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Why should I care about real estate during a millennial apocalypse?
Cantido
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Registered User regular
My scars from being raised by a struggling single mother during the Bush Recession, and the recent Trump Presidency run deep and have shaped me into a secretly bitter pessimist pursuing a minimalist lifestyle. I spent my twenties believing that the secret to happiness was "don't get married, don't have children, don't own a home, just survive and live in peace." My time living in a small apartment in DC was the most fun I've had in my life, though adult age has cooled me from the attraction to "nightlife," which is propped up by alcohol.
My attitude has gotten better now that Trump is out of the White House. My hair has stopped falling out, I've eliminated my student loans, and I have one year left of interest-free payments on my hybrid vehicle. Life is feeling really good.
My mother and workplace mentors pressure me to start caring about real estate. My soon to be girlfriend doesn't want children but also has a dream of retiring via real estate, though she, like me, has done no research. Getting a home in a diverse Blue area like Houston is starting to seem attractive.
But after that damned recession, seeing California burning, Texas increasingly desertifying, and Florida sinking, why would I ever want to own more than one home? Why do I have to participate in this ecologically destructive bubble? Why can't I just build a Roth IRA, an employer 401K (also a Roth,) and maybe invest in green energy? Are there ethically sound real estate markets, like YIMBY affordable housing (see Comcast/Universal Studios investment in Florida Housing?)
My attitude has gotten better now that Trump is out of the White House. My hair has stopped falling out, I've eliminated my student loans, and I have one year left of interest-free payments on my hybrid vehicle. Life is feeling really good.
My mother and workplace mentors pressure me to start caring about real estate. My soon to be girlfriend doesn't want children but also has a dream of retiring via real estate, though she, like me, has done no research. Getting a home in a diverse Blue area like Houston is starting to seem attractive.
But after that damned recession, seeing California burning, Texas increasingly desertifying, and Florida sinking, why would I ever want to own more than one home? Why do I have to participate in this ecologically destructive bubble? Why can't I just build a Roth IRA, an employer 401K (also a Roth,) and maybe invest in green energy? Are there ethically sound real estate markets, like YIMBY affordable housing (see Comcast/Universal Studios investment in Florida Housing?)
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Are you asking why people invest in a second house? are you asking why you should invest in a second house? Are you asking why you should buy a house for yourself?
The answers to those is that we have population growth and we aren’t making more land. Certain areas (San Fran, Seattle, Denver, NYC, DC) prices are going to keep going up substantially until they reach a peak of what people are capable of paying, and then increase based on inflation. And if you can buy property that is protected against climate change in a desirable area, then you are really forward looking. And rent is going to go up as well so buying now allows you to control that cost with a mortgage.
If the question is should you invest in your retirement or buy a second house, I would suggest investing in your retirement you’ll get a better return on investment and you won’t be taxed yearly on it.
If the question is should you invest in a second house or in the stock market or some other ethical investments, that’s a bit in the gray area determining on your risk how important it is that the company to invest in are ethical. Real estate is generally pretty low risk because you can insure your investment, and if the rental portion of your investment isn’t paying off, you can sell the property.
So to sum up my answers, buy a house if you are planning a living at it, because rent is throwing money away. Fully invest in your retirement before investing in a second house, then it depends.
You don't have to go this direction though and juggling houses is not the only way to live life. Me, struggling to buy my first house in this shitty market would argue that if you don't care to, please don't just buy and hold onto houses, every house we've tried to put an offer on got snatched up by an investor with twice the cash we have on hand.
"My soon to be girlfriend" seems like a weird phrasing too. If she has goals to retire this way, thats great, but certainly do research and have a ton of conviction about this before jumping in on purchases of this magnitude with someone else.
Because for the later buying an investment property isn't' going to allow you to retire early. The way people do that (to the extent they do) is by having many properties that are highly leveraged. I have a friend who is into this (haven't seen him since COVID though so no idea how this last year has screwed him).
He basically buys fixer uppers in not great areas for say 50k in cash(he took out a 2nd mortgage to get started so...). Gets them up to code and say he is in for 75k. Then rents them out and turns around and gets a 100% mortgage on the property(often for more than the 75k). He then uses that cash to buy and fix up another place. While the rent on place one pays for the mortgage/taxes/upkeep on it and gets him a small amount of free cash flow.
His plan being basically to do this say 20+ times. And then as the mortgage is paid down and the rents slowly creep up over time, that $100 a month he gets per place, creeps up to a few hundred dollars. And once he has 20-30 places each generating say $250 a month in profit for him, ta da He now has a 60k a year job that doesn't require him to work, and the properties should be appreciating and his equity in them is slowly increasing as well.
Basically, the idea ROI on a property is okay, generally not market beating. But a brokerage isn't going to let you invest with 20:1 margin at 3%. And if you are just looking at cash flow, netting 1% on 5 million dollars, is better than getting say 7% dividends on 250,000.
If not, I honestly wouldn't consider what other investment options are available to you yet. Real estate in that case should be what thing you can afford within your means as a primary place to live if it offers advantage to you over rental because of your long term commitment to an area.
buying your home strategically, at a good price, can be a very good thing for your finances and security
i can't tell where this is coming from but some people are talking about it...
you aren't going to be able to buy a house with a mortgage unless you're planning on living in it. there's a big difference between real estate you live in and real estate you make money off of
if you're trying to buy a home to rent out to other people you pretty much need to pay for it in cash
we also talk about other random shit and clown upon each other
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I'm just gonna point out that this market is not 2008. In 2008 almost everyone was buying houses with little or no down payment, and accepting terrible loan terms because nobody thought home prices would ever stop going up. Today houses are getting all-cash offers the second they hit the market. It's a very different situation. If everybody is saving up waiting for the crash to happen, that means there are a lot of eager home buyers sitting on piles of cash, which means it's harder for a crash to happen.
