Why you should buy a home as early as possible.

[jdm667]

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


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

Income limits and eligibility requirements for MassHousing Mortgage Loans

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

www.masshousing.com

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

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

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

Mortgage/down payment assistance programs push prices higher. The politicians who create those programs know it - but they already own plenty of real estate, so they are happy with the result.

@biophase I agree with your premise in this thread - especially for anyone willing to house hack (there are good threads on the forum for those who want to look into it).

For anyone who doubts you and thinks residential real estate has to crash eventually: it might ... but it could also go much higher. Just look at South Korea as one example.

Business INSIDERS had an article this week: the average millennial in South Korea makes $27K to $38K, but the average home price is $876k: a price to income ratio of anywhere from 23 to 32.

Meet the typical South Korean millennial: educated, overqualified for the job market, and part of the 'kangaroo tribe' that can't afford to leave their parents' homes

At 28, Kwon Joonyeop is the kind of guy most Korean teenagers want to become: He went to a top school, swam varsity, and has a good job.

www.businessinsider.com

Also, remember that a large group of people (mortgage brokers, banks, realtors, cities & towns that live off of property taxes, homeowners, etc.) have a vested interest in ever-higher home prices.

 

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[MitchC]

I bought a home and that was one of the main reasons I was able to quit my job and pursue my business full time.

It’s almost the opposite of what you would expect, you would think that commitment would tie me down, but it didn’t, it gave me the stability and safety to take that risk.

Plus, good luck getting a mortgage as a business owner, much easier with a stable job.

And I wish I did it sooner, I was saving money to the point I wanted to pay cash as I’d never had debt before, what an idiot. I would have saved so much more money and have a much nicer house if I bought earlier.

I have a mate who bought 2 homes straight out of school, did nothing else just worked a job, and he’s probably worth more than me and doing better than me and I had the headache of starting a business, all he did was buy a couple homes.

Buying a house is probably the best financial decision I’ve made.

The equity in the home after just 2 years offsets every single stupid investment in stocks and crypto I made.

And it’s more than the gains I ever had at the top of the crypto and stock cycle.

Also for those trying to time the market and waiting for a dip like we did, we were idiots, don’t wait, if we learned one thing from Covid it’s this, politicians will never ever let house prices drop and will do everything they can to ensure that doesn’t happen.

 

[biophase]

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

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

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

The one thing about interest rates, is that you hope you can refinance when the rates drop.

I know this is a big if. But if you can afford the higher payments, you can get the house you want now. Maybe refi in 5 years when rates drop.

It's an interesting gamble.

Let's say the house you want is $1M at today's rates. But if rates dropped to 3% it would be $1.3M. Would you rather purchase today at 7% or for $300k more for 3%? If you assume you never refi and make payments for 30 years. Which is the better route?

If you assume you can refi 5-10 years down the line, which is the better route?

Alot of math to do there, but high interest rates isn't necessarily bad for you. You could get a much better price and home than you would during a bidding war.

 

[biophase]

Mortgage/down payment assistance programs push prices higher. The politicians who create those programs know it - but they already own plenty of real estate, so they are happy with the result.

I never thought of that. I never even knew these were available until today. I thought my friend got in during a special temporary assistance program. But in the city of Avondale I did not see the prices go up even though they had this program for the last 13 years. I had an investment home in the city and managed my friend's investment home there.

 

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[ygtrhos]

What most people do not understand is that, most real estates are, in fact, businesses.

It brings rent (which you can increase, like product price), appreciates with inflation (which you can increase, like equity price).

It covers a need, which is practically always going to be there (shelter).

MJ defines it as wealth 1.0. and I completely agree as a homeowner.

If you pay rent, it just goes away to another person. If you pay mortgage, every cent you pay back after the interest, goes into your net worth.

Given the fact that 2-3% inflation is a healthy thing, it will almost always appreciate. (as long as you buy an acceptable location without any catastrophes)

In US, choosing a good location is probably more difficult, because of the economic structure (see what happened to Detroit) but it is still a very much doable thing.

 

[James90]

Agreed.

I missed out on 300k opportunity cost selling my property in 2019 to fund my failed business.

