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Patrick will love this. Home ownership doesn't build wealth.

By Strategist following x   2017 Nov 16, 3:09pm 4,137 views   39 comments   watch   sfw   quote     share    


#housing
https://www.cnbc.com/2017/11/16/homeownership-doesnt-build-wealth-study-finds.html "On average, renting and reinvesting wins in terms of wealth creation regardless of property appreciation."
1   Ceffer   ignore (1)   2017 Nov 16, 5:44pm   ↑ like (5)   ↓ dislike (0)   quote        

"In other words, the rent argument only works if the renter invests the rental savings rather than consuming it."

Yeah, tell that to the tattooed, forebrain-less, oxycontin and Jack swilling, monster truck riding masses.
2   Strategist   ignore (1)   2017 Nov 16, 6:44pm   ↑ like (0)   ↓ dislike (0)   quote        

Sniper says
Strategist says
Patrick will love this. Home ownership doesn't build wealth.


ha Ha, when I saw that article earlier, I immediately thought of Patrick too.

Actually, most of that article is correct. Except for some small pockets of the country, homeownership definitely costs more than renting, when you factor everything in.


The Mid West is a horrible place to buy a home long term. The frost belt is even worse.
California, West Coast, Hawaii will always be good.
NY City will always be good.
Rest of North East, I just don't know.
Florida, I think has the most potential.
3   Strategist   ignore (1)   2017 Nov 16, 7:02pm   ↑ like (1)   ↓ dislike (0)   quote        

Hello @Patrick
This CNBC article was designed just for you. Awaiting your input.
4   FortWayne   ignore (2)   2017 Nov 16, 7:07pm   ↑ like (2)   ↓ dislike (1)   quote        

Conclusion... being smart is better than being dumb.

Ceffer says
"In other words, the rent argument only works if the renter invests the rental savings rather than consuming it."

Yeah, tell that to the tattooed, forebrain-less, oxycontin and Jack swilling, monster truck riding masses.
5   WookieMan   ignore (0)   2017 Nov 16, 7:08pm   ↑ like (0)   ↓ dislike (0)   quote        

Strategist says
The Mid West is a horrible place to buy a home long term.

Disagree. I HATE Chicagoland area. I live here, so I can say that. In 30-50 years, it will be one of the most popular areas in the country and maybe world. Water is a thing and even though I'd choose Cali over my current location today, can't survive without water. It's a problem and will continue to be one everywhere and Cali usually has a problem with fresh water.

Unless Cali pumps massive amounts of money into de-sal plants, fresh water is going to be a problem with the current population. Add more people and it gets worse. Chicago and the great lakes hold wealth that is completely unrealized and untapped at this point. You Cali folks got lucky with a historic winter last year. Lake Michigan is always here. And Superior, Erie, Huron and Ontario. We have 25% of the Worlds above ground fresh water sitting right here in the midwest. I'm a homer, but Chicago has some very good decades coming in my opinion.
6   just_passing_through   ignore (0)   2017 Nov 16, 7:37pm   ↑ like (1)   ↓ dislike (0)   quote        

WookieMan says
Unless Cali pumps massive amounts of money into de-sal plants


Yeah, that's why I've been telling people Detroit will come back in a big way as well. Who knows when though. Good de-sal tech might change that but here in SoCal it was a major pain in the butt to get one. Just one. Good luck ever getting another one in CA with the enviro-lobby and demoncrat monopoly.

Then we pumped all of that water into a lake to evaporate during the drought. We had a one size fits all policy in CA and the SD area had too much water after people cut back. Poway even dumped their water tower into the street.
7   anonymous   ignore (null)   2017 Nov 16, 7:38pm   ↑ like (0)   ↓ dislike (0)   quote        

Is there a link to the study? I believe that this excludes the divided associated with living in your own place.
8   just_passing_through   ignore (0)   2017 Nov 16, 7:38pm   ↑ like (0)   ↓ dislike (0)   quote        

Strategist says
"On average, renting and reinvesting wins in terms of wealth creation regardless of property appreciation."


Was/Is exactly my strategy and now I own 3 homes (will not buy in CA) I rent out and have plenty of dough for the markets or more real estate. Just hitting my stride in my day-job biotech career as well.
9   Strategist   ignore (1)   2017 Nov 16, 7:47pm   ↑ like (0)   ↓ dislike (0)   quote        

WookieMan says
Strategist says
The Mid West is a horrible place to buy a home long term.

Disagree. I HATE Chicagoland area. I live here, so I can say that. In 30-50 years, it will be one of the most popular areas in the country and maybe world. Water is a thing and even though I'd choose Cali over my current location today, can't survive without water. It's a problem and will continue to be one everywhere and Cali usually has a problem with fresh water.

