Why you should buy a home as early as possible.

[biophase]

To be honest I think that's an apples to oranges comparison. These people are living beyond their means. Same as the person who finances a multi-million $ home with a 3-car garage on $75k-$150k a year.

I can see your point. Generally the more people make the more they spend. If someone that made $75k a year bought the same house that my friend did on a $35k income. They could have saved the additional $40k a year. If they did the same life that my friend did, they could save $400k in 10 years and be well ahead of my friend today.

The purpose of my original post was to highlight the benefits of a fixed mortgage coupled with a down payment assistance plan. To show how someone at the lower income level could have afforded something years ago and is benefiting from it now.

Ok, if it is not about personal home ownership but rather real estate as an investment, why not use a simple index fund investment strategy (besides the business), starting in your 20's? @fastlane_dad wrote a great thread about that.
Of course you need discipline for that, but you mentioned that the real estate owner also needs that (to safe up the down payment rather than blowing the money).

As a pure investment, yes you can do index funds. But in my opinion real estate is a better option if you can afford it. This is just my opinion. I have friends that are 100% in stocks and hold no real estate and they do well. I’m real estate heavy but trying to balance out my portfolio to add more stocks.

My original post was to purchase as a primary residence. I like having the option of converting the primary over into a rental later. The option of converting into a rental was a reply to others who worried about locking in a payment for 30 years.

Especially for those who earn very little (and don't have other investments) a financed house is a huge "cluster risk". There is zero diversification.
That's even more important for entrepreneurs than for example a school teacher.
I am not sure about the US, but in Germany school teachers NEVER lose their job, unless they do something exceptionally bad. They know what they are going to earn for the next 30-40 years, so there are no issues being locked into a mortgage.
But what about someone who started out with his or her Fastlane business just a few years ago? Most likely it's not a multi-national enterprise yet, but either a local business which is heavily depended on the local economy or a small online business which has at least some control-risk involved.

Worst case one has to go back to a job, but a well-paying job is 3 hours away by car and at that time the housing market in ones region is in a crisis.

Lastly, people often forget to add up all the hours they spent on all the stuff that comes with home ownership or being a landlord. How much is 1 hour of ones time worth?
If something breaks in my rented apartment, I call the landlord and they get someone to fix it. I don't spent my Saturdays at the hardware store, buying stuff for the next home-DIY project.
I don't worry about finding a plumber who does not overcharge me.

The Wealthy Renter: How to Choose Housing That Will Make You Rich: Avery, Alex: 9781459736467: Amazon.com: Books

The Wealthy Renter: How to Choose Housing That Will Make You Rich [Avery, Alex] on Amazon.com. *FREE* shipping on qualifying offers. The Wealthy Renter: How to Choose Housing That Will Make You Rich

www.amazon.com

[URL

I purchased the book above and wanted to finish it before I replied. Your argument above sounds like everything from this book.

Honestly listening to the book, I just don’t agree with the author’s premise. There are so many fluff chapters in the book, it’s hard for me to get through it. He is so anti real estate but guess what? He owns and is/was a landlord. Lol

Found this on an interview from 2017.

‘Renting is a beautiful thing’: The case against home ownership

Home ownership is traditionally viewed as the only sensible choice – but that may not be true in today’s housing market. Here’s why

www.theglobeandmail.com

Interviewer: Finally, I have to ask this. Are you a renter?

Book Author: I've been a renter, an owner and a landlord. My wife and I rented for 15 years and now we own. We bought after we had kids.

 

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[BizyDad]

Woah. What???

@biophase is married with kids?!?!

And here I thought you were some bike riding, dog loving, e-commerce store owning, real estate investing, travelling monk who dated infrequently. Lol.

 

[biophase]

Woah. What???

@biophase is married with kids?!?!

And here I thought you were some bike riding, dog loving, e-commerce store owning, real estate investing, travelling monk who dated infrequently. Lol.

