Dividends with high growth rate versus buying a house

[wxytrader]

With re-investing dividends, after 30 years the investment forecast with a cagr of about 11%, and capital appreciation of about 8%:

Starting capital: $5000
Portfolio value after 30 years: $1,066,328.56
Total invested: $113,000.00

$1,066,328.56 equals $404,952.57 of purchasing power in 30 years with an average inflation rate of 3.28%.

So if you factor in inflation then $1,066,328.56 will only have the purchasing power of $404,952.57 today. So if today $404,952.57 will buy a small house, then in 30 years you will be able to buy a small house with $1,066,328.56.

Why not just buy a small house today instead with a down payment, and have the rent pay the mortgage?

$5000 down payment
Mortgage: 395k
Mortgage payment: $1975
Rent: $2000 per month

With the dividends, you are averaging $1421.08 per month over 30 years...but you only reach $2000 per month on year 24, and $5417 on year 30.

With the house, in 30 years you will have a small house worth $1,066,328.56 and about 4,854.52/month in rent that is 100% a guarantee unlike with dividends.

Somebody explain to me the purpose of dividends?

 

[2rosy]

with a house you have taxes, insurance, maintenance, illiquidity, large transaction costs, renter headaches. I didn't follow your numbers

 

[wxytrader]

with a house you have taxes, insurance, maintenance, illiquidity, large transaction costs, renter headaches. I didn't follow your numbers

Yeah but with the dividend you are relying on the capital growth which isn't a guarantee as with real estate...so the numbers could be a lot worse ..at best it's a push.

Not even because houses have out performed inflation by 2% to 5% so even more reason to buy the house. I've always known dividends were a suckers bet, just a way to dupe people into holding investment portfolios.

 

[murray t turtle]

Yeah but with the dividend you are relying on the capital growth which isn't a guarantee as with real estate...so the numbers could be a lot worse ..at best it's a push.

Not even because houses have out performed inflation by 2% to 5% so even more reason to buy the house. I've always known dividends were a suckers bet, it's a way to dupe non educated people into investing, but and now the numbers are proving me right.

%%
Good \never buy just for dividends\ like IBD warns.
Dividends are not an auto bet/ not a sucker bet.
Business + RE stock ETfs are not gambling; NOR is RE ''guaranteed'' LOL
I like RE, sometimes SPY + dividends + cash metals business.......................
REALTOR friend i bought a lot of land,thru , said ''why dont you buy some rental houses[Dave ramsey sure does,2]??''
I said no thanks\ i fixed up enough rental property for others [+33 years LOL], even Dave Ramsey says a renter may change the oil on his HOG in your living room \risk LOL. [Not to mention gov messes\jams with throwing renters out \virus .....................................]

 

[2rosy]

Yeah but with the dividend you are relying on the capital growth which isn't a guarantee as with real estate...so the numbers could be a lot worse ..at best it's a push.

Not even because houses have out performed inflation by 2% to 5% so even more reason to buy the house. I've always known dividends were a suckers bet, just a way to dupe people into holding investment portfolios.

real estate is guaranteed to go up? what country? Why are dividends a suckers bet?

 

[Scataphagos]

With re-investing dividends, after 30 years the investment forecast with a cagr of about 11%, and capital appreciation of about 8%:

Starting capital: $5000
Portfolio value after 30 years: $1,066,328.56
Total invested: $113,000.00

$1,066,328.56 equals $404,952.57 of purchasing power in 30 years with an average inflation rate of 3.28%.

So if you factor in inflation then $1,066,328.56 will only have the purchasing power of $404,952.57 today. So if today $404,952.57 will buy a small house, then in 30 years you will be able to buy a small house with $1,066,328.56.

Why not just buy a small house today instead with a down payment, and have the rent pay the mortgage?

$5000 down payment
Mortgage: 395k
Mortgage payment: $1975
Rent: $2000 per month

With the dividends, you are averaging $1421.08 per month over 30 years...but you only reach $2000 per month on year 24, and $5417 on year 30.

With the house, in 30 years you will have a small house worth $1,066,328.56 and about 4,854.52/month in rent that is 100% a guarantee unlike with dividends.

Somebody explain to me the purpose of dividends?

If you're thinking of buying RE at this time, suggest you wait until the "great smashola" to come when prices will be much lower.

In the 2007-2009, downturn... some houses in Detroit were going for $1. The local government wanted people to buy them and pay property taxes. May see something along those lines again.

 

[murray t turtle]

If you're thinking of buying RE at this time, suggest you wait until the "great smashola" to come when prices will be much lower.

In the 2007-2009, downturn... some houses in Detroit were going for $1. The local government wanted people to buy them and pay property taxes. May see something along those lines again.

%%
No wonder LOL;
too much socialism there +exodus of many people.
Good points on why sub -average location, location, location, RE is not autoprofit LOL

 

[iprph90]

House Purchase Details:

- Purchase Price: $395,000
- Down Payment: $5,000
- Loan Amount: $390,000

Assuming a 30-year fixed rate mortgage at today's average rate of 7%:

- Monthly Principal & Interest Payment: $2,564

Estimating on the conservative side:
Total estimated monthly expenses:
- Taxes: $330
- Insurance: $165
- Maintenance: $330
- Vacancy rate 5%: $200 per month.
- Conservative estimate management:
6 hours per month if doing light self-management near the property @$50=$300

- Total: $1325

Added to a $2,564 mortgage, the total estimated monthly cost to own the $395k rental home would be around $3,889 rent would need to cover this plus provide a return on investment.

Please correct me if I'm wrong.

 

[murray t turtle]

House Purchase Details:

- Purchase Price: $395,000
- Down Payment: $5,000
- Loan Amount: $390,000

Assuming a 30-year fixed rate mortgage at today's average rate of 7%:

- Monthly Principal & Interest Payment: $2,564

Estimating on the conservative side:
Total estimated monthly expenses:
- Taxes: $330
- Insurance: $165
- Maintenance: $330
- Vacancy rate 5%: $200 per month.
- Conservative estimate management:
6 hours per month if doing light self-management near the property @$50=$300

- Total: $1325

Added to a $2,564 mortgage, the total estimated monthly cost to own the $395k rental home would be around $3,889 rent would need to cover this plus provide a return on investment.

Please correct me if I'm wrong.

%%
LOOKS about right+ taxes good + low
Even less taxes than that on land portion if ag business. Insurance maybe too low, but dont know, maybe about right in Detroit.
Dave Ramsey likes a 15 year mortgage ; but i used 30 year more + paid off in less than 15 years, my home sells @ profits;
on land for re -sale [thru Realtor ]usually paid it off asap when sold + profit + such...................
Purpose of dividends , must be a good reason/ SPY + QQQ pays them;
another good reason, cash flow. Same reason why some buy rentals instead of [raw land/ like i did mostly...........................................................................................]
ON some land properties / i leased hunt rights, like a good dividend

 

[wxytrader]

If you're thinking of buying RE at this time, suggest you wait until the "great smashola" to come when prices will be much lower.

In the 2007-2009, downturn... some houses in Detroit were going for $1. The local government wanted people to buy them and pay property taxes. May see something along those lines again.

It never happens when everyone thinks it will happen. Anyway, what is it 18 months after the first rate hike is when you start to see the effects of the recession? illI think that puts us right about February.