6 ms·

So let's say you save 10¢ on every dollar by renting in your scenario. You'd have to have a hell of a return on that 10¢ you saved to beat the 90¢ you would hav

by prklmn 10y ago

So let's say you save 10¢ on every dollar by renting in your scenario. You'd have to have a hell of a return on that 10¢ you saved to beat the 90¢ you would have invested in the property but instead flushed down the drain in the form of rent....

sanswork 10y ago
You seem to think that 90c is going straight to equity when for many years it will be going straight to interest payments. So for the first 5-10 years your $1 is going down the drain vs the renters 10c going into investments.
- prklmn 10y ago
  At any point over those 5-10 you can turn around and sell the property and collect the full gain - it's entirely irrelevant to the mortgage payments being dedicated to interest. My $1 gets my name on the title, your 90¢ gets your name on the lease. Think about what your net investment is. So maybe my maintainance/tax/interest costs equate to 50¢. I'm still investing 50¢ compared to your 10¢. Also, I get incredible leverage. Let'say my property costs $1 million. I'm controlling a $1 million investment vehicle with a $4k/month mortgage payment + tax/maintenance. That's incredible. My return on the property is driven from the $1 million basis, and I get to keep all of it despite not having much of an equity stake in the property.
  - sanswork 10y ago
    It sounds like nothing I will say will sway your beliefs so good luck with your investment.
  - tehlike 10y ago
    it's how long term wealth is built best. until the bubble pops up, like it did in 2008, but it comes back up so it's a rather temporary set back. Also, rents rarely come down, so most often the property value decline is temporary, or it is another opportunity to buy when things are in water - when there is blood in the streets, there is money to be made.
  - deleted 10y ago
    [deleted]
  - forgetsusername 10y ago
    >My return on the property is driven from the $1 million basis, and I get to keep all of it despite not having much of an equity stake in the property And if that property falls to $900,000? Now you owe $1 million on a home worth less; literally throwing away $100,000.
    - JoeAltmaier 10y ago
      You don't actually lose anything until you sell. A paper loss is a different thing. It has plusses and minuses.
      - webmaven 10y ago
        If you're willing to employ a "buy and hold" strategy for property to ride out the bottom of the RE market, you should be able to do it just as well with a diversified investment portfolio.
      - forgetsusername 10y ago
        >You don't actually lose anything until you sell. If the value of your asset falls, you've lost net worth. It's preposterous to claim that, even though the price of your home has fallen by half, and you are servicing the mortgage on the old value, that you haven't lost anything. Or that the fact that you can offset capital gains with capital losses somehow makes a plunge in value "worth it". "Paper losses" are losses. The value of the asset isn't based on the price you paid.
    - prklmn 10y ago
      If you think of it in these terms, that's about two years worth of rent. But as a renter, you have no chance at benefitting from future appreciation. If you think the housing market is going to be in decline from your move in time, then it might be a good idea to rent depending on your time horizon. Over the long term, it has proven to generally not be a good idea.
raverbashing 10y ago
"flushed down the drain" Oh not this crap again https://www.youtube.com/watch?v=KAMeI4uHAFE https://www.youtube.com/watch?v=KAMeI4uHAFE
- prklmn 10y ago
  "But practically speaking, ownership has worked out better for most people over the long run." As I said before, as long as you don't buy high and sell low, your money has effectively been flushed down the drain in the form of rent.
Hondor 10y ago
You can't predict the property market. It's kind of financially risky to put your entire investment into not just a single sector of the economy or a single industry but a single property! What if you'd bought your house in Detroit? What if you bought at the peak of a bubble? Even if it's not such an obvious disaster, it can still easily perform worse than other investments.
conanbatt 10y ago
You think 90% of the mortgage is equity?? It would take you a decade for the equity you earn to match the interests you pay. (http://www.mortgagecalculator.org/ http://www.mortgagecalculator.org/ to fool around). Theres property that rented out produces 2% income. If you can make more than 2% a year, then renters will be richer and compundingly so if they rent over buy.
- forgetsusername 10y ago
  >Theres property that rented out produces 2% income. Exactly right. Most people here have probably seen nothing but rising house prices their adult life. Even with a massive bust, people still believe it. In reality, real returns to real estate are barely above inflation.

