patrick.net

robertoaribas says

I'll take a small monthly loss to keep my toys and lifestyle :-)

I'll be happy to take your monthly loss, my gain so you can keep your toys and lifestyle. :-)

fizbin says

You do also realize that since you are able to forecast deflation so clearly that you should be able to make an easy leveraged fortune in the commodities markets, right?

Already happening. My email has 'gold' in the username and I set that up back in 1995. Enough said. I view my gains there largely at the expense of the people getting milked out of their savings by the corrupt housing market. When you see corruption, try to get on the other side of the table. ;)

http://finance.yahoo.com/q/bc?s=GLD+Basic+Chart&t=my

RentingForHalfTheCost says

I assumed 0% rent increase just like I assumed 0% housing price appreciation. My assumptions are not as generous for my own decision making. I would assume a -4% on both.

Just curious, but what do you assume for return on cash investments for your own decision making? Your estimate of 3% is pretty high; safe stuff like CDs and even municipal bonds don't pay anywhere near that, and stocks could go in any direction.

If you make those returns zero in your example, both of the positive numbers below "Rent paid" become zero and renting/buying becomes almost a wash, and thus the argument in favor of renting becomes dependent on the guarantee of positive returns on investment.

(I'm a panicky, hyper-conservative saver who would probably assume -0.5% return on investments -- unexpected bank fees, early withdrawal fees, and the like -- just to be safe, ^^;)

Michinaga says

Just curious, but what do you assume for return on cash investments for your own decision making? Your estimate of 3% is pretty high

In a market of free money you get nothing on your savings or t-bills, but corporate American is making a killing. Any company with a good product and global channels is basically printing money. Using a dividend company strategy while selling covered calls gets more than 3%. For my own decision making I actually use 5%, but didn't want people freaking out here. If you think companies like KO, WMT, ATT, COP, PG are going to stop making money then I would only put money in my survival skills and lots of ammo. ;) However, if you believe like me, that corporation are the only growing market out there, then you can get 5% pretty safely. There is never no risk, or no sure thing, but it is all about the cycle we are in now. It used to be companies had to pay for capital and they still found a way to be profitable. Now they get paid to take capital, it is a different game.

What is being manipulated (bond yields) to try to save the housing market, is benefiting the dividend investors big time. I never thought my KO shares would be growing faster than companies like Cisco, Intel, Microsoft, etc. But that is the market we are now in. There are many people trying to benefit from it, and then many that want the old market back because they are left with the playing chips nobody wants anymore.

So, you say 3% is high, I say it is low in today's environment. I could be wrong, but I am willing to trust myself over other people views. Always have. I do my fair share of reading and studying and in the end, I only have myself to blame for any mistakes I make.

BoomAndBustCycle says

If i put $35k into my house over 7 years... I would have a new roof, new a/c, new windows, remodeled pool, and paver driveway... That would surely increase the resale of my home.

If you kept all your house receipts it would blow your mind. I did when I owned around the BA for 5 years and the number was astounding. I am a cheapskate as well. Here is a list of my expenses with ownership

- gardener each week
- gardening supplies (seeds, fertilizer, trees, etc.)
- pool service each week
- pool maintenance supplies (chlorine, filters, broken or worn equipment)
- AC repairs
- replaced Hot water heater
- fence treatment
- garage concrete floor and driveway treatment
- smoke damage to fence from nearby fire
- sprinkler system maintenance
- Damaged window replacement from storm
- yearly gutter cleaning and maintenance
- solar landscaping lights replacement
etc. etc.

Add it all up and the number makes sense to me. If I didn't keep all the receipts then I would think it was excessive as well.

BoomAndBustCycle says

I pay $600 a year for home insurance

You probably only have the bank portion insured at that costs. Earthquake? Mudslide? Nope, Nope. If I have 1/5 million dollars in an asset I would want some security that I don't lose it in one bad predictable event. You get $600/yr coverage when you pay $600, which to me is not enough.

RentingForHalfTheCost says

BoomAndBustCycle says

I pay $600 a year for home insurance

You probably only have the bank portion insured at that costs. Earthquake? Mudslide? Nope, Nope. If I have 1/5 million dollars in an asset I would want some security that I don't lose it in one bad predictable event.

