"100% of people who do not save money do not have any!"--Dave Ramsey

[redpoint5]

Originally Posted by Isaac Zachary

Also, in 2008, for an example, I knew people who had to move but owed more than their homes were then worth.

You also lose 100% of your mortgage payments if you die before you resell your home and never rent it out.

Not that buying isn't the right decision for most people. But it's not the be all end all path to financial security either and could be a wrong choice for some or not make much finacial difference for others.

2008 was the only time in a century that home prices went backwards, entirely due to the incorrect perception people have that their residence is an investment, corrupt lending and insurance practices, and foolish government incentives. It was the exception, not the rule.

Your estate still retains the equity in the home when you die. Personally you'll lose it, but then in death you lose everything. Not following the point you intended here.

I'm not implying homeownership is always the best financial choice, only that it usually is for anyone staying in a particular area for say, 5 years or more. It's especially smart if one is single and rents the spare rooms.

Anecdotally, of the many people that have asked to borrow money, all have been renters; none owners.

[Isaac Zachary]

Originally Posted by redpoint5

Your estate still retains the equity in the home when you die. Personally you'll lose it, but then in death you lose everything. Not following the point you intended here.

The downpayment is a risk that can be lost to you. You could have used it for something else before you died. That was the only point.

Originally Posted by redpoint5

2008 was the only time in a century that home prices went backwards, entirely due to the incorrect perception people have that their residence is an investment, corrupt lending and insurance practices, and foolish government incentives. It was the exception, not the rule.

There can still be regional price variations, like when a factory or mine closes in a small community.

[redpoint5]

Edge cases abound, but the rule is not disproved by the exception.

[Isaac Zachary]

Originally Posted by redpoint5

Edge cases abound, but the rule is not disproved by the exception.

Multiple exceptions increase a the overall risk, and there is no rule as there is no univerally right way to approach housing.

https://www.youtube.com/watch?v=q9Golcxjpi8

[redpoint5]

Best to make no decision then, because the best laid plans of mice and men, or something.

Lack of a universal is a foolish reason to ignore conventional wisdom. Clearly whatever decisions Xist has made haven't resulted in abundance. The liberal disposition would be that a change is called for.

[Xist]

Okay Mr. Smartypants--no, not you, the other one, no, the other other one.

The third Smartypants from the left!

First of all, we have discussed that while Dave Ramsey always talks about a 12% average return on mutual funds, Warren Buffet says it is 7%, and sure, Dave Ramsey has made a great deal of money being correct some of the time, but how much of that money has been from telling people how to make money?

How much has Buffet made investing other people's money?

If your cost of ownership is as much as your rent would have been something is wrong.

Landlords cover all of the expenses you would have as an owner and still make adequate money to buy more properties.

We have also discussed that real estate investing has created 90% of the world's millionaires and that in 2019, homeowners in the U.S. had a median net worth of $255,000, while renters had a net worth of just $6,300.

Also, claiming that you could receive a higher ROI from another investment than buying a property to at least partially rent out is fallacious.

You may, you may not, but you need to live somewhere.

We have also discussed that you're not investing your 20% down payment, you're investing 20%, and your tenants are paying the rest, so if you put $20,000 down, average 3.65% a year, you will get a 2.93x return over 30 years--plus a 2.93x return on the 80% your tenants pay, so your $20,000 turns into $293,142.77--a 9.3% return.

Why are we talking about a down payment anyway? Remember this is eligible for a VA loan?

No down payment is necessary!

I don't know who Doug is, but he shouldn't be too proud of his 5% interest rate, my preapproval letter says "As low as 2.375%."

I sure hope that my actual rate would be lower than 5!

Now that I believe I have caught up with all of your comments, great and small, from what I can gather, airplane noise would be about 80 dB at the house.

[redpoint5]

I was saying 5% down, not 5% rate.

A pre-approval rate isn't locked, and rates are climbing fast. Not only that, but teaser rates are never actually offered. You'll find those rates end up being after paying a ton of points to buy the rate down.

I got an email yesterday saying my mortgage has been paid off. The old mortgage is dead, long live the new mortgage. My monthly payments will be close to $400 less, though I've added back the 2 years I had completed on the old mortgage.

[JSH]

Originally Posted by Isaac Zachary

.
Also, in 2008, for an example, I knew people who had to move but owed more than their homes were then worth. So in order to sell, they had to pay. So they lost more than 100% of their mortgage payment.

People did not have to pay to sell their homes in 2008 - they chose to. People got emotional and wrapped up in an odd sense of financial integrity and chose to pay to get out of their mortgage instead of turning over the keys to the bank and walking away. A mortgage is a contract - nothing more. It doesn't make someone a bad person if they exercise the clause in the contract that lets them walk away and leave the bank holding a loss. If the tables were turned the bank wouldn't hesitate a second.

I also don't personally know anyone that got into trouble with their mortgage in 2008 that had a traditional 30 years fixed rate mortgage with 20% or more down. The people in trouble were putting next to nothing down on adjustable rate or balloon loans expecting prices to always go up.

