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> That’s huge upside. That’s a big gamble. I thought this was about asymmetric upsides but here there’s a pretty huge downside. Firstly, how do you realise th
by nerdawson 4y ago
> That’s huge upside.
That’s a big gamble. I thought this was about asymmetric upsides but here there’s a pretty huge downside.
Firstly, how do you realise the gain when you need somewhere to live? Primary residence != investment.
Secondly, 20x leverage shouldn’t be a selling point. A tiny dip in prices leaves you in negative equity and unable to move home. Less of an investment and more of a prison.
95% LTV mortgages tend to come with well above average rates to match the level of risk too. The gamble isn’t cheap.
Property can be a great investment but people are confusing buying a home with investing in property. They aren’t the same thing.
- dionidium 4y agoYour own argument is that you need a roof over your head, either way, so if the value doesn't increase, then you simply live there. If it does, then you keep all the profit, tax free.
- nerdawson 4y agoNo, if the value doesn’t increase, you have to live there. You no longer have the option. Find yourself at a peak and you could be stuck for years to come. Again, this was all about asymmetric upside. Being unable to move even as life circumstances change seems like a pretty sharp downside.
- dionidium 4y agoYes, you probably shouldn't buy a house if you imagine you'll want or need to move in the next 7-10 years. And, yes, it's also not the case that there is zero risk. It's just lots of leverage with favorable tax treatment. But it's not a magic money machine.
- overrun11 4y agoShort sales, in the United States at least, limit downside. You can generally sell a house underwater and not owe anything, so the risk to you is only whatever you put in plus some harm to your credit worthiness over the next 5-7 years.