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Thread: Living off one income question

  1. #221
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    Quote Originally Posted by davidI View Post
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    Real Estate has provided irrationally high returns for the last few decades, even with the great recession. Given that people are most comfortable taking on debt for a house and governments/central banks have used cheap debt as a tool to spur growth, it's only reasonable that the housing bubble has grown. Population growth has also helped. It's hard to see demographics continuing to support that unless the floodgates are really opened up to wealthy immigrants at the cost of born-and-raised Canadians.
    .

    I have to think that what happened in Alberta and to some extent Saskatchewan from about 2004 - 2008 was a once in a lifetime blip. We built a house in 2002 that doubled in "value" by 2008 and the house we bought in 2008 is worth basically the same today. We had 15 years worth of increase in value squished into four - six years and it's basically been flat ever since. All I want to see is a steady 2% - 3% growth per year.

    What a lot of people don't consider when they buy a bigger house are things like increased property taxes, utilities, maintenance, insurance, etc.. Those things can be insanely high over the life of the property if people are honest about calculating those true costs.
    "Masked Bandit is a gateway drug for frugal spending." - Unknown303

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    Kind of off topic but for obvious reasons, it becomes a different story if the goal is to become and stay mortgage-free.

    My best friend and his wife bought a 600k townhome in Killarney. His dad is very well off so essentially gave him a large lump sum for the home and wife had equity from her condo.

    All in all, their remaining mortgage was only 180k but they made the choice to stretch it into a 25 year mortgage, partly due to my buddy taking a lower income job so he could spend more time with their daughter as she grew up.

    I don't foresee them paying the mortgage off early but if I had a large windfall of cash towards my home, I'd be inclined to maintain that momentum and try to pay the home off even earlier.

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    Quote Originally Posted by A790 View Post
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    Both Manhattan and Buster are totally correct.

    For the average person, they view RE as their biggest investment. I view it as my biggest expense... and I've got two properties valued somewhere around $1.2 MM. I'm a huge hypocrite but here we are.

    Interestly, my RE returns over the past 6 years have been -30% whereas my stock portfolio has been +100%. Funny how that works.
    One thing to keep in mind is RE is the easiest step to leveraged investment that most people can attain.

    100k down on a 500k place, 30% gains over 6 years = 650k. Assuming rental costs cover expenses you've actually gotten 150% gain. (250k equity on 100k investment, not counting actual mortgage payment gains since realtor fees wipe away a lot of that)

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    Quote Originally Posted by max_boost View Post
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    If you're good with money, don't pay down the mortgage.

    If you're bad with money, pay down the mortgage.

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    Quote Originally Posted by pheoxs View Post
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    One thing to keep in mind is RE is the easiest step to leveraged investment that most people can attain.

    100k down on a 500k place, 30% gains over 6 years = 650k. Assuming rental costs cover expenses you've actually gotten 150% gain. (250k equity on 100k investment, not counting actual mortgage payment gains since realtor fees wipe away a lot of that)
    do the reverse calculation on a loss.

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    Quote Originally Posted by pheoxs View Post
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    One thing to keep in mind is RE is the easiest step to leveraged investment that most people can attain.

    100k down on a 500k place, 30% gains over 6 years = 650k. Assuming rental costs cover expenses you've actually gotten 150% gain. (250k equity on 100k investment, not counting actual mortgage payment gains since realtor fees wipe away a lot of that)

    I think you missed the part where he said that his RE is DOWN 30%
    "Masked Bandit is a gateway drug for frugal spending." - Unknown303

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    Quote Originally Posted by A790 View Post
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    Both Manhattan and Buster are totally correct.
    I never said they weren't

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    Quote Originally Posted by cjblair View Post
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    I never said they weren't
    I know, and I wasn't trying to imply that was the case. I was throwing my hat in the ring supporting their position.

    Quote Originally Posted by Masked Bandit View Post
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    I think you missed the part where he said that his RE is DOWN 30%
    Yea. And speaking of which... looks like insurance on the place has skyrocketed per my last Intact renewal. Mel will be a-callin.

    Quote Originally Posted by pheoxs View Post
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    One thing to keep in mind is RE is the easiest step to leveraged investment that most people can attain.

