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> Buying a desirable home in a solid market is pretty much the only way for an average person earning the median wage to make it into the middle class. There's

> Buying a desirable home in a solid market is pretty much the only way for an average person earning the median wage to make it into the middle class. There's also low-cost index funds and ETFs...cheaper, lower barrier for entry, more diversified, more liquid. The government won't seize them for non-payment of property taxes in case of unemployment or health issues. I'd argue they're a better choice than a home for an average person to build wealth. Index funds and ETFs have been around since the 70s - nearly 50 years.

toomuchtodo 9y ago
The leverage you can get on real estate with a mortgage far exceeds any margin account. The US gov subsidizes real estate investment with long duration fixed mortgages.
- jogjayr 9y ago
  Do we really want the "average person" investing with leverage? That didn't go so well 10 years ago. Besides, GP stated that real estate ownership was the "only way" for Joe-sixpack to get into the middle-class. Homeownership may well have financial and tax advantages but it's by no means the sole way to build wealth.
  - toomuchtodo 9y ago
    While not the sole way to build wealth, it’s one of the most accessible ways for anyone who isn’t already wealthy and intends to live somewhere more than a few years. I could, tomorrow, go buy a duplex, triplex, or quad with only 3% down and immediately rent out all units except the one I’m living in. Usually a much higher cash on cash return than index funds when done properly, your co-tenants are paying your rent, and you’re getting to depreciate an asset annually on your taxes that is most likely appreciating. How could you tell people not to take advantage of such a good deal?
    - jogjayr 9y ago
      > I could, tomorrow, go buy a duplex, triplex, or quad with only 3% down and immediately rent out all units except the one I’m living in. But that's not something an average person does. The poster I replied to was speaking of real estate wealth building solely in terms of buying a house, living in it till you retire, then selling it at an appreciated value and going live in Florida or wherever. (or alternatively change house every 10 years, rolling the appreciated property value into a bigger house every time) What you're talking about is the work of a real estate investor, and is far more time-consuming and involved than buying a few index funds on Vanguard. Researching properties, finding and screening tenants, performing or managing repairs is a non-trivial amount of work. You're trivializing the work of getting into landlording (maybe you're already doing it so you underestimate how much work it is for someone who has no experience doing it). If it really was that easy to earn better than index fund returns, everyone would be doing it and the returns would naturally come down. > While not the sole way to build wealth, it’s one of the most accessible ways for anyone who isn’t already wealthy and intends to live somewhere more than a few years. I don't even agree with that. To buy a single share of an ETF you need $50-100 max to spare. To put even 3% down on a property that you can rent out, you're talking thousands of dollars + decent credit for getting a mortgage on the property.
      - toomuchtodo 9y ago
        Doing it already, I probably am glossing over the complexities of doing so. My apologies. My point is that almost always, real estate values in the US go up. So if you need to live somewhere, and the government is going to give you cheap money to do it, you’d be crazy not to. Yes, it’s not as easy as opening a Vanguard account and buying a share of a mutual fund. But it’s also not terribly difficult.
        seanmcdirmid 9y ago
        You would have gotten killed in the 90s if you think real estate could just go up. You definitely have risk that prices might not be where you want them to be when you need the liquidity.
closeparen 9y ago
You can't live in an index fund. They might be a superior alternative to vacation/rental property, but you're going to pay for a primary residence one way or another.

toomuchtodo 9y ago

The leverage you can get on real estate with a mortgage far exceeds any margin account. The US gov subsidizes real estate investment with long duration fixed mortgages.

jogjayr 9y ago
Do we really want the "average person" investing with leverage? That didn't go so well 10 years ago. Besides, GP stated that real estate ownership was the "only way" for Joe-sixpack to get into the middle-class. Homeownership may well have financial and tax advantages but it's by no means the sole way to build wealth.
- toomuchtodo 9y ago
  While not the sole way to build wealth, it’s one of the most accessible ways for anyone who isn’t already wealthy and intends to live somewhere more than a few years. I could, tomorrow, go buy a duplex, triplex, or quad with only 3% down and immediately rent out all units except the one I’m living in. Usually a much higher cash on cash return than index funds when done properly, your co-tenants are paying your rent, and you’re getting to depreciate an asset annually on your taxes that is most likely appreciating. How could you tell people not to take advantage of such a good deal?
  - jogjayr 9y ago
    > I could, tomorrow, go buy a duplex, triplex, or quad with only 3% down and immediately rent out all units except the one I’m living in. But that's not something an average person does. The poster I replied to was speaking of real estate wealth building solely in terms of buying a house, living in it till you retire, then selling it at an appreciated value and going live in Florida or wherever. (or alternatively change house every 10 years, rolling the appreciated property value into a bigger house every time) What you're talking about is the work of a real estate investor, and is far more time-consuming and involved than buying a few index funds on Vanguard. Researching properties, finding and screening tenants, performing or managing repairs is a non-trivial amount of work. You're trivializing the work of getting into landlording (maybe you're already doing it so you underestimate how much work it is for someone who has no experience doing it). If it really was that easy to earn better than index fund returns, everyone would be doing it and the returns would naturally come down. > While not the sole way to build wealth, it’s one of the most accessible ways for anyone who isn’t already wealthy and intends to live somewhere more than a few years. I don't even agree with that. To buy a single share of an ETF you need $50-100 max to spare. To put even 3% down on a property that you can rent out, you're talking thousands of dollars + decent credit for getting a mortgage on the property.
    - toomuchtodo 9y ago
      Doing it already, I probably am glossing over the complexities of doing so. My apologies. My point is that almost always, real estate values in the US go up. So if you need to live somewhere, and the government is going to give you cheap money to do it, you’d be crazy not to. Yes, it’s not as easy as opening a Vanguard account and buying a share of a mutual fund. But it’s also not terribly difficult.
      - seanmcdirmid 9y ago
        You would have gotten killed in the 90s if you think real estate could just go up. You definitely have risk that prices might not be where you want them to be when you need the liquidity.

closeparen 9y ago

You can't live in an index fund. They might be a superior alternative to vacation/rental property, but you're going to pay for a primary residence one way or another.