how did people get it in their heads that long housing is an investment

Quote from TGregg:

Wifey. Get married and the Mrs. wants a house for her kids. Men will live in a cardboard box. But not if they are married.
More...

Lol!!!! So true!!! I went from a 650sq foot place a...Well a decade ago:( to a 2500+sq foot house today.:(

I've got some quarters in the cupholders in my car, and OCCASIONALLY eat the Mcflydonald's $1 Mcdouble.:( :( Of course, I've got to hide the wrapper before I get home. Lol, but not lol!:D :eek:

Back then I even had toys like motorcycles, etc., Now I have this 1/24th model Harley FLSTF sitting in front of my monitors. LOL!!!!!!
 
You don't know much about real estate do you?
Or asset classes in general
hint hint -- look for asset classes that are cheap cheap cheap
notice anything?
no? I thought not....
have a nice day

Quote from KINGOFSHORTS:

First the margin loan rate of 6% lets say for 30 years.

Second is the cost of insurance,taxes,fees,etc. another 3%

Maintenance/upkeep (ie: repairs) 1%

Total carrying cost over 30 years = 10% annually.

And I am not including the wide bid/ask spreads and fees etc.. when taking on a long position in housing.

Someone putting down 10% towards a 200,000K long position in housing will have taken a 10:1 leveraged position without the upside potential you get with a 10:1 leverage.


So you take the risk of 10:1 and you have to return 20% annually on your long position to at least break 10% a year.

And at the end if you want to unlock value on your equity you have to borrow on it and pay who knows what. So you get screwed anyhow.

You cant sell a position and cash in or hedge with calls or collect dividends etc.., its either sell the whole house or borrow against it.



Buy a home because you like it. ie: beachfront,nice place etc... and take a 15 year loan or less.
More...
 
Every investment has drawdowns.

The fact that housing prices have pulled back from bloated highs does not negate the value of owning a home long term.

If you were to survey folks in their 60s who have owned a home for most of their adult lives, I can assure you that the vast majority would report that it has been a great investment.
 
if you paid to much for your house....during the rat race to the top, then you are not looking at the property as an investment.

If you used your head, sat on cash or decided to hold of on a mortage...while the lemmings ran into housing then your ok.

If you bought your house 10 years ago or more and your in an area where housing has yet to drop pass your home value when you bought it...your fine.

Not everyone is FUBARED in housing and right now, is the time to pick up all kinds of RE.

Problem is, like most in trading, Private Equity, etc....they don't use their head when they get into the game and they have zero patience to wait it out.

Sheeople get slaughter'd...Sharks swim on to live another day.

Wait till you see the Stock market correct.....then you will see some serious "RE" take a hit.
 
Here is a look at my math and you can see where your calculations are off. Of three props I have recently owned the avg cost was about $1mm apiece. I put 20% down. Actually I lived in two, the other was spec. Taxes were $15k a year but I never looked at it as an expenditure because they are straight line tax deductable.

My interest was about $35k/yr. This was tax deductable at 33% or about $12k was deductable. My properties increased in value at about 4.5% per year. So taking out the $23k that was not tax deductable, this left me with a $22k gain per year on paper. This over my initial investment of 20% down or $200k was an annual return of 11%.

There are other expenditures like maintenance, but I am not paying anything else to live there. To rent a house like this in my town is $4500/mo. That's $54k/yr I am not spending. Utililities et al are the same no matter where. My figures are low because they don't include compounding on upside. ie: year 5 my 4.5% is more like a $55k gain. When I sold I worked out a 4% commish on two. Sold the other to a friend with no commish.

How is a 17% return on investment in year 5 on that initial $200k a bad investment. Its like I was being paid $33k to live in a great house in year 5 instead of paying $54k. That's a difference of $87,000 a year. Wouldn't you like to save that much a year on living expenses?

Just don't want you guys to scare off any young folks that might be considering buying a house instead of renting forever. Yes some predatory things happened. Don't do Interest/Only or 110% financing or anything stupid. A 5 in 1 arm is fairly safe to get a lower rate.
 
Quote from short&naked:

We'll see. Nobody has a claim on predicting where the market will go (and if it can go further down).

Right now, I don't see how value investing is possible in real estate. Prices are still out of wack.
More...