Lol no, that was a quote from the author of the wealthy renter book. Let me clear it up on my post. Lol

 

[MitchC]

The problem with stocks compared to real estate is there’s no leverage

Someone with 15k saved can buy a house for 150k and earn 8% a year on 150k in appreciation

Someone with 15k in stocks is making 8% on that 15k

“The real estate market doesn’t go up all the time” neither do stocks this is just over simplified

“You have to pay the mortgage” yeah well you’d have to pay rent either way too

2 other advantages

You won’t be tempted to trade or worry or panic like you would in stocks. You can’t check your home price daily. You can’t panic sell your home.

2, as you pay down the mortgage the payments become lower, meanwhile rent generally goes up.

 

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[Guest-5ty5s4]

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!

“A few hundred thousand” - if you have more than two brain cells, you will always care about “a few hundred thousand” no matter how rich you get. Even Jeff Bezos noticed that kind of money. It’s not like he just ignores his bank account. Far from it.

The problem with stocks compared to real estate is there’s no leverage

Someone with 15k saved can buy a house for 150k and earn 8% a year on 150k in appreciation

Someone with 15k in stocks is making 8% on that 15k

“The real estate market doesn’t go up all the time” neither do stocks this is just over simplified

“You have to pay the mortgage” yeah well you’d have to pay rent either way too

2 other advantages

You won’t be tempted to trade or worry or panic like you would in stocks. You can’t check your home price daily. You can’t panic sell your home.

2, as you pay down the mortgage the payments become lower, meanwhile rent generally goes up.

kiyosakis Cashflow game is great for this. The game encourages you to start with stocks, grow a bit, then move to real estate, then make some bigger money, then start buying businesses. Obviously not everyone should follow the real estate path and there are other good paths but this is a nice little financial game…

 

[23Infinity]

Although your advice is well-intentioned I feel it may be invalid for folks living in certain regions/markets, especially in over-priced markets. In Canada the two major cities (Toronto / Vancouver) are ridiculously over-inflated and the govt wants to keep it that way as RE is their golden goose. Even nearby cities have inflated price with less value due to being further away from the main city.

A decent 1bd+den condo is C$650K ($488K USD), and detached houses are ~$1.1 mil. Now add the increased interest rates to that (we don't have 30 year fixed mortgages here, most are either variable for 5 year renewals I believe).

The time frame mention in your original post (around 2000-2008 till now) saw a ton of money printing / near zero interest and huge inflation of asset prices across the West.

At least in Canada, I think we are in a mega-bubble that might be popped if the US Fed (and hence Bank of Canada) continues to keep and hold rates high (or goes higher). I think a lot of people are discounting the reality that interest rates could stay high or go slightly higher for the coming few years (unless some black swan geopolitical event).

Might be a good idea to wait to see how things go for at least another 12-18 months before buying RE, especially as primary residence.

I don't disagree with the intent of your advice though, if I reach certain biz goals, I'd probably buy a primary residence but outside of North America. A friend bought a condo in the Dominican for something like $80K USD in the recent past.

 

[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.

 

[WJK]

Like everything else, it depends...

 

[MJ DeMarco]

Mortgage Rates Hit 7.09%, Highest in More Than 20 Years

Interest rates have hit housing hard: Would-be buyers are locked out, and would-be sellers are staying put.

www.wsj.com

Sellers don't want to sell who have locked in low rates (I have 2.25% mortgage and it'd be stupid to sell) constraining supply and buyers are locked out due to high rates (constraining demand) -- so it feels like a net wash where elevated real estate prices are here to stay.

 

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[TheOP]

Yes this may happen. I bought a place in Chicago in 2005 and sold it for $20,000 cheaper than what I paid for it in 2022.

Not all real estate goes up.


This is a choice that many people make. And then in their 30s and 40s they cannot afford to purchase anything and they do not have any savings.

This is the main reason I made this post because in my lifetime with my friends it is now 20 years later after they made that same statement and I can see the wealth difference between the haves and the have nots.


I am not biased towards real estate. I am biased towards investing when young however, the reason I suggest real estate is because it is a twofold asset.

One is that you get to live in it and two is that it is an investment and savings vehicle.

