Why you should buy a home as early as possible.

[socaldude]

I became a Mexican citizen a few years ago with the intention of buying a property.

I guess growing up and living in California I've grown tired and frustrated (it's really bad). The high cost of living, the $25k/year dead-end jobs, depression, the homeless, crime and government.

Interestingly I ran my credit score in Mexico at the "Buro de Credito" which is owned by Trans Union and my score was 750. That was just me taking out a department score credit card and just stashing it away. I can walk into Santander and they'll give me a mortgage.

If you buy a condo in a growing city like Monterey. You are going to do good.

 

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[Antifragile]

I wasn’t going to post anything until this…

Alternatively, I can opt for dirt cheap newly launched public housing below 200k for unmarried singles. I can rent out after living for 5 years and get 2k monthly rental. Insane yield and impossible to lose money. The downside is that the construction waiting period takes around four years. Public housing here has decent quality and good neighborhoods.

How do you view public housing as a good idea while also being on TheFastlaneForum.com ? One of these two doesn’t fit and I don’t get it. There must be off the charts cognitive dissonance going in your head. Like a smoker who posts “smoking is bad for your health”.



Edit: I mean brother, this whole place exists to promote the abundance mindset. I personally ”fight” with politicians on a daily basis to stop meddling and let the market decide. More housing = more supply, prices will fall etc. Meddling creates slums etc. We’ve all seen how well that worked out for the communism party… history has already been there and done that.

The whole notion of subsidized public housing as part of your “life/business model” is absolutely a$$-backwards to free market enterprise. It’s scarcity mentality on steroids.

And promoting it as if it has “insane yield and impossible to lose money” is driving me up the wall here. We don‘t even know each other.

 

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[SpinnerRedPenny]

you have to live somewhere you can buy your own house. if you still want to travel a lot you can rent it out.

Buying a home is a good way for many people to save money that they would otherwise spend on other junk

@jclean and @biophase I agree in principle with most of your contention(s). @jclean had the "Money quote" (): You have to live somewhere [emphasis added].

Peter Lynch (in either Beating the Street or One Up on Wall Street, I can't recall which) mentioned that buying a home essentially leads one through a due-diligence process that can become a transferable skill when analyzing companies in which one is considering investing. If true, that represents a complementary advantage to owning a home.

My family and I are currently renting in Munich because it was the most reasonable accommodation in a neighborhood with a minimally-acceptable school and a commuting time that wasn't obnoxiously lengthy. We probably could have afforded the (at the time) €1.3m price of a house in this neighborhood, or moved farther out of the city. But renting seemed to us to be the better value.

We rented when we moved to Tucson in 2008 because (mercifully) my father-in-law pointed out that the market wasn't done plunging yet and we'd've taken a bath if we'd purchased there.

We bought our first house in 2011 in Illinois, paid it off by late 2013, and were living large in the slow lane from then until we moved over here. It made complete sense to purchase there, the mortgage payments plus insurance were at right about $1k/month and rent would have been anywhere from $1.8-2.4k/month with no title to show for it at the end of the rental term. Owning the home cost us around $36k for the five years we lived there (maintenance, realtor fees at purchase/sale, miscellaneous). Renting something similar would have cost us $132k.

Any individual's decision to purchase will perforce be based on circumstances unique to the individual.

One of the commenters (I forgot whom, and I apologize) indicated values have been inflated recently and factoring in high interest rates ought to give purchasers pause if they are paying attention to economic headwinds/tailwinds.

Sometimes renting is the right answer, but I agree that owning is (in general) preferable.

 

[MJ DeMarco]

Interesting article that relates to this discussion...

The End of Homeownership - Macleans.ca

For generations, middle-class Canadians have been sold on the promise of homeownership. The promise was always flawed. Today it’s simply broken.

macleans.ca

Curious what any Canadians think...

excerpt...



excerpt...

 

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[biophase]

Scenarios like these are exactly why I made this post…

From the article MJ linked:

Excerpt…



They had years and years to purchase something.

Excerpt…

I mean 40 years old? Come on. Who’s to blame?



Btw, I’m not immune to this either. There’s a neighborhood in Phoenix that I wanted to live in and since home prices were stagnant from 2013 to 2020, I was just waiting and monitoring the area for the perfect home. I wanted a 2 acre property and I could and should have bought a tear down for $500k and built the perfect home. Unfortunately I waited too long and a 2 acre tear down would go for $1.5M today.

