Guy makes $160,000 and barely making it month to month...

[Ryan81]

OMG!!! You only pay 28% tax on a $160K income???!!! And only 35% combined with Fed. tax rate??!!! In Canada that $160K is going to garner you a 45% tax rate on average, Fed + Prov. combined. Oh God, I gotta move to the US. And you guys actually wanted to immigrate to Canada if Trump gets elected??! LOL

Forget about the weather, you guys wouldn't even be able to handle our taxes. LOL

That's not really accurate... if you add in the payroll taxes for social scrutiny (another 12.4% if you include both employee and employer portions, and almost another 3% for Medicare tax.)
And sales taxes in my locale are over 10% and my property tax is very high...

Throw in the fact that there isn't a single payer health care system as a backstop, and we must pay for our own health insurance... things aren't all as rosey as you might think on the surface...

 

[jl1575]

OMG!!! You only pay 28% tax on a $160K income???!!! And only 35% combined with Fed. tax rate??!!! In Canada that $160K is going to garner you a 45% tax rate on average, Fed + Prov. combined. Oh God, I gotta move to the US. And you guys actually wanted to immigrate to Canada if Trump gets elected??! LOL

Forget about the weather, you guys wouldn't even be able to handle our taxes. LOL

Fed tax 28%, state tax 9% (CA), 6.2% Social Security tax (up to 118K), medicare tax 1.45%, so it is close to 45%

 

[sle]

Nice yields? Don't make us laugh. You claimed a few pages ago they beat a broad based stock index. That is total nonsense

I did not. I said that a fair comparison is an inflation protected bond.

Anyway, I can't imagine any sane person saying that a perpetual stream of payments that is adjusted for inflation is cheaper then a single inflation protected principal minus some carry. At least that's not true is simple PV terms. Once you start introducing other forms of investment you get into the whole risk adjusting business and it becomes hand waving.

 

[Zzzz1]

Well of course you have to take risk adjustments into account, else how would you compare renting and borrow/ownership in the first place. Or are you making the assumption that housing prices remain static? So in the same way should you allow for savings to be invested in a broad based index for a similar duration as the mortgage loan.

I did not. I said that a fair comparison is an inflation protected bond.

Anyway, I can't imagine any sane person saying that a perpetual stream of payments that is adjusted for inflation is cheaper then a single inflation protected principal minus some carry. At least that's not true is simple PV terms. Once you start introducing other forms of investment you get into the whole risk adjusting business and it becomes hand waving.

 

[Overnight]

OMG!!! You only pay 28% tax on a $160K income???!!! And only 35% combined with Fed. tax rate??!!! In Canada that $160K is going to garner you a 45% tax rate on average, Fed + Prov. combined. Oh God, I gotta move to the US. And you guys actually wanted to immigrate to Canada if Trump gets elected??! LOL

Forget about the weather, you guys wouldn't even be able to handle our taxes. LOL

JSOP, what is your average health-care cost in Canada? How much of your taxes go to your health-care system?

 

[sle]

Well of course you have to take risk adjustments into account, else how would you compare renting and borrow/ownership in the first place. Or are you making the assumption that housing prices remain static? So in the same way should you allow for savings to be invested in a broad based index for a similar duration as the mortgage loan.

Why are you limiting duration to the length of the mortgage loan then?

To begin with, it's hard to compare apples to apples. You would have to make assumptions on so many things - mortgage type, access to refinancing, renter protection laws, property and mortgage tax incentives, current age of the buyer/renter, life expectancy or holding time for the buyer/renter, transaction costs for the property, access to leverage on the equity investment etc.

 

[vanzandt]

Great business plan.
http://abcnews.go.com/Business/wireStory/insider-qa-mark-wolf-founder-ceo-ahv-communities-45921472

 

[Zzzz1]

True but there are fair assumptions that can be made such as the average long term return of a passive index fund and that handily beats any property appreciation over most 10+ periods of your choosing.

Why are you limiting duration to the length of the mortgage loan then?

To begin with, it's hard to compare apples to apples. You would have to make assumptions on so many things - mortgage type, access to refinancing, renter protection laws, property and mortgage tax incentives, current age of the buyer/renter, life expectancy or holding time for the buyer/renter, transaction costs for the property, access to leverage on the equity investment etc.

 

[sle]

True but there are fair assumptions that can be made such as the average long term return of a passive index fund and that handily beats any property appreciation over most 10+ periods of your choosing.

For sure, even if you take total return on real estate (you are saving rent and paying taxes/mantenance). However, investing in an equity index (say SPYs) you don't get the same access to leverage and tax benefits as a real estate investor. Plus volatility of real estate is more comparable to fixed income. On the flip side, you get hit with horrendous transaction costs.

 

[sle]

Actually, found this:

year median_px monthly_rent 10_year_$return annualized_return minus_expences
2010 221800 855 174440 0.1458528428 0.1158528428
2000 119600 602 94140 0.1190139064 0.0890139064
1990 79100 447 61060 0.1293644068 0.0993644068
1980 47200 243 43160 0.2538823529 0.2238823529
1970 17000 108 13620 0.1144537815 0.0844537815
1960 11900 71 9586 0.1303508295 0.1003508295
1950 7354 42 7656 0.2605854323 0.2305854323
1940 2938 27

The point of it is that even without the tax benefits an average American would have done pretty well on his house purchase. Almost as well as equity investments.