Excessive Focus on Property Values (buying, taxes, move)

[john3232]

Originally Posted by asufan

Look, I'm not looking to get into a debate whether having zero debt gives you a warm tingly feeling, clearly it does. I feel good enough knowing I could pay off my properties several times over tomorrow if I wanted to. Everyone has their own risk tolerance and I'm not debating that.

My response was aimed at THIS quote from the OP "Moreover, a debt-free lifestyle is critical to a good financial plan.". This is simply not true and the advice comes across as a Dave Ramsey parrot. It's certainly something you can do if that's what you're comfortable with, but not "critical" to a good financial plan...not even close.

I agree.

All depends on the individual and how knowledgeable they are.

Dave Ramsey is for many like myself who know little about investing in the markets

[MN-Born-n-Raised]

Originally Posted by asufan

Look, I'm not looking to get into a debate whether having zero debt gives you a warm tingly feeling, clearly it does. I feel good enough knowing I could pay off my properties several times over tomorrow if I wanted to. Everyone has their own risk tolerance and I'm not debating that.

My response was aimed at THIS quote from the OP "Moreover, a debt-free lifestyle is critical to a good financial plan.". This is simply not true and the advice comes across as a Dave Ramsey parrot. It's certainly something you can do if that's what you're comfortable with, but not "critical" to a good financial plan...not even close.

Far enough ^^. Though I'm not so sure he is a "Dave Ramsey parrot". We don't know.... I will say, taking out a mortgage for "cheap money" (too many people forget about the closing costs; remember effective APR) and buying stock isn't in my DNA. As in, no fricken way. I have too much to lose (as in, I'm on easy street so long as I don't screw up). Expanding that logic, anyone who thinks it is brilliant should go back and leverage themselves to the hilt and buy some more stock!

That said, a person SHOULD take out cheaper money on their home versus a more expensive business loan. I also see the smarts in leveraging from your rentals to do rehabs. makes sense. But for stocks?

Disclaimer: early on, I borrowed $$'s out of my home by buying the rate UP (zero closing costs by accepting a higher rate) for short term rehabs on water). I felt extremely comfortable to do so. I knew the market well. But stocks? There are 100 variables that are out of your control.

[asufan]

Originally Posted by MN-Born-n-Raised

That said, a person SHOULD take out cheaper money on their home versus a more expensive business loan. I also see the smarts in leveraging from your rentals to do rehabs. makes sense. But for stocks?
.

Well, if you like making money, aren't paranoid and have a decent length horizon.

I recently looked at how our equity investments have performed whether it's my old IRA's, my SEP 401k, wife's 401K and our taxable investments, and they ALL are earning over 11% over any long term periods, 5, 10, 20 etc. Our brokerage accounts with individual stocks are doing substantially better than 11%, and the kicker is many of those like AAPL pay dividends too, so I have dozens of free shares accumulated over the years. I quite enjoyed the recent 90-day run-up from $155 to $325 I understand some are too risk averse but the math works... 11% is greater than 3.5-4%

[MN-Born-n-Raised]

Originally Posted by asufan

Well, if you like making money, aren't paranoid and have a decent length horizon.

I recently looked at how our equity investments have performed whether it's my old IRA's, my SEP 401k, wife's 401K and our taxable investments, and they ALL are earning over 11% over any long term periods, 5, 10, 20 etc. Our brokerage accounts with individual stocks are doing substantially better than 11%, and the kicker is many of those like AAPL pay dividends too, so I have dozens of free shares accumulated over the years. I quite enjoyed the recent 90-day run-up from $155 to $325 I understand some are too risk averse but the math works... 11% is greater than 3.5-4%

It sounds like you are killing it in the market with really no risk. Why don't you borrow all of the cheap money you can from on your rentals (mortgage them up with 20% equity to dodge mortgage insurance) and put the $$'s in market! After all, 11% is better than 3.5-4%. Since 11% is the lowest you make, that's a 7+% gain? But you're not doing that. How come?

