Say you are giving away 250k for down payment and 5k per month on the loan payment.
Considering 15% again on 250k stock that is 37.5 per year or about 3k per month.
That's about 8k per month of lost money.
You can get a nice apartment for rent about 4k. Why do people want to loose 4k per month?
I understand house value increases but isn't that a high risk? And would you really sell your house for money?
I'd rather spend that extra 4k and enjoy life.
I will add some good comments here to let the readers get a tldr.
tax benefit on mortgage
your pay will adjust as well
You think bank is giving you at a much lower interest rate? Why don't banks crash then?
What if a new technology company comes in and solves this problem? If we can think about flying cars in 2024, why is it so hard to solve the housing problem?
It's funny how most of us work in technology and don't believe this problem would be solved soon and keep worrying about renting 30 years from now.
Say you are giving away 250k for down payment and 5k per month on the loan payment.
- Warren Buffet's average lifetime return is somewhere around 17%. Getting 15% return consistently is hard as fuck. People can do that (or better) for 3-5 years, convince themselves they are hot and then suddenly take major losses, which they don't talk about. A string of impressive returns, followed by zero is zero at the end of the day.
- Rent increase is a higher risk. I don't want my family to be homeless.
- Based on his price range for a good rental in the Bay Area. Also his apparent lack of awareness of the non monetary cost of having to move a family with kids from rental to rental every now and again. It’s a cost those who have luxury of owning their house don’t have to pay.Jun 15, 2018 1
- Lyft ToktokPutting a side the emotional part, a mortgage is one of few avenues for a retail investor to get leverage for their money.
- @ynlE82, for me to buy a house within 30 mins of work would be at least 5k/mo with zero down since I would never drop huge cash on a house. You earn about 5-10k a year in equity even on a house that's 500k+. I pay 18k on rent and invest the rest. You tell me who wins. Even in retirement the cash alone could generate the rent cash just in dividends. If houses were 250% cheaper I would consider if rent was still the same price as now.
- Same rule will apply if you buy, first few years math will look crazy but after a while it will swing in your favor. I bought 5 years ago and my mortgage payment for 3br today is less than 2br rent next door. As time passes, that gap will only widen.
On a side note: 15% return OP talks about is very optimistic (read as unrealistic in long term)Jun 13, 2018 5
- Medallia CXM8Main question isnt who would buy a house, but who would buy a house in shitty California? Do you know the type of house and property you can own for $250k down and $5k/mo in places that are not broken liberal experiments?
Life is amazing working for a company based on the coast, but living in places that do not punish success or have destroyed any semblance of middle and upper middle class.
You all just keep fighting over your $1M shacks surrounded by homeless and needles. Not only do I own a very nice home, but I'm almost debt free and have only 9 years left on a 15 yr mortgage.
- @JsonBlob so pathetic how you troll and shit on California because you can't afford it. There's a reason why those other states continue to be cheap while CA prices climb. No one wants to live in the country, eat Applebee's everyday, be around racists, and have 0 progress. Also I've never seen a needle. Confused by where you stay when you're in CA, perhaps by the freeway where you stay for free?
- If you could get 15% a year consistently you would be a billionaire... Mortgages allow you to leverage huge amounts of money at a comically low interest rate, receive tax benefits, land is a scare resource, payment is predictable and stable unlike rent, and finally the emotional satisfaction of being able to do whatever you want on your property. If the property appreciatiates in value that is just gravy. Finally no, I hope you never sell any of my houses for money. Tenants pay me each month to live there and hopefully always will. Thank you renters!
- Huh? Most mortgages are sold off to Freddie/Fannie, and the bank doesn't fund them at all. They go for the guaranteed return. Freddie/Fannie collateralize those loans and sell them to investors. Mortgages that remain on the bank's books (portfolio loans) and actually funded by Bank assets are fairly rare. Mostly they are jumbo loans to wealthier clients and some credit unions/small bank's hold confirming loans on their books.Jun 13, 2018 3
- I love that I can put as many nails on wall as I want.
I love that I can have a workshop in a room and not worry about damaging the floor.
