8 ms·

I love the 30 year mortgage. I buy a home I couldn't afford in cash or with a substantially shorter term note, live in the house 2-4 years then sell it for a p

I love the 30 year mortgage. I buy a home I couldn't afford in cash or with a substantially shorter term note, live in the house 2-4 years then sell it for a profit with no prepayment penalty. I've done that 4 times in a row each time being able to buy a house that's perfect for my family's needs at the moment. The real problems, in my opinion, are (1) people go all-in for their "forever home" only to discover most people don't stay that long, and (2) people view themselves as owners rather than future sellers. Understand your house is a leveraged investment and you'll do well.

luckyscs 5y ago
Your buys happened to coincidence with the peaking of the housing demand in the US. Are you temporarily lucky or does this advice hold true for everyone forever?
- ARandomerDude 5y ago
  How much good advice holds true for everyone forever? Use this kind of stylus and don't pick a fight with the Babylonians may have been great advice, even if it wasn't eternal.
SavantIdiot 5y ago
> Understand your house is a leveraged investment and you'll do well. Your primary house is not an investment, because if you sell it you are now homeless. This is literally the first thing any RIA or CFPA teaches you.
- globular-toast 5y ago
  No you're not. You should be able to afford many years of rent with the cash from selling a house.
  - danielrpa 5y ago
    Renting isn't like owning a house. You can be kicked out of your rental unit if your landlord decides to do a number of things, such as converting your rental to a condo or sell the property. Rents can go up arbitrarily. A paid off house gives you a type of stability, belonging and security that rentals don't generally offer (at the expense of flexibility and mobility). I'm not trying to say that owning is better than renting, just that they are different enough for the "buying your house isn't an investment" statement to be mostly true.
    - globular-toast 5y ago
      > Renting isn't like owning a house. True, but calling renters "homeless" would be ridiculous. Unfortunately I think people have forgotten what an investment really is. An investment is just a capital allocation. It's not about buying now and then selling later for profit. That's called speculation. A good investment will continue to deliver value over time. A house literally keeps you alive. Of course it's an investment.
- warkdarrior 5y ago
  You are assuming being homeless has an infinite negative cost. As with most things in life, becoming homeless has a certain risk and a certain downside, both of which can be estimated. Those estimates should plug into your calculation when you determine when to buy a house and for long to hold it.
ramphastidae 5y ago
Moving your family every 2-4 years sounds awful. And unless you are moving to a lower COL area each time, you’re reducing your purchasing power with each move because the prices for all the other houses went up too.
- jlokier 5y ago
  > Moving your family every 2-4 years sounds awful. It's life for a lot of people. Here in the UK, many renter families have no choice but to do that their whole life, with the added indignity that they don't decide when it's time to move, the landlord decides at short notice (either by unaffordable rent hikes or no-reason evictions (which are often for renovation rhen hikes too)). Sometimes they don't know which area they will be moving to, when that happens, because they will be unable to stay in a familiar area as local rents rise collectively and what they can afford gets progressively worse, until one day they can't find anywhere local at all within the notice period. So sometimes the children have to move schools as well at short notice. I think stability is the main reason first time buyers want to buy in the UK, and that option is closed to many. By now, we have an increasing number of people approaching retirement who are still involuntarily renting, and it's the leading edge of a very large demographic wave of people in that position. I worry about those because rents are getting to be higher than their entire pension will be, and government housing support is insufficient to make up the difference.
- ARandomerDude 5y ago
  > Moving your family every 2-4 years sounds awful. It certainly could be. We homeschool, the kids enjoy the adventure, and I've taught them how to make money along the way. > And unless you are moving to a lower COL... The trick is to be selective in the houses you buy and use some of the money to buy a nicer house next time. We look for up-and-coming parts of our local area that haven't been fully discovered, then sell when the frenzy hits the area.
  - hackeraccount 5y ago
    Ah yes ... my family follows the exact opposite strategy of yours- we sit on a house for 10 to 15 years make sure to buy on the upswing and then sell when the market is down. Sigh. We just bought a new house... hopefully you haven't.
kerneloftruth 5y ago
Well done. My father was a realtor, and taught me early to distinguish between House and a Home -- the former is a physical thing, an investment, and is your Home while you're living in it; the latter is a precious concept, but a separate one. I'm grateful for him teaching that wisdom to me and my siblings when we were younger.
- beckman466 5y ago
  > distinguish between House and a Home -- the former is a physical thing, an investment so a 'house' is 'someone else's Home that you happen to profit from heavily'?
  - kerneloftruth 5y ago
    Some people own their home, others rent it. Different situations suit different people.
    - beckman466 5y ago
      spoken like a true 'property investor'? if you are trying to tell me that you don't recommend your closest friends and family to buy their own houses, you've really not convinced me.
      - leetcrew 5y ago
        not GP, but I'd recommend buying to some friends/family and renting to others. it depends a lot on how long they plan to live there, the local price-to-rent ratio, tolerance for risk, and desire to make significant modifications to the structure. but I'd err on the side of renting.
      - kerneloftruth 5y ago
        I very much recommend ownership over rent. However, purchase is sometimes not practical, out of reach, or just not desired. I've myself been in steep markets (California) where I rented for years while I saved up a down payment.
beckman466 5y ago
> Understand your house is a leveraged investment and you'll do well. ugh there's truth to this but it just feels so fucking dystopic. within the current systems we're playing games of musical chairs and the people who do not 'win' have further and further to fall when they inevitably 'lose' due to rising inequality/increasing exploitation (gig economy/zero-hour-ing, union-busting etc.) i use quotes because nobody really wins when one of us loses. we have enough to satisfy the needs of every human.
SilasX 5y ago
From the article: > For the individual, the fact that encouraging 30-year mortgages is a bad policy does not imply that getting one yourself is a bad deal.
Spooky23 5y ago
I live in a house that I could afford to buy in cash and are in year 15 of a 30 year mortgage. That bet worked out for me vs getting a 20% rate premium for an ARM. For me, that meant living is a smaller market and limiting my upside. My aunt and uncle got into a pickle with this in the 80s. They were over-leveraged and underwater in a house in North Jersey. The house value crashed in the late 80s and their arm was going up a few points a year. My uncle was a bank officer and would lose his job if they went bankrupt. The job moved and he was forced to commute to some awful place without usury for a few years. It worked out in the long term but it was very difficult. It’s hard for the average Joe to treat home like an investment. Timing is everything with investments and you always need a home.