I guess we just have a different set of assumptions. I personally feel that it is 2 orders of magnitude more likely that we will return to a protracted period of 5-8% inflation then it is that my house will fall off its foundation.

7% inflation will lose you half your money in about 10 years. Our perspectives are clearly different: I think the most likely outcome is that what has historically happened over the past 100 years will continue to happen into the forseeable future, whereas you think you are so much smarter than the markets that you can discern how this time is different.

I can't tell you whether prices are going to be higher this year or next (although it sure looks like it based on listed inventory), but I find it far fetched that nominal prices will be flat or lower in 15 years.

It's hilarious that you think that folks can continue to get 2%+ raises and that you can earn 3% AFTER TAX (where do you get a safe 5% pre-tax return?) and that house prices won't rise along with that.

RentingForHalfTheCost says

There in lies the brain washing about housing in this country. We are so used to thinking owning is such a great thing that we are willing to lose retirement years in order to do it. To each his own.

It's not brainwashing. We think owning is great because....it is.

While renting there were so many inconveniences, living with a shitty stove that doesn't work right. Or the dishwasher breaks so you call the landlord and he gets you a new one - the cheapest one out there. The list is long and goes on and on and on...I don't know how many times my wife and I would say...shit, if we only owned this place then we could remodel this nasty kitchen, put in a jacuzzi in the backyard and actually enjoy it...after all, we are paying every month more than what this guys mortgage is. It just bothered me always that somebody "smart" owns a home that I pay rent for...paying his house of for him and meanwhile he makes a profit on top of it. That fact alone, is why waking up in your own house is a wonderful feeling. Has nothing to do with brainwashing.

To each is own. I totally get Roberto's point about lifestyle and toys.

BTW, where do you SUP in Phoenix?

fizbin says

7% inflation will lose you half your money in about 10 years

Gold is not an inflation hedge? It is tracking to the inflation problem already since 2006, unlike housing. I don't claim to know the direction, I just claim to have an opinion based on a good basket of factors. Ones that many people don't even want to consider because they are unbelievable. Debt, foreclosures, shadow inventory, unemployment, etc. Nothing looks good to me. It hasn't looked good since I started my investing and it still doesn't look good. I wish it wasn't the case.

RentingForHalfTheCost says

What is being manipulated (bond yields) to try to save the housing market, is benefiting the dividend investors big time. I never thought my KO shares would be growing faster than companies like Cisco, Intel, Microsoft, etc. But that is the market we are now in. There are many people trying to benefit from it, and then many that want the old market back because they are left with the playing chips nobody wants anymore.

Tell me about it. I thought of getting into safe dividend stocks but it seems the "herd" is already doing that. So I'm in just cash right now. Maybe if we get a pullback in the market I'll put some $ back in it.

SubOink says

shit, if we only owned this place then we could remodel this nasty kitchen, put in a jacuzzi in the backyard and actually enjoy it

I'd rather enjoy other things in life. That is why "to each his own". If you are just talking financials then we debate, because I don't think the numbers favor buying right now in California. However, when you throw in preferences of lifestyle then no debate. Everyone enjoys different stuff, what one person happy doesn't have the same effect on everyone. If buying and owning creates a lifestyle that makes you happy then good for you. To me, it wouldn't. I like having money to travel, to take leaves from work, to help people I know. Paying that savings to a bank or to upkeep is not what I like. Right now I am hanging out in South American for 6 weeks, only because I don't have a mortgage. Add mortgage and I would be working and working and working. To each his own.

RentingForHalfTheCost says

Gold is not an inflation hedge?

Gold? That's your answer? Seriously? Except for a very few industrial applications, gold has almost no intrinsic value. It's only valuable to you because its valuable to somebody else. Gold provides no utility by itself, it literally just takes up otherwise useful space. If you are buying and storing it yourself, you are subject to a nasty bid/ask differential plus the risks and expense of storage. Even the cheapest ETF (iShares IAU) charges .25% overhead + .3% ETF premium to market just to let the yellow stuff sit in their closet. It's had a huge run up, some might even say a bubble of its own and you want to hold it as your safety answer? To each his own.

(full disclosure: I think gold does have a place -- I have in the past written uncovered GLD puts at 130 and currently am short uncovered GDX puts at 40).

