The Entrepreneur Forum | Startups | Entrepreneurship | Starting a Business | Motivation | Success
  • NOTICE! If you received MULTIPLE EMAILS from the forum today, please be advised that our monthly email system got caught in a loop and inadvertently might have sent you several emails. The problem has since been fixed and all Unsubscribe Requests will be processed within 24 hours.
  • It's back! As an INSIDER you can now SORT any thread by LIKES. See this post for more info.
  • Join 50,000+ entrepreneurs who are earning their freedom and living their dream.

    "Fastlane" is an entrepreneur discussion forum based on The C.E.N.T.S Framework outlined in the two best-selling books by MJ DeMarco (The Millionaire Fastlane and UNSCRIPTED®). From multimillionaires to digital nomads to side hustlers who are grinding a job, the Fastlane Forum features real entrepreneurs creating real businesses with one goal in mind: Freedom— both financial and temporal.

    Download (Unscripted) Download (Millionaire Fastlane) Register
    Registering for the forum removes this block.

HOT TOPIC Convince me to Not Buy a Home

JScott

Legendary Contributor
EPIC CONTRIBUTOR
FASTLANE INSIDER
Speedway Pass
Aug 24, 2007
4,111
7,553
1,731
I'm curious, based on your opinion of where we are at, are you selling your real estate holdings?
For the first time in 10 years, I own no properties that I'm not planning to hold for the next 5 years. In other words, I currently own no flip properties (other than stuff I'm partnering/lending on) or new construction projects. While I'm still looking to do a few flips here and there, I'm not taking on any projects that will require more than 4 months to complete (beginning to end).

I'd rather sit on the sidelines for a few months/years and wait for the opportunities to present themselves. In the meantime, I'm focusing on other investment vehicles and projects.

Let's say you know that REI prices will only drop 20%. Does it make sense to sell?
I'm not selling any of my 42 rental units. They all cash flow well, and even if we take a 20% hit on rents, that won't be an issue. Again, anything that I'm willing to hold for at least the next 5 years, I'm holding on to.

But, if you're asking more generally, see below...

Assume you have $1M in REI. That will cost you 6% to sell it. Then assuming you have capital gains tax, let's just say you've done decent and made $200,000 on your current $1M REI portfolio. So now you pay $40,000 in taxes. So your $1M REI becomes $900,000 in actual cash in the bank.

If REI drops by 10% you are back to even. If REI drops 20% and your properties are worth $800k, was it even worth the trouble to sell in the first place?
Again, I'm not selling. But, playing devil's advocate, I can certainly see an argument to sell in some situations. For example:

- You have property that isn't generating much cash flow, and a small drop in market rents will make it negative cash flow;

- You have property that is leveraged, the loan will come due in the next five years and a drop in values or rise in interest rates in the next couple years can put that asset at risk;

- You expect a larger than 25% drop in values during the next downturn (and/or you're a great investor/negotiator), so the 25% tax/commission hit you take to sell now is worth the potential upside;

- You own Class A (or above median priced) properties and expect that the next downturn will hit you harder than the average market;

- You think the change in market conditions will provide an opportunity in an emerging asset class that will return much better than your current holdings, and there's an opportunity cost to not selling (a good example here was self storage after the 2001 and 2008 downturns).

I can see plenty of reasons to sell property right now, but most of them will be situation dependent. Also, changing market conditions provide opportunity -- if you're well positioned to take advantage of those opportunities, selling now can provide additional cash to position yourself even better.

Most rental real estate is likely generating 8-15% cash-on-cash -- depending on the scale and scope of the downturn, there could be investment opportunities that significantly exceed those returns. I wouldn't fault a smart investor for wanting to be prepared (financially) to leverage those opportunities.
 

Don't like ads? Remove them while supporting the forum. Subscribe.

biophase

Legendary Contributor
EPIC CONTRIBUTOR
FASTLANE INSIDER
I've Read UNSCRIPTED
Summit Attendee
Speedway Pass
Jul 25, 2007
6,706
30,401
5,083
Scottsdale, AZ
I'm not selling any of my 42 rental units. They all cash flow well, and even if we take a 20% hit on rents, that won't be an issue. Again, anything that I'm willing to hold for at least the next 5 years, I'm holding on to.
My properties are mostly free and clear. The ones with loans have loans under 50% LTV. And all them cashflow and have PMs and the most expensive one is $250k. So I don't feel the need to sell any either.

