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Quotealex 03-09-2007 11:04 PM

You know you can also use leverage in stocks, not just in real estate!
And by house, I was refering to a house you live in and not a multi-units property.:winkwink:

Quote:

Originally Posted by Lenny2 (Post 12049659)
That's not necessarily true. It all depends on your aversion to risk and how actively involved you want to be in your investments.

While stocks will bring a higher % return year after year that doesn't mean you make more money with stocks.

If I put $100,000 into stocks and earn 10% per year, that's $10,000 per year in investment income.

If I use $100,000 as a 20% down payment on 500K worth of real estate, and we assume real estate will appreciate over the long term at only 5% (half the rate of stocks) I earn a 5% return on $500,000 which is $25,000 per year.

This doesn't include rental income over and above your expenses or the fact that your tenants are paying down your mortgage for you, so that you're building equity in addition to the property appreciating.

However there are greater risks involved because you have to borrow the other 400K to buy the property, and you're liable for the mortgage whether the propery is rented or not, plus the multitude of headaches involved with being a landlord.

So while you have to willing to take greater risks and bigger headaches, you can earn substantially more in the long term with real estate than in the stock market, even though the rate of return on stocks is double that of real estate.

Counter-intuitive but true. :2 cents:


Quotealex 03-09-2007 11:10 PM

Example, on a per unit basis, a condo appartment cost alot more than an apartment in a multi-units property. Here in Montreal, it's not hard to find multi-units for less than $75,000 per appartment but the same size condo will cost you more than $130,000. thus, the rent will be less in an rental appartment than the mortgage and fees in a condo appartment.


Quote:

Originally Posted by Lenny2 (Post 12049670)
Invest the difference? What difference?

The rent you pay on a house or apartment is usually more than the mortgage would cost to buy the property. Otherwise how does the landlord pay the mortgage :1orglaugh


Snake Doctor 03-09-2007 11:13 PM

Quote:

Originally Posted by Alex from Montreal (Post 12049686)
You know you can also use leverage in stocks, not just in real estate!
And by house, I was refering to a house you live in and not a multi-units property.:winkwink:

Ok well I was replying to a post that compared investing in stocks to investing in real estate, so that's why I made that comparison.

I really don't get why you refuse to believe that paying a landlord rent is better for your financial future than paying a mortgage to a bank. The evidence for my position is overwhelming.

If you found some way to live rent free and used what you would have paid in rent to invest in the stock market, then sure, stocks would make the better investment.

But if you have to pay a monthly fee to live somewhere, how is it not in your interest to be paying a mortgage instead of rent?

gimilin 03-09-2007 11:18 PM

Quote:

Originally Posted by Alex from Montreal (Post 12049039)
Chances are you going to spend a fortune in renovation to make it to your liking (not all of these expenses will be recoverable) and maintenance; and when you do to sell it, it will be to buy an even more expensive house.

As far as I concern, a house is buying into a lifestyle and not an investment!

Yeah,it is not wise to buy a house as a investment in USA.

Quotealex 03-09-2007 11:20 PM

Quote:

Originally Posted by Lenny2 (Post 12049712)
If you found some way to live rent free and used what you would have paid in rent to invest in the stock market, then sure, stocks would make the better investment.

But you are not living rent free. All you did was paid a premium for 25 years (or whatever the term of your mortgage was) so that you can reduce your fees by maybe 50% (you'll still have to pays your taxes and other expenses). :winkwink:

Boobzooka 03-10-2007 02:32 AM

Quote:

Originally Posted by Alex from Montreal (Post 12049611)
Over the long term, smart money would pick stock over real estate.

This is Darwin Award worthy advice. Sorry, nothing personal, I just think it's dangerous to promote owning IOUs before essential real-world assets. Secure a place to live first, then go ahead and gamble after you're debt free. Especially if you're supporting a family, anything less is irresponsible.

INever 03-10-2007 02:45 AM

It's a good investment for the real estate agent when you want them to lie about how great an investment it is when you decide you wanna sell......