That's not to say that a balanced portfolio shouldn't hold a little of the stuff in its commodity basket, but it's hardly a way to CYA for your portfolio wrt inflation. That's what RE leverage does brilliantly: you have both the inflating asset, and the depreciating mortgage.

Literally, mortgage rates are at the lowest point in the modern recorded history and you are not willing to call a bottom. You may be right, the shadow inventory, blah, blah, blah may drive prices lower for a couple of years. But I find the unwillingness to admit that there is even a reasonable possibility that inflation that includes the housing sector will reignite to be both illogical and irrational.

fizbin says

has almost no intrinsic value. It's only valuable to you because its valuable to somebody else.

Sound familiar? Hint: you live in one

Since 2006 real inflation is somewhere between 6-8% and gold has gone up 4x in value. How did housing fair in this inflation market? They went down? Oh, now I get your reasoning then. You stay on your side and I'll stay on mine.

Houses have intrinsic value since you can live in them. But yes they can still be overpriced.

wthrfrk80 says

Houses have intrinsic value since you can live in them. But yes they can still be overpriced.

I'd get a bigger benefit in life sleeping in the woods next to this.

http://upload.wikimedia.org/wikipedia/commons/4/43/Toi_250kg_gold_bar.jpg

With today's survival clothing we don't really need shelter anymore, just like we don't need gold. I have the option of living in a tent in the BA and still be happy collecting more gold. People with mortgages will eventually wish they owned something other than decaying wood and chalk-board.

That 250Kg block of gold is actually the cost of about only 10-15 houses in the bay area (14.6million). 10-15 worn down decrepit homes that have nice paint and flooring to cover up the shifting, cracking, and decaying that is happening underneath. This gold block will be around until the sun burns out. I don't think 10-15 homes is enough. 30-40 would be more like it.

RentingForHalfTheCost says

- gardener each week
- gardening supplies (seeds, fertilizer, trees, etc.)
- pool service each week
- pool maintenance supplies (chlorine, filters, broken or worn equipment)
- AC repairs
- replaced Hot water heater
- fence treatment
- garage concrete floor and driveway treatment
- smoke damage to fence from nearby fire
- sprinkler system maintenance
- Damaged window replacement from storm
- yearly gutter cleaning and maintenance
- solar landscaping lights replacement
etc. etc.

1) I mow my own lawn.. I actually enjoy it and find it relaxing after spending my workday behind a computer screen. It takes me 20 minutes on a saturday morning and is very satisfying and healthy to do some manual labor.

2) Pool service is $80 a month.. visits 4x a week. I'm planning on getting a "creepy crawly" once we replaster the pool. Then I'll only pay $35 or less a month for chemicals. The pool has been one of the biggest expenses in the house, since it wasn't maintained well.

3) A/C system... If you buy a new system... with a warranty.. It should last you 15 years EASY without hardly any maintenance cost.

4) Hot water heater.. same here.. $800 and you get 15 years of life out of it.

Listen your list is valid.. But for the most part once you upgrade something well... You get 15 years of life easy out of stuff with very little maintenance.

I was just saying.. If i spent $35K on my house over 7 years. The house would be much more updated and in far better condition in the 7th year than in the first. And everything I upgraded would add value to the home.

All maintenance isn't a LOSS... I'd say about 50% of maintenance costs add to your equity.

RentingForHalfTheCost says

I have the option of living in a tent in the BA and still be happy collecting more gold.

Why bother with a tent? I thought that was what cardboard and overpasses are for.

fizbin says

RentingForHalfTheCost says

I have the option of living in a tent in the BA and still be happy collecting more gold.

Why bother with a tent? I thought that was what cardboard and overpasses are for.

I'm not an animal. I'd pay $300/mth to stay at Saratoga Springs and wake up to a warm shower and the sound of nature, rather than BA commuters.

RentingForHalfTheCost says

I'm not an animal.

No? I thought you were a Tazmanian Devil. ;P

Hmmm...it's spelled "Tasmanian." I guess I've been watching too many cartoons.

wthrfrk80 says

Hmmm...it's spelled "Tasmanian." I guess I've been watching too many cartoons.