I'm thinking in my head if they dropped 25% would I have wished that I sold? The answer is no.

The only question in my head is, will there be better properties I can buy if the market crashes that will outpace the returns of my current properties in 10 years.
 

Envision

Platinum Contributor
FASTLANE INSIDER
Read Millionaire Fastlane
I've Read UNSCRIPTED
Summit Attendee
Speedway Pass
May 5, 2014
636
3,709
885
25
Real estate indicators don't make it seem we're necessarily at a top, but in most recessions, real estate doesn't lead the downturn -- it's a lagging indicator. 2008 was an exception, and because of it, many new investors incorrectly believe that real estate is typically the *cause* of the recession, and generates leading indications of an economic downturn.

But, that's not generally the case (hardly ever, in fact)... Typically, it's the business cycle that gives way first, leading to increased unemployment and wage depression, which ultimately leads to a turn in the real estate industry. Real estate starts to turn a few months after the rest of the economy.

With that said, how is the rest of the economy doing? All indications are that the business cycle we're currently in may be coming to an end. Some of the most reliable indicators:

- Full employment
- Flattening yield curve
- Rising interest rates
- Consumer credit at a peak
- Reduction in GDP (especially immediately after a tax break)
- Wage and real inflation increasing

(Note that the first two -- full employment and an inverting yield curve -- are almost perfect indicators for recession in the United States.)

And if you just look at the statistics, we're currently in the second longest business cycle in recent history, so just based on timing, we should be expecting a turn in the near future.

I know a lot of people disagree with me on this, and I'm the first to say I don't have a crystal ball, but I'm confident enough in my assessment that I have completely reorganized my real estate business based on the current economic conditions and my perceived implications of them.
This is a good POV but you gotta take into consideration the devastation of the recession and the recovery that we need to make, so it's not outrageous to be in the second longest business cycle.

No doubt, the economy will turn at some point in the future but I'd bet it won't be nationwide, various indicators in my city for example show that people keep coming here, we're in a housing deficit, and house prices are skyrocketing. This would be different compared to California, or the midwest. What's your thoughts on that?

Also, for the op...

Your house isn't an investment. I'd recommend seeking a househacking opportunity like many on the forum have done but you'd need 2 years of w2 income for the fha loan. That would turn your house into an asset.

Can you use the money you have to make more money at a better rate than an investment home would?
 

JScott

Legendary Contributor
EPIC CONTRIBUTOR
FASTLANE INSIDER
Speedway Pass
Aug 24, 2007
4,111
7,553
1,731
No doubt, the economy will turn at some point in the future but I'd bet it won't be nationwide, various indicators in my city for example show that people keep coming here, we're in a housing deficit, and house prices are skyrocketing. This would be different compared to California, or the midwest. What's your thoughts on that?
Regardless of how good housing is looking, at the end of the business cycle, housing will get hit. Recessions (downturns in the business cycle) aren't localized -- while some areas may not get as hard as others, the factors that contribute to the end of the cycle (credit, wages, inflation, etc) have always been pretty uniform nationally.

As an example, in 2008, Atlanta was still growing (and never stopped). They were increasing population both in terms of employment and immigration. Yet, despite the population increase, Atlanta housing was devastated (perhaps the hardest hit market in the country). The reason was that housing demographics changed -- people started to double/triple up, people moved back in with their parents, people moved from houses to apartments, apartments to mobile homes and mobile homes to sleeping on a friend's couch.

Population increased, but housing got crushed. That's because housing is driven by a lot of factors in addition to population. It's driven by wage growth/reduction, it's driven by inflation, it's driven by credit factors, it's driven by property class, it's driven by topography/geographic constraints, etc.

I'm certainly not saying that the next downturn will be anything like 2008 (my guess is it won't), but that doesn't change the fact that the end of the business cycle nearly always impacts real estate, and will impact real estate nationwide. Some markets may not get hit as hard as others; some may emerge relatively unscathed. But, all markets will likely take some hit.

As for when it will happen, again, I have no idea. I've made some big bets on sooner rather than later (both in my real estate business and by buying options), but I could certainly be wrong. But, it's going to happen at some point, and real estate will not be immune...in any market.

