True, but should they pay you Manhattan wages if you are living in and working from Nowhere, Idaho?
I’ve seen and heard it suggested for investments in general, real estate and otherwise. It might well be a good idea, at least with a ceiling level on it.
You’re imagining people who can walk away with millions; and I’m imagining people who will wind up with barely or not enough to live on even if they don’t have to pay taxes on the inflation. People in both categories of course exist.
We’re seeing a lot of that too (not always large corporations, but often out-of-area owners) – with the further complication that the rentals are all short-term Air B&B type rentals, because that brings in more money per month than by-month or annual rentals. This takes the houses not only off the real estate market, but out of the residence market entirely: nobody’s actually able to live in them.
I don’t think you’d be accusing your mother of lying or exaggerating if you asked her ‘Are you aware of this tax deduction?’
You, however, know your mother better than I do. If you think she’s going to take it as an accusation, then keep quiet. Otherwise, I’d ask her.
I recently attended a retirement planning seminar, in which the presenter spent about half the time explaining how income tax brackets work, and what effect that has on your expected take-home pension amount. And this was to an audience of fairly well-educated people making pretty decent wages. In a world where this group of people need such basic things explained to them even after decades of working, I would not be at all surprised to learn almost no one understands the rules around capital gains taxes when selling real estate.
It’s expensive to retire. Even walking away with a couple million will barely do it. In these cases, we are talking about significantly less than that.
And you may even want to leave something to your heirs when you are done with it.
Eh, she lies and exaggerates a lot. On this, I never had reason to think that she was, so never really questioned it.
She probably will, but I’ll ask anyway.
Her woe is me act ended up with me paying for my Father’s tombstone, so I don’t have a whole lot of hangups with it.
Besides, I’m her power of attorney if anything happens, so it makes sense for me to be up to speed on her finances.
Same here, though, I’ve occasionally wondered what we’ve spent additionally in maintenance costs – you know, lawn and home equipment, repairs like the roof, etc. Plus property taxes. But I’m too lazy to do the math.
Plus, assuming you have a mortgage, the payments start out being all or mostly interest, so you don’t meaningfully pay down principal until many years have gone by. So if you move frequently you’ve only been paying interest.
I have some issues with this. I’d prefer people to have and utilize a variety of ways of investing rather than have so many invested in just one method. It might be better if the average person only had a portion of their wealth tied up in their home and also used other forms of investment as well.
I also understand that is not the world we presently live in, in the US at least (possibly elsewhere, but I don’t know enough to discuss that).
No, it’s not.
I started my most recent investment (a mutual fund) with only $1500 and it’s doing well enough. Granted, the idea is to build a bit of nest egg that can be used for a variety of things, including a potential downpayment on real estate, but people who rent very much should be encouraged to save and invest using a variety of options out there.
Does that mean they all appreciate the way real estate does? Of course not. But if I knew back in my 20’s what I know now I could have leveraged some small savings into a small investment vehicle into a downpayment/seed money for a business/larger investment and so on until I’d be in a better financial situation than I currently am. Well, water under the bridge, and I was not helped by the fact my parents were bad with money and ignorant about investing - like all parents, they were far from perfect. My siblings and I had to learn on our own, including discovering some of the stuff our parents assured us was true was actually flat-out wrong. That’s life, and I learned a lot, which is why I’m a person earning around $30k a year with no debt, savings account (not just checking), excellent credit rating (which saves you a LOT of money on my end of the scale), 401(k), and now a growing mutual fund on track to keep my current standard of living into my late 80’s/early 90’s. Not luxurious, but pleasant enough with room for a few luxuries. Unfortunately, I’m in my late 50’s managing my money like I wish I had in my late 20’s, but it’s still worth the effort.
Does that mean if my current 10 year plan pays off I’ll buy a house or condo? No - but I will have the option to do so which is worth a great deal whichever way I go from there.
Actually, one of the best revelations I’ve had in life is that I am NOT a financial genius. I have utilized people who do finances and investment for a living and it’s paid off for me. Not often and not a lot because I don’t have a lot of funds for this, but then, at the scale my personal finances are I really don’t need all that much anyway. It’s the same way I’ve used a lawyer for legal advice and matters, and an accountant, and various other professionals in my life because I’m not and can’t be an expert at everything.
