4 ms·

You realize at the end of those 30 years, you're happy to have $40,000 over $1,000,000 (in the form of a property you can now sell) right?

by taurath 11y ago

Swizec 11y ago
I don't. My grandparents have a "property they can now sell". They never will. They've been investing in it and adding to it for so long that it has become useless to any potential buyer, and parts of it are now so old they really really need repairs. They cannot afford to sell because the investment to make it sellable for a good price is too high. Nobody would want to buy because the investment to turn it into a useable large house, is too high. So instead they turned a tiny part of the house into an apartment for themselves because the costs of living in the whole thing are too high. They turn on the heating in the rest of the house just enough during winter to keep the pipes from freezing. None of the kids want to inherit the property. None of the grandkids want it either. The location isn't that great either because the economic activity the location was great for (wine) is now in tatters and the government is paying people to please for the love of god stop making wine and cut down their vineyards. My mum has a nice flat in a downtown area. She recently had to go into debt to afford to fix it up. She could potentially sell, but then she'd have nowhere to live. She's too young to buy a rural house (same price) because she still goes to work. She's too entrenched to deal with finding a new apartment somewhere else. And she'd have to pay more for a new apartment than she'd get for her current flat. At 50-ish, she also doesn't really want to go into another 10+ year mortgage. So ... no, I don't see the value in owning. Basically: Having all your wealth tied up in an illiquid asset is twoplus not good.
- taurath 11y ago
  If the land and property aren't worth anything, thats an awful investment I'll grant you. Regarding your mum - I assume there are rent controls in her area - in mine (Western US) there aren't necessarily those. If she rented she'd have been priced out of her flat years ago as the landlord ups the rent to market rates or "renovate".
- Tempest1981 11y ago
  How about a home equity loan to make improvements? Or a reverse mortgage if staying? http://homeguides.sfgate.com/differences-between-reverse-mortgage-home-equity-loan-9400.html http://homeguides.sfgate.com/differences-between-reverse-mor...
goldbrick 11y ago
I wish just one of you droids parroting this argument was actually old enough to have done it. My parents own a property like this. They are never going to sell it because (among other things) they have invested more money in upkeep and renovations to make it just the way they want it than it is worth to an average buyer, plus they like having it for family get-togethers. It's simply not at all the investment vehicle you starry-eyed dreamers think it is.
- taurath 11y ago
  Beep boop. Its still assets at the end of the day, no? Just because they don't sell it or they put a lot of money into it doesn't mean they can't. A renter doesn't have that option. I'm not making claims about its efficiency as an investment vehicle, I'm simply pointing out that in the example that I replied to you they'll end up with an asset worth more than the $40,000 they saved by not buying.
  - gdilla 11y ago
    He forgot to factor in the ~$250K cash downpayment to buy that $1MM mortgage. The opportunity cost on that over the next 30 years has to be added in. At 7% annual return (which you can get from Vanguard mutual funds) that 250K is worth almost $2MM in 30 years. Sure, rents will rise over time, but it's probably closer to a wash when you figure the insane downpayments you have to make.

You realize at the end of those 30 years, you're happy to have $40,000 over $1,000,000 (in the form of a property you can now sell) right?

by taurath 11y ago

You realize at the end of those 30 years, you're happy to have $40,000 over $1,000,000 (in the form of a property you can now sell) right?

Swizec 11y ago

I don't. My grandparents have a "property they can now sell". They never will. They've been investing in it and adding to it for so long that it has become useless to any potential buyer, and parts of it are now so old they really really need repairs. They cannot afford to sell because the investment to make it sellable for a good price is too high. Nobody would want to buy because the investment to turn it into a useable large house, is too high. So instead they turned a tiny part of the house into an apartment for themselves because the costs of living in the whole thing are too high. They turn on the heating in the rest of the house just enough during winter to keep the pipes from freezing. None of the kids want to inherit the property. None of the grandkids want it either. The location isn't that great either because the economic activity the location was great for (wine) is now in tatters and the government is paying people to please for the love of god stop making wine and cut down their vineyards. My mum has a nice flat in a downtown area. She recently had to go into debt to afford to fix it up. She could potentially sell, but then she'd have nowhere to live. She's too young to buy a rural house (same price) because she still goes to work. She's too entrenched to deal with finding a new apartment somewhere else. And she'd have to pay more for a new apartment than she'd get for her current flat. At 50-ish, she also doesn't really want to go into another 10+ year mortgage. So ... no, I don't see the value in owning. Basically: Having all your wealth tied up in an illiquid asset is twoplus not good.

taurath 11y ago
If the land and property aren't worth anything, thats an awful investment I'll grant you. Regarding your mum - I assume there are rent controls in her area - in mine (Western US) there aren't necessarily those. If she rented she'd have been priced out of her flat years ago as the landlord ups the rent to market rates or "renovate".
Tempest1981 11y ago
How about a home equity loan to make improvements? Or a reverse mortgage if staying? http://homeguides.sfgate.com/differences-between-reverse-mortgage-home-equity-loan-9400.html http://homeguides.sfgate.com/differences-between-reverse-mor...

goldbrick 11y ago

I wish just one of you droids parroting this argument was actually old enough to have done it. My parents own a property like this. They are never going to sell it because (among other things) they have invested more money in upkeep and renovations to make it just the way they want it than it is worth to an average buyer, plus they like having it for family get-togethers. It's simply not at all the investment vehicle you starry-eyed dreamers think it is.

taurath 11y ago
Beep boop. Its still assets at the end of the day, no? Just because they don't sell it or they put a lot of money into it doesn't mean they can't. A renter doesn't have that option. I'm not making claims about its efficiency as an investment vehicle, I'm simply pointing out that in the example that I replied to you they'll end up with an asset worth more than the $40,000 they saved by not buying.
- gdilla 11y ago
  He forgot to factor in the ~$250K cash downpayment to buy that $1MM mortgage. The opportunity cost on that over the next 30 years has to be added in. At 7% annual return (which you can get from Vanguard mutual funds) that 250K is worth almost $2MM in 30 years. Sure, rents will rise over time, but it's probably closer to a wash when you figure the insane downpayments you have to make.