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At some point you need to make a decision in life. I myself am self-made wealthy and I didn’t do that by putting all my money in index funds and renting. Have

At some point you need to make a decision in life. I myself am self-made wealthy and I didn’t do that by putting all my money in index funds and renting. Have conviction - put down roots - commit.

arcticbull 5y ago
It's interesting that you say that, I've also done quite well for myself, and I was in a position to risk more because I hadn't committed all my free capital to a down payment on a mortgage. In fact, at that time, I wouldn't have been able to afford a place I actually wanted to live in anyways. Putting down roots doesn't mean owning a property you don't want to, and being unable to then expose yourself to more interesting risks due to being house-poor. This is of course equally anecdotal, which is why I think folks would do well to review the NYT calculator to evaluate the specifics of their situation :) Risk is good! I'm a big fan of risk. However, a house won't go up more than a few points a year. That's never going to be life changing money. The opportunity cost of the down payment making you unable to early exercise some startup equity could on the other hand leave you pretty full of regret.
- seibelj 5y ago
  In the US you can put 5% down and lock in your monthly payment forever. This is because the government subsidizes this. It’s an incredible trade and that’s why any attempts at reform are lobbied so aggressively.
  - blitzar 5y ago
    The 'trade' in all this is not the appreciation of house price. Housing is a middling performing, high maintenance cost, depreciating asset. However, you can borrow against it cheaper than virtually any other asset in existence at absurd leverage ratios - and swap your cash flow for the ownership of the asset. So long as interest rates are at or below growth / inflation / or your salary increases - it is a good investment.
- pengaru 5y ago
  > The opportunity cost of the down payment making you unable to early exercise some startup equity could on the other hand leave you pretty full of regret. Startup equity of the kind that produces fuck you-money returns shouldn't cost that much to early exercise since it's usually early stage, that's kind of the whole point of early exercise and filing the 83b before the imaginary value goes up in subsequent funding rounds. When it's late stage enough for exercising to cost a pile of money, people usually don't bother with exercising and simply wait for a liquidity event to occur, assuming accelerated vesting will accompany it, and pay the exercise cost and taxes directly from the shares AIUI. But I suppose it's nice to be able to exercise and leave if you wanted to before a liquidity event, since the options tend to expire in what... 90 days? Preserving that option with a pile of cash on hand is useful, handcuffs are annoying regardless of their color.
  - deleted 5y ago
    [deleted]
AnthonyMouse 5y ago
It's not about roots. Especially now, there's a risk the Fed may raise interest rates to counter inflation which could negatively impact asset prices. And mortgaging a house is leverage. If you put your money in stocks and they go down 15%, you lose 15% of your money. If you plonk a 15% downpayment on a house and the house loses 15% of its value, you get zeroed out. No guarantee that happens right now, but it sure could.
- seibelj 5y ago
  I have a lot of investments but my property has been both a winner and something accessible to even non-wealthy people because of the socialized costs. Highly recommend property to everyone.
  - AnthonyMouse 5y ago
    In general the "people are born short a house" thing is true. Buying a house at some point in your life is a good idea. At this moment we're in a housing bubble inflated by low interest rates that may or may not be about to end. The risk is different than it usually is.
    - seibelj 5y ago
      Shelter is something you need. If you rent, the cost rises with inflation. With the US government, taxpayers effectively pay the inflation for you. The laws of the USA subsidize your property to make it artificially cheaper. I can’t imagine a better deal for someone with enough money for a down payment.
      - AnthonyMouse 5y ago
        The US subsidizes it and then artificially constrains the housing supply through zoning, so the subsidies just inflate the purchase price and go to the banks as interest on higher principal or to the people who owned property when the subsidies were first implemented. The ROI is attributable to the supply constraint in the face of population growth, not the subsidies. If housing supply wasn't constrained the subsidies would lower the initial cost but then it wouldn't work as an investment because the real value would never go up since if it did that would cause an increase in supply through new construction. But that's also what makes it a pyramid scheme. More people bidding on the same amount of housing makes the price go up, but only if the population grows. Fertility rate tells a bad story there. And on top of that it's per-city; ask people who had homes in Detroit. Someday this is all going to fall apart. I don't know when it's going to be though.