Unfortunately, too many people opted for ARM’s during the last housing bubble as a means of either getting more house than they could otherwise afford, or getting a house when really they didn’t have the means to keep on. Result: lots of foreclosures, which can be even more toxic to your long-term financial health than renting all your life but keeping your finances under control and saving/investing via other means. I saw too many people fall for the notion that home ownership is always the answer and the more house the better.
Again - if you don’t have the means to take care of that investment it’s going to hurt you in the end. Home ownership is not just about how much you pay each month towards the mortgage. It’s all the other inevitable bills - stuff that wears out and has to be replaced or upgraded, unexpected problems, on and on. And sure, a home equity loan can help with that but it’s still a loan that has to be paid back and there’s still interest. People who have owned a home for a long time know this. New homeowners may or may not.
A word here about condos. First, in some ways they seem to combine the worst features of ownership and living in a rental apartment building, but they do work for some people. So, in such an arrangement you do in fact own your property, which just happens to be literally embedded in a larger structure. In that case your HOA, while not a landlord, does handle maintenance and repairs of the larger structure/property. And that can be a fine arrangement when done correctly, especially for people who might not otherwise own because of issues with maintaining a home (disability, perhaps, or maybe they just travel an insane amount on business, or whatever). The problem is when the HOA fails to do its job - as we saw in the recent Florida condo collapse which stemmed at least in part to decades of deferred maintenance, failure of the condo association to do the job of maintaining/repairing the building (there is also probably a component involving design failures and shoddy construction). You can get to a point - and it has happened - when owners of condos will have to cough up as much money as their units are worth in order to keep their building structurally sound. Which many condo owners can not afford. If you have to permanently vacate your condo due to safety reasons (or the building actually collapsed) you are, again, in a situation where you’re paying a mortgage on a property you can’t use while having to find and pay for another place to live.
That doesn’t rule out a condo as a good thing - I’ve known several people who cleaned up by buying a condo, living in it for a decade or two, then selling it to move on to something else. On the other hand, if you’re stuck in a decaying, unsafe building - at which point good luck selling your condo - you might have been better off renting because at the point you stand to lose a lot of worth.
There’s the argument that equal work should result in equal pay regardless of where you live vs. some companies are giving more pay in recognition of cost-of-living realities that would no longer apply to someone living in Nowhere, Idado vs. Manhattan.
That is a very good question that our society is currently debating. Please check back in 10-20 years for a verdict.
I confess to some interest in this in part to my nephew and partner’s employment and living situation which encompasses that debate.
There are quite a lot of people for whom the words “only” and “$1500” don’t go together.
A lot of people know less about finances, investing, and so forth than they think they do. As I said, one of the best things I’ve done in my life is admit I not only don’t know a lot about this stuff, I don’t even know what I don’t know. It seems we expect people to have finance knowledge on par with people who go to school to make this a career regardless of what else people are doing with their lives.
Going to a professional is smart. You don’t have to hire a dedicated portfolio manager, and I’d advise against going to a seminar hosted by a charismatic speaker. Admit what you don’t know and start with the basics if that’s where you are.
I’m far from rich - heck, I barely qualify as bottom of the middle class - but professional advice for many things is some of the best time and money I’ve spent. It’s enabled me to recover from mistakes or avoid them and build from there. Yet I see people earning literally 10 times what I do living paycheck to paycheck with no reserves and acting in ignorance. It’s sad. I also seem them looking for free advice and insider tips and some sort of trick to get ahead. Um… that doesn’t really exist (well, OK, some of the free advice is good but there’s a lot of chaff to go through before you get to the wheat). Sorry, it’s not rocket science on the broad level. And some of it is hard work, having to defer some rewards in order to get ahead in the long run, which people often do not like and don’t really want to do.
I’m not going to have “a couple million”. Fortunately, I’m happy with a modest lifestyle AND planning to work longer than many other people to make it work for me.
One thing is that I’m not planning to live entirely on my own in my old age - a number of us are planning to retire together and pool our resources and watch out for each other as a way of managing costs. This is something more younger people, and people without children, are open to than in our parents’ generation and not appealing to everyone. There seems to be this notion that old people want to live in their own discrete homes entirely by themselves but that isn’t always the case. My father could have lived all on his own, but didn’t want to live alone. Lucky for him, he was able to move in with one of his children and it did work out. There are other instances of older adults living together (I almost said “group living” or “group home” but that has a very different connotation). It’s a strategy that will work for some, but not all.