It is much harder to tell somebody young to invest in stocks/funds when they have to purchase shares and still have to pay rent, I tell them that real estate will accomplish those two things with one payment.

Ok I guess I am biased towards real estate in that way.

In your Chicago residence example if you lived in that house as a primary residence during that period you still made quite a bit of money. Going off the assumption that you either needed to rent or buy and you couldn't live somewhere free you would have spend substantially more than you did renting than your mortgage payments. Unless your interest was crazy high anyways.

Even at 1K per month rent which was probably light for the Chicago market even in '05 it would have cost you over 200K over that 17 years in just rent. A 20K dollar hit is a tenth of what renting would have cost.

 

[biophase]

In your Chicago residence example if you lived in that house as a primary residence during that period you still made quite a bit of money. Going off the assumption that you either needed to rent or buy and you couldn't live somewhere free you would have spend substantially more than you did renting than your mortgage payments. Unless your interest was crazy high anyways.

Even at 1K per month rent which was probably light for the Chicago market even in '05 it would have cost you over 200K over that 17 years in just rent. A 20K dollar hit is a tenth of what renting would have cost.

Despite selling it for a loss I made money on this investment. This property was rented for positive cash flow for the 17 years I’ve owned it. It was only vacant 12 months and this was due to Covid in 2020.

 

[SpinnerRedPenny]

“You have to pay the mortgage” yeah well you’d have to pay rent either way too

Shack, @MitchC!

[That's pilot-speak for "You scored a direct hit on the target"]

kiyosakis Cashflow game is great for this. The game encourages you to start with stocks, grow a bit, then move to real estate, then make some bigger money, then start buying businesses.

I agree in large part with @Guest-5ty5s4 here. Monopoly was alright when the kids were too young to understand rudimentary financial statements, but once they were old enough I introduced Cashflow to them. It's worth remembering that in the early phase of the game's rat race, everyone is channeled into "Small deals," nearly none of which are businesses. If I were to combine the best of both worlds, I'd add more 'Start a small business' cards into the "Small deals" card deck*. In any case, once you obtain the right "Small deals," Cashflow then enables you to acquire "Big deals," and many of these are businesses. Nearly everything on the "Fast track" that you have to acquire to try to win the game is a business, I don't recall any of those being real estate and I'm too lazy to run upstairs to unpack the container and look at the board right now .

Personally I think Kiyosaki's greatest contribution to our financial lives was the focus on the financial statements and the mindset needed to concentrate on asset acquisition--this was much more valuable than the explanations of the real estate business. The kids get to learn this concept and practice it in Cashflow. @MJ DeMarco wrote about obtaining securities-type assets himself**; although he recommended obtaining securities after the business whereas Kiyosaki effectively recommends it as an ongoing method of wealth-building from the start (if I remember correctly).

We tend to write about that which we know and understand. It should be no more surprising Kiyosaki's works were heavily laden with real estate, as that was what he understood best because that was the entrepreneurial sector in which his "Rich Dad" poured a great deal of his focus. How many of us on this forum are significantly influenced by @MJ DeMarco's life story and tend to focus on Internet-based businesses? My guess is quite a few. In any case Cashflow uses real estate as one possible vehicle to exit the rat-race. I think people who play Cashflow may tend to focus on real estate in the game because they read Rich Dad, Poor Dad, etc. and real estate played a huge role in Kiyosaki's life and was therefore frequently discussed in the books.


*I think I just discovered my next "House rule" for Cashflow, I'll print more 'Start a small business' cards for the "Small deals" deck. The first house rule is that you can't respawn into a new game if you don't have children. . . a rule created because my kids would cry 'Foul' every time they landed on "Baby!" I was becoming concerned that my own children would try to forego having children of their own and that was my way of circumventing that line of thought. I think the game of Life was much better than Cashflow with regard to family development, but dear Lord did Life train kids to jump into the script to stay in the "Slow lane."
**I meant to find the source in the books, and while I wasn't too lazy to run upstairs to get the books, it seems my oldest has taken them with him on an excursion.

 

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[340PLOX]

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.

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

 

[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.

