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there sure are perks owning your home thats for sure... in my own calculations i subtracted out all the rent i would have paid and figuring 3% rent increases still had enough for 2 homes today.
as far as loosing money in the markets ,i dont want to go off track but anyone over the last 20 years or so that lost money was speculating and not investing... there isnt a broad index around that reflects any markets that arent up many many times over what they were 20-25 years ago.
anyone who lost money dabbled in buying individual stocks which unless you can buy enough of them to cover all industries and sectors and rule out individual company risk then your speculating or they tried timing things and did what most folks do. they buy when they should be selling and sell when they should be buying. just buying a few diversified mutual funds and holding them would have generated substantial returns over the years.
im not saying you cant make alot of money in real estate, we have a family real estate business that did very very well, what im saying is dont assume because someone rents that they are behind the eight ball to someone who buys... they may be able to pay rent forever from the returns they get on other asset classes that smoke the homeowners return . infact in my book the home you live in is not something i even consider an investment.
its a consumption item and costs you money until the day comes you can sell it, get another place to live and then see whats left to live on. i liken a home to fine art or jewlery or any collectable. while it has value you are enjoying it and have no intention of selling it so its worth is a moot point.
it may matter to your heirs and the tax man but unless your selling off your kitchen there is no efficiant practical way of spending your equity when you retire. those reverse mortgages are high fee horrible ideas and they generate very little when all is said and done. there are many miserable failed retirements where people are house rich and cash poor but yet dont want to sell and move somewhere cheaper.
ideally you want the house and you need the investment income or a pension when you retire.
we are retiring at a fairly young age next year, we already bought a home in the pocono mountains of pa . we will leave nyc where we live , move to pa and live there from april to november. our plan is to rent some where different for the winter months every year. all this is paid for with our investments in other asset classes which we built up all these years.. alot of those years were spent renting after we sold our house.
bottom line is whatever you do its a mean to the same end, namely to enjoy where you live and to have enough money to support the lifestyle you want now as well later on in retirement.. which road you take to do this dosnt matter , just that you win the race and arrive at the end of your working career to go on from there in happiness and to be able to live the level of lifestyle you choose
Last edited by mathjak107; 10-22-2009 at 03:40 AM..
Yes... but I would also have to figure almost 25 years of rental income plus I have the benefit of a modest depreciation...
Also, I have been able to 1031 tax deferred exchange into commercial properties with other holdings... not to mention that California Property Tax does experience double digit increases like other States.
I have some very good friends that make their living managing their market investments... they are much smarter than I
The only losses I have ever realized investing have all been in the market...
I forgot a to add a nice perk... I have storage for several of my Antique Cars... and they continue to appreciate nicely and are fun to boot...
that modest depreciation by the way is only smoke and mirrors. when you sell, they recapture most of it back. nice of them isnt it...... that double digit growth when divided out over long term is around 6% long term average in ca. most other areas are closer to 5%. those double digit aberations tend to all level out again to the norm over time. bet you never noticed you can pull any 15 year periods over the last 75 years out of the market indexes and arrive within 1% of the same average return. in fact just pull them randomly not even in order and it still levels out within 1%. thats thru wars, hyper-inflation, recessions and all the worlds events. i found that interesting.....
for this discussion dont mix in rental real estate , we are talking residential homes you live in.. rentals are a buisiness and are like any other business subject to many many things...... there is no long term average return for rental properties in general.. its very personalized. but non the less you are talking an investment in an asset class.
but if you did want to talk rental properties suppose for a second you bought the rental properties and rented a place to live somewhere else. if the rental properties paid for your place you are living and even had cash left over to live on are you at a disadvantage to someone who owned a home but not the rentals? of course not.
now suppose instead of rentals that money was more diversified and included equities ,bonds, commodities etc... does it really matter what generates that income that pays your rent? of course not.
see my point?
Last edited by mathjak107; 10-22-2009 at 03:58 AM..
An important consideration in renting right now is that many land lords are holding on to their property by a thread. Try to find out as much as possible about the financial stability of the owner. It's not good to get settled in and then have to move because the owner has been foreclosed on. There are tons of rentals available so be selective. By this time next year we will more clearly see the direction of the employment/housing market, and will be in a much better position to decide. Rent for now, but be selective.
I have bought 2 houses. I've lived in the present one for 21 years. My house payment is less than rent would be for a comparable house in my area even with insurance and taxes involved.
I can remodel and do things I want to the house.
I can have a dog and don't have to worry about being evicted through no fault of my own because the landlord is behind on his/her mortgage payments.
It is home and it has long term family roots for me and the wife and the 6 kids that grew up in it.
I don't want to make some landlords mortgage payments so they can profit from my rent payments and still sell a house for a profit in the future that I helped pay for.
