School me on investing...

So is the several hundred thousand dollars I've lost on my rental properties paying insane prices to contractors for repairs over the last 20 years. I'm done with that crap.

 

Steve pretty much covered what I would have said. Way too many variables. Yeah, it works out for lots of people. But I run into clients all the time where it doesn't make sense. They are nomadic, jobs are volatile, live in a hyper dense metro area where properties are expensive relative to rent etc. That's not even getting into the fact that they simply aren't financially responsible, or able/willing to take care of a house. I feel like the percentage of people that meet those last two criteria decreases every day in truth. It's really easy to try and tell them to settle down in one spot, invest in their area and they will likely come out ahead. But try telling a 24 year old that in NY or LA. And by the time they are mentally there, the market has likely moved so far out of their reach that it's a non-starter anyway. If they aren't willing to move, they may as well just accept this is as their reality. That isn't necessarily a bad thing for them if they value the lifestyle over the property. The money they "save" on rent, they can simply dump in the market to realize returns in other ways. The issue I have is most don't and just spend it, but that's another topic.

I think most people can only look at this from their own personal perspective and fail to recognize that many people simply don't have their same value systems or economic structure locally. For better or worse. After years in real estate, I don't judge. I help the people where it makes sense and limit the amount of energy expended on those that it doesn't. These last few years, the endless parade of people who are Instagram educated experts on on the real estate market has sort of deadened any real enthusiasm I have for discussing it with anyone. Most have already just decided their opinion is fact, and anyone that disagrees is an idiot without taking into consideration any nuance whatsover. But, I suppose that's the world we live in as a whole.

 

Nuance is dead!

I think that’s the problem with looking at rent as throwing away money and paying a mortgage as an investment. There’s no nuance. I think Ramit says it well when he says that rent is the maximum you’re going to pay for housing and a mortgage is the minimum. There is also the nuance that much of a mortgage is thrown away in interest, taxes, fees and PMI. I don’t think home ownership is bad, I just think it’s bad for a lot of people. It’s also bad for those same people to lease new cars, finance expensive college degrees, etc. There really are only a few big financial decisions that everyone should try to nail down and then you don’t have to sweat the small stuff. The popular phrase is ask $30,000 questions not $3 questions. There are some that are skipping Starbucks or canceling Spotify to save money but making catastrophic errors in bigger areas of personal finance.

 

The topic of being financially savvy/responsible being discussed on a motorcycle racing forum is, well, kinda funny. I'm no saint in this arena, I must admit. I had to learn some hard lessons. But hey, our choice of hobby could have been much worse, financially speaking. I still recall my dad's two replies to my mom, when she would moan and groan on how much time and money I spent on motorcycles:

Spoiler

"What would you rather him do, spend it on beer and cigarettes?"

Spoiler

"Would you rather he rode a horse instead? All they do is eat and poop 24/7."

 

How is leasing a car bad when you say renting living quarters is good?

 

For many it is A way to control housing costs.

 

The car loses value very fast!
Stable living quarters “Not so much”

 

I always balked at the idea that owning a home was a great investment. Once I found out what a front loaded mortage is, and AFAIK they all are, the whole thing seemed like a scam.

We've never done anything with our mortage besides pay it last 15 years but I do have a question. Consideing I've paid all this interest up front, if I sell now and decided to rent, will I get all this extra interest I've paid over the year back or do they just get to keep it? Because if they keep it, then the original APR I signed the loan for is inaccurate and probably approach loan shark level of interest.

I don't understand why there aren't any straight P&I home loans out there, especially if home ownership is such a slam dunk financially, but it's a standard for auto loans which are a depreciating asset.

I'm all ears if somebody smarter than me wants to spoon feed me the explanation.

 

Most people don't read the details of the lease agreement. Same goes for car purchases. All they want to know is "what will my monthly note be?"

Examples - basically anyone you see in metro ATL driving a vehicle with an "ALM" sticker on the back (Atlanta Luxury Motors). Most likely a seven year loan on a used car that will forever be underwater.

 

I think it is situationally dependent and partially on the individual. Some people just are not designed to own a house and deal with it. They are best left to rent and let someone else maintain the property. I look at it this way. Every time I made a payment that was like taking part of it, cutting a hole in a wall and putting that money in the wall. Renting is like setting it on fire in the driveway that someone else owns. All I have to do is pick areas where the value is likely to go up and control my maintenance costs as well as I can. In our case owning is better...for us. I'm sitting in 1.4 million dollars of stored value that isn't likely to go down in value anytime soon. I can't say that with certainty for the pool of money working in the market. What I can say is that some dumbass career Washinton idiot can't get on TV tomorrow and destroy the stored value in the house. Not the case with the market.

I also suck at being a renter. By that same token I never have any desire to be a landlord.

 

What does losing value have to do with it?
If you're renting a place to live, the value going up or down doesn't impact you in any way.
There is literally zero difference in renting a place to live and leasing a car.
Both are "maximum amounts you pay". Neither have any extra costs.

 

New was the key word in that sentence.

NUANCE!

 

Ok, how is leasing a new car worse than leasing a used car?

 

The whole comparison to renting/owning is stupid.

When it comes to renting a place to live, that is a personal decision, and to blanket statement that renting makes more sense than buying is incredibly short sighted.

But hey, that's what a certain group wants for the entire world and is pushing more and more to ensure people own nothing. It will be subscription-based services to use items owned by someone else.
Genius.

 

You’re right. Sorry for the interruption.

I yield back to Motion & Bird. They’ll lead us in the right direction.

 

So you can't back up the statement, don't know the difference.
Understandable.

 

The discussion is within the bounds of an investment thread, so we should assume the argument pertains to investment parameters, not emotional/family/etc.

 

I've made millions in real estate, but also lost a lot. Done OK at the end of the day. Real estate has basically allowed me to not really work my entire adult life, travel endlessly, drive cool cars, have lots of bikes, etc. But at this point in time, right now, I'm at a complete loss as to how to invest in real estate, so I'll defer to my partner

 

Ok, now we are getting somewhere.
How is renting a place to live an investment?
And how does that compare to leasing a vehicle?
Extra parameter - how does leasing a new vehicle compare to leasing a used vehicle in the context of investment?

 

I think that here we're getting to the crux.

It's an individually differentiated notion.

I lived in my last house for 20 years. My in-laws, whose house my spouse inherited via a life estate, lived in that home for 30+ years. I've lived in this home for only 3 so far, and intended to probably die here until TXDOT decided to move the highway that, when I bought, was going to be a quarter of a mile away, to be less than 100 yards away. I'm not OK with living 100 yards from a 14 lane highway, but I am OK with selling these 5 acres to a commercial developer who wants to build on a corner that will have 30-50 thousand vehicles a day sitting at the stoplight 100 yards from my front porch.

My next domicile, I will likely die in. Nomadic is not a descriptor for me.

Where I live now, we bought very cheap for the time, both in price paid AND mortgage rates, and prices have rapidly exploded. I expect that the house I'm in will get knocked down and a Home Depot or some such will be here in the next 8-10 years. So this property wasn't expensive in the grand scheme of things.

We definitely plan our finances and don't spend frivolously. I definitely open my toolbox before I open my wallet on repairs, etc. So I think we're not in the last highlight list.


That said, I can definitely see the trends you're positing. Sadly.

I still truly believe that home ownership under conducive starting conditions with responsible ongoing action/activity is the best course of action for a family or individual to acquire personal financial well-being.

If it can't happen where someone is located physically, professionally, or financially n then that person needs to make the necessary changes to make it happen if they want to have a secure future.

YMMV