Is Real Estate Actually a Good Investment on Average?
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@Dashrender said in Is Real Estate Actually a Good Investment on Average?:
There is value to actually living in the house - so at worse, to me - sounds like he broken even.
I believe that the downpayment was $35K in 1976. An index would have generator $1.55m in 2021 when he sold it.
Assuming 45 years of monthly rent of $1,500 (way, WAY above market for the entire time) that would have been just $810K, or about half of what the money would have cost.
In reality, in those early years rent of $400 would have been more accurate. And by the end, more like $1300. So really, actually renting on his street would like have cost around $450K - $500K over those 45 years.
So roughly, considering he "gained" around $100K on the house, and would have spent $600K... He only LOST about $800K... plus any additional improvements that he had to make over the years which I know were more than $300K.
So his total cost for ownership over renting was easily a loss of more than $1,000,000 USD.
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@scottalanmiller said in Is Real Estate Actually a Good Investment on Average?:
Anyone in financial circles or with financial knowledge. Or real estate experience.
Anyone with the common sense that a market cannot simply go up and up based on no underlying value.You got any links because I've heard no-one predict any kind of "staggering crash" and I have some financial knowledge. There's a massive difference between not going up and a staggering crash.
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@scottalanmiller said in Is Real Estate Actually a Good Investment on Average?:
Actually, that's not quite how it works. Historic data is actually incredibly telling and ALL evidence tells us that we absolutely can predict the future, within a known cone of uncertainty.
It is how it works. Or if you like, let's just say the "cone of uncertainty" is a really, really big cone
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@Carnival-Boy said in Is Real Estate Actually a Good Investment on Average?:
@scottalanmiller said in Is Real Estate Actually a Good Investment on Average?:
Actually, that's not quite how it works. Historic data is actually incredibly telling and ALL evidence tells us that we absolutely can predict the future, within a known cone of uncertainty.
It is how it works. Or if you like, let's just say the "cone of uncertainty" is a really, really big cone
Other than "how soon", it's surprisingly small. It always feels big when you are "in it" because emotions take over. But just like the 2008 crash, the dotcom bubble, everyone not feeling the "but I might get rich" flood of emotions was pretty much all together and expecting exactly what happened.
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Here's a real example.
I'm renting. I love the area we're in. There are other areas where we would enjoy living as well that are exactly the same.
I'm paying under $3K a month for rent. It's a large condo, 3BR 2Bath, wonderful area, 4 pools 4 hot tubs, awesome view, great location, great & quiet neighbors, great community.
Renting other places around here are similar priced, many are a few hundred $ more for now, but still in range.
We'd like to buy a house in our current area, or another area we like, and pretty much keep our current standard of living as we are in this condo, but in house form.
If we did that, the minimum mortgage payment we're looking at MINIMUM is $6.5K, that is with dumping a bunch of cash as a down payment... note that the $6.5K does not include insurance, PMI, taxes, closing costs, etc.
So you see, renting and owning a home is not the same thing. Just because I choose to rent, doesn't mean that I automatically will rent the same kind of house that I would want to buy. So it's just not logical to me to compare them like that. Typically, you rent to save money. Sure, I could rent a house for $8K a month, but wtf would I do that? I'd rather buy! Except, I don't want to buy, because I need the freedom to be mobile and choose where to live and not be stuck... I don't want to throw all my money into a house and live paycheck to paycheck and be forced to sell at the next higher bubble than is currently to make anything.
Yeah, we could move to a cheaper area, but we don't want to. There's no point because we just don't want to give up what makes us live happy and looking forward to the next day/weekend/time off, etc.
I'd rather keep renting, and saving money, and investing money, that I'm not throwing into a house that I may or may not get back plus more later, if life works out perfectly for home ownership. I'm very likely to move as well, need that freedom, while saving! We can't time our life according to the house, we need our housing to work for us.
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@Carnival-Boy said in Is Real Estate Actually a Good Investment on Average?:
@scottalanmiller said in Is Real Estate Actually a Good Investment on Average?:
Anyone in financial circles or with financial knowledge. Or real estate experience.