I would rather pay for my own and have the benefits of home ownership.
and most of those reasons are exactley why we buy a house..... i dis-agree on the financial aspects but all the others are dead on... as i showed you in our case renting left us far ahead at this point. while carrying costs are cheaper on the bought house then rent at this stage the rent is payed with investment money id never even have had if it tied it up in the house and it far exceeds the dis-advante of renting in that respect
put another way, if someone offered you a deal like this: if you have a house we will buy your house at a price equal to 2x the value of its projected worth in 20 years plus whatever you spend in rent we will pay you enough to cover ... would you do it even though the rent is more then the carrying cost of your house now? you bet i would!
well potentially in most areas the financial markets grew at a rate more than 2x home prices ... after subtracting out the rent you would have paid for over 20 years you have almost double the cash you would have had if all you had was the home.
now go buy another home , and have hundreds of thousands left over potentially ....
no one knows if things will play out the same over the next 25 years but the point is its bad thinking when someone goes but my house cost me less then renting without looking at the options of other asset classes as well
in alot of areas at 3% rent increases and the up and down of home prices it can take a decade for the lines to cross where rent is more then all the expenses of buying as well as a substaintial down payment, closing costs and growing real estate taxes,.... its what the renter does with the extra hes saving all those years that makes the difference between the 2
here in nyc it took me 11 years for rents to catch up to the costs on my investment properties.
we had a horrible crash in real estate 2 weeks after i closed on my first property in 1987 here in new york city . it happened when the stock market crashed back then. the markets recovered in a year but real estate didnt.it took many years for the reaLestate and rental market to recover
Last edited by mathjak107; 10-22-2009 at 05:44 AM..
that modest depreciation by the way is only smoke and mirrors. when you sell, they recapture most of it back. nice of them isnt it...... that double digit growth when divided out over long term is around 6% long term average in ca. most other areas are closer to 5%. those double digit aberations tend to all level out again to the norm over time. bet you never noticed you can pull any 15 year periods over the last 75 years out of the market indexes and arrive within 1% of the same average return. in fact just pull them randomly not even in order and it still levels out within 1%. thats thru wars, hyper-inflation, recessions and all the worlds events. i found that interesting.....
for this discussion dont mix in rental real estate , we are talking residential homes you live in.. rentals are a buisiness and are like any other business subject to many many things...... there is no long term average return for rental properties in general.. its very personalized. but non the less you are talking an investment in an asset class.
but if you did want to talk rental properties suppose for a second you bought the rental properties and rented a place to live somewhere else. if the rental properties paid for your place you are living and even had cash left over to live on are you at a disadvantage to someone who owned a home but not the rentals? of course not.
now suppose instead of rentals that money was more diversified and included equities ,bonds, commodities etc... does it really matter what generates that income that pays your rent? of course not.
see my point?
In 1986... Mom put her retirement 401k into a Bank CD and was quite happy with it... she received weekly calls from the bank about the money she was "Loosing" by not being in the market... the bank even offered to let her buy into the mutual funds they were selling and incur no early withdrawal penalty on the CD... she did and lost more than half within a 24 month period...
My father on his Death Bed made my promise Not to stay out of the market... he said mom and him through hard work had put a little away while raising a family and it would be foolish to risk Mom's security...
I don't own real estate that is not income producing...
I don't disagree with anything you've said... it just hasn't worked for me...
The few stocks I bought, with the exception of Apple Computer back in the 80's when I had family working there, have been disasters... local silicon valley companies that are no more or even with the CEO going to jail... a few cents on the dollar returned after years of litigation.
My company 401k... only offers a few mutual funds... no cash equivalent until it was quietly added about a year ago...
The funds have very high fees and I saw my contributions drop nearly 60%... company match of 1/4 of 1% on the first 3% stopped years ago...
Each time we change Fund Companies, are money is untouchable. Last time it was locked for 21 days while everything in the fund is converted...
Many times before I've said my roots are peasant farmers... land has intrinsic value that stocks don't...
Several from my old High School went into finance and more than a few have called over the years with sales pitches... one was very high pressure and apparently did quite well... owning a small Napa Valley Vineyard and living the good life... I've heard he lost it all when the market turned...
Keep posting... I learn a lot from City-Data members...
PS... So far the modest depreciation has worked for me and Starker 1031 exchanges have avoided any recapture...
I got into rentals because the job market back in the early 80's was horrific and because I needed room for my growing antique auto collection... It's unlikely I could live the lifestyle I do as a Renter...
Its all a means to the same end.... namely we can support ourselves thru retirement and live the lifestyle now that we want.
how we each do it dosnt matter. all that matters is that we all keep in mind that what may have worked for them may not work for someone else , everyone just needs to beaware there are other options out there and that they are careful about making blanket statements for everyone like renters loose and home owners only win...... they both can be winners and one is not better then the other in all cases.
Its all a means to the same end.... namely we can support ourselves thru retirement and live the lifestyle now that we want.
how we each do it dosnt matter. all that matters is that we all keep in mind that what may have worked for them may not work for someone else , but just beaware there are other options out there and that some of them may even have worked for you if you were made aware of them.
i dont want to go off track here but your point about your company 401k can be sooooooo true.. some are loaded with high fee, poor performing , non diversified choices.. if thats the case just contribute the min amount to get the company matching and do your investing on your own...
buying individual stocks is more a speculation then investing ... i like broad diversified funds covering many asset classes .
i have been an investor now for almost 25 years and im still not smart enough to pick just the right company in just the right business at just the right time in just the right market. even if i got all of the above correct i still dont know what the competitors are doing.
im also not smart enough to time the markets..
for me i use well diversified low cost funds and couldnt be happier.... i have averged over 9% a year long term for decades now and i can sleep at night in times like these.. thats what counts
It appears that property ownership will be a liability for the short term, as property taxes soar to bail out broke government, and property values continue to plummet due to foreclosure, unemployment, CDW, etc.
Yuo think that the landlord is going to pay those increased taxes ? Get a clue;you pay for everthing plus a profit when you rent.Its the convenience of having somone else handle your housing that you get in return for the profits landlords make.At the end of your rent terms you have nothing of any value or equity.
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