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BEHOLD: MY CAPE posted:Right, the last point you make is very important though - the alternative to buying a house is not investing the money in vanguard total index funds, it's renting with all of its uniquely crappy downsides. Very few people can easily opt out of the housing market in the long term so it's endlessly disingenuous to compare a house purchase to an equity investment portfolio. With one exception you need a deposit to buy a house. That deposit could be invested, and the pittance paid on the mortgage principal could also be invested.
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Mar 9, 2015 04:12
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Devian666 posted:With one exception you need a deposit to buy a house. That deposit could be invested, and the pittance paid on the mortgage principal could also be invested. You can also invest your deposit if you want a house but don't cry out the window humming Somewhere that's Green if you take a hit to those savings.
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Mar 9, 2015 06:31
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MJBuddy posted:You can also invest your deposit if you want a house but don't cry out the window humming Somewhere that's Green if you take a hit to those savings. This is departing from the renting + investing versus mortgage discussion. You can just as easily have a downturn in house prices, or a disaster that destroys the house and an insurance company that takes years to pay out. Same risk as any asset you have your money invested in.
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Mar 9, 2015 06:34
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Swingline posted:What's the FI consensus on renting vs buying? Could it ever make sense to rent forever (assuming of course you invest the cash flow you would save from buying/maintaining a house/apartment). Seems like it could make sense in high-property prices and high-property taxes areas like NYC metro. Buying a home just seems like a never-ending money pit to me unless you happen to be very handy (which I am not). It doesn't have much to do with actual math, but my motto was always that I wouldn't buy a house until I "needed" it. When I was young, moving around frequently, single - despite having a high salary and everyone else at my job buying houses and telling me I was stupid for renting, I kept renting. Now those people are all upside down on their mortgages, but that was largely (un)luck(y) timing of the market rather than predictions on my part. I personally feel like the timing to make money on a house is so random, that it makes more sense to buy when you need the space for hobbies, family members, or pets, plan to stay in one spot for a while (and have a job that is stable), and have no desire to play the real estate market. I initially bought my house to live in, not as an investment property. It has done well investment wise, but it could just as easily under performed. Either way I'd still be living in it, so it didn't make a big difference to me. Also worth looking at, is that many people when weighing renting vs buying, compare the monthly expense of rental payment vs mortgage payment. But if one aggressively pays on the mortgage, the mortgage payment can fall dramatically. For me, as someone extremely risk averse, I know that those extra payments could have been parked in some other investment vehicle with fairly good returns, but after I own my house, the value fluctuations mean very little, as I still have nearly no monthly housing cost. Even just after 2 years, our mortgage payment dropped to something like 1/4 the current rental prices for similar spaces. Once mortgage free, I can invest all that now freed up housing expenses, and worry very little about the returns, as no matter what, I have a place to live and sleep and cook.
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Mar 9, 2015 10:02
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I think the toughest thing for me is trying to decide how much to put into the mortgage versus investments. My next refinancing next year will be interesting. It's highly likely the interest rates will have dropped unless some major event happens. I will be looking at maintaining the same payments but with less interest, and I will likely pay off a proportion of the principal at the same time. I do worry that I'll lose out on investment returns but on the flip side the risk of higher interest rates is a large risk as well.
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Mar 9, 2015 10:39
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Devian666 posted:With one exception you need a deposit to buy a house. That deposit could be invested, and the pittance paid on the mortgage principal could also be invested. Well the deposit and mortgage principal payments are invested, they are invested in equity in your home and it reduces the interest you pay on the mortgage. Again, the practical alternative is to pay this money to someone else unless you're willing to settle for generally smaller or otherwise less desirable housing to remain on an equal budget.
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Mar 9, 2015 18:04
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Probably the largest thing that's going to affect the return on your house is your inability to take that new sweet high-paying job because you happen to be underwater at the moment, or have only been in the house for a few years, or you couldn't sell fast enough, etc. If I had bought a house where I graduated from school, I'd likely be earning about half of what I am now. That's a big deal, and I really doubt there's going to be a big resurgence in job-for-life-in-one-city type jobs. It seems financially suicidal for a huge chunk of folks to sacrifice potential gains in income in exchange for a mortgage and not a rent payment.
