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Renting has its place, at the beginning of ones life, or the end. In between, if you don’t take advantage of the benefits of investing in real estate, you are just missing the boat.
The stock market is absolute garbage right now. There's nothing better to put your money into than paying off your house
Are you struggling with expenses?
Are you in the “buy high sell low” camp or something?? lol it’s a good opportunity in the market now and for the next 6 months…
At my interest rate, as an example, paying off $50k saves me $1250 annually in interest. So in that example I took $50k out of my liquidity and only get a $1250 annual benefit from doing so. I could have that cash sitting in a money market waiting to gobble up anything with a heartbeat over the next few months.
I had reasonable liquidity at the covid dip and earned a years salary for no effort. I’m not that optimistic about a repeat, but stocks at the moment are paying more than 3% dividends without even factoring in market growth on top of that.
My parents moved from Chicago to California in 1978. They then moved out of California in 2004. They missed a big opportunity in California. My mom is seeing how this works now. After buying a townhouse in South Carolina in 2006, this home is now worth over $50k what they paid to buy it. Had they continued to rent in SC mom would not be able to afford rent now that dad has passed away.
I'm not saying that owning isn't better than renting. (That's THE reason I bought a house.)
But it's hard to figure ALL, absolutely ALL, costs of owning -- to compare to renting.
By the time a person pays the purchase price and the interest over 15, 20, 30 years -- depending on the interest rate -- the actual cost to buy could double the purchase price.
For example a mortgage of $304,000.00 at 3.4 % interest ($182,560.32) takes the total mortgage paid up to $486,560.32. Add the downpayment of 20% ($76k) and that 380K house really cost you 486K. Minus any tax breaks, which are not dollar-for-dollar. And that's not even including every ripple effect cost or expenditure due to buying that home.
Again I'm not saying owning isn't better for building assets, just that some people don't figure every cent spent in the calculation, like......
-- addition furniture for furnishing a bigger space,
-- tools and repairs needed for home ownership that aren't needed by a renter,
-- perhaps even more gas for a longer commute to work (because you can't buy as close to work as you could rent)
And of course as was mentioned the apples-to apples comparison of what's rented vs purchased.
Of course not. Why would there be any reason to given that up to half a million dollars in net profit is completely tax free? And if you've done it twice, that would be $1,000,000 tax free.
Yes, the exclusion is nice, but I'm not going to manage my life around this rule. When I want/need to move... I move. Unless there's a drop in home prices, we'll be on the hook for around $100k in cap gains tax when we sell our current house. Oh well.
Let's say we take out tax from the stock gains in my prior example, 25% combined fed+state. The stock appreciation drops from 9.5x to about 7.5x. It's still better than the house, which was 5.5x. Then to be fair, the transaction cost should be subtracted from the house, which makes the renter/investor look even a little better.
Now, in reality most people buy a house because they need one. They want to be in a particular school district, and not face the risk of a landlord not renewing their lease. That's a very disruptive event.
My comments are more about people who buy a house they really don't need, and justify it as an investment. IMO, most of them would be better off financially if they rent, assuming they invest the money they would have put in a house.
...
Design, build, sell... rinse and repeat as desired every 2 yrs.
A co-worker did it (9x) on adjacent properties. He only had to move ONCE, to his final home. He kept an apartment in a shop on the 'aggregate' property and declared his primary residence at the mailbox where he was building the new home.
Get ready to sell, split off the lot with the new home, and do it all over again.
That is a good plan.
The only down side I see is that your using your own earned income for this style of investment.
The only down side I see is that your using your own earned income for this style of investment.
Downside being he spent 18 years doing it. That’s definitely a long term play, but it obviously suited him or he wouldn’t have done it 9 times. I wonder though, if he maybe claimed residence in one of the homes while building 2 or 3 at a time. Pay some gains, take some for free etc
Downside being he spent 18 years doing it. That’s definitely a long term play, but it obviously suited him or he wouldn’t have done it 9 times. I wonder though, if he maybe claimed residence in one of the homes while building 2 or 3 at a time. Pay some gains, take some for free etc
With rental real estate there are also some huge tax benefits. I have not paid into Income Taxation since 1983.
Quote:
Originally Posted by Lowexpectations
Bankruptcy and financial ruin is always a downside too right?
I readily admit that during the Recession we lost all our tenants and did not have enough income to cover our mortgage. The bank refused to allow a short-sale and forced us to file bankruptcy in 2009.
I am not aware of this "financial ruin" you speak of.
We made one court appearance and that was it. Filing bankruptcy was very easy, and outcome of it was minimal.
Seven years later we bought another rental real estate property and today we have fourteen tenants.
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