    100k down on a 500k place, 30% gains over 6 years = 650k. Assuming rental costs cover expenses you've actually gotten 150% gain. (250k equity on 100k investment, not counting actual mortgage payment gains since realtor fees wipe away a lot of that)
    Your hypothetical scenario assumes a 30% gain in six years which is, frankly, extraordinary in non-bubble environments.

    In 2015 I paid $395k for my place in New Brighton. I'd be lucky to see $360 for it today. Nevermind the repairs I've done on the roof, deck, garage, appliances, etc. I'm easily into the house for another $20k. Then property taxes, interest in the mortgage, etc...

    I may and likely won't ever see my money from this house.

    The acreage I bought in August is in a somewhat better position since it depreciated from $900k-ish to $775k-ish... but who knows how far it will go. I don't have much faith in the UCP given their single-minded focus on O&G and the uncertainty that exists in the market. I am hopeful that they can do something to get AB back on track, but honestly, I'm not expecting it.

    So yea, I'm eating my shirt on all of this and that is a reality for many Albertans.

    Speaking to your point re: leverage, you aren't wrong there... but that doesn't mean it's necessarily a good thing. Most people don't realize that on a typical 25-year amortization that the first 10 years are mostly interest or the real risk they've taken on.

    Don't get me wrong, buying a house is a smart decision for many people, but not for all. What I tell people is to avoid buying until they've found a place they're going to be in for 10+ years. Until then, rent and invest the difference.

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    I missed the - sign and read 30%, my bad

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    Quote Originally Posted by A790 View Post
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    Both Manhattan and Buster are totally correct.

    For the average person, they view RE as their biggest investment. I view it as my biggest expense... and I've got two properties valued somewhere around $1.2 MM. I'm a huge hypocrite but here we are.

    Interestly, my RE returns over the past 6 years have been -30% whereas my stock portfolio has been +100%. Funny how that works.
    Your home equity should be considered an asset allocation just like any other.

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    Quote Originally Posted by Buster View Post
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    Your home equity should be considered an asset allocation just like any other.
    With an MER of at least 2% though. If my primary residence was a mutual fund it would be sold by WFG...lol.
    "Masked Bandit is a gateway drug for frugal spending." - Unknown303

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    Quote Originally Posted by Masked Bandit View Post
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    With an MER of at least 2% though. If my primary residence was a mutual fund it would be sold by WFG...lol.
    2.79% MER for me, plus applicable running costs tied to management and building maintenance. lol

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    Quote Originally Posted by Masked Bandit View Post
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    With an MER of at least 2% though. If my primary residence was a mutual fund it would be sold by WFG...lol.
    lol, thats pretty funny. ICWYDT

    But in fact you aren't financing your equity, you are financing your loan balance.

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    I assume the MER talk is property taxes and other dilutive carrying costs for owning a home that don’t go away without a mortgage.
    Originally posted by Thales of Miletus

    If you think I have been trying to present myself as intellectually superior, then you truly are a dimwit.
    Originally posted by Toma
    fact.
    Quote Originally Posted by Yolobimmer View Post
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    guessing who I might be, psychologizing me with your non existent degree.

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    Quote Originally Posted by Buster View Post
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    lol, thats pretty funny. ICWYDT

    But in fact you aren't financing your equity, you are financing your loan balance.
    No financing at this point but now that you point it out, I guess I should amortize the interests costs I paid over the expected timeline of me living in the home. Shit that MER just went through the roof!

    - - - Updated - - -

    Quote Originally Posted by killramos View Post
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    I assume the MER talk is property taxes and other dilutive carrying costs for owning a home that don’t go away without a mortgage.
    Yep. Off the top of my head, property tax, insurance, maintenance & repairs over the life of the home, legal costs when you buy, legal & realtor costs when you sell, moving expenses in and out. I'm sure there are other things I've forgotten.
    "Masked Bandit is a gateway drug for frugal spending." - Unknown303

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    Quote Originally Posted by killramos View Post
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    I assume the MER talk is property taxes and other dilutive carrying costs for owning a home that don’t go away without a mortgage.
    New kitchen/bath and roof every 15-20 years should count toward MER. They add nothing to the value of home in grand scheme of things, just add appeal when you sell.

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