All that said, I'm not an economist and I've been wrong before, so feel free to ignore absolutely everything I said above... :)
 

biophase

Legendary Contributor
EPIC CONTRIBUTOR
FASTLANE INSIDER
I've Read UNSCRIPTED
Summit Attendee
Speedway Pass
Jul 25, 2007
6,706
30,401
5,083
Scottsdale, AZ
Let's say you know that REI prices will only drop 20%. Does it make sense to sell?

Assume you have $1M in REI. That will cost you 6% to sell it. Then assuming you have capital gains tax, let's just say you've done decent and made $200,000 on your current $1M REI portfolio. So now you pay $40,000 in taxes. So your $1M REI becomes $900,000 in actual cash in the bank.

If REI drops by 10% you are back to even. If REI drops 20% and your properties are worth $800k, was it even worth the trouble to sell in the first place?
One other thing I forgot about is depreciation in the tax calculations. I just did my taxes today which reminded me of it. I'm assuming a 13 year ownership period here. So a 16% REI collapse would be break even.

Same example as before, but with a lower cost basis due to depreciation:

Assume you have $1M in REI. That will cost you 6% to sell it. Then assuming you have capital gains tax, let's just say you've done decent and made $500,000 on your current $1M REI portfolio. So now you pay $100,000 in taxes. So your $1M REI becomes $840,000 in actual cash in the bank.
 

SteveO

Legendary Contributor
EPIC CONTRIBUTOR
FASTLANE INSIDER
Summit Attendee
Speedway Pass
Jul 24, 2007
3,619
14,645
2,804
I can see plenty of reasons to sell property right now, but most of them will be situation dependent. Also, changing market conditions provide opportunity -- if you're well positioned to take advantage of those opportunities, selling now can provide additional cash to position yourself even better.
This is the game that I want to stick with. Distressed sales are few and far between right now. The 20% swing is much greater if you dig deep. Could be more like a 50-80% swing.
 

JScott

Legendary Contributor
EPIC CONTRIBUTOR
FASTLANE INSIDER
Speedway Pass
Aug 24, 2007
4,111
7,553
1,731
This is the game that I want to stick with. Distressed sales are few and far between right now. The 20% swing is much greater if you dig deep. Could be more like a 50-80% swing.
Exactly. This is where the strategy for a professional investor will deviate from that of a real estate hobbyist...

With a 20% drop in the market, professional investors will likely be getting deals at 50% off or better. Hobbyists will be getting deals at 20% off.
 
OP
OP
HelpAndProsper

HelpAndProsper

Contributor
I've Read UNSCRIPTED
Apr 1, 2018
63
81
118
45
Boston
After reading a lot of these posts, I'm more convinced to rent and keep saving money on the side and let this play out into the next downturn.
 
G

Guest3722A

Guest
- Flattening yield curve
- Rising interest rates
Do you think Powell is going to actually raise in 2 weeks? Ever since his seating, he's been aggressively stating that this was going to occur. Right now, as I type this, this is how the curve falls:

Left side - FFR 1.75, 2 yr 2.38, 10 yr 2.83, 30 yr 3.015 - Right side

Two weeks ago I was very much bullish on this. The right side broke through key resistance levels, auctions improved and a steepening occurred. Last week, Powell changed his language from aggressively hawkish to moderately dovish and both sides came down hard, breaking support. This how nervous this market has been. And then it comes right back.

Over the last few weeks I've seen alot of scared money running in and out of flight to safety positions in the treasuries. There's also been alot of short covering outside of the obvious levels.

The part that gets me is that the right side steepened after reaching a more enticing yield at the last auction, which was stronger. And now after last week's language changed, what I'm seeing is a possible double top forming in the 30 and a possible head and shoulders forming in the 10. I think that's the clock to watch for.
 

Late Bloomer

Gold Contributor
Read Millionaire Fastlane
Speedway Pass
Apr 17, 2018
952
1,306
362
This is an interesting thread to follow. Thanks for the many perspectives.

