How to ...


By thankshousingbubble   Follow   Mon, 19 Nov 2012, 7:44am   3,818 views   45 comments
In Hermosa Beach CA 90254   Watch (2)   Share   Quote   Permalink   Like   Dislike  


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  1. Goran_K


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    6   11:06am Mon 19 Nov 2012   Share   Quote   Permalink   Like   Dislike  

    bmwman91 says

    These people vote, and our esteemed leaders generally try to make their largest constituency happy so that they can get re-elected.

    I understand this aspect. One would hope that they realize paying less for a house leaves more money for other things...

  2. bmwman91


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    7   11:19am Mon 19 Nov 2012   Share   Quote   Permalink   Like   Dislike  

    Goran_K says

    I understand this aspect. One would hope that they realize paying less for a house leaves more money for other things...

    Bro, what's the point in anything if you can't HAVE YOUR OWN PLACE. I mean fuck, ice cream doesn't even taste good if it comes from a rental fridge. Vacation...what, so I can come "home" to an apartment? If I don't own a home, how will I EVER retire?!

    A strikingly small number of people actually possess the mental fortitude to do a rational cost-benefit analysis of their own life. Or even if they do have the mental fortitude, they have a big ego, personal biases or social pressures blocking the way.

  3. mell


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    8   11:59am Mon 19 Nov 2012   Share   Quote   Permalink   Like   Dislike  

    bmwman91 says

    Goran_K says

    I understand this aspect. One would hope that they realize paying less for a house leaves more money for other things...

    Bro, what's the point in anything if you can't HAVE YOUR OWN PLACE. I mean fuck, ice cream doesn't even taste good if it comes from a rental fridge. Vacation...what, so I can come "home" to an apartment? If I don't own a home, how will I EVER retire?!

    A strikingly small number of people actually possess the mental fortitude to do a rational cost-benefit analysis of their own life. Or even if they do have the mental fortitude, they have a big ego, personal biases or social pressures blocking the way.

    You forgot that kids have no self-esteem unless they grow up in an "OWNED" house and that house-owners are selfless community builders!

  4. dunnross


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    9   12:01pm Mon 19 Nov 2012   Share   Quote   Permalink   Like   Dislike  

    Take places like NYC, where most residents are renters. That's why they have rent control in NYC, because, these people vote it in.

  5. bmwman91


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    10   12:46pm Mon 19 Nov 2012   Share   Quote   Permalink   Like (1)   Dislike  

    Only the children of rape victims grow up in rentals. You can't build a white picket fence around an apartment, so there is no security from depraved rapists.

  6. Nobody


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    11   1:10pm Mon 19 Nov 2012   Share   Quote   Permalink   Like   Dislike  

    dunnross says

    If they drive the prices up any more, then, their children won't be house owners

    Ah, don't forget the people from China for the housing market that is skyrocketing like Silicon Valley.

  7. Goran_K


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    12   1:20pm Mon 19 Nov 2012   Share   Quote   Permalink   Like   Dislike  

    bmwman91 says

    Only the children of rape victims grow up in rentals. You can't build a white picket fence around an apartment, so there is no security from depraved rapists.

    Your memories will suck if you're living in a rental. You won't remember good times, just the times you shoveled coal for your landlord master.

  8. RentingForHalfTheCost


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    13   2:38pm Mon 19 Nov 2012   Share   Quote   Permalink   Like   Dislike  

    bmwman91 says

    The old adage, "markets can stay irrational longer than you can stay solvent" is sort of an ugly fact of life. There should be no question in your minds that the government and Fed have gone full retard and WILL see to it that house prices go up, no matter what headwinds there are to fight.

