Real estate thread
- Thread starter Roosh
- Start date
Amen. It is power in this world.
I think you owe it to yourself to speak to at least 3 property managers about renting it out in some form.
I know a property manager in NYC; his solution is to raise the application standards such that tenants need sparkling credit, income, etc in order to pass. This weeds out a lot of the trash, but also it means that average but honest people struggle with housing applications.
I'm a small time landlord and I intend to keep building the little empire. Over time you find tenants who want to stay several years and keep it in good condition. Makes your life easier and you watch money roll in the door. And yes I think tenants don't resent some guy as their landlord the way they do a big management company, especially if you are at all charismatic or likeable.
The bit about low interest mortgages is 100% correct. I have two of them and don't intend to give them up ever if possible.
My issue with what you wrote here is that interest rates aren't "high" by historical standards. They are now normal, but we've become so used to cheap money that they seem atrocious.
Dips will be bought up only certain things will tank that have become obsolete, think office high rises and malls. Lots of people with cash on the sidelines waiting for blood in the water myself included, would really like to pick up a warehouse but prices lately you would think the bricks are made of gold...
The decision to owning a house or not comes down to lifestyle preferences more than anything. The bottom line is that a home provides stability - which essential if you want to start a family. However, true stability only happens when you actually pay off the mortgage. I love when people get a $250,000 mortgage loan and think they're a homeowner, sorry, you're not a homeowner, your bank is.
A house is not always a great investment, and sometimes it's actually a pretty shitty one. Other posted have already brought this up, but the sunk costs are massive. Everyone always shits on renters "oh you're just throwing away money every month", yeah, well, so are homeowners who have to pay broker/escrow fees, property tax, mortgage interest, HOA fees (God forbid) and other things like lawn care, repairs, etc.
All that said, if you want to start a family, nothing else comes close providing the sort of security that a paid off home can provide.
I genuinely enjoy renting because I have absolutely zero responsibilites for maintaining the home/property and it's generally in line with a minimalist lifestyle, especially if they're prefurnished. Another benefit of renting is that you have complete freedom and aren't tied down. You can just up and leave and go anywhere in a heartbeat and the worst thing you'll pay is a $1000 early termination fee. If some sort of civil war broke out you'd probably feel pretty trapped in your home unless you're willing to just abandon it and lose out on hundreds of thousands of dollars.
Real estate as an investment only really makes sense if you plan to rent the properties out or if you plan to fix them up and resell.
A house is not always a great investment, and sometimes it's actually a pretty shitty one. Other posted have already brought this up, but the sunk costs are massive. Everyone always shits on renters "oh you're just throwing away money every month", yeah, well, so are homeowners who have to pay broker/escrow fees, property tax, mortgage interest, HOA fees (God forbid) and other things like lawn care, repairs, etc.
All that said, if you want to start a family, nothing else comes close providing the sort of security that a paid off home can provide.
I genuinely enjoy renting because I have absolutely zero responsibilites for maintaining the home/property and it's generally in line with a minimalist lifestyle, especially if they're prefurnished. Another benefit of renting is that you have complete freedom and aren't tied down. You can just up and leave and go anywhere in a heartbeat and the worst thing you'll pay is a $1000 early termination fee. If some sort of civil war broke out you'd probably feel pretty trapped in your home unless you're willing to just abandon it and lose out on hundreds of thousands of dollars.
Real estate as an investment only really makes sense if you plan to rent the properties out or if you plan to fix them up and resell.
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Yeah there’s pros and cons to ownership.
We bought a house built in 1954! and have had to pay about 20k in putting a French drain and sump pump in the basement due to flooding. Separately due to ancient piping we’ve had pipes burst three separate times.
Be very careful buying an older home. That was a mistake on our part when moving cross country.
However, aside from the current market situation which is in a standoff, for a younger family few if any investments offer the same potential returns as owning a home. Even with the current situation we’re up about 125k in five years and if we sold a year ago it would have pushed +200k.