Unless Cali pumps massive amounts of money into de-sal plants, fresh water is going to be a problem with the current population. Add more people and it gets worse. Chicago and the great lakes hold wealth that is completely unrealized and untapped at this point. You Cali folks got lucky with a historic winter last year. Lake Michigan is always here. And Superior, Erie, Huron and Ontario. We have 25% of the Worlds above ground fresh water...


I understand your point. I'm speaking from the point of view of an investor. If you have a flat or falling population, investing in real estate for the long term is not a good idea.
The best places to invest in real estate are where people want to live, where tourists like to visit etc. There are always issues like water, but those issues have always been there. Those are solvable issues. California can get lots of water from Canada and Washington with a pipeline, or desalination plants.
10   FortWayne   ignore (2)   2017 Nov 16, 8:20pm   ↑ like (0)   ↓ dislike (0)   quote        

I don't think Democrats will allow it.
There is constant pushback against making water cheaper or abundant with this government. Controlling water is big business here.

Few plants would boom water supply here.

Strategist says
WookieMan says
Strategist says
The Mid West is a horrible place to buy a home long term.

Disagree. I HATE Chicagoland area. I live here, so I can say that. In 30-50 years, it will be one of the most popular areas in the country and maybe world. Water is a thing and even though I'd choose Cali over my current location today, can't survive without water. It's a problem and will continue to be one everywhere and Cali usually has a problem with fresh water.

Unless Cali pumps massive amounts of money into de-sal plants, fresh water is going to be a problem with the current population. Add more people and it gets worse. Chicago and the great lakes hold wealth that is completely unrealized and untapped at this point. You Cali folks got lucky with a historic winter last year. Lake Michigan is always h...
11   Strategist   ignore (1)   2017 Nov 16, 8:48pm   ↑ like (0)   ↓ dislike (0)   quote        

just_passing_through says
WookieMan says
Unless Cali pumps massive amounts of money into de-sal plants


Yeah, that's why I've been telling people Detroit will come back in a big way as well. Who knows when though. Good de-sal tech might change that but here in SoCal it was a major pain in the butt to get one. Just one. Good luck ever getting another one in CA with the enviro-lobby and demoncrat monopoly.

Then we pumped all of that water into a lake to evaporate during the drought. We had a one size fits all policy in CA and the SD area had too much water after people cut back. Poway even dumped their water tower into the street.


And then they thanked us by increasing our rates. Their logic....We saved too much on conserving water, which cut back on our revenues, and now we have to raise the rates.
My last monthly water bill was around $425.
12   just_passing_through   ignore (0)   2017 Nov 16, 9:54pm   ↑ like (0)   ↓ dislike (0)   quote        

Strategist says
And then they thanked us by increasing our rates. Their logic....We saved too much on conserving water, which cut back on our revenues, and now we have to raise the rates.
My last monthly water bill was around $425.


They do that in NorCal too. Not enough sales $ to support the support infrastructure/workers.
13   just_passing_through   ignore (0)   2017 Nov 16, 9:55pm   ↑ like (0)   ↓ dislike (0)   quote        

just_passing_through says
to support the support infrastructure/workers.


I'm sort of puking in my mouth and laughing at myself for typing that.
14   just_passing_through   ignore (0)   2017 Nov 16, 9:57pm   ↑ like (0)   ↓ dislike (0)   quote        

Strategist says
California can get lots of water from Canada


+1

I have a Canadian friend from the Yukon. She gets pissy when I tell her about my plans to build strip malls up there al-la-global-warming.
15   WatermelonUniversity   ignore (1)   2017 Nov 16, 10:24pm   ↑ like (0)   ↓ dislike (0)   quote        

is she comparing renting a small ass 1bed apt vs mortgaging house?why stop there. why not compare living in mom's basement vs mortgaging a house so she'll "save" even more by not buying.
16   bob2356   ignore (1)   2017 Nov 17, 5:37am   ↑ like (1)   ↓ dislike (2)   quote        

Strategist says

I understand your point. I'm speaking from the point of view of an investor. If you have a flat or falling population, investing in real estate for the long term is not a good idea.
The best places to invest in real estate are where people want to live, where tourists like to visit etc


When would you like to post some numbers to back that up? I've asked a couple times and it always comes down to it's true because I say it's true. I'd really like to see the breakdown on the long term (over 10 years at least, 20 would be better) ROI for a property in orange county to see how this all works out. I've done the numbers for some of the places "people want to live" on the east coast, but they just don't add up even with appreciation.The initial cost is far too high and the rents are too low relative to the amount of money tied up. I made a very good ROI in vegas (assuming vegas meets your criteria as a place "people want to live"), but only by being almost totally in cash pre crash and buying at the bottom of the crash. That was a one time shot that won't happen again, not long term steady investing.
17   FortWayne   ignore (2)   2017 Nov 17, 7:02am   ↑ like (0)   ↓ dislike (0)   quote        

just_passing_through says
Strategist says
And then they thanked us by increasing our rates. Their logic....We saved too much on conserving water, which cut back on our revenues, and now we have to raise the rates.
My last monthly water bill was around $425.


