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Grant Cardone "Buying a House is for Suckers"

A detailed account of a Fastlane process...

BradD

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This is exactly the case in Canada too.. You have young families of 2 (two newborns, husband + wife), where the husband is only working, and they're buying $600k+ new construction homes in the middle of nowhere thinking the price will go up by $200k in 2-3 years and they'll make a nice profit... Canada's real estate bubble is in for a very bad burst very soon..

Agreed, and it's going to be ugly- 2 bedroom townhomes in Toronto going for 2MM +, high %s of owners buying in spec expecting principals to skyrocket (and leasing at a loss in the meantime..)- hottest markets implementing foreign buyers taxes in hopes of cooling it down. I know a few realtors in Ottawa and Toronto millennial are pouring up here as they simply can't afford to own in TO.

Personally, I have no plans to own a principal residence anytime soon- have a great price on my condo, rather avoid the hassle and deploy $ to assets that generate a return
 
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TheDillon__

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This is one of the reasons I'm not buying our first house right now. Everyone thinks this, and it leads me to believe the market is overbought. I have 3 FB friends roughly my age (31) that have been posting their new constructions houses they just bought in the last couple weeks. Obviously you never really know how much money people have, but here are the 30 year olds buying brand new homes:
  • Husband, car salesman, wife in school
  • Husband in school, wife assistant professor
  • Husband exterminator, wife teacher.
When these people are all able to access the credit necessary to buy 250k+ homes (which is a nice home in the South), that shit has to tank at some point in the near future.
Rewatches The Big Short for the fifth time.
 

ScottT

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No, it wouldn't but as an real estate investor you build these scenarios into your equation that's an expense all businesses have those that's the cost of doing business read any balance sheet. This scenario would only affect you if this was your only house of course real estate investing is hitting singles instead of hitting home runs but if you have a few houses in your portfolio you would be ok.
 

ScottT

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I bought 2 multi families 16 years ago...i took everything out of the stock market pre-crash...I did this as I wanted a safety net for life...I make 53k a year free and clear on these 2 properties...I did this so as to forever eliminate any anxieties about my basic needs for the rest of my life ( im not out one months rent btw in all these years) Now sitting here on the a$$ end of a divorce, and as well having quit my day job of 100k yr....cuz why not throw it all away at once !...hated that job....I am forever gratefull that I secured my future back then with these 2 properties...one of which I now live in...I found early on that the only thing preventing me from venturing my own road was the fear of being homeless should i fail...So now im benefitting from that decision as I can take my time recovering from this divorce and as well deciding what I want to do next...so to my point...buying these 2 properties ( and placing them in a trust of course) Has enabled me the required level of freedom....to fail...and still live to fight another day....If i did nothing else the rest of my life...I will always have this roof, 53k to live on, which will turn into 75k once social security kicks in...Im 50....I forever thank my 34yr old self...Cant wait to start my next venture ~
 
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D

DeletedUser86

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Buying a house was one of the best things I've done. To give you a little background I was in the military and while living in Aurora, CO for 7 years I lived one of the cheapest apartments that was close to base, a 2 bed 1.5 bath and by the time I got orders out of there I was paying around $730 a month. I can't begin to tell you the issues with that place: we would get roaches because a certain tenant that lived next to us, and the roaches went away when they moved. Car got flooded one day in the parking lot there and I tried to clean it out with a shop vac where the laundry room was and the maintenance man told me I had to use my own electricity. The problem was my apartment was on the opposite side of the parking lot. I said fine and literally drove my car up into the grass and around back to do it, laughing the whole time. Every time the lease was up they kept increasing my rent $20 a month.

I finally got orders to Texas, and let me tell you the housing in this area was quite cheap compared to Colorado. Keep in mind this was 2011 and before an oil boom/bust in the area. I found a house that suited my needs and at a good price, and used 0% down with a VA loan. 3 bed, 2 bath, 2 car garage and a nice little back yard-house was built in the 90's. Paid $90,900 (prev owner paid closing) @ 4.78% and with escrow and insurance wrapped into the loan my monthly payment was $720. Every year when I got a tax return I dumped the majority of it on the principle. My mortgage actually went down instead of up and I'm currently paying $696 a month and only owe $60K on it. If I pay it off I would still owe ~$145 a month in taxes and whatever insurance would cost, say another $100. My neighbor right next to me rents his home which is pretty much the same house in a different color and he says he pays $850 in rent. Apartments around here also go for as much as I'm paying in my mortgage, and every payment I make currently puts $236 towards principle. Maintenance costs haven't been too bad, perhaps because it's a ranch style house that is relatively newer. If I sold today I could probably get $115k-120k for it
 