My significant partner and I are still on our entrepreneurial journey, but we are making it a priority to purchase property here in Hawaii within a year or so.

 

[Kevin88660]

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.

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

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

It is rather unorthodox, of course.

You must be very comfortable watching your cash getting eroded by inflation year by year while resisting the temptation of "investing to beat inflation". Not everyone can do that. Most could not.

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

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

Your cash reserve is as important as a national defense for a country. Nations spent billions to keep and train their army during peacetime.

Inflation is the necessary price to pay for future opportunity and protection against a future cashflow crisis that leads to bankruptcy.

If I pay rent, and anytime I don't feel like paying, I pick up my phone and call my friends or parents to squeeze in with them. If I have a mortgage I have no choice.

In chess you are in a favourable position when you have more options. If you found yourself being forced to make only a certain move everytime it is almost on the road to losing the game.

By loving cash I am both hyperoptimistic about the opportunities that are yet to be seen in the future and also hyper paranoid about the threats of the lack of cash that we always see happening to others.

 

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[Hassassin]

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

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

It is rather unorthodox, of course.

You must be very comfortable watching your cash getting eroded by inflation year by year while resisting the temptation of "investing to beat inflation". Not everyone can do that. Most could not.

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

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

Your cash reserve is as important as a national defense for a country. Nations spent billions to keep and train their army during peacetime.

Inflation is the necessary price to pay for future opportunity and protection against a future cashflow crisis that leads to bankruptcy.

If I pay rent, and anytime I don't feel like paying, I pick up my phone and call my friends or parents to squeeze in with them. If I have a mortgage I have no choice.

In chess you are in a favourable position when you have more options. If you found yourself being forced to make only a certain move everytime it is almost on the road to losing the game.

By loving cash I am both hyperoptimistic about the opportunities that are yet to be seen in the future and also hyper paranoid about the threats of the lack of cash that we always see happening to others.

I'm 27 and paying £900 rent p/m while earning approximately 70k in the UK with a wife and child. I have 15k saved, which is enough for a deposit here, but I want to keep cash liquid for an upcoming venture and to get something fastlane of the ground. The fact is I have a family and I'm not getting any younger, so my deadline is 29-30 years old: if i'm not doing anything fastlane/extremely high earning by that age, I'll bite the bullet on a mortgage - something that feels like nightmare fuel and scares the heck out of me with my current financial horsepower.

 

[James Klymus]

Thanks @biophase I really enjoy your takes on real estate investing and business.

I was wondering if you had any advice/threads on here for finding and buying a 2-4 unit property. I'm in the Chicago burbs right now, Aurora area to be exact. Aurora consistently has 2-4 units for sale, But they usually will need some work and are not in a good area. I would leverage a FHA loan and owner occupy for the first year at least. I quickly googled Illinois first time home buying programs and it looks like they offer up to $10k for first timers like me.

Also, Do you have any advice for someone who's a 1099 self employed barber like me? Income should be around $100k this year just from cutting hair, But I have heard its tough to get loans as a self employed person vs. someone with a W-2. Plus, I only have one year of tax returns since I quit my job early 2022.

Any advice would be appreciated, And thank you for your contributions to the forum.

 

[MJ DeMarco]

I'm kicking myself for not taking RE seriously enough over all these years.

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

Think about that.

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

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

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

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

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

 

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[REV5028]

If I pay rent, and anytime I don't feel like paying, I pick up my phone and call my friends or parents to squeeze in with them. If I have a mortgage I have no choice.

Idk man... there's something super satisfying about not needing to piggyback off of what others have that I am more than capable of having myself. I see my mortgage as two things. 1) a long-term investment that is likely to pay off well and 2) motivation to increase my income. As for preparing for possible catastrophes before developing significant income streams, we have mortgage insurance, life insurance through our 9-5s, we can rent our house if needed, or we can sell and downsize if needed. Only as a last resort will we rely on friends and family, but I'm thinking it would have to be a pretty severe natural disaster or economic crisis for us to do that, and in that case, everyone is going to be shizz outta luck.