Yesterday the state's public radio news (I'm in the Midwest) had a story on how this is the hot, hot time for home sellers, but oh so difficult for buyers. They said half of homes are selling above asking price, because interest rates and unemployment are so low "and that's expected to not change for at least a year." (They didn't give any reasons for these macro predictions.) They had an anecdotal mention of a local well qualified couple, looking to buy, who have lost out on multiple offers $15k above asking price. That was the full report.

A trend follower would say, what a perfect time to sell in a market with at least another year to go up. I guess a contrarian would say, when everyone agrees the market is higher then ever and is only going to keep going up for now, that's the time to get out.
 

Don't like ads? Remove them while supporting the forum. Subscribe.

JScott

Legendary Contributor
EPIC CONTRIBUTOR
FASTLANE INSIDER
Speedway Pass
Aug 24, 2007
4,111
7,553
1,731
Do you think Powell is going to actually raise in 2 weeks? Ever since his seating, he's been aggressively stating that this was going to occur.
Honestly, no idea...

He's been saying a lot of things that would lead me to believe he's preparing to do another hike, including direct references to hikes not having to hurt the global economy and inflation potentially spiking for some period of time. But, I have to imagine there's a lot of pressure not to do this now, especially with mid-terms around the corner.

I've been tremendously bad at predicting rate changes over the past couple years, which is why I like to look at the current conditions rather than speculate on where things are going. Historically, the Fed has been pretty immune from politics...that's no longer true after the past 10 years...
 

W0rkb3nch

New Contributor
I've Read UNSCRIPTED
May 30, 2018
14
16
19
After years of renting I got really bored and irritated of:

a) paying off someone else mortgage whilst they also benefited from the increase in house prices
b) being 3 months away from not having a home [3 months notice in tenancy agreements]
c) not being able to make changes to my homes layout/aesthetics to my taste because it belonged to someone else.

I felt like some elses b**ch working to pay off their loan.

That's just me, I'm 4 years into my mortgage and I don't feel 'restricted' or at the mercy of a large financial institution earning money on the interest I pay. Hell if I sell up now I'd be 100k better off than I would if I was paying rent over the past 4 years.

Yeah the market could crash and I could have negative equity for a while, but I've got a wife and kids and happy with the area we live in, again I feel totally free to progress my business ventures whilst my family has permanent residence in a great area, which is important for schools, near family etc.

Also I was in a financial position to take out a mortgage loan at a competitive rate, not everyone can summon up a decent deposit.

I would say the only bad advice I got was to 'stretch' your mortgage payments as much as you can in order to buy a more valuable property [I didn't do that as it didn't feel right]. For me that's got your a$$ over a barrel with your bank keeping you stuck with a job that pays your high debts and likely removes any meaningful 'side hustle' time from your life.

There are many factors involved in making the right choice, it's down to you and your circumstances.
 
Last edited:

ryanbleau

Silver Contributor
Speedway Pass
Jun 22, 2014
237
513
245
36
Scottsdale , Az
If you cant pay cash you cant afford it. My one rule I live by. I'm 35 and own my house outright. That frees up my money to work for me and not pay for a mortgage or interest. Buy a cheap piece of crap and fix it up. save some money and flip it into your next house. Always pay cash.
 

JScott

Legendary Contributor
EPIC CONTRIBUTOR
FASTLANE INSIDER
Speedway Pass
Aug 24, 2007
4,111
7,553
1,731
With that said, how is the rest of the economy doing? All indications are that the business cycle we're currently in may be coming to an end. Some of the most reliable indicators:

- Full employment
- Flattening yield curve
- Rising interest rates
- Consumer credit at a peak
- Reduction in GDP (especially immediately after a tax break)
- Wage and real inflation increasing
Over the past week, we can add to this list:

- GDP forecast revised down for Q2 (to 2.2%)
- Debt-to-GDP ratio now forecast near 110 this year and near 120 by 2023
- Home sales dropping
- Fed warning of increased inflation
- Real unemployment at 8.6%

I could certainly be wrong, but I'm comfortable enough with my speculation that I just bought a whole lot of QQQ/XHP/SPX LEAP PUTs...
 