 

[Kevin88660]

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.

I remember talking to a retired banker who worked in U.S. and dealt with mortgage backed securities. He told me the bank didn’t take the interest rate risk even they offered loan term fixed rate mortgage.

They manage to package and sell this risk as derivatives to other institutional speculators. So in this case these speculators lost money.

So in another alternative universe even if rate went to zero the bank didn’t earn higher margin from your business. They are always trying to get themselves hedged as much as possible on interest rate risk and earning from the spread between lending rate they receive and saving they pay.

 

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[biophase]

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.

Yup, I got screwed here because my builder finished my house 8 months late.

I could have gotten a $1.4m loan at 3% and my payment would be $5902. Then I could have invested that at 5.25% today and got $6125 a month in interest.

So I could be living in my house and making $200/mo while doing so!

Note: numbers don’t include taxes or HOA.

 

[NervesOfSteel]

Ok, if it is not about personal home ownership but rather real estate as an investment, why not use a simple index fund investment strategy (besides the business), starting in your 20's? @fastlane_dad wrote a great thread about that.
Of course you need discipline for that, but you mentioned that the real estate owner also needs that (to safe up the down payment rather than blowing the money).

Especially for those who earn very little (and don't have other investments) a financed house is a huge "cluster risk". There is zero diversification.

Lastly, people often forget to add up all the hours they spent on all the stuff that comes with home ownership or being a landlord.

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

I was not comfortable of taking a debt on a house and then paying an interest upon that. It would have tied me to my job and I would have never been able to take any risk at a young age!
Whatever I saved, I invested in Gold.

After 20 years, I have a comfortable business, a store, a house and enough assets to buy a new house any day.

When you're young, you have ability to take risks. Buying a house will cost you those years apart from the installments you put in.

Those energetic years, basic installments, the interest upon it, the maintenance etc etc .. always seemed to be an expensive deal to me!

 

[340PLOX]

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.

The OG himself.

Right im not shunning people who secured a mortgage when interest rates weren’t bad but 7.5% 30 yrs IS the new norm. Also im not ignorant to the fact of how much money im wasting dropping 30% of my earned income to my rent, but it does provide me more freedom at same time.

- someone who plans on using real estate as an investment vehicle

 

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[biophase]

The OG himself.

Right im not shunning people who secured a mortgage when interest rates weren’t bad but 7.5% 30 yrs IS the new norm. Also im not ignorant to the fact of how much money im wasting dropping 30% of my earned income to my rent, but it does provide me more freedom at same time.

- someone who plans on using real estate as an investment vehicle

Are you planning on purchasing an investment home and then renting some place else?

Also, you only get the 7.5% rate if it’s your primary residence. Why not purchase as a primary and then rent out after living in it a short time?

 

[Cyberseraph]

I advised my brother to buy something immediately with his girlfriend. they both still lived at home and then immediately bought a house in 2018 for 165,000 euros. has now paid off for 5 years. there is still 130,000 euros outstanding. this house is now being sold for 200,000 euros. = 70,000 euros that will be used to buy a bigger house.

I myself have rented for 6 years +- 800 euros per month = -57,600 euros.

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

What country is it? I live in Germany and a house in my area starts from 700,000 Euros.
Just curious where one can find such affordable homes in EU.

 

[jclean]

What country is it? I live in Germany and a house in my area starts from 700,000 Euros.
Just curious where one can find such affordable homes in EU.

I am from Belgium, my brother lives in the netherlands.

 

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[andrea532]

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.

Hi, the first question is whether this post was written for those who have benefits or support in purchasing their first home?


The second question I wanted to ask is whether this type of post is aimed at people who are in the process of creating their own business or have businesses already started?

and the third question is whether a person should take out a mortgage for a house even without having necessarily started their own business, what percentage of income should be dedicated to the mortgage, in Italy for example they cannot give you installments higher than a third of the own salary, do you think it should be exposed less to ensure that you invest the rest of your savings in entrepreneurial activities?

 

[WJK]

Hi, the first question is whether this post was written for those who have benefits or support in purchasing their first home?