It is being done and will continue. The amatures have been eliminated from the game and the pros are making a fortune. The majority of the prosperous investing is in mid to low end rental properties. Go to a local REI, find a couple guys with 50-100 properties and ask them how many properties they have purchased this year compared to any other. It's the same thing as saying " I dont see how people can make money in this stock market." The pros around the boards will tell you they have made more money in this market than any other and the amatures were kicked out.
 
Quote from EMRGLOBAL:

if you paid to much for your house....during the rat race to the top, then you are not looking at the property as an investment.

If you used your head, sat on cash or decided to hold of on a mortage...while the lemmings ran into housing then your ok.

If you bought your house 10 years ago or more and your in an area where housing has yet to drop pass your home value when you bought it...your fine.

Not everyone is FUBARED in housing and right now, is the time to pick up all kinds of RE.

Problem is, like most in trading, Private Equity, etc....they don't use their head when they get into the game and they have zero patience to wait it out.

Sheeople get slaughter'd...Sharks swim on to live another day.

Wait till you see the Stock market correct.....then you will see some serious "RE" take a hit.
More...
:D :D
 
Is there any other investment that allows you to leverage 20:1 with a 6% loan amortized over 30 years? That is seriously cheap money.

And that's really the answer, IMO. Housing in the US not only provides (encourages, frankly) very high leverage, it does so with subsidized borrowing costs, which means you're betting with OPM anyway. In many ways, it's J6P version of a hedge fund.

Just don't get caught holding and leveraged at the end of the cycle...
 
Quote from Tide31:

Here is a look at my math and you can see where your calculations are off. Of three props I have recently owned the avg cost was about $1mm apiece. I put 20% down. Actually I lived in two, the other was spec. Taxes were $15k a year but I never looked at it as an expenditure because they are straight line tax deductable.

My interest was about $35k/yr. This was tax deductable at 33% or about $12k was deductable. My properties increased in value at about 4.5% per year. So taking out the $23k that was not tax deductable, this left me with a $22k gain per year on paper. This over my initial investment of 20% down or $200k was an annual return of 11%.

There are other expenditures like maintenance, but I am not paying anything else to live there. To rent a house like this in my town is $4500/mo. That's $54k/yr I am not spending. Utililities et al are the same no matter where. My figures are low because they don't include compounding on upside. ie: year 5 my 4.5% is more like a $55k gain. When I sold I worked out a 4% commish on two. Sold the other to a friend with no commish.

How is a 17% return on investment in year 5 on that initial $200k a bad investment. Its like I was being paid $33k to live in a great house in year 5 instead of paying $54k. That's a difference of $87,000 a year. Wouldn't you like to save that much a year on living expenses?

Just don't want you guys to scare off any young folks that might be considering buying a house instead of renting forever. Yes some predatory things happened. Don't do Interest/Only or 110% financing or anything stupid. A 5 in 1 arm is fairly safe to get a lower rate.
More...

I think your calculations need a little work. First of all, the $15k in taxes is not a tax credit, its a tax deduction. That means it still cost you $10k out of pocket each year. Was that an interest only loan of $800k? Otherwise you were making a principal payment each month in addition to the interest. You didn't factor that into your ROI. What about insurance? You got a mortgage, then you got an insurance payment to make. How much was that?

So, you had $50k in interest and property tax deductions, that means your out of pocket costs were about $33K plus your principal payment and insurance costs, which I estimate were an additional $17k, bringing the total to $50k. Lost interest on the $200k you put down assuming you just parked it in a CD? Let's just say $8k/year. So, really not much of a return on your $200k, but you got to live in a nice house.
 
you also forgot about cutting the grass, shoveling the snow, fixing the leaky roof, the new refrigerator, the runny toilet, the water bill, etc etc

if you live in Florida (where i leave) insurance is a nice chunk of money..trust me...maintaince in some buildings is almost as much as the mortgages

still too early to load up on real estate....but i agree with an earlier poster about the low end steals

Buying real estate vs renting is very geographic and type of housing specific

the low to mid priced stuff has potential in the mid west and other areas that didnt go crazy....GA, TX, IL, MI.....there is positive cash flow and potential for appreciaition..but some of them are returing 33% + cash on cash per year

the high end has a ways to go...and in some areas...a LOOOOOOOOOOOOOOOONG way to go to get normal

deals like this exist EVERYWHER in Miami

1.5 million to sell.... $5000 a month to rent... DO the math!

http://miami.craigslist.org/mdc/reb/1342417101.html

I can show you tons of deals like this...

d
 
You must log in or register to reply here.
Back
Top