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Why should I care about real estate during a millennial apocalypse?

CantidoCantido Registered User regular
edited April 5 in Help / Advice Forum
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?)

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Posts

  • CelestialBadgerCelestialBadger Registered User regular
    You are getting a bit ahead of yourself, thinking of going into business with someone who isn't even your girlfriend yet. Maybe you should keep your finances separate.

    Cantidozepherindispatch.oDarkewolfeXaquinspool32ShadowfireceresSoggybiscuitNobodybowenSkeithJoe Camacho MKIIVishNubNarbusDoodmannzagdrob
  • zepherinzepherin Registered User regular
    edited April 5
    I’m not sure what you are asking.

    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.

    zepherin on
    CantidoTychoCelchuuuElvenshae
  • IrukaIruka Registered User, Moderator mod
    I'm not sure what the Houston market is doing, but in Austin you'll need to be prepared to potentially pay 20% over asking price right now. I've heard that Houston is not much better.

    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.

    spool32ceresElvenshae
  • tinwhiskerstinwhiskers Registered User regular
    When you/your GF/whoever are saying retirement do you mean like, retire at 60-something or like retire at 49 and live off rental income?

    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.

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  • DarkewolfeDarkewolfe Registered User regular
    Do you have a fully funded 401k/roth which you max every year and no debt?

    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.

    What is this I don't even.
    mRahmaniTuminzagdrobElvenshae
  • JasconiusJasconius sword criminal mad onlineRegistered User regular
    there's a national real estate bubble right now so like.. this is a pretty bad time to buy especially if it's your first property

    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

    Comahawkschuss
  • Liquid HellzLiquid Hellz Registered User regular
    Jasconius makes some good points. Save your money and wait for the next crash. Buy when prices are low if you can still afford it then rent it out while you enjoy the equity increases.

    What I do for a living:
    Home Inspection and Wind Mitigation
    http://www.FairWindInspections.com/
    Cantido
  • SmrtnikSmrtnik job boli zub Registered User regular
    Don't know what the real situation is but "soon to be girlfriend" sounds super creepy.

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    zepherinmRahmani
  • ceresceres When the last moon is cast over the last star of morning And the future has past without even a last desperate warningRegistered User, Moderator mod
    I know enough people who have learned the hard way that you should not buy a house for the sake of buying a house unless you are independently wealthy.

    And it seems like all is dying, and would leave the world to mourn
    jkylefultonCantidoHappylilElfComahawkSmrtnik
  • SmurphSmurph Registered User regular
    Jasconius makes some good points. Save your money and wait for the next crash. Buy when prices are low if you can still afford it then rent it out while you enjoy the equity increases.

    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.

    kime
  • JasconiusJasconius sword criminal mad onlineRegistered User regular
    edited April 6
    Smurph wrote: »
    Jasconius makes some good points. Save your money and wait for the next crash. Buy when prices are low if you can still afford it then rent it out while you enjoy the equity increases.

    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

    Jasconius on
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  • BurtletoyBurtletoy Registered User regular
    Real estate is very expensive =/= Real Estate is currently in a bubble

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  • zepherinzepherin Registered User regular
    edited April 7
    Burtletoy wrote: »
    Real estate is very expensive =/= Real Estate is currently in a bubble
    I have been tracking real estate prices for a while and our realtor did a descent enough work up on historic pricing. There was a 3 month covid dip when folks didn’t really know what was going on, I bought that, but my house in 2006 sold for $100,000 More than it is worth now, which (according to comps) is about $40,000 more than I paid for it. In some areas it’s ridiculous, but I don’t see New York City, San Francisco or Seattle prices, ever going down. I don’t know about Texas. I know a few folk who live in Austin and it’s a bit spendy and I have some family who live between Houston and Galveston, and they aren’t seeing a huge increase in price in the area around them. The point is to compare the prices to the 2006 prices. And if in 15 years the price is still lower, it’s probably not a bubble.

    zepherin on
  • bowenbowen How you doin'? Registered User regular
    edited April 7
    It's not a country wide one because of shitty lending practices like in 2008, but merely people looking to flip and make profits with airbnb while being extremely over-leveraged on the properties. Couple with "investors", NIMBY boomers, and other shit and you end up with a bunch of mini bubbles in big metros and high demand/tourist areas.

    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.

    bowen on
    not a doctor, not a lawyer, examples I use may not be fully researched so don't take out of context plz, don't @ me
    zepherin
  • ceresceres When the last moon is cast over the last star of morning And the future has past without even a last desperate warningRegistered User, Moderator mod
    Real estate is all heavily location-dependent down to the neighborhood.

    And it seems like all is dying, and would leave the world to mourn
    SummaryJudgmentDoodmannzagdrobzepherinDarklyreDarkewolfejkylefultonComahawk
  • ShadowfireShadowfire Vermont, in the middle of nowhereRegistered User regular
    ceres wrote: »
    I know enough people who have learned the hard way that you should not buy a house for the sake of buying a house unless you are independently wealthy.

    What? Who called me in here?

    WiiU: Windrunner ; Guild Wars 2: Shadowfire.3940 ; PSN: Bradcopter
    cereszepherinComahawkMichaelLC
  • zagdrobzagdrob Registered User regular
    edited April 8
    Buy a house to live in that you can afford and at a good interest rate. That is your best investment.

    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.

    zagdrob on
    zepherinElvenshaebowen
  • DarkewolfeDarkewolfe Registered User regular
    zagdrob wrote: »
    Buy a house to live in that you can afford and at a good interest rate. That is your best investment.

    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.

    What is this I don't even.
    zepherinXaquinCantido
  • tinwhiskerstinwhiskers Registered User regular
    Darkewolfe wrote: »
    zagdrob wrote: »
    Buy a house to live in that you can afford and at a good interest rate. That is your best investment.

    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.

    6ylyzxlir2dz.png
    Burtletoybowenschuss
  • DarkewolfeDarkewolfe Registered User regular
    Darkewolfe wrote: »
    zagdrob wrote: »
    Buy a house to live in that you can afford and at a good interest rate. That is your best investment.

    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.

    What is this I don't even.
  • MugsleyMugsley Registered User regular
    zagdrob wrote: »
    Buy a house to live in that you can afford and at a good interest rate. That is your best investment.

    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.


    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.

  • BlindZenDriverBlindZenDriver Registered User regular
    What ever you do, building up a passive income is a really great idea. I am doing it with stocks and my only regret is I did not start sooner than I did.

    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.

    Bones heal, glory is forever.
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