At some point you need to make a decision in life. I myself am self-made wealthy and I didn’t do that by putting all my money in index funds and renting. Have conviction - put down roots - commit.

arcticbull 5y ago

It's interesting that you say that, I've also done quite well for myself, and I was in a position to risk more because I hadn't committed all my free capital to a down payment on a mortgage. In fact, at that time, I wouldn't have been able to afford a place I actually wanted to live in anyways. Putting down roots doesn't mean owning a property you don't want to, and being unable to then expose yourself to more interesting risks due to being house-poor. This is of course equally anecdotal, which is why I think folks would do well to review the NYT calculator to evaluate the specifics of their situation :) Risk is good! I'm a big fan of risk. However, a house won't go up more than a few points a year. That's never going to be life changing money. The opportunity cost of the down payment making you unable to early exercise some startup equity could on the other hand leave you pretty full of regret.

seibelj 5y ago
In the US you can put 5% down and lock in your monthly payment forever. This is because the government subsidizes this. It’s an incredible trade and that’s why any attempts at reform are lobbied so aggressively.
- blitzar 5y ago
  The 'trade' in all this is not the appreciation of house price. Housing is a middling performing, high maintenance cost, depreciating asset. However, you can borrow against it cheaper than virtually any other asset in existence at absurd leverage ratios - and swap your cash flow for the ownership of the asset. So long as interest rates are at or below growth / inflation / or your salary increases - it is a good investment.
pengaru 5y ago
> The opportunity cost of the down payment making you unable to early exercise some startup equity could on the other hand leave you pretty full of regret. Startup equity of the kind that produces fuck you-money returns shouldn't cost that much to early exercise since it's usually early stage, that's kind of the whole point of early exercise and filing the 83b before the imaginary value goes up in subsequent funding rounds. When it's late stage enough for exercising to cost a pile of money, people usually don't bother with exercising and simply wait for a liquidity event to occur, assuming accelerated vesting will accompany it, and pay the exercise cost and taxes directly from the shares AIUI. But I suppose it's nice to be able to exercise and leave if you wanted to before a liquidity event, since the options tend to expire in what... 90 days? Preserving that option with a pile of cash on hand is useful, handcuffs are annoying regardless of their color.
- deleted 5y ago
  [deleted]

AnthonyMouse 5y ago

It's not about roots. Especially now, there's a risk the Fed may raise interest rates to counter inflation which could negatively impact asset prices. And mortgaging a house is leverage. If you put your money in stocks and they go down 15%, you lose 15% of your money. If you plonk a 15% downpayment on a house and the house loses 15% of its value, you get zeroed out. No guarantee that happens right now, but it sure could.

seibelj 5y ago
I have a lot of investments but my property has been both a winner and something accessible to even non-wealthy people because of the socialized costs. Highly recommend property to everyone.
- AnthonyMouse 5y ago
  In general the "people are born short a house" thing is true. Buying a house at some point in your life is a good idea. At this moment we're in a housing bubble inflated by low interest rates that may or may not be about to end. The risk is different than it usually is.
  - seibelj 5y ago
    Shelter is something you need. If you rent, the cost rises with inflation. With the US government, taxpayers effectively pay the inflation for you. The laws of the USA subsidize your property to make it artificially cheaper. I can’t imagine a better deal for someone with enough money for a down payment.
    - AnthonyMouse 5y ago
      The US subsidizes it and then artificially constrains the housing supply through zoning, so the subsidies just inflate the purchase price and go to the banks as interest on higher principal or to the people who owned property when the subsidies were first implemented. The ROI is attributable to the supply constraint in the face of population growth, not the subsidies. If housing supply wasn't constrained the subsidies would lower the initial cost but then it wouldn't work as an investment because the real value would never go up since if it did that would cause an increase in supply through new construction. But that's also what makes it a pyramid scheme. More people bidding on the same amount of housing makes the price go up, but only if the population grows. Fertility rate tells a bad story there. And on top of that it's per-city; ask people who had homes in Detroit. Someday this is all going to fall apart. I don't know when it's going to be though.