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Mar 13, 2015 18:46
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Radbot posted:Probably the largest thing that's going to affect the return on your house is your inability to take that new sweet high-paying job because you happen to be underwater at the moment, or have only been in the house for a few years, or you couldn't sell fast enough, etc. This is true, but I think it points to a larger problem. Those lucky enough to have a stable well paying job, can buy up properties and landlord, and then those who have to chase the temp jobs around from city to city, are pseudo forced into renting from them (or an apartment complex). This creates yet another area where if you get lucky, you have a path to financial advancement. If I had bought before now, I'd be in your boat, underwater or constantly selling, but because I now have a stable base, I am accumulating realty. I'm trying to be a good landlord, but there is zero market pressure for others to do the same, so people are getting rich who have that initial access to capital to buy and stay put and providing really lovely service for their rent collection.
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Mar 13, 2015 20:10
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The vast, vast majority of people I know who think they have stable jobs do not, in fact, have truly stable jobs. You may in fact have a rock-stable job, but let's face it, virtually no one does in reality. I mean, I work for a massive corporation, get great performance reviews, in a revenue-generating department, etc. - but who's to say I'm not going to get outsourced because of some McKinsey gently caress's misguided ideas?
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Mar 13, 2015 21:02
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If you're gunning for FI, your savings rate should be high enough that negative equity/getting stuck underwater is very unlikely to ever be a meaningful problem for you; you might lose some money if you have to move suddenly during a market downturn or to take advantage of a career opportunity, but you shouldn't ever be trapped in one place by a mortgage.
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Mar 13, 2015 21:14
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Radbot posted:The vast, vast majority of people I know who think they have stable jobs do not, in fact, have truly stable jobs. You may in fact have a rock-stable job, but let's face it, virtually no one does in reality.
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Mar 13, 2015 23:10
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poopinmymouth posted:This is true, but I think it points to a larger problem. Those lucky enough to have a stable well paying job, can buy up properties and landlord, and then those who have to chase the temp jobs around from city to city, are pseudo forced into renting from them (or an apartment complex). This creates yet another area where if you get lucky, you have a path to financial advancement. What's the problem being pointed too? If you have a high stable income you have a better financial outlook than someone without a high stable income, that's not a problem, that's a trueism.
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Mar 14, 2015 07:32
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LemonDrizzle posted:If you're gunning for FI, your savings rate should be high enough that negative equity/getting stuck underwater is very unlikely to ever be a meaningful problem for you; you might lose some money if you have to move suddenly during a market downturn or to take advantage of a career opportunity, but you shouldn't ever be trapped in one place by a mortgage. This. Obviously you have to plan and make an assumption of stability, but its much easier to have confidence of say 5 years of stability than an entire working life. Still no guarantees but a much higher chance.
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Mar 14, 2015 09:24
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Radbot posted:Probably the largest thing that's going to affect the return on your house is your inability to take that new sweet high-paying job because you happen to be underwater at the moment, or have only been in the house for a few years, or you couldn't sell fast enough, etc. You are allowed to move out of houses and rent them to other people when you encounter extenuating life/career circumstances. Granted it is kind of a pain in the rear end and I guess there are a few houses/areas where you will find yourself truly unable to rent or sell, but to not take a much better job because you think you're just nailed to a house you bought is pretty dumb. Speaking from personal experience I bought a house and had to move for my career 5 years later, and as much as I dreaded it at the time, I ended up with a cash generating rental property.
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Mar 14, 2015 15:03
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If you're the average American, you don't even have enough in the bank for an extra month's rent much less a down payment for a second mortgage, which you can't get anyway because you're underwater on your first mortgage and sometimes you can't even break even on renters or keep 100% occupancy, so that's more money a month down the drain, plus movers. But you have to move so you put it all on a CC and find out your renters are paying the mortgage but there's incidentals which now you have to find a way to travel back and deal with, or you could hire a property management company who takes 15% and all of a sudden the house is not even breaking even, but I guess it's maybe better than staying but you're definitely a step down, not up Before, making ends meet was doable but tenuous but you were able to hold on, now if someone breaks their lease or the house is vacant or literally anything happens with your rental property you have no way of paying the rent on the place you're living now because there simply isn't enough money even if you were to not eat. Bhodi fucked around with this message at 15:31 on Mar 14, 2015 |
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Mar 14, 2015 15:28
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And if you're the average American you mortgaged a house you can't afford because your bank and realtor (who both make more money if you spend more) said you could, and have never even heard the term 'financial independence'.