 

[Andy Black]

Who’s to blame? Governments and central banks. The govs for their low down payment house programs driving up the prices fast and central banks driving them up long term by creating money out of thin air. We know this already but I’m just reiterating.

It's like a law of nature - over time prices go up / fiat currency devalues.

So take out a mortgage on a property that will go up in value and where the debt will go down in value? Purely by the passage of time.

We pay heavily for our ignorance and for trying to swim against the tide.

I'm reminded again of MJ's post about Maths being so important. This stuff isn't complicated calculus or trigonometry. It's just understanding simple percentage increases/ decreases, compounding, and the power of the passage of time.

Get time and the laws of nature working for you, not against you.

Who's to blame? At some point we have to take responsibility and accept there are some things we can't change but we can change what we do about it.

 

[MJ DeMarco]

Another example...

Just to keep pace with the market, you needed to SAVE $20K in one year.

You’d need to earn more than $300,000 to afford a home in these U.S. real-estate markets

More than 2 million would-be home buyers have been pushed out of the housing market because of rising prices and mortgage rates, according to a new report.

www.marketwatch.com

This scenario is how I found myself paying a lot more for a home than I originally wanted. In the luxury home market, prices were rising faster than I could save money, even when I was saving $50K/mo.

I told myself, "Meh, it will go down" -- but after three years, the $1.5M homes I was looking at were now $3M.

Will things get better and prices go down?

I don't think so -- I think the high prices are here to stay as there are too many macroeconomic factors keeping prices elevated. Best case scenario is moderation.

 

[MJ DeMarco]

70% of all people can't afford homes anymore lead to a correction at some point ?

I don't think a correction is going to happen, only moderation... which means prices will remain elevated.

High interest rates stopped prices from rising, but for the most part they are still elevated and I don't see any economics in which they come down 20 or 30%.

"70% can't afford homes" represents pent-up demand, which means those people become buyers as housing costs attempt to move lower, keeping prices high.

 

[biophase]

It totally makes sense to me to buy RE once you have the cash from a great business,

Yes, this was my overall message.

but I could almost take the overall message here as prioritize RE over starting a FL business. Maybe the idea is that RE is a more sure thing than a business? Or just a no-brainer?

No and yes, you can do both. You can start a business and own a house.

I’m saying there are many pros to owning a house. Especially if you’re FL business never gets going.

I have seen a lot of issues with RE that aren't always there, but when they are it's a major, major problem in life. RE can easily erode monogamy - if I rent, I don't have to worry about maintenance, major repairs, regulations, tenants, lawsuits, etc. I've known many people who have had to spend enormous amounts of time and drop an additional $20K, $50K or more on things like foundation repair, plumbing, or evicting a tenant.

Of course there are risks. But in my opinion, the benefits outweigh the risks.

Almost 50% of bankruptcies have something to do with being unable to make a mortgage payment.

I’d love to see the reference to this. Got a link? In many states mortgages are non recourse so this doesn’t make sense to me.

I'm one of those who couldn't imagine not moving around a bit in my 20s. I'm sure I would've regretted it more if I hadn't had that experience. I'm probably not as wealthy as people I know who bought a house in a mid-tier city 10 years ago, especially those that have popped for now, but most I can think of are also still in awful jobs that they wish they could get out of, never lived or explored places they dreamed of,

This was my point. You aren’t as wealthy as them because they purchased a home 10 years ago.

But you equate buying a home with not being able to go on vacation or live somewhere else.

I plan to buy a house as soon as I can for the many reasons mentioned here, but it seems like there are many strong reasons not to do it too.

Again, this was my point. Many younger people cite reasons like yours to not buy. But where will be you when you are in your 30’s or 40’s complaining that you can’t afford anything? Don’t complain if your landlord doubles you rent. Are you ok with that?

Note in my original post I never said why you should buy real estate as soon as possible and live in it. You can always buy real estate and rent it out.

I really think when it comes down to it is that people in their 20’s do not want to invest. So it is very hard to get them to save a chunk of money and then plop it all down on real estate. They would rather use that chunk of money to go on vacation. Then when they are 30 years old they complain that greedy investors drove the market up and the interest rates are so high and they can’t afford to live in anything nice. Well, tell that to my friend that is making $20,000 a year and living in a $350,000 house with a $350 a month payment.

