Maxi wins! That was I guess my point. That said, I have not had any web income for over two and a half years. I still help Toni with TFMS but its no longer my business and we do not live together anymore. I have been getting by pretty well on trading alone, though I do actually miss some of the marketing and business related stuff of running a business.
Anybody own a house?
- Thread starter tradecrumbs
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Maxi wins! That was I guess my point. That said, I have not had any web income for over two and a half years. I still help Toni with TFMS but its no longer my business and we do not live together anymore. I have been getting by pretty well on trading alone, though I do actually miss some of the marketing and business related stuff of running a business.
Quote from tradecrumbs:
Or do all traders live in one bedroom rented apartments?
I don't know one trader that owns a house. The only traders that I heard of that own houses are also book authors.
What does that tell you?
It tells me you don't know many very successful traders. How many millionaires do you know or have you heard of that don't own a house, regardless of profession? Obviously, if the cost would preclude you from being able to trade successfully, then you shouldn't own, but then I wouldn't call you a very successful trader either.
I guess you guys don't own cars either since everytime you fill up a big chunk goes to taxes.
I have rentals and all my costs are passed to my renters. The thing is you have to buy when the numbers make sense as well as in the right locations. But to say that owning a house never makes sense because you need to pay property taxes and maintain it, that's leaving a lot of money on the table during a lifetime.
I have rentals and all my costs are passed to my renters. The thing is you have to buy when the numbers make sense as well as in the right locations. But to say that owning a house never makes sense because you need to pay property taxes and maintain it, that's leaving a lot of money on the table during a lifetime.
In many cases, renting is a better option. I have a friend in this situation, consider this case:
He lives in a condo near NYC that would cost $850,000 to purchase. Instead, he rents it for $3550. Maintenance and taxes are a combined $1400 per month. Here is how I see his situation:
*Typical downpayment on this condo would be $85,000 (10%). Annual opportunity cost on $85000 is $4250 at 5% interest in bank. $4250 divided by 12= $354 per month
*Mortgage payment on $765,000 mortgage at 6.5% simple is $49,725 per year just for the interest without repaying principal. Interest is tax deductible so reduce this amount by 30%= $34,807 or $2900 per month after the tax deduction.
*Monthly maintenance and property taxes are $1400. Deduct 15% for the property tax portion being tax deductible= $1190 per month net for maintenance and taxes.
*All numbers are very conservative (ie. 5% opportunity costs on downpayment, 6.5% mortgage, tax deductibility of 30% of mortgage interest payment and property taxes).
*As such, total carrying costs (building no equity) is:
$354 + $2900 + $1190 = $4,444 vs. $3550 in rent.
Property would have to appreciate more than 25% for him to break even. Am I forgetting anything?
He lives in a condo near NYC that would cost $850,000 to purchase. Instead, he rents it for $3550. Maintenance and taxes are a combined $1400 per month. Here is how I see his situation:
*Typical downpayment on this condo would be $85,000 (10%). Annual opportunity cost on $85000 is $4250 at 5% interest in bank. $4250 divided by 12= $354 per month
*Mortgage payment on $765,000 mortgage at 6.5% simple is $49,725 per year just for the interest without repaying principal. Interest is tax deductible so reduce this amount by 30%= $34,807 or $2900 per month after the tax deduction.
*Monthly maintenance and property taxes are $1400. Deduct 15% for the property tax portion being tax deductible= $1190 per month net for maintenance and taxes.
*All numbers are very conservative (ie. 5% opportunity costs on downpayment, 6.5% mortgage, tax deductibility of 30% of mortgage interest payment and property taxes).
*As such, total carrying costs (building no equity) is:
$354 + $2900 + $1190 = $4,444 vs. $3550 in rent.
Property would have to appreciate more than 25% for him to break even. Am I forgetting anything?
So it becomes a financing issue?
< snip > ssss
Wall street rule ,pay only 20% of your asset for house.
< snip > ssss
Wall street rule ,pay only 20% of your asset for house.
Nice job NTB however you forgot just one little thing that'll increase the cost on "renting" side of the equation. The interest on that 85k is taxable. Instead of $354 in missed opp, you can shave that income by a hundo and a half (particuarly with a high wage earning NYC resident).
There's no doubt that in the more heated markets, rents are lagging resale valuations. Interestingly I see this phenonoma in the priciest rental markets rather than visa versa. Expensive rents are a New York legend but when I see how high L.A. rents are, I'm in shock. It put's the high prices of L.A. resale a bit more in context.
One thing though that rebuts conventional wisdom, rents have been cheap for years. I think I've told the story of how as a wise-ass 20yo I berated my Aunt for buying a Chicago condo back in '82 or '83 for 300k. The place was renting for a grand and back then interest rates were sky high. VERY stretched p/e, lol. Well she just unloaded it for 950k. So much for applying Ben Graham principles to condo's......
There's no doubt that in the more heated markets, rents are lagging resale valuations. Interestingly I see this phenonoma in the priciest rental markets rather than visa versa. Expensive rents are a New York legend but when I see how high L.A. rents are, I'm in shock. It put's the high prices of L.A. resale a bit more in context.
One thing though that rebuts conventional wisdom, rents have been cheap for years. I think I've told the story of how as a wise-ass 20yo I berated my Aunt for buying a Chicago condo back in '82 or '83 for 300k. The place was renting for a grand and back then interest rates were sky high. VERY stretched p/e, lol. Well she just unloaded it for 950k. So much for applying Ben Graham principles to condo's......
Illusions were best described by Dr. Henry Kissinger.