    I agree they will try everything possible. But even the gov't has its hands tied now. In fact, they are the ones that tied them. That ugly debt ceiling and fiscal cliff thingy is a product of the free money train. Markets always become accountable, it is just a question of the time window. I agree that it will not happen tomorrow, but it will happen. When it does, you can bet your bottom dollar that everyone will then be saying they saw it coming. This board will be filled with the now bulls, who will suddenly be oracles. Patrick's new source of revenue will be users paying to delete all the posts from the past. No one likes being proven wrong. ;)

  9. RentingForHalfTheCost


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    14   2:40pm Mon 19 Nov 2012   Share   Quote   Permalink   Like   Dislike  

    LiarWatch says

    Nobody says

    Ah, don't forget the people from China for the housing market

    And there are no buyers there.... just like here.

    Yah, we all know how well Chinese real estate has been doing. Do you think when they suddenly cross the pond, they become different buyers. They are as picky as the rest of us. Hence, no sales. Get used to it.

  10. Mark D


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    15   2:40pm Mon 19 Nov 2012   Share   Quote   Permalink   Like   Dislike  

    the real reason people are buying:

    http://www.redfin.com/CA/Valencia/28630-Pietro-Dr-91354/unit-33/home/17232164

    with 20% down, the monthly payment is $2225 including property tax, homeowner insurance and HOA.

    estimated rent is $2275 plus you get $3.5K in tax refund at the end of the year. why wouldn't you buy?

  11. Call it Crazy


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    16   3:30pm Mon 19 Nov 2012   Share   Quote   Permalink   Like   Dislike  

    RentingForHalfTheCost says

    "Also, the National Association of Realtors said last week that the median down payment has sunk to 9% for home buyers this year, its lowest level since 2009. "

    We are in for a good ass kicking in our future. You can bet on it. The average buyer this year has only 3% equity after you take away the 6% realtor fees. That can be whipped out pretty quick in this market and make them unable to sell like the other half of mortgage owners. Greed kills markets. We are not done the stupidity yet folks. As the quote above attests, we are back at it.

    Exactly what I thought when I read the article... more of the same crap that caused the bubble. Lowest level of down payment since 2009, what does that tell you??

    People have very little to put down, they don't have the equity from a previous sale due to the down turn in prices.

    Small down payments that are subsidised means very little "skin in the game". If they have a drop in income, it will make it very easy to stop paying or walk away.....

    These trends don't make for a strong recovery in the housing market... contrary to the OP....

  12. Call it Crazy


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    17   3:33pm Mon 19 Nov 2012   Share   Quote   Permalink   Like   Dislike  

    robertoaribas says

    Despite the effects of hurricane sandy, sales seem to have increased. (seasonally adjusted)

    "Sales "seem" to have increased."

    Did they or didn't they?? NAR's CYA at it's best!!!

    There's that "seasonally adjusted" term again.... what ever it takes for NAR to spin their numbers!!!

  13. RentingForHalfTheCost


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    18   3:33pm Mon 19 Nov 2012   Share   Quote   Permalink   Like   Dislike  

    Mark D says

    wouldn't you buy?

    Because there are much safer and better places to put your 20% to work. The only reason the prices have imploded worst is because the rates have dropped almost in half in the last 5 years. Try running a business where you give people 30 years to pay off the purchase of a questionable valued asset. That is at a 3% rate for your trouble. Good luck staying from getting deeper into a hole with that model. Instead of climbing out, you just keep digging, and digging, and digging. It floors me that people don't see the craziness and keep buying into the ponzi scheme that is being run. Oh well...

  14. Mark D


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    19   3:46pm Mon 19 Nov 2012   Share   Quote   Permalink   Like   Dislike  

    RentingForHalfTheCost says

    Mark D says

    wouldn't you buy?

    Because there are much safer and better places to put your 20% to work. The only reason the prices have imploded worst is because the rates have dropped almost in half in the last 5 years.

    the only safer place you can put that 20% is bond which yields well below inflation. everything else is just as risky if not riskier.

    there is no opportunity cost when your housing expenses are the same as your monthly rent.

    paying rents for another 30 years and you would still be paying rents (which will go up with inflation). buying with the same monthly amount and you own the house in 30 years, not to mention that your principal and interest are not affected by inflation.

    it's not questionable asset value when the monthly housing expenses are the same as your monthly rent.