Correct, nickname 'Taz' is with a 'z'.

http://en.wikipedia.org/wiki/Tasmanian_Devil_%28Looney_Tunes%29

RentingForHalfTheCost says

Right now I am hanging out in South American for 6 weeks, only because I don't have a mortgage

Weird. I have a mortgage and we still travel. Hm.

fizbin says

Gold? That's your answer? Seriously? Except for a very few industrial applications, gold has almost no intrinsic value. It's only valuable to you because its valuable to somebody else. Gold provides no utility by itself, it literally just takes up otherwise useful space. If you are buying and storing it yourself, you are subject to a nasty bid/ask differential plus the risks and expense of storage. Even the cheapest ETF (iShares IAU) charges .25% overhead + .3% ETF premium to market just to let the yellow stuff sit in their closet. It's had a huge run up, some might even say a bubble of its own and you want to hold it as your safety answer? To each his own.

it's clear you don't know the first thing about gold.

"gold bubble" - that's laughable. how about a US dollar bubble. the sovereign debt bubble. and ps: gold ETFs are a scam. there is roughly 1 oz of real gold backing every 100-150 ozs of the paper gold that is traded in this phony, zombie market.

SubOink says

RentingForHalfTheCost says

Right now I am hanging out in South American for 6 weeks, only because I don't have a mortgage

Weird. I have a mortgage and we still travel. Hm.

Try taking a year or two off of work at the prime of your life. We are talking in general terms here. Most people at my work that are cripple with a mortgage would love to take advantage of some of the sabbaticals and leaves that we have available. Most can't and the only people I know that do it, are the people that rent or started wealthy. Just showing one of the positives of that 40K+ savings. Ah, forget it.

lol

SubOink & RFHTC...unstoppable force meets immovable object.

RentingForHalfTheCost says

Right now I am hanging out in South American for 6 weeks, only because I don't have a mortgage.

This is sweet, and this is the goal for me. To be able to just pickup, and take 6 weeks off just because I want to. Splash work in when I feel like it, but be able to do whatever I want whenever I want because I have a lot of $$. That's why buying a house so I can get a jacuzzi, new stove/dishwasher and remodel a house is not gonna happen for me as long as the math doesn't add up.

However, if the market does actually bottom out, and start to show real signs of health and prices start to go up, then that changes things.

RentingForHalfTheCost says

Try taking a year or two off of work at the prime of your life. We are talking in general terms here. Most people at my work that are cripple with a mortgage would love to take advantage of some of the sabbaticals and leaves that we have available

Do you stop paying rent when you go on a vacation?

SubOink says

Do you stop paying rent when you go on a vacation?

I doubt he stops paying rent. But he's been smart with his money and probably has enough savings to cover the rent while on vacation.

SubOink says

RentingForHalfTheCost says

Try taking a year or two off of work at the prime of your life. We are talking in general terms here. Most people at my work that are cripple with a mortgage would love to take advantage of some of the sabbaticals and leaves that we have available

Do you stop paying rent when you go on a vacation?

No, but it is half the cost of ownership in my neck of the woods. The mortgage and housing costs would keep me seated and doing the traditional 2-3 weeks away from the crib each year. I even have a built in person keeping an eye on things when I am gone. The landlord. ;)

RentingForHalfTheCost says

No, but it is half the cost of ownership in my neck of the woods. The mortgage and housing costs would keep me seated and doing the traditional 2-3 weeks away from the crib each year. I even have a built in person keeping an eye on things when I am gone. The landlord. ;)

It's really not fair labeling your parents as "landlord".

:)

wthrfrk80 says

SubOink says

Do you stop paying rent when you go on a vacation?

I doubt he stops paying rent. But he's been smart with his money and probably has enough savings to cover the rent while on vacation.

And you can't do that with a mortgage because....?

SubOink says

wthrfrk80 says

SubOink says

Do you stop paying rent when you go on a vacation?

I doubt he stops paying rent. But he's been smart with his money and probably has enough savings to cover the rent while on vacation.

And you can't do that with a mortgage because....?

Better savings stash because I rent in the BA + less monthly costs.

SubOink says

RentingForHalfTheCost says

No, but it is half the cost of ownership in my neck of the woods. The mortgage and housing costs would keep me seated and doing the traditional 2-3 weeks away from the crib each year. I even have a built in person keeping an eye on things when I am gone. The landlord. ;)

It's really not fair labeling your parents as "landlord".

