I bought at the bottom of the market in Phoenix metro and a year later I’m up $35k based on comps. If this home skyrockets at a 2005 bubble rate I’d do well to sell when my profit will buy a similar home outright in a more stable market in, say, the Midwest, and live out my days without ever making another mortgage payment. If it doesn’t, I still have a really nice house for the same monthly cost as I would have into renting a 2-be apartment.
I paid my home off in the 30 years I had financed it for. At least 25 of those years my mortgage was less than I would have paid for rent. The more time went by the greater the difference became. The rent savings alone more than paid for the home and the financing. In the 30 year period the home went up approx 10 times what I paid for it. Those were good times. Today I think it is still a sound investment but doubt if it will ever be what it was at the peak.
As did I. 
That’s what I was just coming in to say. Your rent will keep going up but the mortgage payments will stay about the same. Even if your rent was a bit lower at the start they will be a lot higher by the end so buying a house actually costs less over the term of the mortgage and you have a large asset at the end.
How can that not be a good investment?
Yeah, and everyone assumes rent will at least start out lower, but that hasn’t been my experience. Our last house would have rented for at least $500 more than we were paying for mortgage/insurace/taxes, and the one we’re in now is costing us a few hundred less a month than it would cost just to board our horses off-property. It would also be hard to even find a rental as nice as the houses we have lived in, plus the quality of life issues of not having to ask permission to have pets or upgrade things.
That’s for 5 months. Please show me someone who will give me 4+ times my collateral to play the market that isn’t due for 30 years.
But as others have said, the problem with your comparison is that not only would the person in case one not be paying rent, but also that they could have used said rent to invest the S&P every month.
As I said though, in relation to the OP - those Homeowner Assoc. people aren’t elling you what to do because of property values… unless you have 3 cars up on concrete blocks on your lawn. They are being little Hitlers because they enjoy lording it over you. In grade school they probably took your lunch money or tattled to the teacher to get you introouble; now, they can use the full force of contract law to make you jump throught hoops and spend money - not because it’s necessary or a good idea, not because it helps property values, but because they like to make you squirm and there’s nothing you can do about it or them.
It’s like the old joke about faculty politics in universities - why is it so vicious? bcause the stakes are so low.
I know this guy Vinnie…
You’d have to actively manage the futures position by rolling it over to the next month as expiry approaches. I don’t actually think this is a good idea for pretty much anybody. Just wanted to share a point of information that is *possible *to leverage yourself as heavily as people do when buying a house.
Fair enough.
Definition of leverage from investopedia. While this technically includes mortgages, that’s not normally how the term is used. It normally means increasing the buying power of the capital you have through borrowing, which of course you do with a mortgage, but generally for the purpose of increasing the return on capital.
That depends entirely on the homeowner association. Plenty of them are NOT run by little Hitlers, and are indeed interesting in maintaining a uniform “look” to the neighborhood because it helps protect property values.
But some of them are not run by homeowners.
We have a neighborhood nearby with a homeowners association that is getting kinda famous for its interesting management. Enough so that a protest group is trying to get it dissolved.
Seems the council is made up mostly of people who don’t live in the community, but DO own multiple homes within it. And they have to approve any new addition to the council.
Many of the homeowners are complaining that the council’s rules are motivated not by what makes it a good place to live, but by what makes it a good investment.
And they just raised dues by 50%, spend the dues questionably, and one of the rules is that anybody behind on their dues get absolutely NO say in how things are run.
Green Run Homeowners Association, Virginia Beach VA.
Reported
Please show me any mortgage lender who will lend you four times your collateral.
Pretty much any of them. 20% downpayment, and they loan you the 80%.
Sure, the house you buy is also collateral, but the same is true in the stock case.
My impression is that people who own houses tend to undercount all the other costs aside from the mortgage.
Renting gives you a lot more flexibility to move and to find a place that’s right for your family’s needs at the time. You can do the same by selling your house and buying a new one, but then you’re (often) paying 6% in transaction costs to a realtor each time. If I bought a new house every time I wanted to move, it would be very expensive. But instead, I rent, and I get to live exactly where I want to and have exactly as much space as I need and am willing to pay for, and I can walk to work. People who buy houses tend to have longer commutes and houses that are somewhat mismatched to their needs, because it’s more expensive to move. Yes, my housing would be cheaper if I bought a three-bedroom five years ago and kept it for another 25 years. But I’d be spending a lot more on cars and gas, a lot more time going to and from places, and although I expect to want three bedrooms in the future, I certainly don’t need them now. It’s phenomenally cheaper in the long term for me to rent one-bedrooms until I need more.
A long commute, aside from the additional commuting cost in time and money, is a much larger drag on happiness than most people realize, and greatly increases the likelihood of divorce.
Repairs and maintenance costs go up over time, as do taxes. All of that’s priced into the rent.
I’m not saying no one should buy a house. I’m saying that rules of thumb and folk wisdom aren’t the right way to make the decision. Think about what’s really important to you and for gods sake make a spreadsheet that incorporates all the costs you can think of. Then read some things and talk to the smart people you know, and add all the stuff you forgot about.
Right, which means nobody lends out 4 times the amount of the borrower’s collateral. Ever.
The value of any underlying investment as collateral is based on many things, not the least of which is the liklihood of that asset to lose value. A house is much less likley to quickly deprecaite than a publically-traded security.
I am not sure I understand what your objection is. Are you saying a down payment on a house should not be considered collateral? Either way, you can get a home loan with other assets other than money.
The home is collateral. 20% down is not collateral, that’s purchase money. It goes to the seller along with the lender’s money. If you buy a $100,000 home with $20,000 down and the bank lends you the remaining $80,000, youre giving $20,000 to the seller (not the bank), the bank is giving $80,000 to the seller, and you’re putting up your newly purchased $100,000 home as collateral.
I’m saying its only a fraction of the collateral.
ETA: Emtar said it better.
Fair point.