  15. Mick Russom


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    20   3:48pm Mon 19 Nov 2012   Share   Quote   Permalink   Like   Dislike  

    robertoaribas says

    It takes more than one month to make a trend, but clearly positive data for housing.

    Yes, a housing bubble is just what a struggling consumer economy with high unemployment needs, a frenzy that causes the cost of living to go up.

    That coupled with inflation on food, rent, tuition, commuting, gasoline, services, insurance, healthcare with stagnant salaries.

    Yes, looking good. Proceed as before and expect a different outcome. But this time, do it Japan style.

  16. Mick Russom


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    21   3:50pm Mon 19 Nov 2012   Share   Quote   Permalink   Like   Dislike  

    Mark D says

    there is no opportunity cost when your housing expenses are the same as your monthly rent

    Except your new job might be in a different city and your house is somehow underwater (as it was before after the bubble) and you become STUCK.

    Being STUCK seems to be the new matra. Give up all freedom and disposable income for a roof over your head.

    Works great in consumer economies driven by disposable income spending. Sigh.

  17. Mark D


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    22   4:09pm Mon 19 Nov 2012   Share   Quote   Permalink   Like   Dislike  

    Mick Russom says

    Mark D says

    there is no opportunity cost when your housing expenses are the same as your monthly rent

    Except your new job might be in a different city and your house is somehow underwater (as it was before after the bubble) and you become STUCK.

    Being STUCK seems to be the new matra. Give up all freedom and disposable income for a roof over your head.

    Works great in consumer economies driven by disposable income spending. Sigh.

    not if you rent it out and have someone else pay your mortgage. even if you have to hire someone to do the management & maintenance and be out $100-200/month it's still profitable in 30 year when you sell it.

    it's hard to be underwater when you put down 20%. prices may go down for another 5% but not much more than that. prices have reached historic norm.

  18. Mark D


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    23   4:15pm Mon 19 Nov 2012   Share   Quote   Permalink   Like   Dislike  

    besides, if the possibility of losing your job is the reason for not buying a house then there will never be a good time to buy a house. unless you pay all cash. how many years will that take?

  19. David9


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    24   4:29pm Mon 19 Nov 2012   Share   Quote   Permalink   Like   Dislike  

    Mark D says

    why wouldn't you buy?

    1.) Unless you have a job there, it's a 10 mile commute on the 5 freeway to the very tip of the San Fernando Valley.

    2.) God help you if the freeway collapses again in an earthquake.

    3.) As for the rent it out option, not complaining, I am doing better than most. On my Dallas rental, I had to spend $6,000 to get it up to snuff for the rental market. After expenses I clear $200. 6000 / 200 = 30, 30 / 12 = 2.5.

    That's 2 and 1/2 years just to recoup my maintenance.

  20. Mark D


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    25   4:42pm Mon 19 Nov 2012   Share   Quote   Permalink   Like   Dislike  

    David9 says

    Mark D says

    why wouldn't you buy?

    1.) Unless you have a job there, it's a 10 mile commute on the 5 freeway to the very tip of the San Fernando Valley.

    2.) God help you if the freeway collapses again in an earthquake.

    3.) As for the rent it out option, not complaining, I am doing better than most. On my Dallas rental, I had to spend $6,000 to get it up to snuff for the rental market. After expenses I clear $200. 6000 / 200 = 30, 30 / 12 = 2.5.

    That's 2 and 1/2 years just to recoup my maintenance.

    that house is just an example. but Valencia is one of the more desirable cities in Los Angeles county. Most people who live there work in the San Fernando Valley. The commute is 30 minute without traffic and 40 minute with traffic. If you work in Glendale, Burbank, or even Los Angeles downtown it's 40 - 60 minutes.

    pretty much every freeway in Socal runs through a fault zone.

  21. David9


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    26   4:48pm Mon 19 Nov 2012   Share   Quote   Permalink   Like   Dislike  

    Mark D says

    Valencia is one of the more desirable cities in Los Angeles county.