DustinH

Bronze Contributor
FASTLANE INSIDER
Read Millionaire Fastlane
I've Read UNSCRIPTED
Speedway Pass
May 24, 2017
240
366
191
Nashville
Don't buy a house unless you are committed to living in it for 10 years. Buy something in a price range that sells (don't get anything over $600,000) and in a quiet suburban area that is desirable with good school systems (stability). Don't put all your cash into the down payment if you don't have to. Only put 20% down to avoid the PMI. Put the rest of your cash to work somewhere else. Don't try to search for a great "deal." Pay for a good house that will be desirable 10 years from now (unless you have plans to update it). Don't try to get a discount on the sales price. Get the sellers to pay for all the closing expenses/fees, and ask your realtor to pay for the inspections. The fees involved in the transaction is cash you will never get back. The cash put as a down payment will appreciate. Here is a list of closing costs and fees you should get someone else to pay for (the seller, your realtor, or even your mortgage broker): inspection fees, repairs, title insurance, loan origination fee, closing attorney fee, homeowners association transfer fees, typical closing costs such as the state mortgage tax and state deed transfer tax. Your mortgage broker should be able to give you a detailed list of every line item you have to pay, except for the inspection costs and closing attorney fee. Your realtor should be able to negotiate these on your behalf.

If you don't want to commit to one place for 10 years then don't buy it. Buy 2 or 3 rentals instead. Don't ever just buy one rental. If you go that route then go into it thinking you will buy 3 rentals. One door is never a good investment.
 
G

Guest3722A

Guest
Over the past week, we can add to this list:

- GDP forecast revised down for Q2 (to 2.2%)
- Debt-to-GDP ratio now forecast near 110 this year and near 120 by 2023
- Home sales dropping
- Fed warning of increased inflation
- Real unemployment at 8.6%

I could certainly be wrong, but I'm comfortable enough with my speculation that I just bought a whole lot of QQQ/XHP/SPX LEAP PUTs...
Yeah with me I personally don't care which way the market goes as I just trade futures contracts usually short term. I will say that after a long string of winning trades I did get burned two weeks ago on some short contracts on the 2yr where I was up on the day before Powell abruptly flipped his language and I've been on the sidelines ever since. I'm waiting for the geopolitical confusion to settle and show a path.

What is interesting though is that some prominent traders down at the CME are baffled at the current price action and then 2 days ago, the bond king himself, Bill Gross, took his largest one day loss ever. Which is odd. So there's all kinds of records being broken at this time. One more that comes to mind is, I'm not sure if you remember the Dow's largest one day point loss back in February, but Goldman just came out stating that they had their largest one day point gain at 200 million on that day.

From a technical perspective, I see the DJIA wedging, and the Nasdaq wedging and both are right about at the point. The next few days they have to break out, up or down. The Nasdaq has been holding strong though and really seems like it wants to put in a new all time high, especially seeing that this current earnings season has been a blowout. But, nothing surprises me with these markets!
 
Last edited by a moderator:

JScott

Legendary Contributor
EPIC CONTRIBUTOR
FASTLANE INSIDER
Speedway Pass
Aug 24, 2007
4,111
7,553
1,731
Yeah with me I personally don't care which way the market goes as I just trade futures contracts usually short term. I will say that after a long string of winning trades I did get burned two weeks ago on some short contracts on the 2yr where I was up on the day before Powell abruptly flipped his language and I've been on the sidelines ever since. I'm waiting for the geopolitical confusion to settle and show a path.
I'm not a technical trader, so I can't even begin to surmise how the markets will react short-term to all the geopolitical posturing, short-term economic news and other contributing factors. My take is that the market is more sentiment driven than ever right now, and the only thing allowing it to maintain the current plateau (which we've been in for almost 6 months now) is trader optimism.

Have you noticed that the market is no longer responding to monthly/quarterly financial releases? GDP forecasts are revised downward, and there is no real impact. Record low unemployment is announced, and there is no real impact. Retail and home sale data is released and there is no real impact.

Nothing is being driven by data anymore. Instead, everything is being driven by daily political/geopolitical rhetoric -- Trump threatens a trade war, the markets drop. Trump gets announces a sit-down with North Korea, the markets go up.

Everyone in the market seems to be trying to figure out how the daily geopolitical maneuvering is going to affect the economy, and nobody seems to be paying attention to the actual economy!

