You might have lower net income than many in your neighborhood but in all likelihood you have far more net worth than the “spend it all” crowd. IMHO debt should be avoided or quickly amortized unless it involves the purchase of earning assets…a personal residence is not an earning asset.
Absent market aberrations, residential real estate has indeed been an appreciating asset. Even said disturbances may not have the expected outcome, either. Post-pandemic house prices have continued to rise at an accelerated rate, despite collateral interest rate growth and inflationary pressure on personal income trends.
Amen. My parents left me just enough of an inheritance to live modestly, since I can no longer work due to my fibromyalgia. It's not bad enough for me to get disability.
I’m not a money genius by anyone’s standard, to me it’s common sense. I bought my house in 2019 as well. Interest rates were about 3% at the time, but I paid cash. Friends thought I was nuts. If I financed they felt I could make more money on interest than I would pay on the loan. They did not realize, if a person earns 5% on 500k, dependent upon tax bracket, they are required to pay 28% of that 5% in taxes. Most also fail to comprehend the interest on all consumer loans is amortized at the beginning and not spread equally throughout the term. Plus it would have cost me $25k in fees to get financing for the loan. Then the interest I earned would have placed me in a higher tax bracket. Yes loan interest is deductible, but in my bracket I would see five cents for every dollar I paid in interest. Because loan interest is amortized at the beginning, after about 5 years, the deduction would disappear. Think about Social Security, people pay into it forever then collect 2-3k per month for a few years before they die. Conversely if they dollar cost averaged the money paid into Social Security and put it into an index fund, after 30 years they could pay cash for 10000 Jeeps. The system Is not set up for intelligent people and loan companies make money off of idiots.
Maybe over the long term, RE can be a nice investment, but everyone needs a place to live. I hate when people say, “can you believe our homes are worth” this. My response is always, sell it and move to Mississippi. A married couple can capture $500k tax free, but unless downsizing or moving to places like Mississippi, it’s a moot point. Now if they die, their kids will get a stepped up basis and that is profit heavy. I refer specifically to owner occupied homes, investment properties can be 10-31 exchanged, which is another ball game, but from personal experience investment properties can be a pain in the ass. However, RE is how most Americans “build wealth”, …….by inheritance.
We all need a place to live and purchasing rather than renting is usually the best option. That said way too many people over extend when purchasing a home leaving very little disposable other investments. In many cases they become house poor as taxes, renovation costs, and insurance increase, taking more and more if their disposable income. Home appreciation is a good thing but it doesn’t generate cash flow. What worked well for me was purchasing my primary residence at a price well below what I could afford, leaving room to buy rentals and other types of cash generating investments , letting lessees buy these properties for me with their rent payments.
And I bet your credit rating is perfect, just like mine. I use my credit card for all purchases and then pay off the full amount at the end of every month.
You’re lucky you live in Kansas. States like California have rent control and other restrictions on property owners. I liquidated my California rentals and fled to Idaho. However, because other Californians did the same thing, Boise is copying California, imposing even some worse restrictions. I sold those properties and took the tax hit. Others are doing the same, which will just cause rents to skyrocket……supply/demand, the policies are counterproductive. You’re correct, a home is a money pit. My insurance doubled this year and next weekend I pay someone $900 to stain my fence, just to name a few.
843 FICO, but it doesn’t mean squat, I never obtain loans. I buy everything on a card.…..when I’m not charged a fee. Wells Fargo to be exact, 2% cash back, all purchases, no limit. Just off the top of head, I get about 10k back , tax free annually. The downside, my card number is compromised frequently, which is a pain
California…not business friendly these days. Long term, rent control is a disaster that snowballs into a bigger problem…because builder/investors won’t add units to the rental pool…and rental owners, as you stated, just sell out and invest elsewhere, further squeezing availability. Yes…my investments in Kansas have been good to me….
I actually saw one at a gas station the day I posted it.Where could I find a good deal on a used Yugo sense they haven’t made any in 30+ years