I don't think trying to time the real estate market is a great idea. The only way to really get hurt is to buy a house you can't afford, or buy a house you don't plan on living in for very long (<10 years). If you're prepared to stay in a house 10-15+ years, chances are you'll outlast any market downturn and end up in profit.
a bubble is still a bubble, even it doesn't pop exactly the same way. you've got investment firms buying *entire neighborhoods* in Texas right now at 50% above asking price, compounded with 6-12 months of materials demand backlog (at least on the east coast)... prices are high, relief is not coming soon, it's not off the rails to suggest the pricing is artificial for many reasons... the OP lets on that he is interested in buying purely for financial motivation... and if that's true, this is a bad time for him to attempt it as a first timer of limited financial means. i agree a crash is probably not due, but it doesn't take a crash to ruin someone and put them into a years-long hole that they have to dig out of
if you are happy renting, by all means, rent... or maybe get something a little smaller and lower commitment like a condo so you can get a friendly taste of what property ownership is like before deciding you want to be a landlord... because boy let me tell you, there's more too it than you think
we also talk about other random shit and clown upon each other
Burbs and rural areas are mostly okay.
Edit: For instance, a pretty big one right now is semi-wealthy tech people fleeing california's high taxes and real estate prices and move to places like Colorado and Texas, causing little microcosms of climbing prices that won't be sustainable long term.
What? Who called me in here?
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Put away at least your full company match into a 401k and stock away 3-6 months worth of savings. Edit - company match is compensation so you should always be doing that no matter what.
Carry no debt except a mortgage, car payment, and maybe a few hundred dollars month to month for rewards / convenience. Oh and student loans but that is a personal thing.
Once you get to that point, the smart and low effort thing is to invest more in retirement or an IRA if you want no effort expended up to the full tax benefits.
If you are willing to hustle and gamble on hanging your ass out, then and only then do you start looking at real estate or flipping houses. And you best know how to actually manage properties and have connections beyond dropping the entire years profit on an emergency plumbing issue.
It can be quite lucrative but real estate is local and there are a lot of people trying to make money (winning and losing) in every market.
I'll addendum that once you hit the "3-6 months worth of savings" also be able to pay cash for your next car instead of borrowing.
No point. interest rates on new cars are less than market returns. Even if you have the $25k in cash sitting around, you are better off throwing it in an index fund and borrowing the 25k at 2.5%. Same reason with rates so low 15 year mortgages are a suckers bet right now. The little bit of lowered interest doesn't outpace the 5% spread you would earn just investing the payment difference every month.
This assumes returns stay steady. If the market tanks, you still have the debt and not the gains.
If you're implying an Emergency Fund, it should be 3-6 mos of expenses. Which ostensibly means you shouldn't be saving to continue adding money to an IRA or 529 or similar savings vehicle.The intent of an Emergency Fund is to handle your expenses (e.g. mortgage, car payment, utilities, cell phone, gas, food, etc) while you work through a crisis.
Now with any type of investment there is risk, often the level of risk is somewhat connected to the possible rewards so there is no way around doing research and putting in some effort to maintain and expand on what you decide to get into.
Also as a guiding principle I would say one should not invest what one can not afford to lose. Like for example do not buy stocks for borrowed money, except if those money come with a fixed really low interest and under some conditions where paying up will not be a terrible burden.
Because it's basically the only way to earn money from real estate as an investment. You have to live somewhere. If you own one home and its value goes way up, you can sell it and...what? Buy another home at similarly-inflated price? Rent instead? (If home prices are inflated then rent is likely to be inflated as well, because if rents are too low compared to house prices it decreases the attractiveness of homes as an investment.) The only way to really make money off of owning a single home is to sell it near the end of your life or sell it and move to somewhere far away where prices haven't risen as much.
Maybe if you and your girl each buy a house that might work. If you two get serious you can move in together and rent out the other property.
You can! Investing in real estate is just one way to build wealth. Plenty of people build up retirement-worthy amounts of wealth with just stocks and bonds.
As an investment? Why? Go take your 7% from a Vanguard fund and get on with your life. If you're doing your own property management, that's a different story, but that's also not an investment, that's a business.
Doc: That's right, twenty five years into the future. I've always dreamed on seeing the future, looking beyond my years, seeing the progress of mankind. I'll also be able to see who wins the next twenty-five world series.
The market never tanks forever. And if it does, how much money you have invested or not will be the least of your worries.
You should always have access to liquid cash which is the primary reason I cringe when people dump their savings in to a car just to avoid interest. Doubly so when you take in to account market returns. Take out the loan, invest some of the cash, make sure you always have access to a bucket of liquid cash, and if you want to pay less interest, pay your loan off quicker from your standard financial inflow (e.g. your normal paycheck).
But at the same time with the rates you can get in the US leaving large sums of money in a savings account is almost as absurd because an APR of 0.1% isn't an interest rate it's an insult.
This is correct, I like to tell people "well, if we're all on bottlecaps..."
If the market tanks, you still own the underlying securities - and the investment growth of your portfolio if you've been reinvesting returns the whole time; when the market rebounds you'll be right back
caveat: if the market tanks right when you need to cash out (e.g. retirement), which is why you reallocate more and more bonds into your mix as you reach your target date
https://forums.penny-arcade.com/discussion/207205/cha-ching-its-the-financial-literacy-thread#latest