They do that in NorCal too. Not enough sales $ to support the support infrastructure/workers.


That's what they claim every year, but somehow spend all our tax dollars on other unrelated random crap instead.
18   FNWGMOBDVZXDNW   ignore (2)   2017 Nov 17, 7:47am   ↑ like (0)   ↓ dislike (0)   quote        

bob2356 says

When would you like to post some numbers to back that up?

This debate of appreciation vs cash flow is quite common and probably depends a lot on how much tolerance for risk one has. I'm going to behave like strategist and add my two cents without calculations at the moment. I suspect that most small time investors, especially those who already own a primary in SoCal would be better off with a less risky cash flow investment elsewhere. Someone who lives in the midwest, and has plenty of disposable income might want to hedge bets (if they ever want to move) and buy an investment property on the coast. That is all ignoring the cost of having someone else maintain a property long distance. If one is willing to do the work, it would make sense to invest locally, unless the buy/rent equation is bonkers.
All that said, I respect your critical thinking ability bob, and since you've recently done a long analysis, I have a few questions for you. I'm assuming that you put in expected appreciation in different locations, and then did some calculation to put income on a year adjusted basis (e.g. calculation of ROI or NPV). Would you mind sharing the ranges that you got? Also, what assumptions you made regarding interest rates and expected appreciation in the calculations? Actually, if you are organized and have a spreadsheet with calculations that you would be willing to share, I would appreciate having a look.
19   Goran_K   ignore (2)   2017 Nov 17, 8:01am   ↑ like (0)   ↓ dislike (1)   quote        

Strategist says
And then they thanked us by increasing our rates. Their logic....We saved too much on conserving water, which cut back on our revenues, and now we have to raise the rates.
My last monthly water bill was around $425.


Funny thing between areas with little water and areas with lots of water.

In California or Nevada, you know those auto faucets? They usually give you 3-4 seconds of spray before they turn off?

In Seattle, and Anchorage, I used those same auto sprays and I promise you, I got at least 6-8 seconds of spray (double). I stood in amazement after I had used the restroom to find out that the auto sprays in no-water restriction states stay on for so much longer.
20   Strategist   ignore (1)   2017 Nov 17, 8:45am   ↑ like (1)   ↓ dislike (0)   quote        

bob2356 says
Strategist says

I understand your point. I'm speaking from the point of view of an investor. If you have a flat or falling population, investing in real estate for the long term is not a good idea.
The best places to invest in real estate are where people want to live, where tourists like to visit etc


When would you like to post some numbers to back that up? I've asked a couple times and it always comes down to it's true because I say it's true. I'd really like to see the breakdown on the long term (over 10 years at least, 20 would be better) ROI for a property in orange county to see how this all works out. I've done the numbers for some of the places "people want to live" on the east coast, but they just don't add up even with appreciation.The initial cost is far too high and the rents are too low relative to the amount of money tied up. I made a very good ROI in vegas (assum...


I have given you the numbers.
You can also simply use the average appreciation rates for California homes for whatever time frame you choose.
That would be 6% to 8% depending on the time frame. Add 2% to 4% CAP rates. Now you have your 8% - 12% returns.
Getting into very nitty gritty details and getting an answer to 3 decimal points is not necessary, and only results in "paralysis by analysis"
21   Patrick   ignore (0)   2017 Nov 17, 8:51am   ↑ like (0)   ↓ dislike (0)   quote        

Yes, the author sounds like me!

researchers in the study claim the old adage of "throwing your money away on rent," doesn't hold up. That is because it assumes that the extra money a renter saves by not owning a home and not saving for a downpayment is simply spent on goods or services and not invested.

"When you assume that those monies are reinvested at a rate of return, renting, on average, wins in terms of wealth creation,"
22   Patrick   ignore (0)   2017 Nov 17, 8:56am   ↑ like (0)   ↓ dislike (0)   quote        

BTW, it's actually a fairly complex calculation dependent on many things. It's not always better to rent, nor always better to buy.

