I have an even better idea, how about not buying a house or renting. We can live in a cardboard box like this guy and have no expenses at all... http://www.howardsview.com/lost/new-york-homeless.jpg
This guy is thinking...all you morons out there spent 6 years in college only to come out and work 70 hours a week to pay for that $4,000 monthly mortgage and $400 a month for a new car, plus you have $100k in student loans outstanding, where your knowledge is just a little more than what you knew back in 12th grade. I, on the other hand, am truly free. I have no boss, no bills, and no debts... http://bighugelabs.com/flickr/onblack.php?id=560172192&size=Large
ts very different. You just illustrated my point of people not understanding. In a simple example, if I put 10% down on a $100,000 house, I've invested $10,000 (not $100,000). Yet in 12 years, I will have $100,000 in equity. ______________________________________ What kinda shithole are you living in, putting 10k down? On what, 100k house? You have been watching "Flip that House" or some lame ass Real Estate Show on tv. Leave Real Estate for those that play the game, stick to trading for your millions. With your logic, you'll go broke in the Real Estate Business before the rest of the country looses their homes. * The equity in your home is as only good as the "Hood" you live in, not to mention that game is OVER.
That game is over too. 20% down will be the norm by next year and the 2/28s and 3/27 are finished. So are the No doc's with no collateral. All gone. You will have to be cash liquid to play the new game of Real Estate, unlike the "Stock Market'.
Nice. I was using $10K and $100K as an example. Makes more sense than saying 3% down plus closing costs on a $367,000 house or something like that because the concept would get buried in the details. FWIW, $100K can get you nice house depending on where you are. I do play the real estate game, and I am making my millions doing it. The real estate game doesn't end just because housing prices stall or even go backward. Talk to anyone that knows the game. Are the malls and apartment complexes shutting down? And, house flipping makes money linearly...its nice for the beginner, but in the end, its small-time. I make mine through geometric growth. If you weren't so quick to shoot down a money making concept that is new to you, especially when it is free and all it requires is for you to open you mind a little bit, you'd be better off than you are today. SM
Whether the leverage is 2 to 1 or 10 to 1, how does it make sense to borrow at 6% to get a 2-3% return?
Assume the following: Person 1: Pays $1200 per month in rent (and takes 15k and invests it in the S&P 500 making 12% per year compounded) vs. Person 2: Pays $1,170 monthly on a 15 yr fixed rate mortgage (150k house 10% down or $15k) In 15 years the person who bought the house/townhouse/apt. will have no payments and a 233k asset (assuming the property appreciates 3% per year for 15 year) Instead of buying a place the renter invested the 15k in the market with 12% annual return. In 15 years the renter will have $82,000 or $150,000 less than the owner and look forward to paying $1870 per month in rent (assume 3% per year rent increases)
I am amazed at how so many of the "professional investors" on these forums shoot down real estate. I am with you 100% SM. I own several apartment buildings, each bought with no money down. They have never cost me a dime, as the renters pay all expenses. When they are paid off the positive cashflow will easily fund my retirement, the depreciation saves me thousands on my tax return, and the equity growth is making me a wealthy man. Since I put nothing down I guess my ROI is infinite, but had I put down 20% my ROI would still be about 70% a year. What the hell do I care if the real estate market stays flat or contracts for a while, my rents are still going up every year. As long as you buy right, it is hard to go wrong in real estate.
Now lets assume that after person 2 pays off his house in 15 years he takes $1,800 per month (what the renter is still shelling out in rent every month) and invests it in the S& P 500 at 12% compounded for 15 years. After 15 more years: (assuming 3% rent increases take place and the house appreciate 3% per year) Person 1 (the renter): will have $449,000 (15k compounded for 30 years at 12%) still paying rent after all these years. Person 2 (the owner): WIll have 363k (the value of the house) plus 911k ($1,800 per month for 15 years invested in S & P 500 with 12% compounding returns) or $1,274,000.