6 ms·

You are right; I've worked out the "accumulating savings" part reasonably well, but the "building wealth" is still eluding me. Stock market index funds seemed

You are right; I've worked out the "accumulating savings" part reasonably well, but the "building wealth" is still eluding me. Stock market index funds seemed to be a good answer in the past. By owning them, you share in the economic growth and income of your country (or another country or set of countries) as a whole. Although, the spectre of Japanese-style stagflation for most of the West makes this less appealing at the moment (although even with the flat growth of the past 13 years, there are still dividend returns.) Property is popular because everyone has to live somewhere, the old "buy land, they don't make it any more" proverb, and the funemplyoment nature of buying, improving, renting, and selling property.

jonnathanson 13y ago
I think a lot of people misunderstand what a pain in the ass buying and renting property can be. Unless one is wealthy enough to own multiple properties and have a full-time management company doing all of his work for him, he's going to be taking a fairly hands-on role. Most tennants are flaky. Our perceptions of such might be colored by the fact that -- I assume -- a lot of us here are white-collar professionals making respectable incomes, or who could quickly arrange a steady enough job if needed. Most people aren't like that. Those people are your likely tennants, again, unless you're wealthy enough to afford higher-end rental property. Then there's the legal minefield. Being a developer or landlord makes one person very rich very quickly, and that person is your lawyer. Especially in the Bay Area. People here pretty much threaten lawsuits if they made eye contact with a teenager on the sidewalk, or if their cat's not eating its food, or if they don't care for the weather on any given day. Source: I own a small apartment building in LA and sit on my HOA board in SF. I am the definition of a small-time real estate owner in the uncanny valley: not poor enough to not give a shit, but not nearly rich enough to do so, either. I'm not a full-time landlord; it's more of a nights-and-weekends thing. But it sucks up a not-very-fun proportion of my nights and weekends, and every now and then, it eats into my workday as well. I would recommend landlording to people born into significant wealth, who can buy multiple properties and let a management company deal with the headaches. I would not recommend it as an upward path for those who aren't prepared to make real estate a full-time job, and who can't afford to jump a few rungs up the ladder at the outset.
- pbhjpbhj 13y ago
  Based on your post it appears you're not profiting at all from your assets - presumably then you're currently selling up? Is this more "first world problems" and in fact you're making a reasonable return given your investment of time and money? I've several friends who're small time landlords - ie own a second residence they let out - they all make a tidy profit and none of them appear to have been exposed any more than a regular home-buyer to fluctuations in the housing market. It all comes across a bit like complaining that your Cristal is warm and your maid keeps coming in late.
  - smackfu 13y ago
    How did your friends get the second residence? Do they have a mortgage on the rental property? That makes things much harder to break even. For a lot of people, the only rental property they can afford is in lower income neighborhoods, and the return on investment is often much better there too. But the headaches are also much greater.
    - darkarmani 13y ago
      > Do they have a mortgage on the rental property? That makes things much harder to break even. You have it backwards. Borrowing money at 4.5% is way cheaper than using your own money. There is opportunity cost to tying up your own money in the real estate. Real estate loans allow you to leverage your 15-20% down. It was really bad when they let you leverage using 3.5% down.
      - smackfu 13y ago
        OTOH, those 4.5% mortgage rates are for property you live in, not for rental properties. You can play games by moving around constantly, but that starts to not be just a passive investment. Also, I wasn't really thinking that people used their cash to buy a second property. (Unless you are buying very low cost houses in low-income areas.) More like an inherited house or such.

jonnathanson 13y ago

I think a lot of people misunderstand what a pain in the ass buying and renting property can be. Unless one is wealthy enough to own multiple properties and have a full-time management company doing all of his work for him, he's going to be taking a fairly hands-on role. Most tennants are flaky. Our perceptions of such might be colored by the fact that -- I assume -- a lot of us here are white-collar professionals making respectable incomes, or who could quickly arrange a steady enough job if needed. Most people aren't like that. Those people are your likely tennants, again, unless you're wealthy enough to afford higher-end rental property. Then there's the legal minefield. Being a developer or landlord makes one person very rich very quickly, and that person is your lawyer. Especially in the Bay Area. People here pretty much threaten lawsuits if they made eye contact with a teenager on the sidewalk, or if their cat's not eating its food, or if they don't care for the weather on any given day. Source: I own a small apartment building in LA and sit on my HOA board in SF. I am the definition of a small-time real estate owner in the uncanny valley: not poor enough to not give a shit, but not nearly rich enough to do so, either. I'm not a full-time landlord; it's more of a nights-and-weekends thing. But it sucks up a not-very-fun proportion of my nights and weekends, and every now and then, it eats into my workday as well. I would recommend landlording to people born into significant wealth, who can buy multiple properties and let a management company deal with the headaches. I would not recommend it as an upward path for those who aren't prepared to make real estate a full-time job, and who can't afford to jump a few rungs up the ladder at the outset.

pbhjpbhj 13y ago
Based on your post it appears you're not profiting at all from your assets - presumably then you're currently selling up? Is this more "first world problems" and in fact you're making a reasonable return given your investment of time and money? I've several friends who're small time landlords - ie own a second residence they let out - they all make a tidy profit and none of them appear to have been exposed any more than a regular home-buyer to fluctuations in the housing market. It all comes across a bit like complaining that your Cristal is warm and your maid keeps coming in late.
- smackfu 13y ago
  How did your friends get the second residence? Do they have a mortgage on the rental property? That makes things much harder to break even. For a lot of people, the only rental property they can afford is in lower income neighborhoods, and the return on investment is often much better there too. But the headaches are also much greater.
  - darkarmani 13y ago
    > Do they have a mortgage on the rental property? That makes things much harder to break even. You have it backwards. Borrowing money at 4.5% is way cheaper than using your own money. There is opportunity cost to tying up your own money in the real estate. Real estate loans allow you to leverage your 15-20% down. It was really bad when they let you leverage using 3.5% down.
    - smackfu 13y ago
      OTOH, those 4.5% mortgage rates are for property you live in, not for rental properties. You can play games by moving around constantly, but that starts to not be just a passive investment. Also, I wasn't really thinking that people used their cash to buy a second property. (Unless you are buying very low cost houses in low-income areas.) More like an inherited house or such.