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As someone else pointed out in this thread, you would have made a lot more money dumping $70,000 into S&P index funds in 1975 than buying a $70,000 bay area hou

by aianus 11y ago

As someone else pointed out in this thread, you would have made a lot more money dumping $70,000 into S&P index funds in 1975 than buying a $70,000 bay area house at the same time and holding it empty to 2016. So I disagree with your premise, no rational investor purchases houses and leaves them empty. And the ones who don't are providing a valuable economic service by assuming all capital loss risk, interest rate risk, maintenance, opportunity costs, etc. involved in owning property in exchange for a tenant's cash.

diogenescynic 11y ago
The difference is you could have lived in that house or rented it out and created additional income. In the book 'Ascent of Money' Niall Ferguson does a breakdown on the housing market in London vs investing in the stock market through index funds and shows how housing really was one of the better investments. It's worth checking out the book for that section. The issue I see is that hindsight is always 20-20 so even if housing was the better investment in the past, I still wouldn't want most of my savings/wealth to be invested in an asset that isn't very liquid and is susceptible to swings in the market. However, if you buy in a place like London or San Francisco those swings are probably only minor setbacks if you're in it for the long haul.
branchless 11y ago
Most people don't have $70k. This is the thing about land. You can borrow against it from the banks. Go to your bank and ask for $70 to mess about on stocks because "you think they will go up". Yes there are margin accounts but these are not in common use. All roads lead to land speculation and the banks are waiting with a big hat to capture all the surplus.
- aianus 11y ago
  It's cheaper to borrow against a stock portfolio than real estate (since it's much easier for a broker to liquidate your stocks than for your bank to foreclose on your home): https://www.interactivebrokers.com/en/index.php?f=1595 https://www.interactivebrokers.com/en/index.php?f=1595 Although they only give you 4x leverage vs. the 5x-20x common in residential real estate. Anyways, I think you're grossly overestimating how good of an investment real estate is. Unless you have some kind of edge (like you're a developer and your friend is on the zoning board or whatever) you're not going to magically get rich doing it. It's just another asset class.
  - branchless 11y ago
    I explicitly named margin accounts so you wouldn't go there. Most people don't know about this. It's all about land. I'm not saying real-estate is the route to riches, I'm saying everyone is speculating on it ("they only go up!"). The system ensures that land prices run ahead of wealth creation which shifts all productivity gains to rentiers.

by aianus 11y ago

diogenescynic 11y ago

The difference is you could have lived in that house or rented it out and created additional income. In the book 'Ascent of Money' Niall Ferguson does a breakdown on the housing market in London vs investing in the stock market through index funds and shows how housing really was one of the better investments. It's worth checking out the book for that section. The issue I see is that hindsight is always 20-20 so even if housing was the better investment in the past, I still wouldn't want most of my savings/wealth to be invested in an asset that isn't very liquid and is susceptible to swings in the market. However, if you buy in a place like London or San Francisco those swings are probably only minor setbacks if you're in it for the long haul.

branchless 11y ago

Most people don't have $70k. This is the thing about land. You can borrow against it from the banks. Go to your bank and ask for $70 to mess about on stocks because "you think they will go up". Yes there are margin accounts but these are not in common use. All roads lead to land speculation and the banks are waiting with a big hat to capture all the surplus.

aianus 11y ago
It's cheaper to borrow against a stock portfolio than real estate (since it's much easier for a broker to liquidate your stocks than for your bank to foreclose on your home): https://www.interactivebrokers.com/en/index.php?f=1595 https://www.interactivebrokers.com/en/index.php?f=1595 Although they only give you 4x leverage vs. the 5x-20x common in residential real estate. Anyways, I think you're grossly overestimating how good of an investment real estate is. Unless you have some kind of edge (like you're a developer and your friend is on the zoning board or whatever) you're not going to magically get rich doing it. It's just another asset class.
- branchless 11y ago
  I explicitly named margin accounts so you wouldn't go there. Most people don't know about this. It's all about land. I'm not saying real-estate is the route to riches, I'm saying everyone is speculating on it ("they only go up!"). The system ensures that land prices run ahead of wealth creation which shifts all productivity gains to rentiers.