. As another poster said, it isn't either/or. But I am old enough to remember when a second mortgage was a badge of shame. Refinancing unless it is for a better interest rate without extending the payback period is just changing the name.
You forgot to subtract the mortgage payments he also made for the 2 years in your second scenario. If they were around $1500/month, that would leave your hypothetical person another $36,000 poorer.
Makes sense to me, and I believe helps reinforce the possible risks of carrying a mortgage. Thanks for pointing that out.
Personally I love the idea of people afraid of risk of carrying a mortgage. They fund my early retirement through my rentals.
And you fund my retirement through everything you buy, because I own broad market index funds instead of tying money up in a house (a house which, conveniently, cannot be moved if I get offered a better job in another city...)
There is nothing special about real estate that makes it intrinsically superior to any other investment. Rather, everyone should run the numbers and see whether renting or buying makes sense for them.
Cliches are for people too lazy or uneducated to actually do math.
And you fund my retirement through everything you buy, because I own broad market index funds instead of tying money up in a house (a house which, conveniently, cannot be moved if I get offered a better job in another city...)
There is nothing special about real estate that makes it intrinsically superior to any other investment. Rather, everyone should run the numbers and see whether renting or buying makes sense for them.
Cliches are for people too lazy or uneducated to actually do math.
In most* cases real estate investing, especially when leveraged have much higher returns than just an index fund. It should be expected as you have to put in a lot of actual work unlike the index fund. I personally own both, each one has their advantages and disadvantages.
No, because his house is paid for. There are still taxes and insurance, but those should be minimal in comparison and are owed whether or not one has a mortgage payment.
He still have to pay property tax and such. No freebie. Plus it’s not the same comparison. It’s not rent vs buy. It’s already own.
And you fund my retirement through everything you buy, because I own broad market index funds instead of tying money up in a house (a house which, conveniently, cannot be moved if I get offered a better job in another city...)
There is nothing special about real estate that makes it intrinsically superior to any other investment. Rather, everyone should run the numbers and see whether renting or buying makes sense for them.
Cliches are for people too lazy or uneducated to actually do math.
Same here ..I thank the owners of our building for tying up their money so I can earn a lot more on mine then I pay them ..
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