Personally, I think that the above will continue to play out as it has been the past year, UNTIL there is some really important piece of economic data that wakes up the market. We've already seen that sentiment can change very quickly (as we've gotten a glimpse of a couple times recently when we've seen some of the largest single-day point drops in history) -- and I have a feeling that one of these days, a single bad piece of financial data is going to be released that will cause a domino effect in the market.

Will it be tomorrow? Next week? Next month? Next year?

I have no idea. And I have no idea what that single piece of data will be. But, I have a feeling it's coming. And when it happens, I don't think it will be a gradual decline...

But again, I've been wrong before, so don't please don't make any financial decisions based on me! :)
 

Nmm540

Contributor
Nov 4, 2015
33
26
47
30
Dont buy a house. Instead learn how to House Hack.

Buy a duplex, triplex, or 4 plex with your FHA 3.5% down payment loan. I bought a duplex in October '17. I paid $7,700 as my down payment for a $220,000 duplex. Its a 1900 sq ft with my unit being a 2 bed room one bath at 800 sq ft and the other unit being an 1100 sq ft unit. I pay $1,440 a month for my total mortgage including insurance and principal and interest. I have a tenant in my other duplex that pays me $900 a month total. I therfore pay $540 total for an 800sq ft place which is $300 below the market and Im the boss of the place. Over one year I will pay $17,280 total for my mortgage payments. My tenant wil reduce that down to $6,480. 17,280-(900 tenant pays x12)=$6,480. If you include the upkeep for the place at around $200 a month itll come out to $2400 a year (12x200=2400) . So far I will put in over one year 7700+17280+2400=$27,380.

Lets add the credits now.
My tenant will reduce it by $10,800. So now were at $16,580 total.
The down payment of $7,700 is still mine so were down to $8,800 total.
Im gaining $317 a month in equity and climbing a dollar per month $317, $318, $319 etc coming out to $3,876 the first year. Lowering me down to $4,924 total. My house is appreciating according to zillow at 5.7% for the year which is $12,540 bringing me down to a POSITIVE $7,616. I will MAKE $7,616 (net worth) in my first year just living here.

The drawback is that this additional net worth is basically all dependent on the housing market. Your best bet would be to buy a triplex or 4 plex and have it CASHFLOW. I messed up and pulled the trigger too soon and didnt think it through and just got a duplex. You only get one FHA loan at 3.5%. All this is truly possible. Imagine the freedom this plan can give you to work on your business when you dont have to worry about paying rent.
 
G

Guest3722A

Guest
Nothing is being driven by data anymore. Instead, everything is being driven by daily political/geopolitical rhetoric -- Trump threatens a trade war, the markets drop. Trump gets announces a sit-down with North Korea, the markets go up.
I have a few things I wanted to add but unfortunately don't have the time but I wanted to get in before 8:30 est that the employment situation report is coming out at that time. https://www.nasdaq.com/markets/us-economic-calendar.aspx Imo, wages are stagnating even though the beige book shows growth but they can't keep up to at the least, fuel prices. So this report will show where wages are going and how the market will react. But yes, Trump took quite a command on the markets as depicted by the chart I attached showing the massive volume that occurred right after his election. I believe that the market thus far wants to hold a belief in his ability to, for lack of a better word, execute.
 

Attachments

JScott

Legendary Contributor
EPIC CONTRIBUTOR
FASTLANE INSIDER
Speedway Pass
Aug 24, 2007
4,111
7,553
1,731
Imo, wages are stagnating even though the beige book shows growth but they can't keep up to at the least, fuel prices. So this report will show where wages are going and how the market will react.
Wage growth has been interesting to watch. Apparently up 2.7% last month, which is finally inline with what I would be expecting...

Here is how I expect this cycle to play out over the next few months (based on basic economic theory and history):

1. We are at full employment;

2. Companies can't find as many workers as they need to fill their open positions, so they start to offer more money to lure workers from other companies. It took longer than I expected, but we're now seeing this wage growth starting last month;

3. This wage growth is good for employees (they make more money), but also increases costs for companies, so companies raise prices on their goods and services. We're starting to see this, and the Fed is warning it will get worse;

4. Increased prices means inflation (literally). Products and services costs more. And typically the real inflation from wage growth is higher than the wage growth itself, as employers have to pay additional overhead costs when they pay salaries (FICA taxes, insurance, etc). So, employees find that their paycheck isn't going as far as it previously was;

5. This leads to increased debt, lower spending by consumers and reduced earnings by companies. Which leads to layoffs, higher unemployment, lower GDP, etc.
 