 

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[NervesOfSteel]

Your right. Raising a family in a "warm comfortable house" is nicer. I've been in RE for 47 years, so I look at it differently from you. It is a business for me. But I also like to be personally comfortable.

I'm a retired RE appraiser. In commercial and residential situations, I have seen about every living situation a human can have. I have been able to ask the question -- why -- so I have a lot of the reasons that people do what they do. It's not binary -- renting vs. buying a home.

And the concept of "rich" is relative to the person's perspective. When I was a kid, I just wanted a house with heat and an indoor bathroom. Dad had a talent for buying houses that had neither. He was always going to build something someday. The indoor bathroom in our last family home came a few years after we moved in. They got a furnace for heat after I left home.

Where I live, which was a crazy hot market two years ago - no inventory, tons of people trying to buy - houses are down 15% and falling everywhere. Tons of inventory sitting around now. I know several people who bought two years ago who are down $20-30K from their original price, not to mention the $10-20K they've "invested" in the house already. One of them needs to move for their job, and now they'll be paying for an apartment + a few hundred dollars since the rent their house can get is a good bit lower than their 2% IR mortage. Assuming they can find a tenant since tons of new apartments are coming online and there is lots of vacancy.

I think about buying a house a lot, since it would be nice to have more space and be able to make it my own. But since I'm just starting on FL, it just doesn't make sense to me. Mortgages are 50% higher for a house the same size as a 2br apartment. Renting eliminates the risk of major maintenance/repair, which seems to come up every year or two with a house. I've known several people who had to take our more debt on their modest house because of things like that. I can also downgrade my apartment if I need to get leaner as I'm starting out, but downgrading a house is extremely expensive with all the fees and time.

RE makes sense for wealth preservation, passive income, or as a business if it's your main thing. But buying a house to live in "as early as possible" regardless of market conditions has started to look way less attractive in my area the last few months. Would love to hear any arguments against this though, because it will be a major decision on my mind in the next year or two.

My house has proved to be an asset rather a liability.
It has helped me stay positive in darkest days by serving as a fall back net of small wealth.
Since my house is set up as my comfort, it saves me a lot of time with daily routine and makes my life smooth.
I have used it as my Office, Research Lab, Prototyping workshop, warehouse, etc.
It has provided me with rental income and helped my pay a substantial chunk of its own debt.
It has provided me with a personal gym and a personal bar.
above all,
It is enabling me me to raise my children in a warm and comfy environment with substantially less mental scars that I developed in my childhood due to extreme poverty!

As for monetary gains, every house will eventually sell at a profit after a decade or so!

 

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[EvanOkanagan]

My ex girlfriend did especially well with this strategy.

I bought 7 homes including a primary residence between 2013-2018. Buying fixer-uppers/dated homes in above average areas that I was able to make some improvements to. Also in areas that had potential future zoning changes (to increase density).

She had no money down, didn't need to deal with financing (all in my name), and no headache with dealing with any of the properties or tenants. She's never made more than 40-50k/year and was able to walk away with approx 1m tax-free in 2021.

TL;DR Get a cohabitation agreement kids!

 

[MitchM]

My fiancé is from Singapore and I’m currently on the fence as to whether we should buy there or in the US first - because Singapore will cost a lot more upfront.

I’m 27 now and am definitely starting to see the effect that the lifestyle of traveling and renting places is having on my net worth. Your post definitely hit home for me there.

It’s really the current interest rates in the US that are pushing me towards Singapore. The main problem on the Singapore side is the legal situation with renting it out if we go with an HDB property. We’d have to wait 5 years or do it under the table - which many people do ‍

Even though my numbers have grown over time and my “Net Worth” is solid if you factor in the value of business (which I don’t think is a fair thing to do).. I can’t shake the uneasy feeling that I have. I’ve always been confident, but we’re talking about having a family at this point - and that has me really scared of failing her and our future children.

Lots of big think lately.

 

[biophase]

Well sh!t, I went down the rabbit hole and googled '$50,000 down payment assistance program" and found a bunch. So they are out there. I've never looked for them.


Here's a link to one in Massachussets. Up to $50k in down payment assistance, no payments, no interest. You pay back when you sell your home.