Snake Doctor 03-10-2007 02:45 AM

Quote:

Originally Posted by Alex from Montreal (Post 12049728)
But you are not living rent free. All you did was paid a premium for 25 years (or whatever the term of your mortgage was) so that you can reduce your fees by maybe 50% (you'll still have to pays your taxes and other expenses). :winkwink:

I still don't get where you get this "premium" idea from.
Maybe you live in a fucked up real estate market.

Where I live it would cost me more to rent a house like mine than what I pay for my mortgage.
The same thing goes for condos/apartments in the area. So why on earth would I pay more to live in the same place and not build any equity?

Renting is for people who relocate frequently, are young and have roommates to help defray their living expenses, or who haven't yet built up enough savings to make a down payment on a home of their own.
There are of course exceptions, but that's the general rule. You're delusional (or live in a very fucked up real estate market) if you think that renting for the next 30 years is a better financial decision than buying your own home.

Mutt 03-10-2007 02:46 AM

like somebody said above a house is a forced investment and that's good.
for the average person it's the only investment of that size they will ever be able to make. somebody making $75,000 can go to a bank and get a mortgage on a $250,000 house - go try going to the bank to borrow $200,000 to start a restaurant or retail store. and of course if you don't make the investment in a house you're going to be paying rent to somebody else.

i know so many of my friends whose parents were middle class people - just normal middle management jobs, good blue collar jobs, small businesses - now those parents are dying off. the family homes they bought in the 50's and 60's for 20-40,000 dollars 40 years later are several hundred thousand dollars, some close to a million dollars in the right neighborhoods. my best friend's parent bought theirs in the 60's for 40K and it's now worth at least 2 or 3 million - whoever buys it when my friend's mom dies or has to get out will knock it down for sure.

wyldworx 03-10-2007 02:55 AM

real estate will always be that. Real dollars, real emotions, real people. I found it impossible to continue in a career like this after I witnessed, and was involved in, the great crumble in 2004 in Australia, where houses had dropped by 10% in some places overnight. It was to no surprize that I had resigned 6 months after due to the massive decline in demand. Yes real estate is rediculous, but if wise about what option you use in what situation, you really can call it the wise investment, and beleive me, it has related to all my rises and falls from grace.

RawAlex 03-10-2007 03:17 AM

Even with that 10% drop, I would assume by now that those properties have picked that 10% back up... or will in the near future.

Alex one very important thing: If you are buying a house to live in yourself, and you stay there more than two years, all of the money you get when you sell it is tax free (provided it is a single family home, not a duplex or other form of revenue property). Capital gains on stocks if you were to sell 300k worth of stocks in a year would hurt.

At bare minimum, make sure you own where you live, even if it is a condo or whatever. That is effectively a free investment that will pay you in the end. Most "old family wealth" comes from the asset of the family home and revenue properties.

wyldworx 03-10-2007 03:23 AM

Quote:

Originally Posted by RawAlex (Post 12050219)
Even with that 10% drop, I would assume by now that those properties have picked that 10% back up... or will in the near future.

Alex one very important thing: If you are buying a house to live in yourself, and you stay there more than two years, all of the money you get when you sell it is tax free (provided it is a single family home, not a duplex or other form of revenue property). Capital gains on stocks if you were to sell 300k worth of stocks in a year would hurt.

At bare minimum, make sure you own where you live, even if it is a condo or whatever. That is effectively a free investment that will pay you in the end. Most "old family wealth" comes from the asset of the family home and revenue properties.


absolutely, that is given, but it is a rigourous experience nevertheless...

inthecrack 03-10-2007 04:48 AM

See Donald Trump.

shermo 03-10-2007 04:54 AM

I have a place to live, a nice yearly tax write off, appreciation, no idiot neighbors that trash the apartments in which they lease, and there were no renovations which I had to make, as I bought it 2 years old and it was completely upgraded from the floors, to the paint,the upgraded cabinets, to the back yard.

