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For most people, housing is the best investment they will ever make because it takes far more know how and far more discipline to make it any other way.Only if you buy low. Your discipline comment doesn't apply to us who have it a la most regulars on Pat.net
When you invest $100k downpayment (20%) into a house, and housing goes up 20%, you make $100k in equity
The money wasted on rent verses the money wasted on the house is difficult to compare. In my area, rents are "only" about $4k/month for a $2M house. I think you would be insane to buy a house right now and be on the hook for more than $10k/month, $6k of which is taxes, maintenance, and interest.
BayArea saysWhen you invest $100k downpayment (20%) into a house, and housing goes up 20%, you make $100k in equity
Not a fair comparison!
A fair comparison would have you buying the stock on margin!
Take your typical brokerage account... You cannot buy on enough margin to equate a 20% DP on a house.
BayArea saysTake your typical brokerage account... You cannot buy on enough margin to equate a 20% DP on a house.
Then you should be comparing paying cash for a house vs owning stock outright.
I can’t buy stocks with 20% down.
You’re asking me to do an apples to apples comparison between two things when one of them provides a massive investment upside over the other. I can’t ignore that.
BayArea saysI can’t buy stocks with 20% down.
You’re asking me to do an apples to apples comparison between two things when one of them provides a massive investment upside over the other. I can’t ignore that.
I will have to research if there are any highly leveraged ETF's that one could invest in.
Yeah it's a horrible idea, the 500K in equity I've made in the last 5 years sucks.....
No, $2M houses are not renting for $4k/mo in Sunnyvale. That’s a gross exaggeration.
Yeah it's a horrible idea, the 500K in equity I've made in the last 5 years sucks.....
Here's one with zestimate of $1.9MM and rent zestimate of $4150.
"In reality, it's usually a terrible investment," he says. That's because, at the end of the day, owning a home takes money out of your pocket: "You're paying property taxes, you're paying maintenance, you're paying insurance. There are all of these other things that happen with your home that you've got to pay for." ...
Say you live in Brooklyn, New York, and pay $2,500 a month to rent. If you buy your own place, you might pay $5,000 a month between your mortgage, taxes and other maintenance costs, Mallouk gives as an example.
The money wasted on rent verses the money wasted on the house is difficult to compare.
Further, the problem of getting your capital out of the house to spend during your retirement may be complicated.
Firstly, a home should NEVER be bought as a investment.
Patrick saysSay you live in Brooklyn, New York, and pay $2,500 a month to rent. If you buy your own place, you might pay $5,000 a month between your mortgage, taxes and other maintenance costs, Mallouk gives as an example.
Another crappy example to show bias. Finding a landlord that will eat $2,500 a month and not covering his carry costs, is rarer than hen's teeth. A landlord, in most cases will cover his costs to own the place, or he'll dump it. Very few landlords are in business to lose money every month.
Come on out to Silicon Valley. There are houses that cost $2MM and rent for barely $4k/month. Admittedly, those figures were from a year ago and the difference has shrunk a little. But still, a new buyer of a $2MM house is looking at $10k/month PITI. You can rent $2MM houses very easily for $5k/month or less.
Love data, but owning and renting will NEVER realistically comparable in an honest statistical sense. I've lost a lot of money owning a primary residence and I currently sit with six figures of paper equity investing none of my own dollars in my current primary residence (in rural IL). I've rented and at that time it paid off well to not be tied to a mortgage and ownership. Just do what's going to keep the most money in your pocket at the end of the day.
MrMagic says
Not really. Pay rent for 5 years, what do you have to show for it? Nothing but pissed away money.
Once again, it is the numbers game. If the rent is much less than the mortgage, then you have the savings ( or better still if you invested it) to show for it.
Come on out to Silicon Valley. There are houses that cost $2MM and rent for barely $4k/month. Admittedly, those figures were from a year ago and the difference has shrunk a little. But still, a new buyer of a $2MM house is looking at $10k/month PITI. You can rent $2MM houses very easily for $5k/month or less.
For most people, housing is the best investment they will ever make because it takes far more know how and far more discipline to make it any other way.
The rest of the country (like 98%) isn't Silicon Valley. Come out and visit where the smart people live. Your bank account will appreciate it! That $2MM house in many other parts of the country would be a $400 - $500K house, with a $2K mortgage payment.
Whether a house/condo is a good investment or not would largely depend on 1. location of the house/condo 2. how you pay for it in the first place.
Whether a house/condo is a good investment or not would largely depend on ... how you pay for it in the first place.
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