Income limits and eligibility requirements for MassHousing Mortgage Loans

Am I eligible for a MassHousing Mortgage Loan with Down Payment Assistance?

www.masshousing.com

Here is one in Cali from the city of Yorba Linda:

The City of Yorba Linda has recently reinstated the Mortgage Assistance Program (MAP) to assist a limited number of low and moderate income households in purchasing a home in our community.

The MAP loan is in the form of a “silent second” and is considered a second mortgage on the home. The MAP participant borrows a prescribed amount from the City, in addition to the amount borrowed from the lender providing the first mortgage loan. The maximum loan amount is $50,000. The loan is interest free and is considered payable when the home is sold or no longer considered a primary residence.

 

[biophase]

Thanks for this thread, @biophase . It gives me some hope.

My boyfriend and I mortgaged a lovely Santa Fe style, 2400 sq. ft., 13 year old house for $292k @ 5.99% fixed interest last August in a small college town about 1 - 1.5 hours from a larger city. As first time homeowners and just getting out of college, we put the minimum down (can't remember exactly, maybe 5%?). I know $292k and 5.99% aren't awful by today's standards, but looking at the amount of interest we'd be paying if we stuck to the standard monthly payment makes me physically ill.

Congratulations. I think there is some comfort in knowing that your payment ("rent") will stay at $1750 for the next 30 years if you don't move at all. 20 years from now, when rents are $10,000/mo. You'll be sitting pretty like my friends who are paying $400 a month now.

I know that for me, once I had my first property paid off in Arizona. I knew that if I ever f*cked up royally I always had a place to live and all I needed to do was pay the HOA and taxes which amounted to $250/mo. This gave me alot of confidence to be more aggressive in my business.

 

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[WJK]

I read this thread and agree that most people really need to buy a house and pay it off ASAP.

I'm in the affordable housing business with bunches of tenants who are elderly or disabled who must rent. They don't own a home or anything else. Scary.

We decided personally not to build a new house. We've remodeled where we live and we're fine. I don't need a big house. I'd have to clean it or pay someone to clean it. I want to use all of our space rather than only living in a fraction of it. I like having a simple life.

 

[biophase]

My personal view is that for someone just leaving school and starting out working, in their early or mid-20s the best investment is cash.

Stack as much as cash as you can, after buying million-dollar term insurance for hospitalization, critical illness and accident. Invest in 10 percent gold and silver bars if you are really paranoid about hyperinflation.

I don't agree with this, but I don't 100% disagree with it. I mean in your early 20's, you really don't know what you will be doing in the next 6 months, let alone a year later. You probably shouldn't be buying anything at this point. Maybe live with roommates and get to know yourself.

But once you get a little stable, like have a good job, or a business that is consistent and decent, and you are growing a group of friends locally, then I would say, get yourself a home.

Health insurance during this age is relatively cheap, so I agree with that.

I disagree with purchasing 10% in gold or silver. Historically, they have not been very good investments. If you aren't going to invest anything, then don't invest into anything. Imagine you are 23 and have $20k savings. What's the point of putting $2k in gold. It's only worth $3k if gold increases 50%. That's hardly hedging against any inflation.

With real estate you can control a $100k investment with $20k down. That is where the beauty of its leverage comes in.

$20k in gold doubles and becomes $40k
$20k down real estate at $100k doubles and becomes $120k.

Only extreme events matters in life. The same is true in personal finance. The business opportunity or once-in-a-lifetime investment that can turn your life around. The sudden cancer diagnosis despite the fact that you do not smoke or drink.

I would not be telling my 25 year old friend that saved his cash to spend it on a once in a lifetime opportunity investment. How realistic is this scenario?

Nobody gets broke due to inflation (If you get paid in a trustworthy major currency). If you talk to people getting broke or miss a great opportunity, it is always a cashflow problem.

I don't understand this statement. We have seen that in the last 3 years, wages have not kept up with inflation. Many people are broke today due to inflation.

Can you clarify this statement? What do you mean by it's a cashflow problem?

 

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[biophase]

I advocate having a large cash reserve, hence not having the money to pay the rent will not be a scenario.

You don’t like your place. You can change.

You hold the cards. Power and freedom means having the ability to walk away from any “situation”.

I have seen this mentality play out over the last 10 years. This is exactly why I made this post. You have freedom, cash and can do whatever you want. But what is your plan in 2033?