Renters deal with fewer expenses, which can add up. But they don’t have a more near term investment asset which can produce significant returns. Maybe you hit big in stocks but it’s less likely. Retirement funds are for decades down the road.
However to really capitalize on appreciation requires uprooting to a different area where your money goes further. As the nicer areas nearby also appreciated.
We bought a house built in 1954! and have had to pay about 20k in putting a French drain and sump pump in the basement due to flooding. Separately due to ancient piping we’ve had pipes burst three separate times.
Be very careful buying an older home. That was a mistake on our part when moving cross country.
However, aside from the current market situation which is in a standoff, for a younger family few if any investments offer the same potential returns as owning a home. Even with the current situation we’re up about 125k in five years and if we sold a year ago it would have pushed +200k.
Renters deal with fewer expenses, which can add up. But they don’t have a more near term investment asset which can produce significant returns. Maybe you hit big in stocks but it’s less likely. Retirement funds are for decades down the road.
However to really capitalize on appreciation requires uprooting to a different area where your money goes further. As the nicer areas nearby also appreciated.
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The home you actually live in is an expense, not an investment. That's a longer conversation but it is 100% true, all those dumb lazy kids on Reddit and wherever else crying about not owning a home have no idea what they're saying they probably couldn't afford it or take care of it even if it were handed to them....which is what they want.
The best life I ever lived was a few years ago when I had a loft in the downtown of a small town, I locked my door and didn't worry about anything. Now that I own a home it's endless headache, even with it being paid off. To raise a family sure you need a base and stability for the kids but for a single guy owning and maintaining a home is a mess. I got suckered into this....again long story.
Are you up 125k though?
If you sold your home you just have to buy another home right? It's not like you can sell high now and then wait and buy low, you would be buying in the same high market unless you bought a lesser home but then you have a lesser value asset. That's not even to mention the cost of selling/buying a home and also not factoring in any of the costs related to owning a home/mortgage in general.
If you want you to borrow on that 125k you have to pay interest and if you don't pay it back they take your home right?
So really are you "up" anything at all? On a piece of paper you may be but not in actual practicality.
Not trying to knock you down brother, I'm just talking.
I'm not advocating for renting over buying I'm just saying that the home you actually live in is an expense, it's not an investment. It may be a necessary expense or a smart expense but an expense nonetheless. You will never have any realized value from its worth.
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Excellent points. I can't speak for the poster, but my experience is people heavily heavily overvalue how much they are 'up' on a home.
1) How many people keep track in a spreadsheet of exactly how many repairs and the costs? Not many. These can total tens of thousands of dollars, even more.
2) Did they buy the home outright with cash or is it a mortgage? Are they figuring in the interest rate payments? That home over a 20 or 30 year mortgage will cost way more than the asking price. By the # of Americans who have CC debt, math is not a strong point.
3) Liquidity. Let's say you're 'up', say 100k. Ok cool can you access it? Not easy unless you sell. HELOC maybe?
4) Inflation. Are the gains inflation adjusted? Saying you're up 100k means very little with inflation reported at 5 or 6%, but reality is it's probably closer to 15% or more.
ISR92
Robin
Real estate is good and all, but don't let it be the majority of your portfolio. And try to avoid getting a mortgage. This is because a) you pay the bank interest which eats up your wealth b) you miss the opportunity cost to invest in high-yield assets. The longer you can delay buying a house, the better. Live frugally and invest each week into something you think will outperform the market.
Your house should ideally be 25-50% of your overall portfolio. This is because if you need to flee your country, you will still have some wealth. This is why Bitcoin is so important right now. I can pass through customs without anyone knowing I have a sizeable Bitcoin holding.
Your house should ideally be 25-50% of your overall portfolio. This is because if you need to flee your country, you will still have some wealth. This is why Bitcoin is so important right now. I can pass through customs without anyone knowing I have a sizeable Bitcoin holding.
Real estate is the best investment you can make, barring some catastrophic extenuating circumstance you will never lose. It just doesn't apply to your 30 year mortgaged high expense home that you're actively using. The house you live in is not part of a portfolio at all, there is no return from it and there will never be any realized gains from it.