:)

Probably won't believe, but I actually took my savings from renting in the BA and have purchased a home for each parent. In my life the bank of M&D doesn't exist. It is actually the reverse. Told you, you wouldn't believe.

RentingForHalfTheCost says

Probably won't believe, but I actually took my savings from renting in the BA and have purchased a home for each parent

Nice. But it doesn't make sense - if renting is the way to get rich...why buy the parents a house? Why not rent them a house and get rich renting it with all the cash you are saving?

hihi...

I see an infomercial at 2Pm at Night ...RFHC comes on - Has anyone told you that getting rich by buying real estate is bullcrap?? Renting is the way to absolute wealth....especially when you rent FROM me. :)

SubOink says

Nice. But it doesn't make sense - if renting is the way to get rich...why buy the parents a house? Why not rent them a house and get rich renting it with all the cash you are saving?

Because the market where I bought the houses actually makes a lot more sense than here in California. Both have performed well and continue to perform well. However, they are not in this country, they are in Canada. It also helped that when I bought the exchange was 1.5 to 1, and now it is basically 1 to 1. I didn't count on that, but will take it.

I bought in California in 2003 and when someone said they would give me 50% more than I paid just 5 years earlier, I gladly sold. I still don't think it was correct, but I'll gladly take someone money if they are throwing it at me. I doubt he is paying his mortgage at this point.

RentingForHalfTheCost says

I bought in California in 2003 and when someone said they would give me 50% more than I paid just 5 years earlier, I gladly sold

er.. so you rented in the BA saved up a whole bunch of cash by renting and then in 2003 bought two homes, one for yourself and a home in Canada for your parents?

What made you think that 2003 was the right time to buy after renting in the BA for so many years? .. and why didn't you sell earlier than '08? Surely you should have seen the frothy signs in 04 or 05.

Don't you ever regret not buying in the 90s? You'd probably have the house paid off by now.

Derp derp herp derp

E-man says

SubOink says

living with a shitty stove that doesn't work right. Or the dishwasher breaks so you call the landlord and he gets you a new one - the cheapest one out there.

I couldn't stop laughing reading this. So true so true.

We were crying for years...and now we are finally laughing about it too :)

zesta says

RentingForHalfTheCost says

I bought in California in 2003 and when someone said they would give me 50% more than I paid just 5 years earlier, I gladly sold

er.. so you rented in the BA saved up a whole bunch of cash by renting and then in 2003 bought two homes, one for yourself and a home in Canada for your parents?

What made you think that 2003 was the right time to buy after renting in the BA for so many years? .. and why didn't you sell earlier than '08? Surely you should have seen the frothy signs in 04 or 05.

Don't you ever regret not buying in the 90s? You'd probably have the house paid off by now.

I never bought in the BA, I bought in the surrounding area where prices/rents/income made sense at the time. It was just a weekend home on my way to Tahoe.

I never bought in the 90's because I was only in a position to buy in the BA around 2000 and by then things were already getting overpriced. Looking back I never really had an opportunity unless I did a 5% down and that is not in my blood. I watched my parents lose their home during the 1980 interest rate increases. Once you live through it once you don't ever want to do that to your family. In Canada there is no such things as a 30 year fixed. It is a 30 yr amortization with a refi every 5 years. You can lose your home with big jumps in interest rates.

Anyway, I have regrets in life, I sure we all do. But my housing decision don't have any of them. I have always stayed true to my conservative thinking. Others can go chase big money, but all I want is a place to call my own eventually. I will never overpay for it. It has value, but nothing close to what BA housing sells for today in my opinion.

zesta says

Don't you ever regret not buying in the 90s? You'd probably have the house paid off by now.

I got a house paid off already now. Just don't have it in decaying wood and chalk. It is in real investments where I like it. People keep saying that, thinking that renters can't invest the difference and save.

Buying with other people money is easy. Buying with your own is much harder. Kinda like looking at the monthly payment instead of the full purchase amount. Each year right now I actually am avoiding another 50K drop in my worth by not buying. Even with a high paying tech job, that is more than a years of hard savings. I think there are still a few years left like that.