I love that I can put brown color paint on exterior.
I love that I was able to dig a pond in my yard.
I love that I can have a 100lb dog and not worry about him eating the doors.
To me buying a house is kind of freedom. I did not have this in my rental. Investment or savings that house brings is a side benefit.
- PayPal IsjndExactly.
I’m lucky in that I have a great landlord right now, so I was allowed to use my garage as my shop space.
But by the sound of it, most everyone in this thread is interested in their returns, while staring out the windows of their 3rd floor condo, longing for that early retirement where they can do more of the same thing.
I track my bikes, my cars and I work on them in my spare time. Oh, and I have a 75lbs German Shepherd. In other words, I have hobbies that necessitate a certain freedom that renting usually doesn’t give you.
(That same landlord is having all siding redone and wants us to tell him what color to have it pained. Cool dude.)
- You have already figured out what you want. Why do you care about others?
- Let me make it worse for you. My tc is 430k, hoping to cross half mil next year. Eleven years of experience.
See, there’s no end. There’s always be something if you keep looking. Sometimes it’s better not to look. You might fail and become even more frustrated.
Happiness consists in contentment.
- There is a critical mass though. I am way happier at 280k than I was at 100k in the Bay Area. Do I want more? Sure but the sacrifice vs reward is not as attractive as it once was. I am far more content now than previously.
Just because you can always make more does not mean people have to go that route.
Knowledge is power. I think it’s good to ask questions and expand your perspective regardless of if you implement change.Jun 13, 2018 4
- Are you insane? That’s not lost money. You’re converting liquid assets into illiquid assets each month, but the money is still yours (except interest / tax).
We just bought another property in San Jose. $200k down payment; $4000/mo. On Airbnb we’ll get $5-6k each month, while it currently rises over $15k/mo.
Our primary house has risen $1m. But if we had your mindset, we’d be dumb and poor. And the risk isn’t that high; there’s an incredible number of people here and so little construction.
- Not really true, google. Surely the uniqueness of a detached property will help hold value, but since there are so few condos/apartments, you basically have to buy a SFH or rent one.
An increase in condos will decrease the value of SFHs, all other factors equal because the housing supply is increasing.
- U have to pay taxes on sale of stock , so profit is 2.1 k after taxes. You get tax benefits on buying the house let’s take it 1k. So now the profit is down to 1k 😀. Now in the mortgage payment you are actually building equity which is not the case with rent. Rent always increases but not the mortgage payment. So if you do the math buying is better in your example
- You are borrowing money at a low rate from the bank. If you are located in the Bay Area or Seattle, housing has been going up like crazy (15% a year?).
- OP, don’t buy a house ever, just keep investing in the stock market. I need tenants for my rentals and I promise not to increase rent more than 10% per year. That way someone else is paying for my mortgage, taxes, insurance and HOA. Plus I get cash flow every month to enjoy life. Deal?
- That's awesome.. I'm jealous. Although, you have to weigh the opportunity cost of selling and poetntial stock market returns vs rental income.
However, give prop 13 shennigians, I'm sure the rentals will be quite lucrative. I'm not sure why so many Californians want to subsidize investment properties for people
- Google NotAHipsteEvery single argument I've seen against buying houses start with "let's consider you get N% in returns from your money", where N is something you only get if you are investment-savvy and has a good amount of luck.
Also, before buying my house my rent increased more than my comp raise for 4 years in a row (bay area). Now my monthly spending with housing is frozen for decades while the salary keeps going up.
- Arguments against:
1) same house I saw for rent for $5000 vs $8000 to own (so $300k down payment tied up plus $3k month coulda gone to stocks)
2) change in tax law, doubling standard deduction, capping salt at 10k, big win for rent over buy
3) call my landlord when shit breaks, don't have to pay maintance
4) ability to up and move to new construction / full amnenity buildings with much less friction that owning
5) matching my high liability (housing) to my current high income without having to know if I will keep that high incomw for 30 years (as in I can move to lower cost area in event I don't have super high income anymore)Jun 12, 2018 3
- The leverage is unmatched and it’s the most tax advantaged place to park your money.