[asufan]

Originally Posted by MN-Born-n-Raised

It sounds like you are killing it in the market with really no risk. Why don't you borrow all of the cheap money you can from on your rentals (mortgage them up with 20% equity to dodge mortgage insurance) and put the $$'s in market! After all, 11% is better than 3.5-4%. Since 11% is the lowest you make, that's a 7+% gain? But you're not doing that. How come?

Because I'm too lazy to refinance houses it's a PITA and I have other things going on

The 11% is pretty typical for most people if they check their 401k performance over long term periods, it's not like I'm getting lucky or smarter than everyone.

I go into it looking for 9% on ETF or Mutual Fund investments if I park money and leave it alone. Using the simplistic rule of 72, a $100,000 investment at 9% will double every 8 years. So at the end of 16 years you have $400,000. At 11% that we've experienced, that $100,000 turns to $400,000 in just 13 years.

Let's look at a money market account at a generous 0.75% return. It will take you 96 years JUST to double the money. Ninety-Six. No thanks, I like having money work for me. Almost nothing better than that.

[Sydney123]

Most people want the best bang for their bucks....

[Burning Madolf]

Originally Posted by Happs

In my opinion, there appears to be an excessive focus by residents in Metro Phoenix on property values. HOA Board members and residents frequently base their decisions and comments on how something will effect property values and rarely care about having a healthy level of reserve funding. I'm all for maintaining property values and not letting a neighborhood decline, but it seems as if people in Metro Phoenix put too much hope and reliance on their house as a source of future income, rather than work, savings, and investment in equities and bonds. It's important to have multiple streams of income in case of a recession or if you don't, then it's wise to have adequate savings and to live below your means in case of a recession. Moreover, a debt-free lifestyle is critical to a good financial plan.

Too many things to unpack here with very little backing (none actually).
But it is just an opinion.

[Hal Roach]

The City of Phoenix has fairly stringent blight laws. I would file complaints with them, even when living in an how. They were very responsive about unsecured homes during the crisis. HOA are often the same negative to values as high taxes. Same with trailer park fees or timeshares..
And don't think you can just walk away. Look at some of the most expensive markets..the cheapest homes will often have suprisingly high fees. Anyhow, the 400 sf house on N 8th St, I paid 18,500 for in 2010, that those from the exurbs called ghetto is under contract just under 200k..not quite a 1000% gain..must be the walkability, because it sure isn't the crappy schools or the 1946 house. The big turnaround seemed to start about the time the Phoenix PD shot the pitbull at the end of the street.

[Burkmere]

Originally Posted by asufan

Well, if you like making money, aren't paranoid and have a decent length horizon.

I recently looked at how our equity investments have performed whether it's my old IRA's, my SEP 401k, wife's 401K and our taxable investments, and they ALL are earning over 11% over any long term periods, 5, 10, 20 etc. Our brokerage accounts with individual stocks are doing substantially better than 11%, and the kicker is many of those like AAPL pay dividends too, so I have dozens of free shares accumulated over the years. I quite enjoyed the recent 90-day run-up from $155 to $325 I understand some are too risk averse but the math works... 11% is greater than 3.5-4%

Sure, as long as you don't hit a period like 1929-1954 and 1966 to 1982 where the broad indices took 25 years and 16 years respectively to go to new highs. Recency risk is important. It wouldn't be fun to retire at the beginning of a long period such as the two I mentioned.

The recent sunup in the S&P from 666 in 2009 to 3350 recently is a huge runup that probably increases the risk of a decent bear market in the near future. And I"m not talking a mere 20-30%. We shall see.

[kishac]

Originally Posted by Burkmere

Sure, as long as you don't hit a period like 1929-1954 and 1966 to 1982 where the broad indices took 25 years and 16 years respectively to go to new highs. Recency risk is important. It wouldn't be fun to retire at the beginning of a long period such as the two I mentioned.

The recent sunup in the S&P from 666 in 2009 to 3350 recently is a huge runup that probably increases the risk of a decent bear market in the near future. And I"m not talking a mere 20-30%. We shall see.

I feel that same way regarding the huge runup and a risk of a bear market. These things are impossible to predict but I have seen countless C/D postings boasting about big returns for 5+ years now.