Originally Posted by Xist

First of all, we have discussed that while Dave Ramsey always talks about a 12% average return on mutual funds, Warren Buffet says it is 7%, and sure, Dave Ramsey has made a great deal of money being correct some of the time, but how much of that money has been from telling people how to make money?

How much has Buffet made investing other people's money?

Both Ramsey and Buffet are right but Buffet's number is more realistic. Ramsey's is the simple average of S&P 500 returns since 1928. A better number would be 10% which is the Compounded Annual Growth Rate. An even better number is Buffet's which takes that 10% number and adjusts for inflation.

Ramsey has made a bunch of money selling financial advise
Buffet has made even more investing other people's money
The people you listen to on Youtube with their get rich schemes are hoping to make money convincing you their techniques work (instead of following their own advice)

We have also discussed that real estate investing has created 90% of the world's millionaires

BS number from someone that wants you to invest in real estate. (Also that link is blocked on my work computer for "Criminal Activity".)

Originally Posted by Xist

in 2019, homeowners in the U.S. had a median net worth of $255,000, while renters had a net worth of just $6,300.

True but misleading. The vast majority of Americans are really bad at investing - as in they don't do it. The primary reason people that own homes have more wealth is mostly due to the equity in that house - which is a forced investment. Even that is changing as more and more people tap the equity in their homes to finance their lifestyle and end up perpetually paying a mortgage.

That said:

Originally Posted by Xist

If your cost of ownership is as much as your rent would have been something is wrong.

Landlords cover all of the expenses you would have as an owner and still make adequate money to buy more properties.

This is completely true. Rents pay for every expense for the property owner + a small profit. Nobody would own and rent houses if it was a money losing activity as a whole.

Originally Posted by Xist

Why are we talking about a down payment anyway? Remember this is eligible for a VA loan?

No down payment is necessary!

Which puts you at high risk of being upside down on the loan in a market correction.

[redpoint5]

As Jason pointed out, being upside down on a mortgage isn't a big problem because you can walk away (but the foreclosure will stick on the record for something like 7 years), or simply wait it out (housing prices recovered). As mentioned, the losers were people taking out ARM loans thinking they were going to be HGTV real estate heros.

I'm a big fan of 5% down (or less) because it shifts the risk back towards the bank, and frees up the cash to be invested in something that earns a higher interest (index funds). Basically the bank ends up taking on the extra risk of your gamble, which historically is a low risk one, and the only cost is a slightly higher mortgage interest rate, which itself is tax deductible. Since home values tend to appreciate, the extra cost of PMI usually only exists for a couple years. Through rising home value, it quickly crosses the 20% equity threshold where banks drop PMI.

Besides all that, fixed rate debt is a hedge against inflation. Something pretty well guaranteed to occur (and is occuring).

There has to be a lot of things going wrong for such a strategy like that to end up being worse than any other strategy. I mean, even the 2008 bubble pop wouldn't derail such a strategy. Back then checking accounts were paying 6-7% interest.

All that said, in Xist case assuming he is living with Mom for little/no cost, the only way buying a house makes financial sense is if roommates pay a substantial portion of the mortgage.

[Xist]

The mom of a client said they just refinanced and their new payment is 37% higher.

She was more excited about that than I was.

As I have mentioned, my sister bought her house in late 2006 for $220,000 and it sold for $115,000 2 years later, but for $380,000 in 2021.

She foreclosed on it, not because she needed to, but because she already had a nicer house in a much better location.

She was upside-down, which was why she foreclosed.

Unfortunately, after building equity for 7 years she sold for her doomed adventure in Oregon, which cost her $100,000.

My sister didn't have 20% down, but she got out of mortgage insurance before prices crashed.

To whom do I listen on YouTube?

Joe Scott?

Verisatium?

Linus?

Ah! Homemade Home!

No, he explains how to spend a month finding a distressed property, 6-12 months fixing it up [full-time], and then renting it out.

I don't know what I am missing from my own YouTube history, you tell me!

What your work filter does and does not block is meaningless.

How about "Billionaire Andrew Carnegie famously said that 90% of millionaires got their wealth by investing in real estate." CNBC

How upside-down can I get on a house that costs $636 a month for mortgage, taxes, and insurance?

Mom bought her house for a little over $100,000 in 2003 and all that Zillow's value estimate shows is that it bottomed out somewhere under $90,000.

The FRED doesn't show the White Mountains, but the average home sale when Mom bought her house was $160,860, $292,570 the fourth quarter of 2006, and $143,110 the second quarter of 2011. https://fred.stlouisfed.org/series/ATNHPIUS38060Q

If home values up here followed the same trend, hers would have gone up to $192,791 and then down to $94,303.

I believe that the real estate market is hugely overvalued, but the government propped it up during a global pandemic.

People have been talking about a crash for 10 years and I don't see one happening any time soon.

By the way, home values are currently 48% higher than they were at the peak 15 years ago--an average of 2.67% a year.

Yes, you could have made a ton if you timed the market right, but if you bought a house for $292,570 and it is now worth $434,090, you would owe $212,000, and have $222,000 in equity.

I may live with my mom, but I pay about as much rent as I did before I moved here.