Sure I pay a little more than I would if I lived in an apartment, but the perks outweigh the downfalls in my case. I love my home, and investing in the happiness of myself and my wife is good enough for me. Selling at a profit in 5-10 years is also a nice perk, and I wouldn't necessarilly have to buy up. I'd probably actually move from Vegas to a smaller city, thus making my real estate money work for me.

TigerDragon 03-10-2007 04:58 AM

very interesting thread

goldmine 03-10-2007 05:23 AM

actually buying a Land/house is always a win win situation. As mentioned in Superman: The return, land is more valuable than gold because its constantly shrinking. No one's manufacturing land.

I remember here in Asia before a certain volcano errupted last 1991 and the price of land in nearby area of the volcano dropped to $.10/sq meters (not sq/ft!) guess what, after only 15 yrs and commercialization, the price of land fly to around $500/sq feet. Wow.

ADL Colin 03-10-2007 05:28 AM

Quote:

Originally Posted by goldmine (Post 12050435)
actually buying a Land/house is always a win win situation. As mentioned in Superman: The return, land is more valuable than gold because its constantly shrinking. No one's manufacturing land.

How about if you bought land in Tokyo in 1990?

goldmine 03-10-2007 05:30 AM

Quote:

Originally Posted by ADL Colin (Post 12050443)
How about if you bought land in Tokyo in 1990?

dunno... but i still think the price of land in tokyo last 1990 will be lower than the price on 2020 :winkwink:

V_RocKs 03-10-2007 05:36 AM

Cost for me to rent, $2500 a month at $30,000 a year.
Cost for me to buy this same house, $3500 a month at $42,000 a year.

For the first 5 years all of the money goes towards interest only.

So while the market is stagnant or dipping I am screwed. Had I bought in 2003 my monthly would have been $1800 and the price would have appreciated 2 and 1/2 times. Which means, I would have made a lot of money on paper (or if I sold it)...

So buying for me would be stupid.

ADL Colin 03-10-2007 05:38 AM

Quote:

Originally Posted by goldmine (Post 12050446)
dunno... but i still think the price of land in tokyo last 1990 will be lower than the price on 2020 :winkwink:

Is that the criteria for a "win/win" investment? That the price is higher by any amount 30 years later?

Quotealex 03-10-2007 06:06 AM

Quote:

Originally Posted by DareRing (Post 12050122)
This is Darwin Award worthy advice. Sorry, nothing personal, I just think it's dangerous to promote owning IOUs before essential real-world assets. Secure a place to live first, then go ahead and gamble after you're debt free. Especially if you're supporting a family, anything less is irresponsible.

Alot of people thinks that buying assets other than real estate (i.e. a house to live in) is gambling! Real estate also fluctuate in price, not always positively too; and the reason people don't notice it, is because it's not as liquid as other investment vehicles.

I'm not saying you shouldn't buy a house if you can afford one. I just think it's not as good an investment as people think it is.

bausch 03-10-2007 06:11 AM

No, a house is not a good investment at all. Just keep on spending your money at the strip club and eating the buffet at the tittie bar. That's the way to go!

Quotealex 03-10-2007 06:16 AM

In the same 40 years, Berkshire Hathaway shares have been increasing annually at 24%. A stock bought at 8$ back in 1962 would be worth $96,000 per share. Imagine if they bought just 100 share instead of a house how well off their children would be today:winkwink:


Quote:

Originally Posted by Mutt (Post 12050149)
li know so many of my friends whose parents were middle class people - just normal middle management jobs, good blue collar jobs, small businesses - now those parents are dying off. the family homes they bought in the 50's and 60's for 20-40,000 dollars 40 years later are several hundred thousand dollars, some close to a million dollars in the right neighborhoods. my best friend's parent bought theirs in the 60's for 40K and it's now worth at least 2 or 3 million - whoever buys it when my friend's mom dies or has to get out will knock it down for sure.