    Yes, I suppose we lean more toward investor on this board.

  22. RentingForHalfTheCost


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    27   6:59am Tue 20 Nov 2012   Share   Quote   Permalink   Like   Dislike  

    Mark D says

    the only safer place you can put that 20% is bond which yields well below inflation. everything else is just as risky if not riskier.

    there is no opportunity cost when your housing expenses are the same as your monthly rent.

    Simply not true. Buying many dividend paying stocks (yielding upwards of 6%) and selling covered calls can generate up to 15% return. In my opinion that is much much safer than relying on the government (who is up against a wall right now) to keep giving out free money to prop up a horrible asset class.

    Opportunity costs is always lost when you tie up money. I can take that 20% and in 10 years have enough to buy a home outright. The buyers will still have 20yrs of payments left to go.

  23. RentingForHalfTheCost


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    28   7:03am Tue 20 Nov 2012   Share   Quote   Permalink   Like   Dislike  

    Mark D says

    it's hard to be underwater when you put down 20%. prices may go down for another 5% but not much more than that.

    Wow, Put down your hard earn cash. Say 100K for the 20%. And be okay with losing 25% (25K). You now have 75K - realtor fees/closing costs/etc.. I have 100K + 15% annually. Now which is safer you say?

  24. RentingForHalfTheCost


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    29   7:06am Tue 20 Nov 2012   Share   Quote   Permalink   Like (1)   Dislike  

    Mark D says

    besides, if the possibility of losing your job is the reason for not buying a house then there will never be a good time to buy a house. unless you pay all cash. how many years will that take?

    Yes. Now you get it. It will take about 10-15 years of saving. Remember that word? Somehow in American culture over the years, we have lost the whole idea of saving for something. Give it to me now and I will pay you for my whole life for it. Save, save, save. Invest in yourself and grow your income and savings. Buy a house when you don't need to ruin your future earning power. Oh well, it is a pipe dream. Once greed becomes the norm, fiscal crisis is always around us. Silly

  25. RentingForHalfTheCost


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    30   7:30am Tue 20 Nov 2012   Share   Quote   Permalink   Like   Dislike  

    Mark D says

    pretty much every freeway in Socal runs through a fault zone.

    So, don't worry about the inevitable, because we are all in the same boat. Bad advice. You should worry, it keeps us from being a lemming.

  26. tatupu70


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    31   9:31am Tue 20 Nov 2012   Share   Quote   Permalink   Like   Dislike  

    RentingForHalfTheCost says

    Wow, Put down your hard earn cash. Say 100K for the 20%. And be okay with losing 25% (25K). You now have 75K - realtor fees/closing costs/etc.. I have 100K + 15% annually. Now which is safer you say?

    Once again I call BS. There is absolutely NO way you are earning 15% in a safe investment. None.

  27. Kevin


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    32   10:42am Tue 20 Nov 2012   Share   Quote   Permalink   Like (1)   Dislike  

    I earn 15% royalties on my bullshit farm.

  28. RentingForHalfTheCost


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    33   12:14pm Tue 20 Nov 2012   Share   Quote   Permalink   Like   Dislike  

    tatupu70 says

    RentingForHalfTheCost says

    Wow, Put down your hard earn cash. Say 100K for the 20%. And be okay with losing 25% (25K). You now have 75K - realtor fees/closing costs/etc.. I have 100K + 15% annually. Now which is safer you say?

    Once again I call BS. There is absolutely NO way you are earning 15% in a safe investment. None.

    PG, MCD, GE, KO, WMT, COP and JNJ. Doesn't get much safer than that. Have been over 15% by dividends and covered calls since I started the approach in 2007. I don't need appreciation of the stock. Just need the continued dividend and the greed of the other investors out there (which is only growing).