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Mar 14, 2015 16:06
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Bhodi posted:If you're the average American, you don't even have enough in the bank for an extra month's rent much less a down payment for a second mortgage, which you can't get anyway because you're underwater on your first mortgage and sometimes you can't even break even on renters or keep 100% occupancy, so that's more money a month down the drain, plus movers. Being housepoor with no savings is a separate problem from owning a house and being presented the opportunity to move for a much better/higher paying job. Like, yes, you could get stuck in a crappy rental situation with negative cash flow but let's say you are in a truly awful bind and manage to lose $1000 a month net on your rental - that's $12000 a year. More realistically you're going to run close to zero or make a small profit for your stress and hassle. Just seems like of all the valid reasons not to buy a house (like for instance you literally could not afford to eat if you had to eat the mortgage payment for a couple of months) the possibility that you might suddenly come across a great life changing job opportunity that you can't take because you might lose a little bit of money renting isn't that high on the list.
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Mar 14, 2015 17:20
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Yeah It's a pretty extreme example but it's just as valid as saying "Well, my rental property turned a profit so it's a great idea!". Buying a house is a risk and that risk isn't diminished if you make it a rental property; the risk goes up, not down. Especially if you've got a property you aren't regularly visiting. It's fairly comparable to investing in a single stock and while a lot of people are aiming for FI, I assume most of us haven't reached it yet. A bad run of luck could set you back a decade. I ran the numbers before I sold my house about 5 years ago, driving past it recently I'm really glad I did - it would have been a losing proposition for me had I tried to keep it and convert it into a rental property.
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Mar 14, 2015 20:03
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BEHOLD: MY CAPE posted:You are allowed to move out of houses and rent them to other people when you encounter extenuating life/career circumstances. Granted it is kind of a pain in the rear end and I guess there are a few houses/areas where you will find yourself truly unable to rent or sell, but to not take a much better job because you think you're just nailed to a house you bought is pretty dumb. Yes, I'm aware you're allowed to do that. I think the problem is that this situation is rarely as simple as you're outlining here. What if I buy a house, and six months later I get an offer for the job of a lifetime (this happened to me, at least the latter part - I narrowly avoided the former). I get that hardcore FI people may have another $40-50k lying around, but I don't yet. That money took me 2 years of saving to acquire. This is to say nothing about another round of closing costs, etc. You were able to stay in your job for 5 years which is much longer than the average person my age stays at a job, nearly twice as long, in fact. Buying a house just seems like a ridiculously massive gamble that you a.) will have the same job for AT LEAST five years after you buy, which seems laughable to me in my 20s, or b.) that you will be able to instantly find good tenants at a rate that will make you money, and never have any vacancies or repairs. Both situations COULD work, but don't seem likely to, in the majority of cases.
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Mar 16, 2015 23:18
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It's not about how long you'll stay at one job, it's about staying at one location. If you move from one job in NYC to another there's probably no need to sell.
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Mar 16, 2015 23:23
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Radbot posted:Buying a house just seems like a ridiculously massive gamble that you a.) will have the same job for AT LEAST five years after you buy, which seems laughable to me in my 20s, or b.) that you will be able to instantly find good tenants at a rate that will make you money, and never have any vacancies or repairs. Both situations COULD work, but don't seem likely to, in the majority of cases. Personally, I have pretty vague career goals and the secure feeling of owning a suburban Phoenix home trumps any real ambition to move and shake for a career. I am in a job market that still has a lot of growth potential and between Scottsdale and Tempe my commute is <45m either way. It was in my case a no-brainer, at least in the mid term of ~10-15 years. I can't really envision wanting a bigger house or changing neighborhoods unless I suddenly got like a $1mil windfall. It's plenty of room in a good middle ground locale. We opted for a 4 br so we have family growth potential too, even though its just the wife an I for now. If career were a primary goal I can see the reluctance, but I think being married (and boring) changes the priorities, and open options almost start to feel less secure than routine.