Don't like ads? Remove them while supporting the forum. Subscribe.

MJ DeMarco

Administrator
Staff member
EPIC CONTRIBUTOR
FASTLANE INSIDER
Read Millionaire Fastlane
I've Read UNSCRIPTED
Summit Attendee
Speedway Pass
Jul 23, 2007
29,207
100,756
3,751
Fountain Hills, AZ
This has turned into an interesting economic discussion...

But I'm also leaning toward a significant event downward. My prediction is it begins at the end of August with October being absolutely brutal.

As such, I've reduced my option sales and short exposure, assuming my dates are off.

Among other things mentioned by @JScott, I come to this conclusion based on that 1) the market has been unable to recover the February correction and 2) Large up days in the S&P is accompanied by below average volume (no conviction) and 3) Netflix is a 350 stock with a 250 PE.
 
OP
OP
HelpAndProsper

HelpAndProsper

Contributor
I've Read UNSCRIPTED
Apr 1, 2018
63
81
118
45
Boston
If you cant pay cash you cant afford it. My one rule I live by. I'm 35 and own my house outright. That frees up my money to work for me and not pay for a mortgage or interest. Buy a cheap piece of crap and fix it up. save some money and flip it into your next house. Always pay cash.
I really like your philosophy. I've thought about this...I have the cash to buy a crappy, very small house or I could buy a condo outright.

That way, I'm paying 0 interest to a bank while having a mortgage.

I can immediately probably rent the place with no mortgage.

Or, I can live with no rent/mortgage payment.

So the real question, am I willing to live in a less-than-ideal home for a while knowing that I owe nothing, but taxes/insurance/repairs.

I think your philosophy may be the best advice mentioned on this thread.
 

ryanbleau

Silver Contributor
Speedway Pass
Jun 22, 2014
237
513
245
36
Scottsdale , Az
If your going to bootstrap a new business you make sure the constants in your life are taken care of cant be repossessed. My car is paid for, my suv is paid for. I have no loans on anything they can take if I fail. I also have growing equity in my home if shit hits the fan.
 

MJ DeMarco

Administrator
Staff member
EPIC CONTRIBUTOR
FASTLANE INSIDER
Read Millionaire Fastlane
I've Read UNSCRIPTED
Summit Attendee
Speedway Pass
Jul 23, 2007
29,207
100,756
3,751
Fountain Hills, AZ
and 3) Netflix is a 350 stock with a 250 PE.
And I will add that Lululemon (a freaking Yoga pants company) is now a $125 stock with a PE of 55.
 

LaraJF

Bronze Contributor
Read Millionaire Fastlane
I've Read UNSCRIPTED
Apr 1, 2017
44
113
124
51
Silicon Valley, California
I'm happy I bought my house for similar reasons (noise).

But you wanted the negatives. You're responsible for paying for everything. Leaky pipe in the wall? the plumber charges you to open a hole, repair it, and then you need to find someone else to repair the dry wall and paint.

You pay property taxes usually (check NH...it may be different then California aka Tax You To Death State). I also have homeowner's insurance and earthquake insurance. It adds up.

Appliance dies? Yup, have to buy a new one.

Rat dies squeezing out between the house & the chimney? Guess who gets to remove it or pay $175?

Owning a home feels like "if it's not one thing, it's another." (yet I'm glad I bought when I did even though the interest rates were around 11% in 1995 if I recall correctly)

So, time to make a pro's & con's sheet.

IMG_6954.JPG

I'm posting this as a way to FIGHT the urge to follow the herd!!!!

I don't want to follow the herd!!!

I'm tempted to buy my first house in Portsmouth, NH area because I love it there and it's beautiful. Here's the thing.....I know real estate in these hot markets has run up considerably the last few years....I feel I would probably be buying at the TOP of the market.

I really want to live in a small house because I HATE hearing my neighbors through apartment/condo walls.

Should I try to find a house to rent for a while? Suck it up in another apartment in a new location while I build my business?

Any advice is appreciated!!
 
