Given today's real estate market

[martingale]

Don't do it, for two reasons:

1) Real estate is not an investment, it is a place to live. (Unless of course you are very wealthy, don't have to borrow to incur in debt, and can afford to have an illiquid asset as a small percentage of your total net worth).

2) When interest rates go back up, the cost of money is going to be higher and it is very possible real estate prices will go down because buyers will not be able to afford as much real estate as today.

[phikappapsi]

Logical flaw... As interest rates go up, inflation does too... So even if rates would pressure home values down, inflation pushes home values up. So if you can leverage debt in today's dollars at 3.5% and rates go back to the 7-9% range which is a historic average, youre basically earning. 5+% untaxable dividend, even before the home itself rises in value.

I know it sounds like I'm talking myself into liquidating my collection...not the case, just playing devils advocate to the previous post.

[tiger8mush]

I've heard good and bad stories about rentals. Some of my friends have rental properties. Sometimes the tenants are perfect, the houses never needing maintence, tenants always paying on time, etc. But then there are the not-so-good parts, where friends need a place to stay and it they don't pay rent and they out-welcome their stay, tenants wreck the house, are a nuisance to neighbors, house is in constant need of repairs or appliances always breaking, roof leaks, basement carbon monoxide detector goes off at 2am so u get the phone call, house goes unoccupied for a few months in between tenants, etc.

Sure, you'll probably make some money, but is it worth it? Is the renter's market good right now, considering people can buy the house themselves for a cheaper price? Can you afford to hang on to the house a few years until the market picks up so you CAN make money on the rental?

Good luck!

[egbeachley]

Originally Posted by phikappapsi

Logical flaw... As interest rates go up, inflation does too... So even if rates would pressure home values down, inflation pushes home values up. So if you can leverage debt in today's dollars at 3.5% and rates go back to the 7-9% range which is a historic average, youre basically earning. 5+% untaxable dividend, even before the home itself rises in value.

But with inflation you also get appreciation on pretty much everything, houses and cards.

In general, interest rates and housing prices go in different directions. It sounds counterintuitive but the best time to buy a house may be when interest rates are very high, and housing prices low. Then when the rates go back down and the house prices are back up you refinance. N

[phikappapsi]

To clarify for some in the thread...the house I already own is a multifamily rental. The house I'd be buying would be a single family, and I'd be renting out the unit of the current house that I already live in.

[phikappapsi]

Originally Posted by egbeachley

But with inflation you also get appreciation on pretty much everything, houses and cards.

In general, interest rates and housing prices go in different directions. It sounds counterintuitive but the best time to buy a house may be when interest rates are very high, and housing prices low. Then when the rates go back down and the house prices are back up you refinance. N

I understand what you're saying, and logically it makes sense, but it doesn't actually hold water. Look at the time periods in this country of relatively high interest rates, and expansive inflation...housing values typically outperform the inflation adjusted metrics of those time periods.

Again, I have multiple avenues of buying the second home. I was only toying with the idea that cardboard might be the correct source of liquidity to cover the initial costs. Not sure there's one specific "correct" answer

[egbeachley]

Originally Posted by phikappapsi

I understand what you're saying, and logically it makes sense, but it doesn't actually hold water. Look at the time periods in this country of relatively high interest rates, and expansive inflation...housing values typically outperform the inflation adjusted metrics of those time periods.

Again, I have multiple avenues of buying the second home. I was only toying with the idea that cardboard might be the correct source of liquidity to cover the initial costs. Not sure there's one specific "correct" answer

Over time, housing prices always match inflation. If they were off by even a few tenths of a percent, eventually everyone would own a home or nobody would.

[JasonD08]

Coming from a builder/investment property owner/card collector.....Guys it all comes down to math. I have lost over $200K in the last 3 years sitting on empty real estate. With taking that into consideration, every deal has to be looked at uniquely. If the math works out then a person can build wealth faster now with real estate than ever before. I have lost most $$ on spec homes built to sell and made more recently on investment property. With that being said, the time is right now to purchase rental property because the supply is high and interest rates are lower than we will ever see them. Now, I would not recommend being a landlord to anyone but it can pay off. I have had many in the same business tell me dont do it, that it is a headache, but hard work can pay off. You have to rent to the right people and line up your ducks, and be willing to sit empty for a month or two rather than just stick anyone in there. Also make a plan to own atleast 10......1 or 2 will just be a headache and not worth it. Atleast with 10 you should have a nice income every month and if 1-2 go empty the others will help carry them. Do what you enjoy in life. I would not recommend investment property to just anybody. I still stand firm in real estate as the way to build wealth. All of the other stuff (cards, stocks, etc.) are just smoke and mirrors. They dont make more land folks.

Jason

[JasonD08]

and yes I have liquidated many nice cards to purchase real estate. When the time is right to buy, you liquidate to make it happen. Matter of fact I am looking at another piece of property so stay tuned to the B/S/T folks! Real estate investing is long term (20 years). I figure in 20 years I can rebuild most of the collection I sold off a little at a time.


Jason