  29. Mark D


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    34   12:22pm Tue 20 Nov 2012   Share   Quote   Permalink   Like   Dislike  

    RentingForHalfTheCost says

    Mark D says

    the only safer place you can put that 20% is bond which yields well below inflation. everything else is just as risky if not riskier.

    there is no opportunity cost when your housing expenses are the same as your monthly rent.

    Simply not true. Buying many dividend paying stocks (yielding upwards of 6%) and selling covered calls can generate up to 15% return. In my opinion that is much much safer than relying on the government (who is up against a wall right now) to keep giving out free money to prop up a horrible asset class.

    Opportunity costs is always lost when you tie up money. I can take that 20% and in 10 years have enough to buy a home outright. The buyers will still have 20yrs of payments left to go.

    the best mutual fund gained 5% last year and the average annual gain for stocks since WWII is 9% and you are telling me you can consistently gain 15%? LOL.

    you are living in fantasy land buddy. if you knew how you would have owned a few mansions by now.

    i would say 7% average for the next 10 years considering the national debts and budget deficits. at that rate, after capital gain taxes, which will go up, it would take you 30 years to turn 20% into 100%. not 10.

  30. Mark D


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    35   12:30pm Tue 20 Nov 2012   Share   Quote   Permalink   Like   Dislike  

    RentingForHalfTheCost says

    Mark D says

    it's hard to be underwater when you put down 20%. prices may go down for another 5% but not much more than that.

    Wow, Put down your hard earn cash. Say 100K for the 20%. And be okay with losing 25% (25K). You now have 75K - realtor fees/closing costs/etc.. I have 100K + 15% annually. Now which is safer you say?

    you are comparing my worst scenario with your best scenario.

    i only lose 5% if i sell it exactly when it hits that low. but i won't be cause i would be able to rent it out. and chances are prices would go back up from there.

    on the other hand, your investment wouldn't get 15% annually consistently, more like 5-7 on average. if it does gain 15% in one year then it's due for a correction the next year and you would probably see a loss the following year.

  31. David9


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    36   12:37pm Tue 20 Nov 2012   Share   Quote   Permalink   Like   Dislike  

    RentingForHalfTheCost says

    PG, MCD, GE, KO, WMT, COP and JNJ.

    RentingForHalfTheCost, will you please clarify? Are these mutual funds? What are they?

    I am fortunate enough to be able to invest something and am not interested in missing stoves, faucets, and dirty carpet.

  32. tatupu70


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    37   12:53pm Tue 20 Nov 2012   Share   Quote   Permalink   Like   Dislike  

    RentingForHalfTheCost says

    PG, MCD, GE, KO, WMT, COP and JNJ. Doesn't get much safer than that. Have been over 15% by dividends and covered calls since I started the approach in 2007. I don't need appreciation of the stock. Just need the continued dividend and the greed of the other investors out there (which is only growing).

    OK--let's see:

    PG--pays 3.4%
    McD--pays 3.7%
    GE--pays 3.4%
    KO--pays 2.8%
    WMT--pays 2.3%
    COP--pays 4.8%
    JNJ--pays 3.5%

    Looks to me like the average there is ~3.3-3.5% The other 12% is covered calls? Either you're taking more risk than you realize or you're lying about your returns.

  33. David9


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    38   12:58pm Tue 20 Nov 2012   Share   Quote   Permalink   Like   Dislike  

    Stocks, duh. Thank you! Saved in my Patrick folder

  34. zesta


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    39   2:36pm Tue 20 Nov 2012   Share   Quote   Permalink   Like   Dislike  

    RentingForHalfTheCost says

    PG, MCD, GE, KO, WMT, COP and JNJ. Doesn't get much safer than that.

    The mix of those stocks is probably down 10-15% since Nov 2007.

  35. RentingForHalfTheCost


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    40   2:58pm Tue 20 Nov 2012   Share   Quote   Permalink   Like   Dislike  

    tatupu70 says

    Looks to me like the average there is ~3.3-3.5% The other 12% is covered calls?

    Yes. In today's market you can make 10-12% additional by writing covered calls. Here is the strategy.