It depends on the numbers.
23   HEY YOU   ignore (7)   2017 Nov 17, 9:17am   ↑ like (0)   ↓ dislike (0)   quote        

Buying,flipping & selling to retard overpayers is the only path to wealth.
24   Strategist   ignore (1)   2017 Nov 17, 5:32pm   ↑ like (1)   ↓ dislike (1)   quote        

If I didn't want to buy a home because the numbers did not match, my wife would show me the numbers for a divorce.
Buying a house worked out much much cheaper.
25   bob2356   ignore (1)   2017 Nov 18, 8:17pm   ↑ like (0)   ↓ dislike (2)   quote        

Strategist says

I have given you the numbers.
You can also simply use the average appreciation rates for California homes for whatever time frame you choose.
That would be 6% to 8% depending on the time frame. Add 2% to 4% CAP rates. Now you have your 8% - 12% returns.


I didn't see any numbers posted anywhere. But I'm not on patnet day and night checking every thread either.

These are your numbers? Seriously? California is a state not a housing market.

So why is your 8-12% somehow a superior return? I'm getting a better return than that and can reinvest the money every single month that is tied up in an appreciating house you seem to believe is the end all be all.

Sorry epic fail in proving you have a superior investment strategy.
26   bob2356   ignore (1)   2017 Nov 18, 10:53pm   ↑ like (0)   ↓ dislike (2)   quote        

YesYNot says

All that said, I respect your critical thinking ability bob, and since you've recently done a long analysis, I have a few questions for you. I'm assuming that you put in expected appreciation in different locations, and then did some calculation to put income on a year adjusted basis (e.g. calculation of ROI or NPV). Would you mind sharing the ranges that you got? Also, what assumptions you made regarding interest rates and expected appreciation in the calculations? Actually, if you are organized and have a spreadsheet with calculations that you would be willing to share, I would appreciate having a look.


The ranges I got where? The numbers are all over the place because appreciation is at best a wild ass guess and depends so much on when you buy. I actually worked the other way. Looking at low appreciation high cash flow area's and calculating how much appreciation would be needed in what strategist calls a "desirable" (aka coastal) area to match. .I just can't come up with numbers that make sense looking at some of the markets on the eastern seaboard and the Eugene to Bellingham corridor. Move a couple hundred miles inland the picture changes dramatically in many places. It's not something I do constantly. When I'm looking to reinvest I go back and look at area's I know and see what they look like currently.

Since I only look at places I've lived and know the area well CA ( a place I've always had less than zero desire to live) isn't someplace I have any knowledge of or I would ever look at to invest money into. . .

Unlike strategist I don't think I have any kind of superior strategy that can't be beat and everyone else is ignorant of the truth. If someone wants to gamble on appreciation then great, it takes them out of competition for what I want to buy. I just don't have the stomach for tying up what would be 5 or 10 inland houses worth of capital in a single property then crossing my fingers praying it will appreciate. I'll take my money as tangible cash coming in every month that I can put to work immediately. Plus you have a lot more flexibility if you need to sell a (or half a dozen) 100k house and move on than a 900k house. Markets change. Ten years ago I had insurance triple (post hurricane even though I"m 30 miles from the coast) and taxes double (revaluation) in less than 3 years in south texas. So I got out. Vegas has unexpectedly and dramatically appreciated the last 5 years killing ROI. I'm leaving that market totally this year.
27   lostand confused   ignore (0)   2017 Nov 18, 11:12pm   ↑ like (0)   ↓ dislike (0)   quote        

YesYNot says
Someone who lives in the midwest, and has plenty of disposable income might want to hedge bets (if they ever want to move) and buy an investment property on the coast. That is all ignoring the cost of having someone else maintain a property long distance. If one is willing to do the work, it would make sense to invest locally, unless the buy/rent equation is bonkers.


Yeah for me I got out of stocks when I reached my profit expectation limit. Of course it blew through my expectations-after I sold most of my stock :) I do have two rental properties now , but my place with taxes and such, it does not appreciate much. It doe snot sell fast either. I am cash flow positive , rents aren't great, but at least if it falls, it won't crash like the coasts.

Stocks-at least for me seem risky. I took a position in Ensco oil driller and Teva pharmacy and both are down. It is just too high to reenter in bigger amounts-at least for me. Real estate seems to be the same, way too high. I don't want to buy some million dollar crapshack and with trump's plan it could cause a price collapse in high priced areas. Oh well lets wait and see. But at some point would like to buy something in CA or some other low property tax state-just not at these levels.

