3 ms·

So this is a fun topic. I own 3 places, two apartments and one house. One of the apartments I lived in [and co-own with my partner] before we moved to the house

by verelo 9y ago

So this is a fun topic. I own 3 places, two apartments and one house. One of the apartments I lived in [and co-own with my partner] before we moved to the house, the other apartment I purchased because I was able to make the month to month math work [read: cash flow break even] and it gave me the 60(personal property)/20(market funds)/20(investment real estate) net worth split i wanted. The only reason real estate can work for me is because I'm able to put down 30% of the purchase price in cash for the apartments and borrow the rest at crazy low rates [2.99% & 2.59% for the more recently purchased unit]. If we assume a reasonable return on the apartment (4% annually) and a healthy yearly stock market return (8%), if you consider the fact that I couldn't borrow money to play with stock, the 'bonus' I get on appreciating portion of the property that is actually borrowed money makes them experience very similar performance when modelled[1] over a 10 year period. At the end of the day, as with all financial advice, what you should do dramatically depends on your current personal situation, goals and age. [1] https://docs.google.com/spreadsheets/d/1esgwYfYhDo0JaFP0qGhr3ybD4vaw_2I89n6zB5fAa9Y/edit?usp=sharing https://docs.google.com/spreadsheets/d/1esgwYfYhDo0JaFP0qGhr...

davio 9y ago
Can you talk more about the crazy low rates? What terms are you getting?
- verelo 9y ago
  The first place i got 2.99% in 2014 on a 5 year fix [at the time 20% down], second was the house at 2.49% in 2016 on a 5 year fix [50% down], the 3rd an final was 20% down for 2.59% in 2017 [30% down].
  - verelo 9y ago
    uh it seems i brain farted, final place was 30% down...im not sure how i managed to type something conflicting twice in there.
mstade 9y ago
See, you've obviously put significant thought into this, even to the point of building a model. Most people I know, they buy a place because they need a place to live. They also tell themselves that buying a place is a great way to grow your capital. They may be right, but when asked "where are you going to live, once you've sold?" most people I know have terrible answers. Most people I know answer "I'll just buy a new place." The reality is that most people I know would rather rent – it's easier and in many cases even cheaper here. But the problem is that here is Stockholm, and Stockholm has a highly dysfunctional rental market where it's practically impossible for anyone to just come on to the market and find a place to rent within a week or two. You're more or less forced into buying a place if you're going to stick around. People that stick around for a couple of weeks, maybe a month, are going to be fine – plenty of hotels and such make it easy to stay. But if you're staying for more than a month, but probably less than say three years – you're more or less SOL. There's a sort of secondary (and even tertiary, believe it or not) rental market, but you'll probably be moving around every few months whether you like it or not. I can't help but think the chips are stacked against those who just need a place to live for a while, here in Stockholm at least.
- verelo 9y ago
  FYI here is a copy of my model: https://docs.google.com/spreadsheets/d/1esgwYfYhDo0JaFP0qGhr3ybD4vaw_2I89n6zB5fAa9Y/edit?usp=sharing https://docs.google.com/spreadsheets/d/1esgwYfYhDo0JaFP0qGhr...

by verelo 9y ago

davio 9y ago

Can you talk more about the crazy low rates? What terms are you getting?

verelo 9y ago
The first place i got 2.99% in 2014 on a 5 year fix [at the time 20% down], second was the house at 2.49% in 2016 on a 5 year fix [50% down], the 3rd an final was 20% down for 2.59% in 2017 [30% down].
- verelo 9y ago
  uh it seems i brain farted, final place was 30% down...im not sure how i managed to type something conflicting twice in there.

mstade 9y ago

See, you've obviously put significant thought into this, even to the point of building a model. Most people I know, they buy a place because they need a place to live. They also tell themselves that buying a place is a great way to grow your capital. They may be right, but when asked "where are you going to live, once you've sold?" most people I know have terrible answers. Most people I know answer "I'll just buy a new place." The reality is that most people I know would rather rent – it's easier and in many cases even cheaper here. But the problem is that here is Stockholm, and Stockholm has a highly dysfunctional rental market where it's practically impossible for anyone to just come on to the market and find a place to rent within a week or two. You're more or less forced into buying a place if you're going to stick around. People that stick around for a couple of weeks, maybe a month, are going to be fine – plenty of hotels and such make it easy to stay. But if you're staying for more than a month, but probably less than say three years – you're more or less SOL. There's a sort of secondary (and even tertiary, believe it or not) rental market, but you'll probably be moving around every few months whether you like it or not. I can't help but think the chips are stacked against those who just need a place to live for a while, here in Stockholm at least.

verelo 9y ago
FYI here is a copy of my model: https://docs.google.com/spreadsheets/d/1esgwYfYhDo0JaFP0qGhr3ybD4vaw_2I89n6zB5fAa9Y/edit?usp=sharing https://docs.google.com/spreadsheets/d/1esgwYfYhDo0JaFP0qGhr...