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Mar 17, 2015 01:13
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Radbot posted:Yes, I'm aware you're allowed to do that. I think the problem is that this situation is rarely as simple as you're outlining here. What if I buy a house, and six months later I get an offer for the job of a lifetime (this happened to me, at least the latter part - I narrowly avoided the former). I get that hardcore FI people may have another $40-50k lying around, but I don't yet. That money took me 2 years of saving to acquire. This is to say nothing about another round of closing costs, etc. You were able to stay in your job for 5 years which is much longer than the average person my age stays at a job, nearly twice as long, in fact. First, you're also allowed to rent even if you already own a house - so you do not need $40-50k in savings in order to move for a once in a lifetime job opportunity after you've bought a house. Really you need the money to move, and savings to support yourself during a major career/life change is exactly the purpose of keeping an emergency fund (one might even hope that such a great job offer would include relocation benefits, but for the sake of argument we'll say it doesn't). For what it's worth, I personally would not buy a house without living somewhere for a year or two in order to gather information and shop patiently, even if I had cash sitting around. So put yourself in your own shoes but this time you bought the house. If this was a truly life changing job, and you alluded to something like a doubling of your salary, would you have foregone the opportunity because you were afraid to rent or sell a house, maybe even at some modest loss? It just seems penny wise, pound foolish to pass up tens of thousands in salary a year because you might lose $200 a month or whatever cash flow on a suboptimal rental situation. Whether it makes sense or not for any particular person to buy a house is a complicated question, but again I think the hypothetical possibility that you stumble across an amazing faraway job opportunity and won't take it is not the defining factor you make it out to be.
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Mar 17, 2015 01:49
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Also in the scenario described once you sell the house it's not a big deal unless it's underwater and you literally can't afford to sell it. However, that should be unlikely if you are trying for FI anyway, and in the worst case you can be like the guy in Detroit trying to swap his house for an iPhone 6.
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Mar 17, 2015 03:00
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I died laughing when I saw MMM unironically call people "Sheeple" in his latest blog post. I'm probably going to keep up with him forever.
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Mar 17, 2015 03:09
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That article kind of makes me want to constantly drive an SUV outside of his house. e: Financial Independence: Planet of the Sheeple Devian666 fucked around with this message at 03:32 on Mar 17, 2015 |
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Mar 17, 2015 03:30
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The gimmick is amazing, I wonder how much ad/referral money he's getting off of it.
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Mar 17, 2015 03:35
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He's nice enough to send the entire post via RSS at least. Everyone else forces me to go to their website to read the full post.Devian666 posted:e: Financial Independence: Planet of the Sheeple
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Mar 17, 2015 03:41
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When Ridiculousness is Ubiquitous or When words almost rhyme. quote:The interior of the each house was clad with beige carpets, artificial finishes, and tiny windows placed with complete disregard to the prevailing direction of the Sun. These stupid consumers are not only materialistic and vapid, they're also too poor to buy tasteful poo poo like hardwood floors, high quality finishes, and huge windows! quote:Soon there will be a poison-spewing circus of completely batty people sitting there idling in sleek 400-horsepower Mercedes SUVs, or clackety Diesel jacked-up yellow offroad diesel Super Duty trucks, comparatively small-looking Honda and Toyota minivans, new cars, old cars, and anything else they can find that burns gas and wastes money. 'You said "diesel" twice' 'I like diesel' Okay, honestly I did keep reading for more laughs, but I kind of agree with him on the whole SUV thing. I've never been able to make heads or tails of it. So I just ended up nodding my head a bunch...
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Mar 17, 2015 05:04
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Mr Money Man posted:And every one of them convinced that he or she is going through life in a perfectly reasonable way, trying to get ahead and take good care of their kids, but things are just hard these days unless you’re one of those privileged lucky elite 1% multimillionaires that we read about in the paper while cursing our own fate, the fate of the middle class. Hahaha isn't this guy likely a multimillionaire who's totally going to give his money to charity? He lays it on thick, but it must work.
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Mar 17, 2015 05:28
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Blackjack2000 posted:When Ridiculousness is Ubiquitous *Goes to sign the contract to join the MMM gang and they see I have diesel on my hands* SUVs remind me of the stupid penis waving related to owning trucks in the 80's (or now). Although one of my New Zealand tax books points out that a heavy vehicle gets a higher depreciation write off than a regular car. No idea how it works in the US but I don't see any money being saved.
