Paying off mortgage

[Clubber Lang]

If anyone watches real estate shows like "Million Dollar Listing", 90% of the wealthy buy their properties in cash.
In fact, many times high price sellers won't even entertain a buyers offer if a mortgage is involved. They simply take the cash deal even if it's sometimes for hundreds of thousands less.

 

[Sig]

If anyone watches real estate shows like "Million Dollar Listing", 90% of the wealthy buy their properties in cash.
In fact, many times high price sellers won't even entertain a buyers offer if a mortgage is involved. They simply take the cash deal even if it's sometimes for hundreds of thousands less.

A million dollars buys you a two bedroom condo in SF or NY, is that really considered rarified property or just a catchy name (not familiar with the show)?

 

[Overnight]

This thread has gotten too civil. I need more people like @Overnight coming in here in screaming for us debtors to die.

Hey @Overnight I'm levered to 5465464x annual income in unsecured credit. I'm gonna default and take the whole global economy with me.

Lol, what you picking on me for? I gave my opine on holding debt rather than paying it off when able. And while many folks here say working with debt to make profit makes more sense than working with own liquidity...*shrugs* Hey, if it works for them, then make it so. Do what works for you.

I simply do not understand the concept of borrowing money to make money. Seems counter-intuitive. You can go ahead and chastise me, I'll take the lumps for it; I am not an experienced financier and so know nothing about anything regarding money. I think in simple terms, like a caveman. Thus, my opinion is worth nothing.

I do recall this bit though which gave me a chuckle upon review. Yes, it is mostly about simple consumer debt, but it does the screaming for me.

 

[wrbtrader]

If anyone watches real estate shows like "Million Dollar Listing", 90% of the wealthy buy their properties in cash.
In fact, many times high price sellers won't even entertain a buyers offer if a mortgage is involved. They simply take the cash deal even if it's sometimes for hundreds of thousands less.

I saw this happen on another TV show in Europe where someone made an offer with a mortgage involved although the person was paying 70% down and the remainder 30% for the mortgage.

They were out done (seller didn't take their offer) by another buyer paying 5k less but all cash although I believe there was other issues involved.

 

[Clubber Lang]

A million dollars buys you a two bedroom condo in SF or NY, is that really considered rarified property or just a catchy name (not familiar with the show)?

Hi Sig,
The first few seasons were mostly 1-3MM properties but now they are swinging legit trophy properties (8 figure condos on the NY show and 8 figure houses on the LA show).
Many buyers are foreigners who send their agents to bid without even seeing the property themselves.
Crazy wealth and all cash deals

 

[luisHK]

Hi Sig,
The first few seasons were mostly 1-3MM properties but now they are swinging legit trophy properties (8 figure condos on the NY show and 8 figure houses on the LA show).
Many buyers are foreigners who send their agents to bid without even seeing the property themselves.
Crazy wealth and all cash deals

2 notes about foreigners investing in US real estate :

Setting up and following a credit abroad is more difficult than in one's local market, and if the goal is to move funds to the US while investing in its real estate market, paying cash is a faster and safer way to move that money.
That beeing said, I've seen financing programs in overseas private banks to finance UK real estate purchases, same programs might be available for the US, and there are also schemes for the wealthy to buy on credit large properties to reduce their tax burden, Maverick here once wrote a long post about it

 

[ironchef]

Leverage is a nice thing, when you can get it cheaply. Over the long term, most homes bring a pretty modest return, so paying for your house in cash is sort of like buying a long-term Treasury bond and holding it to maturity. If you think that is the best investment you can make, then why are you trading?

Because it is assets allocation. Consider the following scenario:

OP paid off his home loan, like buying an equivalent of 30 year TIPS with better guaranteed returns (him not having to pay mortgage), he then use a percentage of his funds to purchase investment property with a mortgage, his cheap leverage. He could also use the remaining percentage for buying stocks and (a small percentage) for trading.

I think he is being prudent and can still be a trader who can trade without a lot of pressure to be consistently profitable.

Not trying to argue or debate, just looking at things a little different.

Best to you.

 

[ironchef]

If anyone watches real estate shows like "Million Dollar Listing", 90% of the wealthy buy their properties in cash.
In fact, many times high price sellers won't even entertain a buyers offer if a mortgage is involved. They simply take the cash deal even if it's sometimes for hundreds of thousands less.

Many of the wealthy bought with cash borrowed from their margins/investment accounts in order to drive a better deal (short escrow, etc.) and after purchased, shopped for a good mortgage without the pressure of having a closing date hanging over their head. When you have non conforming mortgage (especially multimillions ones), the interest rate varies all over the place and it is prudent to shop around.

 

[wrbtrader]

2 notes about foreigners investing in US real estate :

Setting up and following a credit abroad is more difficult than in one's local market, and if the goal is to move funds to the US while investing in its real estate market, paying cash is a faster and safer way to move that money.
That beeing said, I've seen financing programs in overseas private banks to finance UK real estate purchases, same programs might be available for the US, and there are also schemes for the wealthy to buy on credit large properties to reduce their tax burden, Maverick here once wrote a long post about it

Several of my asian pals did this in early 2000's in Paris, Whistler, Vancouver and Toronto real estate markets instead of the U.S. markets but via the same process you've described.

 

[murray t turtle]

I'm not going to put my family home in jeopardy for some investment. It may not make mathematical sense but risk adjusted its a better play IMO.

%%
It does make math sense, unless one like$ living in an apartment.