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Because it’s really the only place where a non-rich person can get massive 4:1 leverage on their assets, and where there has been a secular growth trend over th

Because it’s really the only place where a non-rich person can get massive 4:1 leverage on their assets, and where there has been a secular growth trend over the last 50 years.

H8crilA 7y ago
This. Never underestimate the power of leverage combined with luck (good asset selection, which almost always is luck). TQQQ, a NASDAQ 3x leveraged ETF is up almost 50x since 2010. Real estate has insane leverage via mortgage. 10% downpayment results in a 10x leverage, 5% downpayment is a 20x leverage. Imagine a house that was purchased at 10% downpayment. A 2x (+100%) house value appreciation gives you a 11x (+1000%) return on that 10% downpayment.
- BeetleB 7y ago
  > Imagine a house that was purchased at 10% downpayment. A 2x (+100%) house value appreciation gives you a 11x (+1000%) return on that 10% downpayment. A 2x appreciation is probably something 95+% of houses will never get to in a decent amount of time. As a benchmark, the S&P 500 tends to double every 10 years after adjusting for inflation. Not many houses do that. Yes, there are always markets where this happens, but it's not the norm and is pretty much a speculation game like stocks are. Of course, taking leverage into account you don't need it to appreciate 2x. With a 10% downpayment you just need it to appreciate about 9-10% to double your investment (probably more than 10% to make up for all the fees you'll pay). And don't forget to subtract all the interest payments you made while you wait for it to appreciate. Factor that in your ROI. Most of the gains in real estate these days is finding crappy houses that you cannot get a bank loan for. So you buy it at a big discount if you have the funds, or you get a private loan at high interest. Spend 3-6 months bringing the house up to code and then refinance to rent or sell (i.e. flip).

Because it’s really the only place where a non-rich person can get massive 4:1 leverage on their assets, and where there has been a secular growth trend over the last 50 years.

H8crilA 7y ago

This. Never underestimate the power of leverage combined with luck (good asset selection, which almost always is luck). TQQQ, a NASDAQ 3x leveraged ETF is up almost 50x since 2010. Real estate has insane leverage via mortgage. 10% downpayment results in a 10x leverage, 5% downpayment is a 20x leverage. Imagine a house that was purchased at 10% downpayment. A 2x (+100%) house value appreciation gives you a 11x (+1000%) return on that 10% downpayment.

BeetleB 7y ago
> Imagine a house that was purchased at 10% downpayment. A 2x (+100%) house value appreciation gives you a 11x (+1000%) return on that 10% downpayment. A 2x appreciation is probably something 95+% of houses will never get to in a decent amount of time. As a benchmark, the S&P 500 tends to double every 10 years after adjusting for inflation. Not many houses do that. Yes, there are always markets where this happens, but it's not the norm and is pretty much a speculation game like stocks are. Of course, taking leverage into account you don't need it to appreciate 2x. With a 10% downpayment you just need it to appreciate about 9-10% to double your investment (probably more than 10% to make up for all the fees you'll pay). And don't forget to subtract all the interest payments you made while you wait for it to appreciate. Factor that in your ROI. Most of the gains in real estate these days is finding crappy houses that you cannot get a bank loan for. So you buy it at a big discount if you have the funds, or you get a private loan at high interest. Spend 3-6 months bringing the house up to code and then refinance to rent or sell (i.e. flip).