    Sell options that expire in roughly 3 months. That will generate roughly 2-3% return. Here are the scenarios
    1) prices stays steady - don't go to jail and collect dividend + covered call return
    2) price rises - collect dividend during when you owned the stock, covered call return, + the appreciated up to the call price
    3) price drops - collect dividend, buy back the call for next to nothing. Stock has now dropped so dividend looks more attractive - buy more if fundamentals are still good

    If you stick to these basic rules, then it is not that hard to see good returns. The problem is always greed. When people feel that 6% return when things go well quickly, they load up for more. Then it all goes bad. Be comfortable making small returns with covered calls 4 times/yr. 4 x 2-3% = 8-12% + 3-4% dividend = 11-16% return. We haven't even asked for appreciation here.

    The hard part is when you lose your shares and collect your quick 5-6% return is to time the entry back into that stock. I have lost and simple never gone back sometimes. I will never overpay on emotion. Just because you nailed a stock before, doesn't mean it is good luck for you. Be picky.

  36. RentingForHalfTheCost


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    41   3:00pm Tue 20 Nov 2012   Share   Quote   Permalink   Like   Dislike  

    zesta says

    RentingForHalfTheCost says

    PG, MCD, GE, KO, WMT, COP and JNJ. Doesn't get much safer than that.

    The mix of those stocks is probably down 10-15% since Nov 2007.

    Go ahead and check. Up about 50% collectively.

  37. RentingForHalfTheCost


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    42   3:08pm Tue 20 Nov 2012   Share   Quote   Permalink   Like   Dislike  

    RentingForHalfTheCost says

    zesta says

    RentingForHalfTheCost says

    PG, MCD, GE, KO, WMT, COP and JNJ. Doesn't get much safer than that.

    The mix of those stocks is probably down 10-15% since Nov 2007.

    Go ahead and check. Up about 50% collectively.

    You can't use COP because it split off PSX and together is up over 50%. GE is a new addition just last year into my fold. The others are all doing well over the last 5 years. Remember, I don't care for appreciation. Rather if they just stay stable and keep increasing the dividend each year.

    http://finance.yahoo.com/echarts?s=KO+Interactive#symbol=ko;range=5y;compare=jnj+mcd+pg+wmt;indicator=volume;charttype=area;crosshair=on;ohlcvalues=0;logscale=off;source=undefined;

  38. everything


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    43   4:34pm Tue 20 Nov 2012   Share   Quote   Permalink   Like   Dislike  

    RE nowdays = investments. Fed injects 40B MBS monthly. Now, who is really buying these homes?

    Interest rates at 30 year lows.

    Sales up, prices up.

    Not rocket science, just market forces.

  39. RentingForHalfTheCost


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    44   4:40pm Tue 20 Nov 2012   Share   Quote   Permalink   Like   Dislike  

    robertoaribas says

    in a nonvolatile time, that strategy will work; With high volatility, not so much...

    comparing a strategy with such a high beta to home ownership today, with prices under rent in many areas, is completely ridiculous.

    Agreed, but in my area rents are still much cheaper, so I'll take the stock approach. As a renter I have more capital to use towards this strategy. If renting was cheaper then I would probably favor housing. However, here it is not by a long shot.

    The volatility can be combated with picking companies that have proven to weather storms before. The ones I mentioned have been through it all and have managed to raise dividends over and over. That is no guarantee that they will continue, but it does add comfort. Like I said, if it rockets up, I win (just not big), if it sinks I use my free cash flow from being a renter to keep loading up. Works for me.

  40. RentingForHalfTheCost


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    45   4:44pm Tue 20 Nov 2012   Share   Quote   Permalink   Like   Dislike  

    SFace says

    A homeowner's working capital is significantly more than renters.

    For me it is the reverse. If I bought into the same level of houses I have been renting I wouldn't have any working capital. A typical bay area house in a safe area with good schools puts you into about a 6-7K/mth expense. How is that increasing your capital significantly?

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