Assume you buy a home for 1m with 20% down (200k). You pay ~4% interest and the home appreciates by 5% YoY in this market. That 5% appreciation is now 50k in home equity. That is a 25% return on your original 200k which more than offsets your taxes. The following year that compounds for even greater gains.
Now imagine putting a renter into the home where the mortgage is covered for you. Populations are growing faster than new construction. It’s one of the best places to put your money if you can deal with the illiquidity.
One thing that 90% of millionaires have in common: they own real estate.
- Right?! I have a 2,500 square foot condo with a garage and all the upgrades right in the middle of everything and 10 minutes from my job that I put 10% down and my mortgage is 2k a month. Not only that, when HQ2 hits NOVA (and we all know it’s coming to Virginia) then my house value will double, I can sell in 5 years and have 300k to put down on my dream custom build house by the river.
All by myself as a 33 year old female. No husband or other income sources but my job.
People in SV... holy shit why.
- @mona - No way it goes into DC proper. They aren’t really business friendly and didn’t give Amazon all the perks they wanted. The two sites that are most possible are Rosslyn and out by Dulles airport in Herndon. If I had to put money on something I would out by Dulles for a couple reasons:
1. It’s the most land and the building is cool
2. AWS is already HQd about 5 blocks away, and we know Amazon likes doing business in that county.
3. The AWS data centers are a hop skip and jump away in the other county that the joint proposal was from.
4. Right now there is affordable housing out at the Dulles site, unlike DC or the sites closer.
5. It’s a hop skip and jump away from Loudoun county wine valley. It’s literally a mini Silicon Valley with the federal arms of Google and other major players already here.
Also it’s telling that Apple said they were coming here. The Rosslyn site might be attractive to Apple but I think they go to Tyson’s (which amazon already took out of the running so they can start now)
It’s nice to see so many companies coming home to the birth place of the internet. SV thinks they are the shit but I read recently something like 90% of internet traffic goes through northern Virginia, and my county is once again the richest county in the country for median income. Virginia for life :) until I retire at least.
- A house is not an investment. It might be a lifestyle decision, but definitely not an investment.
- Let's describe your great investment :
- high front load cost
- high sale cost
- no liquidity, takes months to sale
- not diversified, performance tied to the faith of a neighborhood
- high maintenance cost
- high yearly taxes to pay
- changing toilets
- doesn't pay you a dime for holding it
- can make you house poor
- limits your future opportunities because you can't move easily
- and so on
Sounds like the best "investment" everJun 14, 2018 5
- In stock terms, buying a house is like buying into a mutual fund that:
1. Uses leverages
2. Pays no dividend
3. Has an expense ratio > 0
4. Is costly to buy and sell (high transaction fees)
5. When you want to sell no one will immediately buy (low volume)
And for most people, they will only have 1 share.
Money in real estate is made at the purchase. For stocks, you just need to continually dollar cost average over time.Jun 14, 2018 2
- Apple / Other Tres comasTher american tax system is set up to benefit homebuyers and people starting families. Property tax and other expenses can be tax write offs. Plus, You can increase the value of a house quicker with renovations. Want to live somewhere else? Sell it or rent it out. Tons of people sell their homes for cash or reinvest. My parents sold our home and bought 3 smaller properties in the bay area. 1 they live in and two they rent for income.
Assuming you’ll always make money from stocks is rather naive. You can lose money on housing too but its nowhere near as volatile.
- it is called leverage
Let’s say you put 200k down for a 1M house. If your house appreciates 5% It is appreciation on the entire 1M. I think u can figure out the stock market comparison on 200k. Don’t even need to mention tax savings, risk profile, a place to live, etc.
There are whole industries like private equity built on this model btw. But i guess ppl here only leetcode
- Amazon Gvtw14My house is up $750k since I bought it. Plus all interest was tax deductible
- 5k is not loss, that is investment when you sell the house. 4K you paid to rent is absolutely loss. Also what investment gives you 15% gain with now risk? I want to do that