luckyscs 5y ago

Your buys happened to coincidence with the peaking of the housing demand in the US. Are you temporarily lucky or does this advice hold true for everyone forever?

ARandomerDude 5y ago
How much good advice holds true for everyone forever? Use this kind of stylus and don't pick a fight with the Babylonians may have been great advice, even if it wasn't eternal.

SavantIdiot 5y ago

> Understand your house is a leveraged investment and you'll do well. Your primary house is not an investment, because if you sell it you are now homeless. This is literally the first thing any RIA or CFPA teaches you.

globular-toast 5y ago
No you're not. You should be able to afford many years of rent with the cash from selling a house.
- danielrpa 5y ago
  Renting isn't like owning a house. You can be kicked out of your rental unit if your landlord decides to do a number of things, such as converting your rental to a condo or sell the property. Rents can go up arbitrarily. A paid off house gives you a type of stability, belonging and security that rentals don't generally offer (at the expense of flexibility and mobility). I'm not trying to say that owning is better than renting, just that they are different enough for the "buying your house isn't an investment" statement to be mostly true.
  - globular-toast 5y ago
    > Renting isn't like owning a house. True, but calling renters "homeless" would be ridiculous. Unfortunately I think people have forgotten what an investment really is. An investment is just a capital allocation. It's not about buying now and then selling later for profit. That's called speculation. A good investment will continue to deliver value over time. A house literally keeps you alive. Of course it's an investment.
warkdarrior 5y ago
You are assuming being homeless has an infinite negative cost. As with most things in life, becoming homeless has a certain risk and a certain downside, both of which can be estimated. Those estimates should plug into your calculation when you determine when to buy a house and for long to hold it.