Don't be like some people I know that cleared $1M in 10 years and have $0 networth, because they wanted "freedom".

Guess how much freedom they have now? They can't rent in a good neighborhood. They can't afford to buy. Their freedom is a 1br in a major city. While my other friends that made $350k in the past 10 years are living in a 3br house

I choose cash in bank over a partial ownership of a title deed. Cash in banks are like soldiers that can get activated in seconds when I call them for actions.

Am I missing something here, where you're just not believing in inflation? Cash reserves are good, but how much is too much? When do you plan to "activate" your cash?

 

[Guest-5ty5s4]

As an American, you have the power to clear $250K tax free every 2 years.

Think about that.

The government will NOT tax you! When does that ever happen?

If there was ever a lazy Slowlane strategy this is it:

If you move 10 times in 20 years with an average $100K gain, that's $1M tax free. You'd have to earn $1.5M to net the same amount. If you put those gains into the stock market and earn 8% annually, in 20 years you'll have around $1.3M, for simply DOING NOTHING other than moving every 2 years.

Yes, this is Slowlane, but it is still a powerful weapon for wealth creation, especially if you fail at 100 businesses.

Also, as you level-up in home, the amount of the gain tends to also correlate with the cost of the home. My tax-free RE gains were bigger the more expensive the house.

This is precisely my strategy with every home I plan to own until I buy or build my dream home. It's like flipping houses but on steroids, because every dollar goes into your pocket (until you get to big, big houses). Only issue is you have to wait two years. It's pretty much this, or do the duplex / fourplex househack. Those are your best ways to "hack" your primary residence when you're still starting out.

You can also rent rooms to your friends in this house (have roommates) to make it even better.

I bought my house for 210k and the appraisal came back at 275k (that's just getting a good deal). It needed a lot of work, was in bad shape, and now that it's all fixed up with new flooring, paint, new countertops, the works, plus 2 years of ownership, it's appraised at nearly 400k. I'm 27.

 

[biophase]

It also has to do with the options I have in my country.

When I reach 35 soon, I can get decent resale public housing in the range of 400-500k.
Alternatively, I can opt for dirt cheap newly launched public housing below 200k for unmarried singles. I can rent out after living for 5 years and get 2k monthly rental. Insane yield and impossible to lose money. The downside is that the construction waiting period takes around four years. Public housing here has decent quality and good neighborhoods.

Most of my peers opt for private apartments that cost around 1.5M these days, taking up a significant mortgage liability. The rates could not be fixed for 30 years, five years max fixed rate here, because the banks here could not hedge the risk away.

There is also no tax benefit here. Property tax is not high, but REITS that collect dividends are taxed at zero (zero dividend tax). So the only power of home ownership comes from leverage if you choose to use it. In the right direction, you make money; in the wrong direction, you are screwed.

First, thanks for answering and trying to help us understand.

So if I understand this correctly, you cannot purchase public housing until you reach 35 years old? Does the public housing ever appreciate? This doesn't make sense to me, if you can buy it at $400k, then someone who is 25 years old can buy it at $400k in 10 years? The price must increase each year right? What's the point of purchasing it if there is no appreciation. It's not hedging inflation at all.

A single person at any age can buy a place for $200k, and after 5 years can rent it out for $2k a month? 12% return? The downside is waiting 4 years after you pay $200k? Or just waiting 4 years with a deposit? Do these $200k places ever go up in price? Why wouldn't you have chosen this option? You said and I quote. "Insane yield and impossible to lose money." THIS WAS YOUR UNSEEN OPPORTUNITY that you were saving your money for. You just turned your $200k into a $24k salary.

So due to this, you have been trying to save up all your money so that when you reach 35 you can purchase a home without a loan? Was this your strategy all along?

 

[biophase]

See, I noticed this, but I cant do anything. I’m 13… for example, I know someone who built their house in 2011 for like 1 million, now its worth 3-3.5 million, now each 1k sq ft is 1m$, which is weird. Like what am I supposed to do? What about my sister? By the time im 20, a 3 thousand sqft house is going to be like 9 million!

Let's just see what the housing market is like when you are 20 and figure it out then. No need to worry about this at your age.

 

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[21elnegocio]

You can still find a way. Everyone always thinks that they are too late. If you are making six figures, you should be able to get something.

I bought my first home for $230k on a $65k salary at 8.25% interest. It was a 1.5 hour commute from my work.