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Mar 17, 2015 07:35
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It's just good old consumerism rearing it's ugly head in again. People have money to spend and they feel obliged to spend it on making everything in their life bigger and shinier regardless of any actual practical benefits. My father has a younger brother working as a vice-CEO at a northern energy company who has been sold hook, line and sinker on this philosophy. Every time I've ever met the guy he has been somehow trying to flex his money by showing us his new massive gas grill, his newly renovated bathroom, his 100-inch TV, the new espresso machine, the carbon-fibre bikes he bought for his entire family, the ever more expensive family car and on and on. Hell, he rented a sport car to drive down last time he visited despite a flight ticket costing 1/10 as much and taking roughly 1/4 the time. Anyway, my point is that it's quite clear that he feels pride in being able to buy more pointless crap than his older brother, consideration of the practicality of the purchases have since long gone out the window. It's about finding excuses to spend more money, not saving money.
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Mar 17, 2015 07:49
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Xoidanor posted:It's about finding excuses to spend more money, not saving money. It sounds like an element of mid-life crisis as well, or a lack of goals. Looking for meaning is buying a bunch of worthless crap to avoid thinking. Although if he's on the good oil money you can add millions of net worth in a matter of years which would reduce even buying top end carbon fibre bikes to a fraction of total income.
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Mar 17, 2015 10:26
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Xoidanor posted:It's just good old consumerism rearing it's ugly head in again. People have money to spend and they feel obliged to spend it on making everything in their life bigger and shinier regardless of any actual practical benefits. My father has a younger brother working as a vice-CEO at a northern energy company who has been sold hook, line and sinker on this philosophy. Every time I've ever met the guy he has been somehow trying to flex his money by showing us his new massive gas grill, his newly renovated bathroom, his 100-inch TV, the new espresso machine, the carbon-fibre bikes he bought for his entire family, the ever more expensive family car and on and on. Hell, he rented a sport car to drive down last time he visited despite a flight ticket costing 1/10 as much and taking roughly 1/4 the time. Anyway, my point is that it's quite clear that he feels pride in being able to buy more pointless crap than his older brother, consideration of the practicality of the purchases have since long gone out the window. Or in the case of someone I know, they claim they need an SUV to "carry stuff" ignoring that the few times they actually have more than a regular car could carry, nearly every hardware store and even minor city has rental vehicles.
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Mar 17, 2015 10:55
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Yep. I had a truck for eight years and the majority of stuff I carried was friends' local moves. I have a car now.
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Mar 17, 2015 12:56
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Look at all you car clown sheeple... *bikes to work today* Also, that MMM article makes me hope he doesn't have to come to my kid's birthday or something. "Look at this tacky, wasteful, expensive dump you call a home..." Thesaurus fucked around with this message at 14:51 on Mar 17, 2015 |
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Mar 17, 2015 14:43
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I borrowed a friend's trailer and used my old 2007 Camry to haul a couple tons of sand and screenings when I was building a brick walkway for my side yard. The idea that someone would buy a truck to do this once every few years instead of buying a hitch for a more reasonable car makes me laugh. The joke's on me, though. I sold that Camry when I got a Fusion from work, and I left that job about a year later, so now I have only my Miata. I have not tried to haul a trailer with it, but I imagine it would be hilarious.
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Mar 17, 2015 15:34
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I think MMM's losing it, a truck or SUV can be comfortably slept in. Combining your vehicle and home is the true mark of Moustachian thinking!
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Mar 17, 2015 16:31
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surc posted:I think MMM's losing it, a truck or SUV can be comfortably slept in. Combining your vehicle and home is the true mark of Moustachian thinking! Maybe some kind of push cart or bike wagon that you could sleep in would be most efficient. I guess that's why homeless guys with a shopping cart and a few pieces of cardboard have it figured out.
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Mar 17, 2015 16:33
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Thesaurus posted:Look at all you car clown sheeple... *bikes to work today* He is playing a character, and I don't think he's that obnoxious in real life. Though clearly he does have a tenancy to notice idiocy in real life, but from everything I've read about the real person he's not the type to actually criticize people for their life decisions.
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Mar 17, 2015 16:37
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There was a blog post sometime last year about a BBQ he went to and listened to a relative or neighbor or something talk about horrible financial issues, and he said "If he was to ask my opinion, here's what I'd tell him. I obviously didn't because I'm not an rear end in a top hat who tells people what to do in social contexts" He's totally playing up a character at this point, and who can blame him? He's making crazy amounts of money just by having a blog.
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Mar 17, 2015 16:50
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