ramphastidae 5y ago

Moving your family every 2-4 years sounds awful. And unless you are moving to a lower COL area each time, you’re reducing your purchasing power with each move because the prices for all the other houses went up too.

jlokier 5y ago
> Moving your family every 2-4 years sounds awful. It's life for a lot of people. Here in the UK, many renter families have no choice but to do that their whole life, with the added indignity that they don't decide when it's time to move, the landlord decides at short notice (either by unaffordable rent hikes or no-reason evictions (which are often for renovation rhen hikes too)). Sometimes they don't know which area they will be moving to, when that happens, because they will be unable to stay in a familiar area as local rents rise collectively and what they can afford gets progressively worse, until one day they can't find anywhere local at all within the notice period. So sometimes the children have to move schools as well at short notice. I think stability is the main reason first time buyers want to buy in the UK, and that option is closed to many. By now, we have an increasing number of people approaching retirement who are still involuntarily renting, and it's the leading edge of a very large demographic wave of people in that position. I worry about those because rents are getting to be higher than their entire pension will be, and government housing support is insufficient to make up the difference.
ARandomerDude 5y ago
> Moving your family every 2-4 years sounds awful. It certainly could be. We homeschool, the kids enjoy the adventure, and I've taught them how to make money along the way. > And unless you are moving to a lower COL... The trick is to be selective in the houses you buy and use some of the money to buy a nicer house next time. We look for up-and-coming parts of our local area that haven't been fully discovered, then sell when the frenzy hits the area.
- hackeraccount 5y ago
  Ah yes ... my family follows the exact opposite strategy of yours- we sit on a house for 10 to 15 years make sure to buy on the upswing and then sell when the market is down. Sigh. We just bought a new house... hopefully you haven't.

kerneloftruth 5y ago

Well done. My father was a realtor, and taught me early to distinguish between House and a Home -- the former is a physical thing, an investment, and is your Home while you're living in it; the latter is a precious concept, but a separate one. I'm grateful for him teaching that wisdom to me and my siblings when we were younger.

beckman466 5y ago
> distinguish between House and a Home -- the former is a physical thing, an investment so a 'house' is 'someone else's Home that you happen to profit from heavily'?
- kerneloftruth 5y ago
  Some people own their home, others rent it. Different situations suit different people.
  - beckman466 5y ago
    spoken like a true 'property investor'? if you are trying to tell me that you don't recommend your closest friends and family to buy their own houses, you've really not convinced me.
    - leetcrew 5y ago
      not GP, but I'd recommend buying to some friends/family and renting to others. it depends a lot on how long they plan to live there, the local price-to-rent ratio, tolerance for risk, and desire to make significant modifications to the structure. but I'd err on the side of renting.
    - kerneloftruth 5y ago
      I very much recommend ownership over rent. However, purchase is sometimes not practical, out of reach, or just not desired. I've myself been in steep markets (California) where I rented for years while I saved up a down payment.

beckman466 5y ago

> Understand your house is a leveraged investment and you'll do well. ugh there's truth to this but it just feels so fucking dystopic. within the current systems we're playing games of musical chairs and the people who do not 'win' have further and further to fall when they inevitably 'lose' due to rising inequality/increasing exploitation (gig economy/zero-hour-ing, union-busting etc.) i use quotes because nobody really wins when one of us loses. we have enough to satisfy the needs of every human.

SilasX 5y ago

From the article: > For the individual, the fact that encouraging 30-year mortgages is a bad policy does not imply that getting one yourself is a bad deal.

Spooky23 5y ago

I live in a house that I could afford to buy in cash and are in year 15 of a 30 year mortgage. That bet worked out for me vs getting a 20% rate premium for an ARM. For me, that meant living is a smaller market and limiting my upside. My aunt and uncle got into a pickle with this in the 80s. They were over-leveraged and underwater in a house in North Jersey. The house value crashed in the late 80s and their arm was going up a few points a year. My uncle was a bank officer and would lose his job if they went bankrupt. The job moved and he was forced to commute to some awful place without usury for a few years. It worked out in the long term but it was very difficult. It’s hard for the average Joe to treat home like an investment. Timing is everything with investments and you always need a home.