patrick.net

NuttBoxer says

Strategist says

If you have enough equity, you could extract it with an equity line, or by selling the home. I would not recommend either.
In the event of an economic crash you are likely to lose your equity until the market comes back.
If you lost your job, an equity line would enable you to pay your mortgage. How would you pay your rent if you lost your job?

So debt is your answer. Figures, since debt is how most people get a house to start with. I enjoy living debt free and within my means.

Are you really debt free if you are paying your landlord's mortgage?

Strategist says

Are you really debt free if you are paying your landlord's mortgage?

Absolutely!

I'm completely debt-free and have a good pile of money in the stock market. More all the time. Thanks, Trump!

And yet I still rent. Why? Because it's cheaper. And because I'm too lazy to change things.

Strategist says

Buy even if B > A, because in a few years B < A.

Not necessarily. For me, and it's been a damn long time, B > A even now. Cost of owning the same thing is significantly larger than renting it. I won on a month to month basis for, oh, 18 years in a row. True that I did not participate in the appreciation of the land under the house, but I got mine in the stock market.

Land did really appreciate around here, but the stock market did about the same for me that the land would have done. So I don't get all that excited about the arguments anymore.

Buying real estate in the SF bay area is like buying AMZN or some other similarly overpriced stock. It looks like a poor investment when you crunch the numbers, but it has been making good returns for 5 years straight right now.

rando says

I'm completely debt-free and have a good pile of money in the stock market. More all the time. Thanks, Trump!

If you didn't already diversify investments into some realestate, you should consider how diversified you are right now, and look for the next opportunity to add it to your investments. I think ideologically, you are so anti-home buy, that you cannot admit to yourself that ...

rando says

Cost of owning the same thing is significantly larger than renting it.

... when you are paying your mortgage, anything going to principal is paying yourself. Roughly my mortgage was 3K, 1K being paid to principal a month. That means you would have to be renting for 2K. Want to argue on property taxes, insurance, and upkeep costs? Fine. Show me you can rent a 5 bedroom, 2 bath, 2000+ square foot single family home for 2K, and then beat the additional costs. Can't be done.

Additionally the current home price has gained 120K, each year, for the past 3 years, not including the work we have done to the home. Rent/mortgage would now be around 4K if one was to acquire the property now.

If I took ALL the money invested, put into, and tied up in the house, and bet it all on a winner like AMZN for three years (roughly a 500 -> 998 per share price gain), I'd still only make 200K. That's a 200K gain for a hell of a lot of risk!

People who have an opportunity to buy a SFH in an area they want, should work to do it, when there are deals to be had. When you see a maximum of fear take hold in the housing or stock market again, it's time to buy.

Hint: right now its not bad to get some cash ready to do that buying. People look pretty optimistic for what has been a very long, tired, slow cycle. Anything people have in the stock market, I'd say they should be willing to let sit there for 5-7 years, and don't pull your money out when it drops. Too late.


Here, just read G-Sachs:
http://www.businessinsider.com/market-valuations-goldman-sachs-warns-most-expensive-since-1900-2017-11
When your main business is investing, and one potential you mention is a big bear market ... Logan will call you an America hater ... but I really don't care that I missed this years run up sitting on a chunk of cash, or next years.

Too each their own. Best of luck.

Sniper says

What investment would that be that won't be affected in the next crash?

Anything not tied to fiat currency for it's main source of value. Land and houses obviously still have intrinsic value apart from dollars, but they won't retain their current inflated values. Especially if they don't have a well on the land. Gold and silver are the most common historical hedge. But there are other assets that will retain, or gain value, food is a good example. Proper storage and control/security become an issue though, as food isn't as easily transported as coins. Personal business's that can maintain a steady supply of their product, and sell something people always need, are another one.

WookieMan says

The benefit of owning is the landlord (bank) will take absolute minimum 9 months to maybe years to kick you out.

That is a good point. Was three years for some people during the last housing crash. You'd still have to calculate your down against other top investments, upkeep, taxes, against the money you save waiting for the sheriff.

Rew says

when you are paying your mortgage, anything going to principal is paying yourself.

Of course, I already took that into consideration.

Still way cheaper for me to rent my place in particular, and it's generally cheaper to rent than to own in most of the SF Bay Area.

The numbers are facts:

https://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html

The inputs to that calculator are the subjective part. People tend to assume way too much appreciation in the value of the land. (Houses never appreciate. Only the land under it appreciates. A house is a wooden box which sits out in the rain and slowly rots.)

Slowly rots is right. My 200 year old house cost $180 on the earliest land records from the year 1832.

In 2012 I pulled up one room of antique floor boards and sold them to a lumber co for $300 nearly double the cost of the whole house!

anon_4c105 says

Slowly rots is right. My 200 year old house cost $180 on the earliest land records from the year 1832.

In 2012 I pulled up one room of antique floor boards and sold them to a lumber co for $300 nearly double the cost of the whole house!

I would have paid $1 million for it if you threw in the worthless lot beneath the floor boards. Too late.

anon_4c105 says

Slowly rots is right. My 200 year old house cost $180 on the earliest land records from the year 1832.

In 2012 I pulled up one room of antique floor boards and sold them to a lumber co for $300 nearly double the cost of the whole house!

Assuming you bought in 1832...

anon_7ebb1 says

In vast majority of cases, investing downpayment in stock market will seriously under-perform buying a house with 20% down due to leverage issues and rent increases. It is literally an unforced error in terms of tennis and may result in serious long term regrets.

Yes.. using a loan will give you potentially more rewards (and more risk). It's difficult to get a loan to invest on stocks. But if we compare apples to apples, stocks tend to do better than housing, considering everything.


http://www.fau.edu/newsdesk/articles/homeowners-cant-count-on-property-appreciation-for-wealth.php
Abstract:

It is ell accepted that homeowners, on average, have greater total wealth than renters. However, Beracha and Johnson (2012) show that in a strict “horserace” comparison, renting creates higher wealth than ownership in the majority of cases. In this paper, we revisit Beracha and Johnson's buy versus rent model to investigate factors affecting the wealth outcomes of the buy versus rent decision. Three key findings emerge: (1) the difference in wealth between renting and owning can be most affected by choices within the scope of the individual rather than through the impact of exogenous market variables; (2) households that fail to reinvest buy-rent cash flow differentials acc