I remember in the crash looking at a 26 unit apartment complex at 700k+ during the crash-probably at 2-3 million now in Phoenix. Oh well, I think you never can time these things, I just try and avoid risk and expect masisve returns. In stocks, ironically, the biggest gainers I had were the ones I considered safe plays!
28   Strategist   ignore (1)   2017 Nov 19, 8:22am   ↑ like (1)   ↓ dislike (0)   quote        

bob2356 says
So why is your 8-12% somehow a superior return? I'm getting a better return than that and can reinvest the money every single month that is tied up in an appreciating house you seem to believe is the end all be all.

Sorry epic fail in proving you have a superior investment strategy.


I'm happy where I am. If you are happy where you are, stick with it.
29   bob2356   ignore (1)   2017 Nov 19, 4:18pm   ↑ like (1)   ↓ dislike (2)   quote        

lostand confused says
But at some point would like to buy something in CA or some other low property tax state-just not at these levels.


CA doesn't even make the top 10 for low property taxes. The list from the tax foundation is:
Hawaii - 0.28 percent
Alabama - 0.43 percent
Louisiana - 0.51 percent
Delaware - 0.55 percent
District of Columbia - 0.57 percent
South Carolina - 0.57 percent
West Virginia - 0.59 percent
Wyoming - 0.61 percent
Colorado - 0.61 percent
Arkansas - 0.62 percent
30   lostand confused   ignore (0)   2017 Nov 19, 8:30pm   ↑ like (0)   ↓ dislike (0)   quote        

bob2356 says
CA doesn't even make the top 10 for low property taxes. The list from the tax foundation is:


Yes but in the other states, does it stay at purchase price? For example in CA if you bought a house for 300k in the crash and it is 1 million now-you are still paying 1% of 300k. In most other states it jumps with the market price. In IL for example your property axes can go up 15-20% in one single year.
31   lostand confused   ignore (0)   2017 Nov 19, 8:33pm   ↑ like (0)   ↓ dislike (0)   quote        

One of the reasons that I bought in this frozen tundra is that even if it does not get rented or can't sell, I can afford it. My payments are very small-mostly for tax reasons I am keeping mortgage.

Whereas if I buy in CA, I would be dependent on rent to pay the mortgage-that is not where I want to be at these prices. Lets see if the Trump tax plan causes a crash in high tax states. If high earners can't deduct state taxes and property taxes, that might cause issues. Though I guess if you were a rental/commercial property owner, you would still deduct?
32   Hassan_Rouhani   ignore (3)   2017 Nov 19, 9:25pm   ↑ like (0)   ↓ dislike (0)   quote        

bob2356 says
lostand confused says
But at some point would like to buy something in CA or some other low property tax state-just not at these levels.


CA doesn't even make the top 10 for low property taxes. The list from the tax foundation is:
Hawaii - 0.28 percent


Oh, wow, what a pleasant surprise: for a democrat-dominated shithole that's low. Heck, that's low, PERIOD. Definitely makes HI worth a second look. (Love it as a vacation destination, of course).
33   Patrick   ignore (0)   2017 Nov 19, 9:28pm   ↑ like (0)   ↓ dislike (0)   quote        

bob2356 says
Hawaii - 0.28 percent


Wow, that's quite surprising. I wonder why it's so low there.
34   bob2356   ignore (1)   2017 Nov 19, 9:33pm   ↑ like (0)   ↓ dislike (0)   quote        

lostand confused says

Yes but in the other states, does it stay at purchase price? For example in CA if you bought a house for 300k in the crash and it is 1 million now-you are still paying 1% of 300k. In most other states it jumps with the market price. In IL for example your property axes can go up 15-20% in one single year.


Tax foundation calculates on market value. That's really the only way to compare. How states value houses for taxes are all over the map.
35   Strategist   ignore (1)   2017 Nov 20, 9:03am   ↑ like (0)   ↓ dislike (0)   quote        

Even different islands in Hawaii have different tax rates. They charge a lot more tax for out of state residents.
Even their state income tax is low. 4% ??. And they dont tax social security income.
So Patrick, are we moving to Hawaii? The Puna district on the Big Island is very affordable, and has some of the highest population growth in Hawaii. Check out "Hawaiian Paradise Park" about 15 miles from Hilo.




The Housing Trap
You're being set up to spend your life paying off a debt you don't need to take on, for a house that costs far more than it should. The conspirators are all around you, smiling to lure you in, carefully choosing their words and watching your reactions as they push your buttons, anxiously waiting for the moment when you sign the papers that will trap you and guarantee their payoff. Don't be just another victim of the housing market. Use this book to defend your freedom and defeat their schemes. You can win the game, but first you have to learn how to play it.
115 pages, $12.50

Kindle version available


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