 

[WJK]

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

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

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

 

[Kevin88660]

Idk man... there's something super satisfying about not needing to piggyback off of what others have that I am more than capable of having myself. I see my mortgage as two things. 1) a long-term investment that is likely to pay off well and 2) motivation to increase my income. As for preparing for possible catastrophes before developing significant income streams, we have mortgage insurance, life insurance through our 9-5s, we can rent our house if needed, or we can sell and downsize if needed. Only as a last resort will we rely on friends and family, but I'm thinking it would have to be a pretty severe natural disaster or economic crisis for us to do that, and in that case, everyone is going to be shizz outta luck.

I think I didn’t give a good example.

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

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

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

Having mortgage is like committing yourself to half a marriage.

But everyone’s situation is different, if I am Hassan and my wife “forces” me to own a home I will just do it to avoid the conflict and hassle. I will drag the maximum loan tenure to have the smallest monthly repayment.

If you are single you still have the option to quit your job, start a business, move back to live with your family to save the cost. Once you have a mortgage you basically killed that option.

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

 

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[Kevin88660]

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

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

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

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

Lots of big think lately.

Singapore central bank policy is that the rates here tend to follow U.S. rates.

HDB is a lower risk bet because things cannot go too wrong with an investment that comes with a lot of state subsidy.

Real estate ownership and investing is like a national religion in Singapore.

 

[Ocean Man]

Would it make sense to take out an FHA loan if I have a good credit score? I've heard that you may be able to get a more competitive loan if you have a better score.

And in my situation, lucky enough to be able to come back from abroad and still live with family, pay low rent, and invest in index funds without worrying about super high rent.

 

[biophase]

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

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

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

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

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

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

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

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

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

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

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

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

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

 

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[biophase]

I'm 27 and paying £900 rent p/m while earning approximately 70k in the UK with a wife and child. I have 15k saved, which is enough for a deposit here, but I want to keep cash liquid for an upcoming venture and to get something fastlane of the ground. The fact is I have a family and I'm not getting any younger, so my deadline is 29-30 years old: if i'm not doing anything fastlane/extremely high earning by that age, I'll bite the bullet on a mortgage - something that feels like nightmare fuel and scares the heck out of me with my current financial horsepower.

This would be tough call for me. I understand you wanting to start your business right away. You have a 3 year deadline and would buy a house at that point.

But I can also see you buying a house now. Then saving the money up again and doing your business from 30-33 years old.

The largest risk is if homes appreciate in the next 3 years to the point where you can't afford it.

The only other comment I have is that you haven't factored in the enjoyment or stability you and your family may feel owning a home rather than renting for the next 3 years.

Can you do us a favor, link us a home that you would purchase today. And we can revisit it in 3 years and see how the market is in 2026.

 

[biophase]

Thanks @biophase I really enjoy your takes on real estate investing and business.

I was wondering if you had any advice/threads on here for finding and buying a 2-4 unit property. I'm in the Chicago burbs right now, Aurora area to be exact. Aurora consistently has 2-4 units for sale, But they usually will need some work and are not in a good area. I would leverage a FHA loan and owner occupy for the first year at least. I quickly googled Illinois first time home buying programs and it looks like they offer up to $10k for first timers like me.

Also, Do you have any advice for someone who's a 1099 self employed barber like me? Income should be around $100k this year just from cutting hair, But I have heard its tough to get loans as a self employed person vs. someone with a W-2. Plus, I only have one year of tax returns since I quit my job early 2022.

Any advice would be appreciated, And thank you for your contributions to the forum.

The first thing I would do is talk to a mortgage broker and find out what I need to qualify for a loan. If you need to have 2 years of 1099, then you'd have to wait until 2024. There are probably programs that will take 1 years of 1099 income. But the rates could be higher. Without knowing this, it doesn't make sense to even look.

Then I'd figure out how to qualify for the $10k down payment assistance. Get that lined up. Does a 2-4 unit qualify for the $10k assistance?

Now you are ready to start looking for a property.

 

[biophase]

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

Think about that.

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

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

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

Not to mention this isn't even taxed at the state level. Save another 4%-10%!