Quotealex 03-10-2007 06:28 AM

I do own a house and have other "real" and "IOU" investments (as DareRing would put it) but none of it bring me as much pleasure than spending some of my leasure time at strip clubs:winkwink:

Quote:

Originally Posted by bausch (Post 12050553)
No, a house is not a good investment at all. Just keep on spending your money at the strip club and eating the buffet at the tittie bar. That's the way to go!


bausch 03-10-2007 06:37 AM

Quote:

Originally Posted by Alex from Montreal (Post 12050582)
I do own a house and have other "real" and "IOU" investments (as DareRing would put it) but none of it bring me as much pleasure than spending some of my leasure time at strip clubs:winkwink:

Sorry, it's just that you talked about strip clubs so much in previous threads that I will forever automatically associate your nick with strip clubs, it's ingrained in my brain and won't get out. So every time you post it's hard for me to resist
adding in a sarcastic remark about strip clubs and eating the buffet there. I really can't help myself.

ADL Colin 03-10-2007 06:43 AM

Quote:

Originally Posted by Alex from Montreal (Post 12050582)
I do own a house and have other "real" and "IOU" investments (as DareRing would put it) but none of it bring me as much pleasure than spending some of my leasure time at strip clubs:winkwink:

F-A-C-T. Time spent at strip clubs has good ROI.

ADL Colin 03-10-2007 06:56 AM

The answer to the question is "it depends". It depends on a lot of things. In which market at what time? Do you have a mortgage? Will your house appreciate faster than your mortgage rate? How much would you have spent on rent elsewhere? What other opportunities do you miss?

How much SATISFACTION do you get? If I were willing to rent a smaller place and invest the money in my home elsewhere I would probably end up with greater monetary wealth in the long-run but would lose a lot of satisfaction. The cost of satisfaction with my life is not worth that.

Quotealex 03-10-2007 06:58 AM

Quote:

Originally Posted by shermsshack (Post 12050372)
Sure I pay a little more than I would if I lived in an apartment, but the perks outweigh the downfalls in my case. I love my home, and investing in the happiness of myself and my wife is good enough for me. Selling at a profit in 5-10 years is also a nice perk, and I wouldn't necessarilly have to buy up..

That a very good justification and the main reason for buying a house.:thumbsup

I'm glad you realise you are paying a bit more in owning a house than renting, alot of people can't see that. They think that with rent they are throwing money away altho part of the expenses spend on a house is also thrown away money (i.e. closing costs, interest on mortgage, realty taxes, insurance, mortgage insurance, maintenance, etc.) and they could invested the difference in rent and house cost in other investments.

Quotealex 03-10-2007 07:02 AM

Quote:

Originally Posted by ADL Colin (Post 12050637)
How much SATISFACTION do you get? If I were willing to rent a smaller place and invest the money in my home elsewhere I would probably end up with greater monetary wealth in the long-run but would lose a lot of satisfaction. The cost of satisfaction with my life is not worth that.

Another person that understand the real reason in owning a house:thumbsup

Narfle 03-10-2007 07:42 AM

Quote:

Originally Posted by SomeCreep (Post 12049074)
There is no money in real estate.

Tell that to Mr Trump ^^

Gnus 03-10-2007 07:56 AM

I bought some land in Missouri 5 years ago close to Branson and now I could get 3 times what I paid for it. To me that's a pretty good investment.

Gary

Peaches 03-10-2007 08:00 AM

Location, location, location.

If you're in a bad location (i.e. bad part of town or even a great part of town where the prices are inflated) you could be in trouble.

The way you finance can also cause you problems, witness those in pain now with their ARMs.

Over the past 25+ years I've been living on my own I've rented if I've KNOWN I was going to stay somewhere less than 3 years. I've heard the "experts" have extended that to 5 years. I do know my house just appraised for more than twice what I paid for it 6 years ago. That makes me happy :)

Peaches 03-10-2007 08:07 AM

Quote:

Originally Posted by Gnus (Post 12050779)
I bought some land in Missouri 5 years ago close to Branson and now I could get 3 times what I paid for it. To me that's a pretty good investment.

