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Your thoughts on homeownership?
06-20-2013, 07:51 AM
another thing people tend to leave out in the "once you have it paid off" point is that you still have to pay taxes every year, and that amount increases as your property increases in value.
Even a paid off home worth 250k can set you back thousands of dollars a year in taxes. Not to mention the insurance (which only goes up) and maintenance costs (and if you have an HOA payment, which also only go up). Even a paid of place might still cost you 12k a year to
You also have to consider that you have little to no control over the area around your home, which does impact the homes value as well. Some developer may come along and flatten that pretty park across the street to put up something you don't like/damages your lifestyle or that hurts the value of the property.
Its a pretty big gamble, especially when there are plenty of other investments just as capable of increasing your wealth that don't limit your flexibility.
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Your thoughts on homeownership?
06-20-2013, 06:14 PM
Quote: (06-20-2013 10:03 AM)Tigre Wrote:
Why do you guys think property makes you location dependent?
I am location independent. My lifestyle options are something that a lot of RVF guys would aspire to have. I can do that because of net worth built up mainly through properties.
I've had some good investments. 10 bagger stocks. IPOs that more than tripled on listing. Regardless, I consider my first condo as the best investment I ever made.
I have it managed with an agency. I haven't set foot in that city in ten years. During that time I've had maybe five days total of vacancies. A few times the tenant paid a few weeks late. Still, they always paid.
Yes, there is downside risk, I wouldn't claim otherwise. But the key point is my properties enable a location independent lifestyle.
The flip side is that there are numerous things that could go wrong and tie you to the property, so it is not that owning will automatically tie you down, but more the possibility. For people with that concern you can avoid it entirely by not taking the risk to begin with. It isn't like all property is automatically that much better an investment than all the other options for investment.
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Your thoughts on homeownership?
06-23-2013, 01:24 AM
Never been a fan of single family or condo's. Struggling to pay a mortgage every month in the hopes of a payout when I sell? Fuck that, that shit is for the birds. Like that dude from "Rich Dad, Poor Dad" said, if is not making you money right now, its a liability regardless of what it is. An owner occupied multi family is where the money is at.
Whatever portion of the property you don’t occupy is considered a business expense. For example, if you buy a 4 family, rent 3 units and occupied 1 unit, 75% of ALL your expenses are tax deductible. Once you add your depreciation expenses(Cost basis*75%/27.7 years) you are going to show a paper loss(You spent more on the property than you received in rent) on your taxes. You can take that “loss” and deduct it from you regular income (Passive activity loss rules). In other words, the money you receive in rent more than likely is going to be tax free.
This is almost idiot proof and is the way generations of Americans have accumulated their wealth. Nothing can go wrong unless you start fucking one of your tenants and she unilaterally decides she’ll let you eat her box in lieu of rent. Even during the great recession while RE prices took a hit, rent never went down in NYC. Just make sure that the numbers are there from the jump . I.e. the rent roll will cover your monthly nut. Your tenants will pay your mortgage and even living expenses for you and you can use the money you would otherwise have spent on housing to pay your mortgage off even faster, stack your money up, or blow it all once a year at "Classicos" in Sosua. Also, once you completed your renovations and screened the tenants, this business basically runs itself.
tenants tend to be on their best behavior when the landlord lives on site.
If you wanna make even more bread, have roommates on your apartment as well. You can give him a little discount on the rent and make him your bitch... snow clearing, light cleaning, separating the trash, dealing with the other tenants.You would be surprised what people would do for a cheap place to crash in a high cost city.