The second question I wanted to ask is whether this type of post is aimed at people who are in the process of creating their own business or have businesses already started?

and the third question is whether a person should take out a mortgage for a house even without having necessarily started their own business, what percentage of income should be dedYoucated to the mortgage, in Italy for example they cannot give you installments higher than a third of the own salary, do you think it should be exposed less to ensure that you invest the rest of your savings in entrepreneurial activities?

This is a two-sided question.
A house is a personal expense for most people. It's like a consumable. It's expensive to maintain and gives limited benefits back other than a place to live -- until you sell it.
On the other hand, for most middle-class people, it will end up being their biggest asset that is paid for over most of their lifetime.
My mentor taught me that you should live in your smallest house or apartment -- and rent the rest. I have known people who have lived in one room in the back of their businesses. Living over the store was very common in the past. Businesses used to be in physical buildings. Your question is part of the process of rethinking the different options.

 

[biophase]

Hi, the first question is whether this post was written for those who have benefits or support in purchasing their first home?

Not sure what you are asking here.

The second question I wanted to ask is whether this type of post is aimed at people who are in the process of creating their own business or have businesses already started?

This post was mainly aimed at people who started a business, or had a decent job, but decided to rent in order to not be tied down, or wanted to be digital nomads.

and the third question is whether a person should take out a mortgage for a house even without having necessarily started their own business, what percentage of income should be dedicated to the mortgage, in Italy for example they cannot give you installments higher than a third of the own salary, do you think it should be exposed less to ensure that you invest the rest of your savings in entrepreneurial activities?

In the US, the amount is about 33% of your salary also. Yes, I would recommend taking out a mortgage vs paying cash. By paying cash, you probably waited too long to purchase your first home.

I'm loosely making up an example based on a generalization of people I've met in the past. Imagine you are a single guy 25 years old, making $150k a year. You want to live where the action is so you rent a nice downtown apartment in Austin $4,000/mo. What you should have done is buy a nice home for $500k a few miles outside of downtown and commute to the clubs and bars.

 

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[andrea532]

Not sure what you are asking here.


This post was mainly aimed at people who started a business, or had a decent job, but decided to rent in order to not be tied down, or wanted to be digital nomads.


In the US, the amount is about 33% of your salary also. Yes, I would recommend taking out a mortgage vs paying cash. By paying cash, you probably waited too long to purchase your first home.

I'm loosely making up an example based on a generalization of people I've met in the past. Imagine you are a single guy 25 years old, making $150k a year. You want to live where the action is so you rent a nice downtown apartment in Austin $4,000/mo. What you should have done is buy a nice home for $500k a few miles outside of downtown and commute to the clubs and bars.

perfect now I understand thank you very much

 

[NervesOfSteel]

This is a two-sided question.
A house is a personal expense for most people. It's like a consumable. It's expensive to maintain and gives limited benefits back other than a place to live -- until you sell it.
On the other hand, for most middle-class people, it will end up being their biggest asset that is paid for over most of their lifetime.
My mentor taught me that you should live in your smallest house or apartment -- and rent the rest. I have known people who have lived in one room in the back of their businesses. Living over the store was very common in the past. Businesses used to be in physical buildings. Your question is part of the process of rethinking the different options.

No one can solve the riddle of buying vs renting a house as this is more of a "economical life" vs "quality life" question. Some might enjoy living decades behind the store in a small compartment while others may prefer to raise a family in a warm comfortable house.

"One must sacrifice the quality of life in order to be rich" - Its a myth !

 

[circleme]

Should I buy a home despite the Fastlane or "hope" to succeed with my FL business in the foreseeable future (next 5-7 years)?

Why I am interested in this topic has very little to do with asset accumulation, but rather with the fact that a paid-off apartment is a kind of backup plan. You can F*ck up as hard as you want, at least you have a roof over your head and the running costs are many times lower than with a similar sized rental apartment or house. I also think that the topic of owning a home is part of the process of achieving financial independence for many.

The topic you raised @biophase still concerns me and I made my statement on it a few months ago.