Gary

It always amazes me that when GFY folks (I swear I don't see it other places) talk about real estate, it's always a house. I've done VERY well on my land purchases, especially those I picked up at auction. I made a sale a few months ago that was 20X what I paid for the property 2 years ago. Yeah, I'm going to get nailed on taxes, but it's still SOME money in my pocket :)

Quotealex 03-10-2007 08:17 AM

Quote:

Originally Posted by Gnus (Post 12050779)
I bought some land in Missouri 5 years ago close to Branson and now I could get 3 times what I paid for it. To me that's a pretty good investment.
Gary

Buying a land is not exactly the same as a house.

Ross 03-10-2007 08:23 AM

I agree with most people here. Buying your own home is not an investment as such. You'll spend a lot of your income decorating, redecorating and on bills and everything else. But its much better to buy your own house than rent from someone else. In the long run your house will eventually be paid off. Therefore the actual "house" you bought becomes worth the time and money. Everything else connected with it is just a lifestyle choice.

Gnus 03-10-2007 08:50 AM

Quote:

Originally Posted by Alex from Montreal (Post 12050826)
Buying a land is not exactly the same as a house.

Yes it two completely different things. I was referring to the guy that said there's no money in real estate. I should of done a quote.

I bought my place I live in now at the same time I bought my land in missouri and the value of it hasn't changed very much but over time I expect it will.

My dad bought his place in 1965 for $5000 and in the 70's he spent roughly $25,000 to remodeling it and since then he's probably spent around $20,000 in upgrades and what not. Today he could get roughly $200,000 for the same property which he has lived in for over 40 years. To me that's not a bad investment at all. If he wanted to he could sell it and buy some land and build a new house on it for $200,000 that would be bought and paid for. So I would have to yes buying a house would be a long term investment.

Gary

Peaches 03-10-2007 09:05 AM

True, the vast majority of RE is long term - that's what people have to accept. Yes, we know about the guy who bought a house, put $X into it and sold it for 100 times $X 6 months later, but that's not the norm. If you're going to move every 3 years, renting is a better bet, IMO. But at some point you have to grow up and not move every 3 years, lol.

Personally (knock on wood) I've never lost money on RE. Even the 2nd house my ex-husband and I bought that I had to sell at a bargain price to get out of when he left after 6 months of buying it in my name, I broke even on - and that's including all the work we did on it.

Quotealex 03-10-2007 09:32 AM

Quote:

Originally Posted by Gnus (Post 12050906)
My dad bought his place in 1965 for $5000 and in the 70's he spent roughly $25,000 to remodeling it and since then he's probably spent around $20,000 in upgrades and what not. Today he could get roughly $200,000 for the same property which he has lived in for over 40 years.

That's is barely a 10% in annual return, and I didn't even consider the $45,000 he spent in renovation, nor the annual taxes, insurance and maintenance cost he spent throughout the years. If I where to had these expenses, his return would be alot less. He could have easily gotten that 10% return in stocks without paying all those expenses....

Peaches 03-10-2007 09:37 AM

Quote:

Originally Posted by Alex from Montreal (Post 12051002)
That's is barely a 10% in annual return, and I didn't even consider the $45,000 he spent in renovation, nor the annual taxes, insurance and maintenance cost he spent throughout the years. If I where to had these expenses, his return would be alot less. He could have easily gotten that 10% return in stocks without paying all those expenses....

You're forgetting he would have had to pay rent if he didn't own his own home. Add that into the equation. Even if he was paying an average of $500 a month over 40 years (40 years ago it would have been less and now it would be more) - that's $240K he would have spent out of his pocket. And 10% return backed up by RE instead of stocks a year ain't horrible. :thumbsup

Quotealex 03-10-2007 09:40 AM

Quote:

Originally Posted by Peaches (Post 12050948)
True, the vast majority of RE is long term - that's what people have to accept. Yes, we know about the guy who bought a house, put $X into it and sold it for 100 times $X 6 months later, but that's not the norm. If you're going to move every 3 years, renting is a better bet, IMO. But at some point you have to grow up and not move every 3 years, lol. .

You're right. people tend to bring up success stories to justify their purchase of their house. And is funny how these same people all know someone that lost all their saving "gambling" in stocks:1orglaugh


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