It wasn't a great home. It had shag carpet in all the rooms.

I agree with you @biophase 1000% I am a real estate agent in Phoenix, 80% of my clients are milenials and I see this over and over again my millenial clients think their first home will be a huge house with the white picket fence. Let me tell you the harsh truth, in many cases IT WILL NOT BE THAT HOME you saw on IG BUT I guarantee you it will be the best investment you will ever make.

I always let me clients know about this, I also tell them that the first home will get you closer to that dream home why? Because as your house appreciates, you can later on sell that first home or refinance and use the profit to buy that dream you home want.

Step 1 Buy a house with down payment assistance
Step 2 Wait a couple of years 24-32 months
Step 3 Sell first home take (Lets say $175K profit, keep in mind you dont pay taxes on your primary residance capital gains if you owned it for 24 months or more)
Step 4 Use that $175k plus your own downpayment to buy your dream home.

 

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[Kak]

I bought a nice home that needed work in a nice neighborhood at 25. We put in a bunch of work, ourselves, and I still live in it. It’s worth at least 300k more than we bought it for.

I wish we had bought something more expensive now and maybe we would have 500-700k of appreciation. Either way, it wasn’t some starter home. Even the big addition we will put on it will be a good investment for the day we sell.

The existence of the federal reserve makes @biophase totally right on this concept.

 

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[JordanK]

There are very big examples of where the theory of property prices are "guaranteed" to go up are just flat out wrong.

If you want a case study to learn from look at Japan. Demographics started trending the other way and house prices/stock market have been stagnant since the 90's.

In the US, UK, Canada, Australia and where I'm from Ireland this shouldn't be a problem as we still have big waves of population growth due to immigration but if you are investing elsewhere you should be very weary of population growth/decline in the area and the country as a whole.

I also noticed a trend of Irish and UK buyers picking up places out in Dubai, UAE. In certain countries you need to look at how weak/strong the rule of law...property rights are. If you annoy the wrong person or get arrested could all your assets be seized? There is a reason so many Russian, Chinese and Middle Eastern buyers want to own assets in the west.

In many parts of the world you also need to be aware of local environmental or political issues. Many of the Ukrainian refugees in Ireland only wished they had sold their property back home before the war.

These aren't issues many people on the forum will have to contend with as historically the US has been insulated from these type of problems but there is a global readership of this forum.

If you are living in Phoenix/Las Vegas are you worried about future water availability or soaring temperatures during the height of summer? If you live in Florida are you worried about sea level rising, increasing frequency of storms? As I type this, my friend a fastlaner from Tulsa has been living in his truck for the past 4 days as a massive storm blew trees into his house and there are power outages (no a.c), water outages and its super humid outside.

I'm in property and I agree wholeheartedly with this thread. Buy buy buy but educate yourself to make the best decision!

Edit: I also wanted to mention that between 2000-2008 my father bought a load of property. When it crashed the bank sold all the loans to vulture funds. They seized the properties and sold them for penny's on the dollar at the time and left him with the residual debt to pay. Its 2023 and the situation has still not been fully resolved... *this happened in Ireland and we have different laws/practices. I don't think a situation like this would continue as long in the US.

 

[MJ DeMarco]

My city will require a channeling of my inner Oprah...

You're a millionaire, you're a millionaire! Yes, everyone is a millionaire!

 

[Saint]

I'm kind of surprised to see the love of RE here. I thought the point of FL was to get to a point that whether a decent house goes up by a few hundred thousand is immaterial.

It totally makes sense to me to buy RE once you have the cash from a great business, but I could almost take the overall message here as prioritize RE over starting a FL business. Maybe the idea is that RE is a more sure thing than a business? Or just a no-brainer?

I have seen a lot of issues with RE that aren't always there, but when they are it's a major, major problem in life. RE can easily erode monogamy - if I rent, I don't have to worry about maintenance, major repairs, regulations, tenants, lawsuits, etc. I've known many people who have had to spend enormous amounts of time and drop an additional $20K, $50K or more on things like foundation repair, plumbing, or evicting a tenant. That plus basic weekly upkeep seems like a lot of time sacrificed that could go to a business. You could also get too happy with the belief that RE will go up forever, overleverage yourself, then wind up erasing your whole net worth in one bad market situation. Maybe everyone here is too smart to let that happen, but it has happened to numerous people. Almost 50% of bankruptcies have something to do with being unable to make a mortgage payment.