CommonCents

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I don't buy into sweeping generalizations. Everything in most peoples lives is not about strictly financial. It all depends on the situation and audience. Most people want the security of ownership even if it might cost them in the long run. Most peoples homes are their retirement and savings vehicles, kind of like getting their "bonus" tax refund! (their own money back, earning no interest)

But owning a home on a time horizon of several years isn't a bad way, especially if you happen to buy during downturns and low interest rate environment. Renting doesnt make much sense for many, depending on flaky landlords, being at their mercy on repairs/maintenance, "marking to market" every rent renewal, PITA in moving often, especially with a family/schools etc...

both have benefits and tradeoffs depending on each person and their timing IMHO. Whether you are a buy/hold/live there or rent out or more short term horizon and transient where renting is more applicable.

on a side note, the market here in MN is going insane....properties selling within days/weeks. rentals renting out at a similar pace. here we go again!
 
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RBefort

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Buying a house is the dumbest thing I've done. Is my own space cool? Yes...no more living in a duplex. I rented a nice, quiet $825/mo duplex newer construction in small, 5k resident town. Found a house around the corner over our budget for $167k. I'm in car sales and made $55kish last year working 2x as much as another normal 8-5'er. My wife makes around $40k. Since I worked at my job less than 2 years, we didn't qualify for the 3% down and actually had to do 5% ($8500ish)...that mostly zapped our $10k savings that I should have been paying off CC debts with instead. Not to mention, inspections, blah blah blah. I went from the $825 rent to $1215 mortgage AND adding a gas bill (previously only had electric). All told, we are now spending $500+/mo more...and we had to buy mower, kitchen table, wife wants decorations...just doesn't get it. I also told her I didn't like my job and wanted to switch. Pits of getting married and not being aligned goal-wise :( No mobility, house repairs, lawn to mow...gah.

*Only in my 3rd full month of home ownership too*
 

illmasterj

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One day, when I buy a primary residence it will probably be subsidized by a tenant. A family home with a 1-2 bed semi-detached suite next door - after the property is paid off, why not have the tenants pay your bills?
 

MJ DeMarco

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Millenial_Kid5K1

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In my area, rents are around the same as mortgages on a small house. If it's not a huge loss to put $5000 into an investment vehicle that isn't going to make you rich, I think it's a good investment. You're paying a similar amount monthly, and you can eventually get some of that money back when you sell. Or hell, do what a lot of us do and buy a multi-unit, live in one of the units. Then your tenants can pay your mortgage.

Needless to say, buying a big house where the mortgage will take >1/3 of your post-tax income is a life and soul suck that traps far too many people. The instant they lose the job or the housing market crashes, they're SOL.
 
D

DeletedUser86

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Might I add that I bought a house that was well within my means (we'll say 20% of my monthly income in this example), and suited to what I wanted out of a house. If you buy an overpriced home/out of your means then the chances for catastrophe are great. No this isn't fastlane, it is more of a security/savings play. A bank won't give you 5% on your savings anymore, but you sure can save 5% in interest. "But interest is tax deductible"-every time I went in to get my taxes done they put me on a standard deduction, so that amount did not apply anyway. I may be moving soon, and will make this home a rental and refinance for the lower monthly payment.

If I accept this job offer in Colorado, I'm not sure if I will buy another property(perhaps a multi-family like others have said) or rent. The real estate market in Colorado is insane right now at bubble levels, and with other states legalizing marijuana I don't want to be holding the bag when the bubble pops. I've made and lost enough money playing stocks that I've learned to play it a bit more safely
 

CycleGuy

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I've read some great posts itt. I think the biggest issue is there is no right or wrong answer. Every situation is different. Every regional market is different.

I've rented for several years but my wife and I recently purchased our first home.

It was a 40 year old home that needed a full renovation inside and out. We went through 1 year of renovation and when we finished we had a great living space that suited all of our needs for a fraction of the cost of what a similar sized new construction.

Our monthly mortgage including taxes and insurance is less than what a home the same size would rent for in the area. Of course I have to maintain my property and handle small issues but they are not as bad as most make them out to be. I learned a lot of valuable information through my renovation project that I look at as an education in how to handle future construction/renovation business.

One thing I can take away with a reno project is buy as absolutely cheap as possible if you know there is going to be a lot of reno work. The hidden costs of old homes will eat someone up if they are not prepared. Also mentally prepare yourself to go over budget on what you think you will spend.

Good luck potential buyers!
 
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GameOver

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I think the answer, as is usually the case in life, is "it depends."

