Discussion in 'The Dungeon' started by Robby-Bobby, Apr 26, 2017.
There are two components to this:
Cash Flow (the total outlay) and Investment return (the appreciation on your original investment)
If you borrow money to make an investment, you will pay for that use of someone else's capital. However, that does not affect the return on your investment.
It will significantly affect your cash flow, however.
So if you buy a house for $100,000, but paying $20,000 down and borrowing $80,000, you will pay interest on the outstanding amount of the loan until it is paid off.
Say 5 years later, you sell the house for $150,000. You still made $50,000 on your investment. However, you have also paid interest on the owed amount of the loan, which after 5 years will likely still be over $70,000, as when you have equal payments, the early years are mostly paying for interest.
Now, if you want to sell and buy another home in that same area, the same factors that raised the market value of your house will likely have also raised the market value of other houses in the area. Again, this is separate and distinct from your investment, and your interest payments. Appreciation/depreciation is a third aspect of owning an investment.
The house was still a good investment.
The loan, however may not have been a good choice.
It's the cost of using someone else's money.
My grand mother bought her house in SoCal for $25. It's going to sell for north of $500k and she looking at homes of the same type here in Texas for 1/5 of that.
You're missing the point of a home investment. If I buy $25 of stock in Walmart And sell it for $100 and buy $100 of stock in target I still have an investment of $100. The point is you don't sell something to turn around and buy the same thing.
My Gma bought her house in SoCal when there were still orange groves along the streets. Now she's selling and moving to a place like it was before. So buys at 25k sells at 500k then moves and buys a bigger place for $150k
Just like any investment you have to sell and walk away to gain any money. It's buy low sell high, WALK AWAY, Buy low, sell high, repeat. It's not buy low, sell high, buy high again.
Yeah I don't get that - if you sell a house then buy another for the same money you're not done with the house investment, you're still working with your original amount and it's still gaining (until the market crashes of course). It's still an investment, it's still a profitable one, it's just one you haven't cashed in on yet.
Or you move to Costa Rica when you retire and you don't pay 1.2 mil for a small home. Maybe you have a bit left over to live on for the next 30 years.
Bought my house for 100K, now worth about 250K and paid off. No house payment, no rent for the next 15-20 years, doesn't seem too bad of an investment so far.
How's it a faulty logic?
If that person now relocates to a cheaper location, how is netting $450K in say a 25 yr span a fault in logic?
I'm not familiar with the cost of living/home values in your area and maybe that difference is what's making this discussion slightly bizarre but honestly, I'm unaware of ANY other form of investment that can yield $450K in a 25yr span utilizing ONLY THE DIFFERENCE from monthly rent vs monthly mortgage.....assuming they're the same value/size of a home and it doesn't cost more to rent!
I can tell you with certainty (cuz I just checked on Zillow....LOL) here in NNJ, I found two similar sized homes in the same neighborhood........the home for sale is $450K, say you only have 5% to put down, 30yr loan comes out to $2250/month, adding in taxes and ins will probably see that monthly cost rise to nearly $3k/month.....again cuz they put down 5%.
The rental down the street is $2900/mo. ...do you think that $100/mo investment will net them more than the equity the other family will build in 25 yrs???
Let's revisit those two families in 25yrs and see who came out ahead.
Exactly......I've been pumping about $800/month into my mutual fund for the last 15+ yrs, about half that for almost 10 yrs before that.......although I'm ahead of my 'total contributions' I'm no where near the overall value of the equity my home has built for me in the same time frame. Call it what you wish, but my home will have been the best investment of my life....even with the money I put into it over the yrs in improvements. And I'm now in a position to relocate to a cheaper region, potentially mortgage free. I have no regrets.
If you're like most of us, you're going to have to spend something for shelter, just like food, etc. That being the case, when you're all said and done you can own a house/property or not depending on whether you buy or rent. I may have spent about $225k on purchase and interest plus another $25k on maintenance so call it $250k. I've lived here for 25 years so that boils down to a non-inflation adjusted rate of $10k per year...not so bad...but wait. I "plan" on living here for another 15 years so that knocks the rate down to $6250 per year..AND... if I wanted to I could get a reverse mortgage to further reduce that rate. Bottom line...if you stay in one spot for a long time owning makes sense. If you move frequently then you are exposed to market variability and may lose based on timing, perhaps then renting is better.
They have never fully offset the cuts on a year by year basis, or on a 10 year rolling basis.
Right. The issue is spending, nothing more.
If total tax revenue increases, how can the cuts not be offset? A ten-year rolling basis has nothing to do with anything.
Historically, tax cuts have led to more taxes collected.
And apparently, the rest of the world has figured that out since our corporate tax rate is so high in comparison.
Beac, where did you get this statistic? There are a ton of variables involved in how tax cuts work out in the long run but, from what I've witnessed, most of the time healthy tax cuts result in an increase in revenues coming into the coffers. One of the problems with that is that some Congresspersons (usually on the left side of the isle) will get greedy when they see all that extra money coming in and immediately start dreaming up new ways to spend it and will have some success at negating those new revenue streams. Then the cycle starts over again with slowly rising tax rates only to end up going too far at which time the taxes are, once again, rolled back. Over and over we go. Will we stop? Nobody knows.
Cato Institute: 1920s Income Tax Cuts Sparked Economic Growth and Raised Federal Revenues
Forbes: Do Tax Cuts Increase Government Revenue?
The Heritage Foundation: The Historical Lessons of Lower Tax Rates
All these links are from a time when more of the money was reinvested in our own country. Now when money is spent by US corps, companies, or consumers, more of it goes to other countries than in the past. Without fixing the trade imbalance first, tax cuts will simply increase the national debt.
Before Trump I probably would have leaned towards agreeing with that concept, however, the guy just signed an E.O. that encourages businesses [and us] to Hire/Buy American......who was the last President to do that BTW?
Between that and all the other actions he's already started, to either bring back OR keep manufacturing HERE, I think the writing is on the wall already. Invest in America or face upcoming tariffs.......all in his first 100 days. Terrible POTUS so far!
I'm still skeptical about Trump's intentions regarding "made in America". What does his executive order actually do?
All I see is the same old stall tactic of "lets study it" then if violations are found lets study what to do about it!!
Actions speak louder than words. Did he move production of his signature clothing line into our country like he said he would?
If he's serious about this he should have done it long ago. He doesn't need to wait for new rules to do that.
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