I have a totally different perspective. When interest rates were rock bottom, I wasn't trying to avoid a mortgage, I actively decided to take on the largest mortgage I could possibly find. I could have put more down, but why would you when interest rates were under 3%?
You can always just rent a house out and move on. Then you have both a financial footprint and actual physical place to live if you want to move back. Get government-backed Fannie/Freddie loans to pay for a house, renters to pay off the loan, and a property manager to get rid of the headaches.
Very different perspective than "buy a house to live in as an investment", which I agree is likely not the best unless you happen to hit some fantastic appreciation, and even then, as others have pointed out, you need to actually sell, and then you need to pay selling costs and etc.
Yea that's smart, you took advantage of cheap money and it worked out because rates skyrocketed, not the same thing as buying a home just to not be a renter as if you're making some great investment for your future. I kick myself every day for not taking the massive EIDL loans I was offered for both of my active businesses, base interest rates right now are higher than the loan interest rate would have been.
So let's run some sample numbers which are in the neighborhood. And the 125K up is home value, which is an estimate. It isn't equity.
Buy for 500K in 2018 @ 2%.
Monthly is $1,800.
50 monthly payments cuts mortgage balance to 380,000.
Property taxes at 10K/yr is another 40K paid.
So 160K paid in principle, interest and taxes.
There is a terrible rental market here and for a similar house the lowest monthly I can currently find is $4,100. But let's pretend we could have found similar for $3,500 in 2018 and just renewed the lease.
50 payments of $3,500 is $175,000 paid in rent during same time frame.
No principle or property obviously. Although as a tenant I now simply paid the property taxes for the owner who rolled it into the monthly.
So we're at 160K paid for the home. 175K paid in rent.
Now add in the 20K for the French drain I mentioned, and let's estimate an additional $850 per month, 10K per year in general home owner expenses and repairs. Anything from Home Depot runs to blowing out the irrigation. So 40K during that period plus the drain.
Now we're at roughly 220K for principle, interest, taxes and home ownership expenses.
Vs 175K in rent.
That's a fair general comparison.
Home owner paid $4,400 per month for 50 months to cover the above.
Renter paid $3,500 per month for 50 months.
Renter saved $900 per month for 50 months. 45K.
So in 2023 we want to move.
The 500K house sells for 625K. Realtor fees and closing costs are 35K. Left with 210K equity at point of sale. No capital gain tax owed.
If I rented I just make a clean break (unless breaking lease which I've had to do before and owing months). But I don't have that 210K cash in my pocket that the home owner now has.
But I do have an extra 45K in my pocket. Maybe it's invested. Maybe not.
I would strongly argue that 210K is a realized gain. It is not an income generating investment as secondary RE ownership is. But at point of sale and now looking to relocate it is a good chunk of change a renter does not have.
That 210K can be invested. It can also substantially buy down the next mortgage..
Both the former owner and renter now need a new place to live. Both are coughing up monthly payments of $2,500-$3,500 again. One has 210K to assist.
People are free to disagree here. That's fine.
But I would also add, often ignored is as a tenant you are paying the mortgage, interest, property taxes and general repair costs on behalf of the owner. The owner rolls all that in and often on top of it marks it up. Then you get the monthly they charge the tenant. Nothing is free. The owner expenses are just a hidden cost you still pay as a tenant. The landlord already figured that in. You're paying the taxes, the property management company, the maintenance guy, the lawncare company, etc.
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Own or Rent...there is no win. But if you gotta do it, buy something small, well below your means with a 15% or less mortgage rate. Paying rent is terrible.
This calls for a Matrix reference....
Morpheus : The Matrix is everywhere. It is all around us. Even now, in this very room. You can see it when you look out your window or when you turn on your television. You can feel it when you go to work... when you go to church... when you pay your taxes. It is the world that has been pulled over your eyes to blind you from the truth.
Neo : What truth?
Morpheus : That you are a slave, Neo. Like everyone else you were born into bondage. Into a prison that you cannot taste or see or touch. A prison for your mind.