OP
OP
HelpAndProsper

HelpAndProsper

Contributor
I've Read UNSCRIPTED
Apr 1, 2018
63
81
118
45
Boston
And I will add that Lululemon (a freaking Yoga pants company) is now a $125 stock with a PE of 55.
But I have some maroon Lululemon pants/slacks and they are some of my favorite pants of all time...True story....:)
 
OP
OP
HelpAndProsper

HelpAndProsper

Contributor
I've Read UNSCRIPTED
Apr 1, 2018
63
81
118
45
Boston
I'm happy I bought my house for similar reasons (noise).

But you wanted the negatives. You're responsible for paying for everything. Leaky pipe in the wall? the plumber charges you to open a hole, repair it, and then you need to find someone else to repair the dry wall and paint.

You pay property taxes usually (check NH...it may be different then California aka Tax You To Death State). I also have homeowner's insurance and earthquake insurance. It adds up.

Appliance dies? Yup, have to buy a new one.

Rat dies squeezing out between the house & the chimney? Guess who gets to remove it or pay $175?

Owning a home feels like "if it's not one thing, it's another." (yet I'm glad I bought when I did even though the interest rates were around 11% in 1995 if I recall correctly)

So, time to make a pro's & con's sheet.

View attachment 19683
thanks for the advice,

You seem like a nice person. I'm sorry you live in California. I lived there for 12 years and will never go back now that it's a haven for everything indecent and unAmerican in the Universe. Did I mention how much I detest the coastal Cali culture?

:)
 

DustinH

Bronze Contributor
FASTLANE INSIDER
Read Millionaire Fastlane
I've Read UNSCRIPTED
Speedway Pass
May 24, 2017
240
366
191
Nashville
I am curious to why you are against a mortgage. You're paying the government for the right to "own" the property (property taxes). You're paying an insurance company for replacing anything that gets damaged (homeowners insurance). You pay the neighborhood for god-knows-what (homeowners association fees). That probably adds up to $500-$700 a month, anyways. So, is a mortgage really that bad?

The tax advantages for a mortgage are there (FYI I'm not a mortgage broker).
Mortgage Principal - not deductible
Mortgage Interest - Tax Deductible
Property Taxes - Tax Deductible (up to $10,000/yr)

Insurance - not deductible
HOA fees - not deductible
Rent - not tax deductible

On a 30-yr fixed mortgage you will pay more in interest in the first 15 years than principal. So, the tax advantage is there. Especially in the first few years.

Also, calculate how much money you have to make to pay your rent vs paying a mortgage.

Let's say your effective tax rate is 25%. So, when you make $100, $25 go to taxes and you keep $75.

Rent = $2,000 then you have to make $2,667 to pay your rent.

Mortgage = $2,000 (principal = $500, interest = $1,500 in the beginning with 30yr fixed)
then you have to make $667 to pa your principal and $1,500 to pay your interest
So, you have to make $2,167 to pay your $2,000 mortgage

The $2,167 you need to make to pay your mortgage compared to the $2,667 to pay your rent sounds like a better deal to me.

Then, if you add in the fact that the $500 principal goes into your equity, which is money you will get back if you sell it. Rent is money you will never get back.

A mortgage loan is setup as an advantageous tool. The tax advantages and the incredibly long financing term are impossible to find anywhere else. You can't borrow money to buy stocks or a business and have 30 years to pay it back at the lowest interest rate available amongst the entire consumer debt spectrum.
 

LaraJF

Bronze Contributor
Read Millionaire Fastlane
I've Read UNSCRIPTED
Apr 1, 2017
44
113
124
51
Silicon Valley, California
I know!!!!!

I was born & raised here and still wonder what the heck happened.

Some day I'll escape and pray people in another state don't discriminate against me because I came from California.

thanks for the advice,

You seem like a nice person. I'm sorry you live in California. I lived there for 12 years and will never go back now that it's a haven for everything indecent and unAmerican in the Universe. Did I mention how much I detest the coastal Cali culture?

:)
 

Create an account or login to comment

You must be a member in order to leave a comment

Create account

Create an account on our community. It's easy!

Log in

Already have an account? Log in here.


Fastlane Insiders

View the forum AD FREE.
Private, unindexed content
Detailed process/execution threads
Monthly conference calls with doers
Ideas needing execution, more!

Join Fastlane Insiders.

Top Bottom