by prklmn 10y ago

sanswork 10y ago

You seem to think that 90c is going straight to equity when for many years it will be going straight to interest payments. So for the first 5-10 years your $1 is going down the drain vs the renters 10c going into investments.

prklmn 10y ago
At any point over those 5-10 you can turn around and sell the property and collect the full gain - it's entirely irrelevant to the mortgage payments being dedicated to interest. My $1 gets my name on the title, your 90¢ gets your name on the lease. Think about what your net investment is. So maybe my maintainance/tax/interest costs equate to 50¢. I'm still investing 50¢ compared to your 10¢. Also, I get incredible leverage. Let'say my property costs $1 million. I'm controlling a $1 million investment vehicle with a $4k/month mortgage payment + tax/maintenance. That's incredible. My return on the property is driven from the $1 million basis, and I get to keep all of it despite not having much of an equity stake in the property.
- sanswork 10y ago
  It sounds like nothing I will say will sway your beliefs so good luck with your investment.
- tehlike 10y ago
  it's how long term wealth is built best. until the bubble pops up, like it did in 2008, but it comes back up so it's a rather temporary set back. Also, rents rarely come down, so most often the property value decline is temporary, or it is another opportunity to buy when things are in water - when there is blood in the streets, there is money to be made.
- deleted 10y ago
  [deleted]
- forgetsusername 10y ago
  >My return on the property is driven from the $1 million basis, and I get to keep all of it despite not having much of an equity stake in the property And if that property falls to $900,000? Now you owe $1 million on a home worth less; literally throwing away $100,000.
  - JoeAltmaier 10y ago
    You don't actually lose anything until you sell. A paper loss is a different thing. It has plusses and minuses.
    - webmaven 10y ago
      If you're willing to employ a "buy and hold" strategy for property to ride out the bottom of the RE market, you should be able to do it just as well with a diversified investment portfolio.
    - forgetsusername 10y ago
      >You don't actually lose anything until you sell. If the value of your asset falls, you've lost net worth. It's preposterous to claim that, even though the price of your home has fallen by half, and you are servicing the mortgage on the old value, that you haven't lost anything. Or that the fact that you can offset capital gains with capital losses somehow makes a plunge in value "worth it". "Paper losses" are losses. The value of the asset isn't based on the price you paid.
  - prklmn 10y ago
    If you think of it in these terms, that's about two years worth of rent. But as a renter, you have no chance at benefitting from future appreciation. If you think the housing market is going to be in decline from your move in time, then it might be a good idea to rent depending on your time horizon. Over the long term, it has proven to generally not be a good idea.

raverbashing 10y ago

"flushed down the drain" Oh not this crap again https://www.youtube.com/watch?v=KAMeI4uHAFE https://www.youtube.com/watch?v=KAMeI4uHAFE

prklmn 10y ago
"But practically speaking, ownership has worked out better for most people over the long run." As I said before, as long as you don't buy high and sell low, your money has effectively been flushed down the drain in the form of rent.

Hondor 10y ago

You can't predict the property market. It's kind of financially risky to put your entire investment into not just a single sector of the economy or a single industry but a single property! What if you'd bought your house in Detroit? What if you bought at the peak of a bubble? Even if it's not such an obvious disaster, it can still easily perform worse than other investments.

conanbatt 10y ago

You think 90% of the mortgage is equity?? It would take you a decade for the equity you earn to match the interests you pay. (http://www.mortgagecalculator.org/ http://www.mortgagecalculator.org/ to fool around). Theres property that rented out produces 2% income. If you can make more than 2% a year, then renters will be richer and compundingly so if they rent over buy.

forgetsusername 10y ago
>Theres property that rented out produces 2% income. Exactly right. Most people here have probably seen nothing but rising house prices their adult life. Even with a massive bust, people still believe it. In reality, real returns to real estate are barely above inflation.