I will say that not having children does remove the “leave some money for heirs” from my worries and consideration. Unfortunately, most of the free/readily available advice always assumes you have children to worry about. Kids really are expensive! Not having them puts you in a very different place (with, again, both positives and negatives).
Let’s assume supply > demand for a second. Let’s also assume you can pay the mortgage every month.
Walk into any lender without ALL of these.
- A down payment of at least 3.5%. 10% would be better
- Earnest money of a couple thousand $
- A FICO score of 620 minimum. Actually make it a 640.
and get a house. Not gonna do it.
VA loan allows $0 down.
So does USDA. My point is for a vast majority that could avoid a house, there are still barriers that are creating the affordable-housing crisis that supply ain’t gonna fix.
Understood.
10 years ago when when I was struggling to find steady work and still on food stamps I was one of those people. I had to work up to having $1500. There are even some threads in which I participated (even started) about that situation.
People starting at that level have to do different things than someone at my level, which is different than the level of a friend of mine who just retired with significant real estate investments he’s now cashing in/re-investing and some other things that paid off handsomely.
This notion that poor people would get ahead if they just used money like rich people did is pernicious. No, it doesn’t work like that. You need different things at different levels.
In some cases it really is a matter of “you need a full time job” or “you need a better job”. That’s where I was 10 years ago. Now I have had steady and adequate employment for nearly a decade during which I had a phase of “build up a rainy day/emergency account”, then “now that you have a half year’s salary in the bank you need to do more with your money than just let it sit there”.
I’ve been encouraging some friends (I won’t say advising, just encouraging them) who are at the stage of adequate employment but are paying off their debts. They’ve made significant progress, increased their credit rating into the high 700’s, and built up an emergency fund. But they’re in a different place, having recently taken on custody of a teen age relative who was a victim of neglect, needing to get better medical/dental coverage, and they’re renting their current house (which is an actual house) from the parents of one of the two people who make up the couple which is a very different renting relationship than the one I have.
People middle class and lower are actually in dire need of sound financial advice but have less means to access it. Which is a shame. They need sound advice not to force them into one option or another, or to make decisions for them, but rather to give them options and the means to decide what would work best for them. There also needs to be more legit means for the least wealthy to actually save and invest rather than be exploited and drained of their resources to feed the greed of others.
Yeah, that’s a big part of what drives this notion that even having “a couple of million” for retirement means you’re likely going to “struggle”.
If you’re paying yourself a retirement salary of $100,000/year, “a couple of million” will last 20 years, just on the principle alone. Having even a basic investment strategy will stretch that even further. People think only having a couple of million to retire on is a problem because there’s so many people out there that insist you should never touch the principle, because they want to leave it to their kids, or something.
Well, screw that.
Agreed, but is there any statistical evidence that this is a common phenomenon? Because at first glance, buying a house and then leaving it empty, while paying maintenance and property taxes seems like a terrible investment strategy.
The statistics online are varied, but here’s one:
“Around one in 20 homes in Central and West London lies empty, according to the UK government’s statistics agency.”
Good question and unfortunately I don’t have a good answer.
I do agree that buying a property and leaving it empty is a terrible long term strategy, but I’m not convinced that the people doing this are doing it for holding property long term. I think it applies more to entities buying property and holding it in a volatile market just long enough to turn a comfortable profit before selling it off to someone else. You only supply sufficient maintenance to keep it from deteriorating and losing value.
Another factor is that they’re storing money in a solid investment that isn’t likely to lose value, and is in a country that’s unlikely to either seize the property, or undergo a war of some kind which would destroy the property. So long as the long-term growth covers the associated costs of owning the property, some people/companies might see this as a good way to keep some wealth safe from chaotic events. Having to deal with tenants and all their associated hassles might not be worth the trouble to them.
I presume this particular ‘solution’ been discussed elsewhere on the SDMB (I haven’t checked), but …
Lots of towns don’t allow tiny houses within their city limits.
Lots of towns have setbacks, minimum square footage, minimum lot sizes, etc – collectively, what I referenced above as artificial scarcity.
What it big swaths of land were dedicated TO occupancy by tiny homes or …
NIMBY. Right. That’s almost the only compelling criticism that I can think of offhand.