Yup. Very true. When you get down to the brass tacks renting is probably cheaper than owning when you factor in all the costs...Not many people will agree with that, but you rarely make money on a home investment. My brother is a pretty smart guy who has plenty of money and he's always rented...
Mortgage/Retirement question
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Yup. Very true. When you get down to the brass tacks renting is probably cheaper than owning when you factor in all the costs...Not many people will agree with that, but you rarely make money on a home investment. My brother is a pretty smart guy who has plenty of money and he's always rented...
I couldn't agree more. You can not completely isolate yourself from risk...especially if we are headed into uncharted waters. The best you can do is find ways to mitigate it. One way that makes sense to me is to work as quickly as you can to take the burden of debt payments obligations off you personal balance sheet....including your mortgage.
I agree. Any of the negative things you listed, could occur. If/when they do, would you and your family be in a better place to weather it with or without a monthly mortgage payment?
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I think in the past you could make money on home ownership. I think many of us can point to examples of our parents, grandparents, and even in certain circumstances ourselves as proof. I would argue that many probably overstate the gain conveniently forgetting money spent on upkeep and lost weekend/weeks of their time spent on upkeep (assuming you value your time) vs what they paid for a property vs what they sold it for.
I'm not disputing that point.
I'm just suggesting that entities that many/most of our homes are located are coming up on a future that does not bode well for them...and thus by default (pun intended), us. I do think there is real value for a many to rent but if you are going to own, go into the risks with your eyes wide open.
I guess the situation makes a world of difference. Let’s say you have a 3-4% interest rate. You have a 100k mortgage with 100k in cash or investments sitting there. You could pay it off, or have cash. Let’s say inflation pulls a mini 70/80s and hits 7%.
You pay it off and have no cash or little cash with wild inflation, or you have that money making you 8%. Which are you better positioned? I’ve always been big on cash.
First off, no one should ever put themselves in a position where they don't have an emergency fund. (3-6 months take home pay saved/banked). I guess I'm making some assumptions here regarding understanding, but maybe that wasn't fair.
Can we agree, that if we hit unprecedented economic times, the $100k in "investments" could be worthless...or at least close to it....theoretically?
Cash? Can we agree that a country's currency can become greatly devalued? Since 1974, the US dollar stopped being back by gold. It is now just back by the US gov't. What will your 100k in cash really buy in the situation that the dollar has tanked?
What is the one constant you can control? Answer: The check(s) you must write every month to someone you owe money to.
Again...if you're confident the future will be just like or similar to the past, then my position probably doesn't resonate with you. I would suggestion instead, that the Cobb County Georgia example I linked to is probably closer to the norm where most of us live in (and thus our home's value is greatly dependent on) , vs the exception.
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But that isn't really the question is it? The question really is --
Would you rather have:
a) a mortgage of $X, with monthly payments of $Y, and $Z in bank/savings/stocks
OR
b) no mortgage, no monthly payment, and $W in bank/savings/stocks, where $W is less than $Z-$X
Conventionally, the consensus is A. And the younger you are the more sense A makes due to the longer time the %s help you out and the longer time to ride out bad market conditions.
But if that mortgage payment keeps you up at night - go ahead and do B. You will be worse off long term in pure $$s, but if you are happier and less anxious... well that is worth some of your $$ too. Could be $$ well spent.
Again...that would be the conventional argument and where I used to land in this type of discussion.
A couple caveats:
- historically a good portion of the individuals do not invest the difference between what they saved in NOT paying off their mortgage vs paying it off. Instead, they spend the difference....so they don't ended up being further ahead.
- you are assuming historically similar market conditions. My whole premise is that is not likely given unprecedented debt obligations that can't be ignored that face gov't bodies at almost every level.
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Just way overpaid for a house and put the minimum down so I could use the rest of the money I made from selling the previous home to lease a Range Rover for myself and the wife wanted that new Jag SUV so we got one of those too. It’s going to look great dropping the kids off at their pay for play soccer team practices. Probably going to have pay the student loan monthly with a rewards card that we won’t pay off every month but gotta be the boss.
Could you tell me how that in any way affects my large positions in Amazon, Apple, Nike, Coca Cola, and Canada Goose?
In regards to your first paragraph. We built our house in 2003. I bought the lots in the winter before. It’s a small town so I am talking only 20k for both. When making the offer I asked what I needed to put for earnest. I figured it was like a farm and 10% so I asked if 2k was right or if I needed to write a check for all, we had the cash. Realtor gave me a strange look and said, if you give me $500 you will be in the top 10% of the deposits I receive. Most were 50-100 bucks she said. So I would say 3-6 months in funds would be non typical.
Good question. hummm....let me just put it this way:
blue star loves anacott steel.
I'd love to hear your responses to the other items too.
Small town Iowa (or maybe small town anywhere) is a somewhat different set of decisions IMO. In those markets, you simply aren't necessarily leveraging yourself out like those of us living in the top 100 metros (size-wise) in the US.
That said, the reality is with migration from rural to urban, most of the US lives in larger metros.
Renting doesn't really provide much protection though. If the cities raise property taxes (and many will do so drastically) the landlords will just raise the rent and you get tossed. The best coarse is to not over leverage and choose your location wisely.
Who is renting without signing a lease? You can't be "tossed" without violating the terms of the lease.
If your rent is jacked up upon lease renewal time, you look elsewhere.
If you own and your prop taxes get raised, it isn't as easy to break the commitment.
I had a long explanation typed out and wasn’t done. Then decided to do a tl:dr response. I am known for having contingency plans for contingency plans. Accountants love me. I do cash flows and income statements semi weekly. I feel every situation is different because different people perceive things differently. I am very comfortable with the amount of leverage I have and prefer some leverage over pure debt free approach since I saw my elderly folks go that route and have to claw for a penny.
Most rents are on a monthly or yearly basis. So the rents would certainly raise. If you are prepared to leave then I suppose renting is easier. Many people will end up walking from homes again I'm sure as the taxes and HOA fees soar. This has happened many times before and you often just have to walk away.
Awesome. You are obviously very prudent with your finances.
Again, I want to repeat, I don't think the future you and I will experience will be what your grandparent's experienced. That is why throughout this thread, I keep suggesting people use other considerations vs what those that came before us experienced. I don't believe their experiences are helpful because the playing board has (Or will) change. Again...doesn't mean I am right...just my take based on my perspective. (I'm trying to get people to stop referring to what occurred in US' recent past in defending their position against the arguments I'm presenting since mine do not assume history is a good indicator.)
Given your conservative nature, I wonder if you would be motivated to approach your municipality that your house is located and ask for a breakdown of future infrastructure obligations vs expected revenues (property tax revenues)?
(hint: believe it or not, no one will have this number in most instances).
I"m talking leases, not payments/rent.
I think it is safe to say, most leases are on a yearly basis. The exception would be shorterthan 12 months...and because of that, more costly to begin with.
I know the town has very little debt and has a lot of bonding space. Besides I plan to move in 10 years so to be a little blunt and heartless, I don’t care much.