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

Since I started my business in 2007, I've encouraged all my friends to start one too. 16 years later, I've learned that most people are just not cut out to start or run a business. A good chunk of our population likes a 9-5 no stress job. For them, this is absolutely their highest EV in life.

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

Absolutely. As home prices get higher, a 20% jump has much more magnitude. Unfortunately, I'm blowing past the $250k limit on all my REI these days. It's a good problem to have.

 

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[biophase]

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

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

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

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

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

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

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

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

 

[biophase]

Would it make sense to take out an FHA loan if I have a good credit score? I've heard that you may be able to get a more competitive loan if you have a better score.

And in my situation, lucky enough to be able to come back from abroad and still live with family, pay low rent, and invest in index funds without worrying about super high rent.

I don't know much about FHA loans. I think the homes have a more stringent requirement? But yes, you want to have a good credit score so you can get the best interest rates. That goes for FHA or any loan you can get.

 

[Mr. Tycoon]

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

when they should get deployed Your little soldiers would be half dead cos of starvation caused by inflation.

While someone owning a RE\ hard assets are protected against inflation by thick walls - think citadel.

 

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[Kevin88660]

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

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

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

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

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

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


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


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

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

My view is that unless you are somewhat wealthy, you should be mostly in cash.

If you are not sitting on close to 300-500k cash any major investment to “fight inflation” is not a high priority.

I just don’t see real estate as a high priority that rob away future buffer against unseen events or unseen opportunity.

Most people get into financial trouble because they underestimate the possibility of getting into a shortage of cash. They have a high paying job with high expense once they lose then job everything turns bad real quickly.

We have some many people coming with post that they have no money/time for their own business ideas.

If someone has wages not keeping up with inflation, it is not an issue if you have saved up a huge cash reserve. If someone needs their current month’s income to pay for their current month expense it is a cashflow issue that they got themselves into in the first place.

They blame wages not keeping up, they blame the unfortunate event of losing their job. They refused to have cash reserve ready.

I would rather get even more coverage for life insurance that covers all the illness possible. The more I hustle the more likely the immune system could be weakened due to stress. If you are healthy you can always make the money.

Real estate just put a lot of fear and uncertainty into me. What is the future value of the location? Can I find tenants in the future when I don’t live in it? I just don’t have the answers.

 

[Guest-5ty5s4]

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

Think about that.

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

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

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

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

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

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

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

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

 

[MJ DeMarco]

My view is that unless you are somewhat wealthy, you should be mostly in cash.

If you are not sitting on close to 300-500k cash any major investment to “fight inflation” is not a high priority.

I just don’t see real estate as a high priority that rob away future buffer against unseen events or unseen opportunity.

Most people get into financial trouble because they underestimate the possibility of getting into a shortage of cash. They have a high paying job with high expense once they lose then job everything turns bad real quickly.

We have some many people coming with post that they have no money/time for their own business ideas.

If someone has wages not keeping up with inflation, it is not an issue if you have saved up a huge cash reserve. If someone needs their current month’s income to pay for their current month expense it is a cashflow issue that they got themselves into in the first place.

They blame wages not keeping up, they blame the unfortunate event of losing their job. They refused to have cash reserve ready.

I would rather get even more coverage for life insurance that covers all the illness possible. The more I hustle the more likely the immune system could be weakened due to stress. If you are healthy you can always make the money.

Real estate just put a lot of fear and uncertainty into me. What is the future value of the location? Can I find tenants in the future when I don’t live in it? I just don’t have the answers.

You're entire post is from the perspective of a poor person living in fear. It is not grounded in reality. Someone who doesn't have any cash reserves shouldn't be buying a house anyway.

 

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[Hassassin]

This would be tough call for me. I understand you wanting to start your business right away. You have a 3 year deadline and would buy a house at that point.

But I can also see you buying a house now. Then saving the money up again and doing your business from 30-33 years old.

The largest risk is if homes appreciate in the next 3 years to the point where you can't afford it.

The only other comment I have is that you haven't factored in the enjoyment or stability you and your family may feel owning a home rather than renting for the next 3 years.

Can you do us a favor, link us a home that you would purchase today. And we can revisit it in 3 years and see how the market is in 2026.