Three way's to manipulate/control the masses:
#################################
Dear Electric Savant
As you possible knew writing of J.Lokk,B.Franklin,T.Jefferson,
B.Pain,K.Marks,F.Nietzsche, Spinoza,Kant ,Montesk'e & are plagiat
from Griek philosophie .
Thomas Aquin integrated work of Aristotel in Bibel .
But this can be matched from work of Gorgias,Protagor,
Diogen ,Critij ,Heraklit
http://www.utm.edu/research/iep/g/gorgias.htm
Gorgias
i. Nothing exists
ii. Even if existence exists, it cannot be known
iii. Even if it could be known, it cannot be communicated.
Protagor
1.How strong argument can be make week
2. How week argument can be made strong
3. How good biography can be made worst
4. How worst biography can be make good
Critij -"If religion not exist,she must bee created"
Diogen -"Better onanism on marketplace ,as
to be hungry"
Heeraklit -"War is the mother of all things"
It is enough to catch each kind of instrumental doktrin .
Writing of H.Kissinger alsov based on Aristorel reason,Platon
utopie (possible some parts of jews religion)
Your respectfully
Three way's to manipulate/control the masses:
#################################
Dear Electric Savant
As you possible knew writing of J.Lokk,B.Franklin,T.Jefferson,
B.Pain,K.Marks,F.Nietzsche, Spinoza,Kant ,Montesk'e & are plagiat
from Griek philosophie .
Thomas Aquin integrated work of Aristotel in Bibel .
But this can be matched from work of Gorgias,Protagor,
Diogen ,Critij ,Heraklit
http://www.utm.edu/research/iep/g/gorgias.htm
Gorgias
i. Nothing exists
ii. Even if existence exists, it cannot be known
iii. Even if it could be known, it cannot be communicated.
Protagor
1.How strong argument can be make week
2. How week argument can be made strong
3. How good biography can be made worst
4. How worst biography can be make good
Critij -"If religion not exist,she must bee created"
Diogen -"Better onanism on marketplace ,as
to be hungry"
Heeraklit -"War is the mother of all things"
It is enough to catch each kind of instrumental doktrin .
Writing of H.Kissinger alsov based on Aristorel reason,Platon
utopie (possible some parts of jews religion)
Your respectfully
Good point regarding the tax on the interest earned. Now it is $4300 per month in carrying cost to break even vs. $3550 in rent. Same principal applies, it just doesn't make sense to own unless you are confident of sharply rising real estate prices (which has occurred recently). The biggest advantage is that owning a home is like a forced savings plan. However, that is a matter of individual discipline.
Yes, what you forget is that this scenario doesnât apply for every one and even in your scenario there are things missing.
*I get about 4% on the bank and have to pay 15% taxes on the intrest. So intrest is 2890 or 240 per month.
*I pay 4.25% instead of 6.5% mortgage. So cost is 22758 instead of 34807 or 1896 per month.
240 + 1896 + 1190 = 3326 versus 3550 rent.
Even if we take your figures you forgot 1 very important thing: prices for real estate go up every year. The value of my house doubled in 6 years time now. Median US real estate prices rose between 1970 and mid 2005 from 20,000 to 252,000 $. The owner followed this move, those who rented missed the move, and will have to pay an ever increasing rent while the mortgage stays stable ( and at the level of the initial value, not the actual value).
On top of that where I live rent is indexed which means that each year the rent goes up about 1.5%. So after 16 years the rent will be 4438.
I know people who are not able to buy today the house they live in and bought 20 years ago. Which means that prices went up much faster than the income of the average worker. And as rent is related to the actual value of the house you can imagine what that means.
Thanks for your reply. A few points, however:
"*I pay 4.25% instead of 6.5% mortgage. So cost is 22758 instead of 34807 or 1896 per month."
Unfortunately, the past is the past, a 4.25% mortgage is not relevant in todays world and should not be utilized in looking at the value of renting vs. owning at present. At the time you got the mortgage, the calculation was different and it may or may not have amounted to the same conclusion.
"Even if we take your figures you forgot 1 very important thing: prices for real estate go up every year. The value of my house doubled in 6 years time now."
This is true, if you believe that house prices will continue to double in the next 6 years (about a 12.1% annual return), then most likely it is best for you to own.
"Median US real estate prices rose between 1970 and mid 2005 from 20,000 to 252,000 $."
While this seems like a startling move, it amounts to 7.1% annually, less than the annual return of equities during the period and possibly on par with money market rates especially when considering the high interest rates of the 70s.
Overall, people feel rich and happy from owning a house because it has amounted to a forced savings plan (via mortgage payments and stability of their downpayment).
"*I pay 4.25% instead of 6.5% mortgage. So cost is 22758 instead of 34807 or 1896 per month."
Unfortunately, the past is the past, a 4.25% mortgage is not relevant in todays world and should not be utilized in looking at the value of renting vs. owning at present. At the time you got the mortgage, the calculation was different and it may or may not have amounted to the same conclusion.
"Even if we take your figures you forgot 1 very important thing: prices for real estate go up every year. The value of my house doubled in 6 years time now."
This is true, if you believe that house prices will continue to double in the next 6 years (about a 12.1% annual return), then most likely it is best for you to own.
"Median US real estate prices rose between 1970 and mid 2005 from 20,000 to 252,000 $."
While this seems like a startling move, it amounts to 7.1% annually, less than the annual return of equities during the period and possibly on par with money market rates especially when considering the high interest rates of the 70s.
Overall, people feel rich and happy from owning a house because it has amounted to a forced savings plan (via mortgage payments and stability of their downpayment).