I own a home; I own it outright free and clear. It's a really nice house and I am pretty young to have already achieved this... I did it by renting for a good long while and saving-up. I also have a good amount of money in the bank... maybe not MJ levels of "F*ck you" money but it's enough for me and my lifestyle.

I cannot tell you how freeing the above scenario is. I have no debt... I'm setting on a bunch of cash... I own property that is mine... I have a job where I am making a lot of money and saving virtually all of it so that I can start or buy my own business soon....

Buying a house that you will live in is definitely not an investment. After living in one for a few years I truly believe the outflows from maintenance and upkeep, if you really think about all of them, usually exceed any gains unless you're in a really hot RE market area. A RE investment is one where you specifically pick a shitty property in an awesome location and make it less shitty and flip it or sell it for commercial or whatever. Buying at market price and then pouring tens of thousands of dollars a year into a house is not an investment.

But... in my case, I do view the house purchase to be a positive one. For me, it was buying-down risk. I have almost none, and so if I start doing some really risky things related to starting a business, for me I have a modicum of comfort and insulation.

So I really think it comes down to the details, why you are doing it, and how quickly you can be free and clear. The house you live-in is absolutely not an investment... but it could be a risk reduction strategy for you.
 

GameOver

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I did want to say that I do like Grant Cardone's books... 10X Rule and Sell or Be Sold are some of my favorite sales type books. I do think his thoughts about how to be a salesman in the 21st Century are spot on.
 

biophase

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I just want to add that renting the home you live in while owning other rental homes gets you the same financial security feeling. Sure you can be forced to move but you always have the income to pay for rent and you still get the appreciation of home ownership.

You don't need to own the home you live in to get all the benefits that others have posted you just need to own a home.
 
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UncommonWay

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I wish I had read this thread before buying my first house. We were in such a mad rush to be "home owners" that we ended up buying a house without a dishwasher, with a tiny kitchen, and with tiny rooms. The day we moved in, we were like, "Where's the rest of it? Is this really what we bought?"

We did better on our second house, and the first one is (mostly) rented out and covers the mortgage (barely), so we've got that going for us, which is nice.
 

Camaro68

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I think a major issue with homeownership for most folks (besides the mental aspects of security) is the idea of LEVERAGE.

With 20% (or sometimes less) people can "own" an "asset" that is worth more than they paid.

Flawed thinking or not, the majority of the population is financially illiterate. They just look at the numbers, low rates and think that hey in 15,25,30 years we'll own it and it'll probably be worth more than what we paid!

Most don't have the ability to compare the benefits of owning a home as an "investment" vs a plethora of other alternatives as places to stick or invest that money. Additionally, most people don't think to use leverage for other endeavors, and if they did, they wouldn't be able to comprehend the idea that it wasn't a hard asset i.e. a home they could live in.

Its the easiest and most common way for the average population to use "leverage" and appear to be successful and responsible. The posters here have mixed views because, not unlike the population, people value things differently and have varying levels of financial aptitude.

If I had an investment that would yield you 5% ROI in perpetuity and asked most people what that would be worth today, you would get a different answer from each person.
 

Denim Chicken

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I bought 2 multi families 16 years ago...i took everything out of the stock market pre-crash...I did this as I wanted a safety net for life...I make 53k a year free and clear on these 2 properties...I did this so as to forever eliminate any anxieties about my basic needs for the rest of my life ( im not out one months rent btw in all these years) Now sitting here on the a$$ end of a divorce, and as well having quit my day job of 100k yr....cuz why not throw it all away at once !...hated that job....I am forever gratefull that I secured my future back then with these 2 properties...one of which I now live in...I found early on that the only thing preventing me from venturing my own road was the fear of being homeless should i fail...So now im benefitting from that decision as I can take my time recovering from this divorce and as well deciding what I want to do next...so to my point...buying these 2 properties ( and placing them in a trust of course) Has enabled me the required level of freedom....to fail...and still live to fight another day....If i did nothing else the rest of my life...I will always have this roof, 53k to live on, which will turn into 75k once social security kicks in...Im 50....I forever thank my 34yr old self...Cant wait to start my next venture ~
Can you speak to more about these properties? How much did you need in cash to buy both/each? What price point would that be?

I always looked at a "basic level of income" as security. I can't rely on the government or anyone else to pay for me so my sense of security comes from having at LEAST a certain amount of income every year. The people over at financialindependence uses a 4% or 3% safe withdrawal rate which puts the number at maybe 800k to generate something that can provide. But I know with real estate and other ways, it can be a higher return.
 
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