So here's a house I'd consider purchasing for 200,000k (it sold for 125K in 2007). Monthly repayments over a 25-year period are roughly 1K/month.

The whole 25-year debt thing scares the sh*t out of me. Like what if it all goes to pot and I lose a job etc., I'd be chained by debt repayments.

But we'll always need a roof over our heads, so that cost will exist regardless of it being a rental or purchased property.

Regarding stability, the rental we have at the moment is long-term and extremely well-furnished and a great built for the price. So it's pretty comfortable, but for sure there is little control over our future here if we get kicked out or something.

Overall, house prices and rent are appreciating in my city. As the population of Birmingham (second largest city after London) is expanding more people are living here but commuting to London. I could get cheaper housing by moving out of town, but that would mean no family or friends and inferior public facilities overall.

Hence my deadline to get a business off the ground in the next year or so. I'd be more comfortable taking on a mortgage with a higher or additional income.

Edit: I've set a reminder for next year to review this house/this post. Let's see.

 

[biophase]

My view is that unless you are somewhat wealthy, you should be mostly in cash.

If you are not sitting on close to 300-500k cash any major investment to “fight inflation” is not a high priority.

That is just ridiculous. How did you come up with this number? So if you have $300k and inflation is 5%, you are ok with losing $15,000 a year in buying power? I have no words for your perspective. I mean I could see you saving $50k, but $300k or $500k?

I just don’t see real estate as a high priority that rob away future buffer against unseen events or unseen opportunity.

This sentence is so ironic. You are waiting for an unseen opportunity and you are literally not seeing it.

If someone has wages not keeping up with inflation, it is not an issue if you have saved up a huge cash reserve. If someone needs their current month’s income to pay for their current month expense it is a cashflow issue that they got themselves into in the first place.

They blame wages not keeping up, they blame the unfortunate event of losing their job. They refused to have cash reserve ready.

When you save money you aren't keeping up with inflation. You're blind spot is that you think savings combats inflation when it is the exact opposite.

I would rather get even more coverage for life insurance that covers all the illness possible. The more I hustle the more likely the immune system could be weakened due to stress. If you are healthy you can always make the money.

The fact that you worry so much about health insurance at a young age is troubling.

 

[biophase]

So here's a house I'd consider purchasing for 200,000k (it sold for 125K in 2007). Monthly repayments over a 25-year period are roughly 1K/month.

The whole 25-year debt thing scares the sh*t out of me. Like what if it all goes to pot and I lose a job etc., I'd be chained by debt repayments.

This is hard thing for younger people to swallow. When I bought my first house in 1999, I thought, man in 2029 and the house will be all paid off, that is a long long time. But reality was that in 2004 I sold it and moved.

You can always sell your place or pay it off faster. There's a high chance you won't be in the house for 25 years. Just take it one month at a time.

Here's another perspective. Imagine you purchased this home in 2007 for $125k. Your payment would be $594. Today in 2023, you would be paying $600 to live in this exact home. Would you be happy with that purchase?

There's probably going to be someone posting in 2030, telling you that you got lucky and bought when the prices were low.

 

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[wanttogofaster]

The whole 25-year debt thing scares the sh*t out of me. Like what if it all goes to pot and I lose a job etc., I'd be chained by debt repayments.

I had that same "fear" 11 years ago when I bought my first house (which I've been renting out for 9+ years). Turns out it now rents for almost 4 times the monthly payment.

I remember my agent telling me back then that it was "the right" time to buy as many as I could. I did buy some more, but not as many as I could, as he told me to.

He did, and last time I talked to him a few months ago he had a net, all hands off as he has a PM, cash flow of more than $20K a month from all his properties (not a single one is a STR due to city regulations).

Having said this, while I agree with the person that said that a 1M property at 7% is a 1.3M property at 3%, I'm still seeing inflated prices coming down quite a bit, even now, in June, which is historically the "best" time to buy real estate.

I've always bought in the fall and winter and am kind of waiting and seeing how things play out in the next few months.

 

[MJ DeMarco]

Today in 2023, you would be paying $600 to live in this exact home.

Or if decided to "wait", he can now be renting the same home for $2,100 a month and yearly rent increases.