School me on investing...

This is old-ass data, but you get the idea:



Edit: quick peek indicates that TSLA would be equivalent to the top 6 or 7 now.

 

Just imagine when that all comes crumbling down, how many people are going to be in a world of hurt.

 

I’ve wanted to short them for years. But I learned I’m not smart enough in the early 2000’s, when I guessed wrong on a short and had to keep covering the margin calls.

Still seems a joke to me the valuation Tesla gets? But then again, I thought these high interest rates would have already tanked housing?

 

Isn’t the issue with housing that low inventory is still keeping prices high? For housing to tank we will need to see mass mortgage defaults or something that injects a large amount of inventory back into the market all at once (I.e. 2008). At least that’s my uneducated understanding of the situation.

 

The issue with housing is when housing defaults again, what little privately owned properties still in existence will fall to the “institutional investors”.

You’ll own nothing and be happy…

 

I love real estate and it’s one of the main reasons I have a comfortable life. However, I can make a strong case that private home ownership isn’t good for a large segment of the population.

 

Rather patrician attitude…

 

I absolutely do not comprehend this concept. I definitely respect your and @shakazulu12 opinion on RE matters, as you two have forgotten more than I'll ever know about the topic.

BUT!

My thought process is: If you don't own, you must rent, and your rent check will be as high as, or higher than, the basic cost to own the domicile that you rent. If I don't have this right, please explain how.

HOW can pissing a rent check out the door every month be better for a person's long term financial well-being than building equity? Obviously notwithstanding a market crash. But then, even 2008 didn't tank long term prices as badly as some make it out to be.

 

Here in little Red Lodge, one can rent a 2BR cottage for around $1500 per month. That same little 2BR cottage costs $400K to buy. Do the math. Disparity is even greater in SoCal (these are the 2 markets I know).

Back in the day, you could count on a 25-30% tax benefit for owning, but these days the lower income brackets pay little or no taxes, so that benefit is essentially gone.

Then there is rent assistance from the guvmnt. I own rentals in Albuquerque and they are now mandating that I accept Section 8 applicants. I have no choice. A huge portion of the population is on rent assistance.

 

in some boroughs of NYC, it's closer to auminer's line of thinking, where the tenant is paying all or more of the mortgage

 

There's no doubt that there are pockets of crazy high rental rates out there.

I used to rent a 2BR condo in Monarch Beach. Rental rates for that unit are now around $5,000, which is insane. But, it will cost you $1.2m to buy that condo. Rent is still a deal.

 

Rents are way too low, then. That's weird. Perhaps because it's a touristy place rather than a metro suburb? But that would make me think it would be even MOR$E expensive.

Homes around NE DFW go for more. There aren't many 2BR places at all, so this is all homes

Filtered for under 1800 / month ... There's one place over in a shady hood in The Colony at 1700.



Up to 2000. That cluster in Allen, I used to live in that area. That place is slippin'!



2200 gets a broad selection




As for sale prices, that cluster in Allen that rents 2000-2200, those sell for 350K-ish.

That's way out of line for the numbers I ran when selecting a Lubbock house as a rental investment. Mine rents at 1650 for a sale price of 220K. I could probably bump to 1750 but I'd rather not rock the boat and keep that guy in place. He's paid timely and kept up with the place well.

 

From the surface, it sure does look like buying is better in your area. But what about property taxes and insurance? Aren't your taxes something like 3% per year? If so, that adds another $500 per month to the monthly burden of those 220K homes, yes?

 

I put your 350K typical home in Allen into a mortgage calculator:

 

Then there's the optionality that renting provides, the LACK OF MAINTENANCE, and other material benefits. I have a good deal of equity in my home and I've thought about selling now and renting for a couple years to try out living in a different area and/or to lock in the paper gains I've got on my equity with the unknown of what the next couple of years may bring.

To that point, I think it used to be 6-7 years was the time needed to be in your home for it to make sense vs renting.........I haven't run the numbers, but with 7% mortgages that number is likely significantly higher (with the expectation that the interest isn't a 100% pass through to the renter).

 

I’m interested to hear @SteveThompson and @shakazulu12 reasons too. I do believe in pockets renting is better. Tyler lives in Manhattan and pays 4600 a month for a nice studio that is under 600 sq ft, new place, elevator, doorman, roof top pool and barbecue, etc. A dump out there is over $3500 I believe. Anyway it would cost over 1.2 M for a 1 bed apartment in the city and then they have high city taxes and a bunch of other fees. It looks like, from our initial searches it doesn’t currently make sense to buy in the city. As I recall even during 3-4% money it didn’t make sense.

 

I will say property is what saved my bacon and gave me the ability to leverage it and buy our business. Which then let me leverage again to buy our commercial building 8 years later.

I bought the commercial building, because the owner sold the place I was in. I wanted to buy eventually, but had to jump through hoops to do it at that time. Buying gives you the ability to control your own destiny. Stable pricing, if you aren’t on an adjustable, and no one evicting you, if you can make your payments, adds a lot of peace in your life.

 

On another note, I was calculating our net worth and laying out all our assets, because we are doing a living trust.

Anyway, our life savings and all my and my wife’s 401k’s, etc are worth less than the equity in our home. So once again, real estate is saving our bacon.

 

I don’t know how to summarize it concisely, but I think most people don’t know how much they are spending on their house. For some, it is a forced savings account and I guess that is good. There is a lot written on the “American Dream” of owning your home. It’s very similar to the diamond engagement ring. It’s an idea that didn’t exist and then suddenly it did. I think if most people objectively run the numbers, the financial benefit is a wash at best. Of course most financial decisions are emotional and not logical, so there are lots of reasons for owning your home that are not financial.

@motion posted numbers above that kinda make the point. That doesn’t include ANY maintenance. It also doesn’t include costs to sell, etc. Ramit Sethi has done a good job of simplifying renting vs owning if you want to read about it.

In the end, I think it’s something people should analyze and not just assume that owning is better. Especially if you are in any way financially vulnerable. A small down payment, volatile career, propensity to move, low emergency fund, etc can make home ownership a huge liability. When I walk into my average friend or family member’s home the amount of deferred maintenance is huge. They are going to have to spend a lot to get it ready to sell for market value. I think that in itself speaks to the cost of owning a home. Lots of people can’t really afford it, but do it anyway. Of course, finding a good landlord who takes care of everything well is also a problem.

 

Yeah... property taxes are a mothertrucker here. Not quite as bad as you guessed, though. 1.488 on my residence, 2.09% on the rental. Looks like Carbon County ganks you for less than 1%.

Interest rates reverting back to reality after a 20-year hiatus has certainly changed the game.

I'm coming at it from the perspective of having a 2.25% rate on the mortgaged home I live in, and buying investment properties straight cash or maaaaybe taking 401K loans to make up whatever $ we can't cough up.

I guess I gotta count myself damn lucky to be in the situation I'm in.

Yeah... renting would mean less $ going out every month... but again, those $ are gone for good when you rent.