Real Estate

[Sniper]

Squiff,

Never forget that your mortgage is the bank's asset... an asset that will provide the bank with a nice return over the life of the loan!

[squiffy]

The bank gets 6% a year. The real estate owner could be getting 9% a year or more on the land, plus playing no rent. It can be win-win.

And I would be happy to pay 6% to make 9% plus, tax-deferred, possibly tax-free, over 30 years.

[Peter666]

I don't think a beaver is a good investment. I expect a true investment to give me a net gain. A person taking a mortgage of $200,000 over 25 years on the house they own actually pays around a million dollars for that house. You must take into account property taxes, cost of maintenance etc. It is very unlikely that you will be + EV when you get that million dollar loan from the bank. It's an illusion.

I also believe your 9% per year figure on land is exhorbitant. My records show that a little less than 3% is the average figure.

While taking a mortgage on the house you live in for the long term maybe beneficial over renting for the same period of time, it should not be considered an investment.

Buying a property for cheap, renovating/building and selling it at a much higher price is a different matter.

[squiffy]

Peter Lynch Learn to Earn page 103.

You're right. It's not a good idea to borrow money to buy a home. It's generally not a very good investment.

That 9% figure I quoted is probably impossible to achieve.

[ChipWrecked]

If there is not a real estate bubble in California, middle class earners like myself will never be able to buy a home. Something just smells wrong about that.

I work with a guy who crows about how his $140,000 house from 4 years ago is now worth $350,000. And this is in the Sacramento area.

So we sit in our apartment and wait. And look at undervalued markets like Salt Lake City, though we really would rather stay in California. I can't believe we're alone in this. Looks like another mass eastward migration out of here, get ready y'all.