What people really seem to be saying is "buy in a market that will always go up (and make sure you always have a job that pays well in that time), it's a no-brainer way to make a few $100K extra every year". Austin probably was that way 10 years ago, but it's becoming unfashionable, not to mention the massive tech layoffs. Prices down 15% already even with low inventory. Same with SF. Or the numerous places where prices just never went up. Maybe places like Phoenix or South Florida won't face that for a long time, but there's no guarantee. This doesn't seem much different to me than saying "Buy early in a bubble and sell before it pops". Sure, Bitcoin at $20K may not be a bubble, and RE in London may not be either, but Bitcoin at $70K was, and how do you ever know where you're at?

I'm one of those who couldn't imagine not moving around a bit in my 20s. I'm sure I would've regretted it more if I hadn't had that experience. I'm probably not as wealthy as people I know who bought a house in a mid-tier city 10 years ago, especially those that have popped for now, but most I can think of are also still in awful jobs that they wish they could get out of, never lived or explored places they dreamed of, and have no end but slowlane retirement in sight. Unless they "Went Fastlane" with their RE, which just means they were an entrepreneur earlier than me, I think they still missed out on a lot despite that part of their portfolio looking good.

I plan to buy a house as soon as I can for the many reasons mentioned here, but it seems like there are many strong reasons not to do it too. Mainly just getting my thoughts down here because this was a very interesting read and got me thinking as I'm finally settled and seriously contemplating RE. Welcome any criticism of my points!

 

[Spenny]

Big thank you @biophase for this. I initially turned my nose up at this but gave it some time to mull over. I then ran some numbers and found that this venture could be rather profitable if I have one or two lodgers along with me.

After putting some numbers in a rent vs buying calculator, I found that I could be £45,000 better off over 5 years, which is not bad considering I could have a partial mortgage paid off & have a house that I get to live in rent-free. This will be something I'll be considering in the future.

 

[Xeon]

Public housing is only available to married couple or single people aged 35 and above. You can either buy resale or new flat. New flat has higher appreciation potential since you will be the first owner, buying from the government (housing development board). But the downside is that you have to be on a waiting list that will take 3-4 years.

But TBH saving for housing hasn’t been high on my priority either.

I have a friend who went through the ballot process (single after 35 scheme) and got a new flat in a mediocre location rather quickly. He has to pay around 150k, and after living for five years (a rule on renting out), he could rent it out for 2k a month. Downside is that he has to wait for four years. It is not even constructed yet and he will pay for it after it is done. So it will take nine years before he can rent out or sell it.

The public housing is being bought and sold in the market as well. You just need to be a local (citizen or permanent resident).

A common strategy used by local is to queue for new public housing unit in good location (paying more for that as well). The bet is as more immigrants come to Singapore and get converted into citizens they get to sold it at higher price in the future.

So basically there are two housing markets in Singapore. One is public housing that only locals (with criteria on age or marriage) could participate. The other is private property market that everyone could participate.

Don't wait. If you can afford to buy a public resale flat now, do it, or latest wait till 2024 to see if the sellers' market cools down. If it doesn't, buy it either way.

I used to scoff at properties, thinking that the only way to get rich is via businesses / The Fastlane way. I would save and hoard cash, and use all that to fund my side hustles to test ideas. Biophase is right. There are probably tens of thousands or more members here, how many actually reached the wealth levels of some of the bigger boys here? It's not one way or the other.

By buying public resale within your means, you get to rent out the whole unit (under the table) and use all your CPF + gov grants to fund a major part of it. The ROI (net profits after deducting all expenses etc.) per month on average is about USD1300+. This won't make anyone rich, but in such fast-changing, unstable times, it helps to solidify your "foundation" and provides extra $$$ to test/fund your business ideas.

MJ mentioned about the "foundation" here:

View: https://www.youtube.com/watch?v=r_58zPgArb4

Passive income from rental complements the Foundational Job tier. If you get fired tomorrow, at least you won't be sleeping on the streets. Multiple sources of income.

My only regret was not buying the house earlier....my bank account would be far, far fatter by now, close to 3x....