After looking at it for a while, I came to the following conclusion:

I will buy my first property in the foreseeable future, as my business model is hardly capital-intensive and I can ideally use my savings for a down payment. After some comparisons between self-use, renting, house hacking, etc., I came to the following conclusion:

I'll take out a loan for the remaining amount and just buy a small apartment. I will in turn rent these out, so I will be happy if, after all deductions, the whole thing remains a zero-sum game because the tenant pays all my costs, including the loan. I still live in my rented apartment. As a result, I see the following advantages in my position:

1. I build equity because someone else is paying me back my loan
2. I have some sort of backup after X years since the apartment will eventually be mine (once the loan is paid off)
No matter how hard I F*ck with the business model, at some point it will be mine and I will use it to cover the largest item of all the fixed costs that one can have, since from this point on I no longer have to pay rent.
3. If I can't find a tenant for a long time, I can move into the apartment myself and pay back the loan for X months until I find a new tenant or I live there myself for a longer period of time

If I don't do that AND my Fastlane business fails for X years in a row, I'll actually be left with nothing - at least from a purely financial perspective. That is a fact and I thank you for addressing it in your post. If I do it AND my Fastlane business only works to a certain extent, then in addition to a business that works far away from my time, I also have a paid-off apartment, which in turn is reflected in my overall assets.

After thinking about it for a while, I see my path as desirable and definitely sensible if you are still relatively young (late 20s).

What do you guys think? Are there any serious logic breaks in my plan?

 

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[MJ DeMarco]

Three years ago I was thinking I should "wait" for lower prices and higher interest rates instead of taking a stab at something at or near the zenith of the housing frenzy.

In the areas I was looking at, prices have not gone down, only up. The frenzy is gone, but the high prices are not.

Had I waited things out, it likely would have cost me on order of $1M-$2M, either in higher interest costs or higher prices. Now that's $1-$2M I don't need to make, and this under that premise that my current home hasn't gone up in price.

More important to me, my real estate is a fixed, tangible asset. There's a reason why I own millions in real estate indirectly via REITS (even though many of them have suffered this year) -- I'll take the losses for the peace of mind of having my money behind hard assets.

As some know, I'm pretty pessimistic on the US economic situation and the US Dollar.

No matter what happens there, I own assets that will always have tremendous value, not matter how they are denominated.

I will buy my first property in the foreseeable future, as my business model is hardly capital-intensive and I can ideally use my savings for a down payment. After some comparisons between self-use, renting, house hacking, etc., I came to the following conclusion:

I'll take out a loan for the remaining amount and just buy a small apartment. I will in turn rent these out, so I will be happy if, after all deductions, the whole thing remains a zero-sum game because the tenant pays all my costs, including the loan. I still live in my rented apartment. As a result, I see the following advantages in my position:

1. I build equity because someone else is paying me back my loan
2. I have some sort of backup after X years since the apartment will eventually be mine (once the loan is paid off)
No matter how hard I F*ck with the business model, at some point it will be mine and I will use it to cover the largest item of all the fixed costs that one can have, since from this point on I no longer have to pay rent.
3. If I can't find a tenant for a long time, I can move into the apartment myself and pay back the loan for X months until I find a new tenant or I live there myself for a longer period of time

If I don't do that AND my Fastlane business fails for X years in a row, I'll actually be left with nothing - at least from a purely financial perspective. That is a fact and I thank you for addressing it in your post. If I do it AND my Fastlane business only works to a certain extent, then in addition to a business that works far away from my time, I also have a paid-off apartment, which in turn is reflected in my overall assets.

You're describing "house hacking" which is quite common.

When life's largest expense is taken care of, it really levers up the freedom.

So owning a place, free-and-clear, is a big gamechanger for your freedom, especially if you're more of the FIRE type.

 

[WJK]

No one can solve the riddle of buying vs renting a house as this is more of a "economical life" vs "quality life" question. Some might enjoy living decades behind the store in a small compartment while others may prefer to raise a family in a warm comfortable house.

"One must sacrifice the quality of life in order to be rich" - Its a myth !

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.