Maybe if you could actually realize that gain, but I'd argue there are many factors that won't let you.
500k in 2018 is 625k now? You're going to have to find a buyer who is going to pay that and with interest rates continously going up, there's a good chance you won't and will have to lower your asking price to get any bids at all.
Also according to the CPI calc 500k in 2018 is around 608k in 2023.
So inflation adjusted with your estimate it's not as up as it seems. The math and inflation can play tricks on you.
500k in 2018 is 625k now? You're going to have to find a buyer who is going to pay that and with interest rates continously going up, there's a good chance you won't and will have to lower your asking price to get any bids at all.
Also according to the CPI calc 500k in 2018 is around 608k in 2023.
So inflation adjusted with your estimate it's not as up as it seems. The math and inflation can play tricks on you.
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I'm not advocating for renting and I am not saying renting is smarter than buying, I'm saying the house you live in is not an "investment". It is an expense, it may be a necessary expense it may be a smart expense but it is still an expense. I am a homeowner and my house is paid off, the house I live in does not add any value to my life monetarily it only takes away from it. If I sell my home I will not see any gains from the sale as I have to purchase another home unless I buy a home of lesser value but then I have a lesser asset and I will lose on costs. If I borrow money on my home I have to pay it back and pay interest on it or they take my home.
Mind you this is also all neglecting what you are actually paying in the end of that 30 year mortgage vs the buying price, closing costs, lifetime of taxes, lifetime of insurance, lifetime of maintenance and all the other unlimited costs of owning/buying a home.
The idea that buying a home means you have made some great investment into your life and future as the bank would have you believe is very flawed. All you have bought is debt and an expense, again perhaps a necessary expense but certainly not an "investment".
I
I remember when Raoul (or whoever manages real vision youtube) celebrated hitting 666000 subscribers. Dont want to derail the thread but something people should be awarw of
I remember when Raoul (or whoever manages real vision youtube) celebrated hitting 666000 subscribers. Dont want to derail the thread but something people should be awarw of
Well we can disagree.
If you just rent as a tenant year after year, you're paying the mortgage, taxes, maintenance, insurance, etc, for the owner/landlord. Some just classify it as paying rent but rent includes all of that as hidden costs.
I don't understand why renters think they aren't paying the additional costs. If I rent out my house my tenant is paying for the additional costs.
Investments often are expenses. It's not either/or.
Home ownership creates leverage and long term is almost always certain to appreciate more than the original borrowed rate. It's also a hedge against increased rental rates.
It is also odd to suggest a paid off home does not add value. The value is you're not paying a monthly rent that the next person is paying because they've been renting their entire life. The return/value isn't income. The return/value is one less major expense.
And the money that otherwise would go to rent, can be leveraged for yet more investment/gain.
If you just rent as a tenant year after year, you're paying the mortgage, taxes, maintenance, insurance, etc, for the owner/landlord. Some just classify it as paying rent but rent includes all of that as hidden costs.
I don't understand why renters think they aren't paying the additional costs. If I rent out my house my tenant is paying for the additional costs.
Investments often are expenses. It's not either/or.
Home ownership creates leverage and long term is almost always certain to appreciate more than the original borrowed rate. It's also a hedge against increased rental rates.
It is also odd to suggest a paid off home does not add value. The value is you're not paying a monthly rent that the next person is paying because they've been renting their entire life. The return/value isn't income. The return/value is one less major expense.
And the money that otherwise would go to rent, can be leveraged for yet more investment/gain.
Like Francis I'm not arguing that renting is better, I just agree with him that it's not really an investment, it's a place to live. Your equity is locked up until you sell and it's not generating any cash flow unless you are renting it out.
Compare a home to say a dividend portfolio worth the same amount, 500k and yielding 5%. That's generating 25k in cash flow you can reinvest or even use to payoff your mortgage.
Compare a home to say a dividend portfolio worth the same amount, 500k and yielding 5%. That's generating 25k in cash flow you can reinvest or even use to payoff your mortgage.