And just to add, the passive income from rental, accumulated over a couple of years, can help you buy an automated-laundromat franchise here for a 2nd source of income stream. I'm not sure how much those are making, but there's many around my area in quite deserted/quiet locations but they've been around for many years, which means they should be doing quite well. 2 sources of passive income + day job to fund the FL idea.

 

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[jwest95]

I know that this may be a controversial topic, but I want to give you a few examples of people that I know that are slowlaners but are actually doing very well vs. some aspiring "fastlaners" that aren't anywhere in the same position. This topic came to mind when another friend was shocked when he learned that one of our mutual friends had a decent net worth despite having a low paying job.

Example 1: I had a friend who we will call Amy who made $7/hr back in 2008. Back then a city in the Phoenix area had a first time homebuyers program. The city would pay up to $50,000 down payment for a home, but the catch was that when she sells the home, the first $50,000 is returned to the city. She qualified for the program due to her low salary.

So she bought a home for $100,000. With a $50k down payment from the city, she got a loan of $50,000 at something like 4.5%. She was able to qualify for a house on a salary of under $15,000 a year!

Today her home is worth $375,000. Her house equity is probably $170kish and she is lucky to have a nice fixed $500 mortgage payment on her current home until its paid off. If she had continued renting, she wouldn't be able to afford anything today!

Example 2: I have another friend who we will call Julie. I have known her since 2008. She has never made more than $35k per year. She bought a house for $88k in 2000. Today her house is almost paid off (she's been making an extra $100 payment per month). Today her house is worth $340k. Her equity is $330k. There is no way she could have saved that amount in 20 years on $35k a year.

These are two examples of people who would have huge issues in surviving today if they had not purchased a home years ago. Rents in their areas are $2500 a month for a home in their area. They would have been priced out a long time ago. But because of their purchase, they are paying $500 and $450 a month in mortgage payments.

I contrast this to others I have known who consistently make $75k-$150k per year but never buy a home. They lived the digital nomad life or the lifestyle business life of renting a nice loft in the city. 5-10 years later, their net worth is close to zero and they cannot afford a home any more due to the prices and interest rates.

I can already hear the naysayers saying, but if you reinvest everything back into your business, that's a much higher ROI. I agree. But this is assuming your business is successful. What I would tell any 20 year old aspiring entrepreneur is that if your business is doing well, invest into a home first, then the rest into your business.

I do completely agree with your post tbh. I'm in the UK but I don't think the reality is much different. There was a time in my early 20s when I dabbled in whether buying a house was the way I wanted to go - and I was getting more and more influenced by the likes of Grant Cardone and Robert Kiyosaki. For the most part I've now rejected their advice on homebuying.

I'm 28 now, and I was extremely lucky to be in the position to buy my first home outright last year (no mortgage involved). I've been in this place about a year now. I love it, but I don't think it's fully sunk in yet how strong my position is. My expenses are probably as low as you can go and I'm able to spend a lot more time working on my business and hobbies than anyone in full-time work would be able to. I'm incredibly thankful, but I think the full benefits won't be clear until maybe 10-20 years down the line.

 

[MJ DeMarco]

Buying a home is 100% a slave move if your not doing it as an investment vehicle. With debt taxes and expenses your paying for the house at bare minimum twice. The borrow is a slave to a lender, don’t make this 30 yr mistake

Taxes, debt, expenses; all of this trickles down to renters in your rent payment ... so you can pay it as a renter, or as an owner. There's no escaping it unless your plan is to live in a cardboard box under a bridge, which as I understand, is becoming quite popular in today's "you'll own nothing" culture.

Right now my mortgage is 2.25%. US Treasuries pay 5.25% and money I would have spent on a house is now earning a net 3% -- in other words, not only is the US government paying my mortgage, they are also paying me a premium to do so.

Because I took debt on my house, my bank is now the slave, and they hope I pay off early. And I get free money.

With respect, your take is 100% false from a Fastlaner's perspective. Hold a 7.5% mortgage for 30 years, and yea, you might have some valid points.

 

[Kak]

Another good reason...

The government will never get its hand out of the cookie jar.

Most people don't understand this concept, but every dollar SPENT by government is really our collective tax burden. Even if it isn't directly paid by check. Thankfully a bunch of foreign suckers have USDs or it would be worse.

That money comes from somewhere. Make no mistake, inflation is a tax and it's as likely to stop as actual taxation.

Now they're talking rate cuts in March... Lol... Time to go home shopping.

 

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