Bay Area home price down

BAGB · May 2, 2019, 10:33pm

Here is a poll for @all

Which option do you prefer with 200k in hand?

Buy 200k worth of SP500 index fund. Hold for 19 years, total portfolio will be worth 400k.
Buy a $1M house, hold for 19 years. Total equity will be worth 1.2M.

harriet · May 2, 2019, 10:46pm

That’s such a stupid poll.

Elt1 · May 2, 2019, 10:47pm

If you live in the house it is a much better investment. Plenty of costs though. But probably comparable to rent.

wuqijun · May 2, 2019, 11:28pm

Buy Tsla and hold for 19 years. Total equity will be worth $50M.

hanera · May 2, 2019, 11:46pm

Assuming is a rental, are you presuming rent (no vacancy or downtime for 19 years?) is sufficient to pay for PITI of 80% loan + maintenance/ minor repairs + asset replacement + re-modeling + property management (or your imputed labor) ? Or did an actual detailed computation?

manch · May 2, 2019, 11:53pm

If you rent you are short housing. A neutral position would be to at least own the house your live in. To be long is to have more than one house.

Don’t short housing.

BAGB · May 3, 2019, 12:30am

It’s such a content-less and demeaning comment

BAGB · May 3, 2019, 12:31am

Rent increase over 19 years would make you a lot of money.

ITI is cost, P is equity. Over 19 years, your P might be over half a million, I left this out to counter arguments such as yours

hanera · May 3, 2019, 1:33am

Dreaming. No way you can increase rent throughout the 19 years, I am pretty sure there were a few times during those 19 years, rent dropped drastically.

Intentionally to trap you. Your investment is no longer 20% It becomes a bad comparison since didn’t increase capital in index fund investment, yet monthly increase for the house. And depending where, should have a few times where there is a long period of vacancies. You would need to clean the house thoroughly between change of tenants hence vacancies, and at least one interior painting hence vacancy. You can continue to insist in your return computation and that rental is better, but I am pretty sure won’t be much different from index fund. So long you didn’t do a detailed computation, your return comparison is wrong, Told you a dozen times with detailed computation, you still use general computation.

harriet · May 3, 2019, 2:17am

Your comment has content? That’s news to me. The way you phrased your so-called poll already shows your bias.

cloud · May 3, 2019, 2:35am

A locally optimal solution proves to be globally effective . Or use Greedy algorithms.

Ride the waves . Park your money and take it out for the next one .

But this is all constant work . You make millions but then you are constantly thinking about “what next” . Better way …just pay off everything …zero debt and just make 10K every month and live your life while you have it .The problem is vey simple …all you have to make is 10-12 to live if your house is paid off.

cloud · May 3, 2019, 3:10am

Right now one has to make more to pay many more people along the way especially banks .

If the house is already paid off then one can live off by making less money .

Tax rate less than 168K is only 24% so you are saving over 15% right there .

Is this thinking completely whacky ?

wuqijun · May 3, 2019, 3:41am

Yes. But you should leverage. Don’t play too safe.

BAGB · May 3, 2019, 4:15am

Can you rephrase the poll to make it not biased?

wuqijun · May 3, 2019, 4:59am

Which would you rather do:

Spend 200K and buy a condo as rental in Vallejo (paid off free and clear) and hold it for 19 years
Put 200K into an S&P 500 fund and hold it for 19 years