Anyone with the common sense that a market cannot simply go up and up based on no underlying value.You got any links because I've heard no-one predict any kind of "staggering crash" and I have some financial knowledge. There's a massive difference between not going up and a staggering crash.
Sort of, in the terms of house prices there is already a big drop from 2004's peak that the UK hasn't returned to. So even today it's 18 years of lower than the peak (after adjustment for inflation.) Holding steady (not adjusted for inflation) is a pretty rapid crash in reality if that holds for any length of time because that's a lot of loss on top of maintenance and other overhead costs, especially when it's already down so much from the top.
Unfortunately the UK doesn't have the hundreds of years of data that places like the US have because the housing market wasn't an open economy until recently and council houses weren't for sale until the 1980s. So the UK lacks the historical data of baseline and the historical knowledge of investing at the generational level, that many other countries have. So you get a much more wild west market of fluctuations more like crypto where speculation is more rampant.
But if you had prices stop increasing altogether and simply match inflation, I think most people would feel like it was a pretty serious crash and not just a "cooling off".
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@scottalanmiller said in Is Real Estate Actually a Good Investment on Average?:
@Dashrender said in Is Real Estate Actually a Good Investment on Average?:
lack of social interaction with peers - i.e. water cooler work.
Of course lack of #2 is good for the employer - should mean the employee is spending more time on the job...
That's awful for an employer. Employers don't make money by people not working nor from them "being at work". They make money from them working. Water cooler time isn't just bad, it's the absolute worst. Employees view it as "working" and the government views it as "working" and it carries all the costs of people working and all the risks and insurance problems... yet it has zero business value. Huge negative business value.
A smart employer wants the water cooler thing out the window more than almost anything. Water cooler time is loathed by productive employees who are there to work and it makes them disenchanted. It's mostly a tool to avoid work at the employer's expense.
Middle managers willing to sabotage their businesses for their own gains like water coolers because they make it easy to fool upper management that work is being done when really, everyone is lost and doesn't know what to do.
Did you miss where I said - "lack" of #2 is good for the employer?
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@scottalanmiller said in Is Real Estate Actually a Good Investment on Average?:
@Dashrender said in Is Real Estate Actually a Good Investment on Average?:
There is value to actually living in the house - so at worse, to me - sounds like he broken even.
I believe that the downpayment was $35K in 1976. An index would have generator $1.55m in 2021 when he sold it.
Assuming 45 years of monthly rent of $1,500 (way, WAY above market for the entire time) that would have been just $810K, or about half of what the money would have cost.
In reality, in those early years rent of $400 would have been more accurate. And by the end, more like $1300. So really, actually renting on his street would like have cost around $450K - $500K over those 45 years.
So roughly, considering he "gained" around $100K on the house, and would have spent $600K... He only LOST about $800K... plus any additional improvements that he had to make over the years which I know were more than $300K.
So his total cost for ownership over renting was easily a loss of more than $1,000,000 USD.
Where are you getting rent of $1500 in 1976? Did he live in a mansion?
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@Dashrender said in Is Real Estate Actually a Good Investment on Average?:
@scottalanmiller said in Is Real Estate Actually a Good Investment on Average?:
@Dashrender said in Is Real Estate Actually a Good Investment on Average?:
There is value to actually living in the house - so at worse, to me - sounds like he broken even.
I believe that the downpayment was $35K in 1976. An index would have generator $1.55m in 2021 when he sold it.
Assuming 45 years of monthly rent of $1,500 (way, WAY above market for the entire time) that would have been just $810K, or about half of what the money would have cost.
In reality, in those early years rent of $400 would have been more accurate. And by the end, more like $1300. So really, actually renting on his street would like have cost around $450K - $500K over those 45 years.
So roughly, considering he "gained" around $100K on the house, and would have spent $600K... He only LOST about $800K... plus any additional improvements that he had to make over the years which I know were more than $300K.
So his total cost for ownership over renting was easily a loss of more than $1,000,000 USD.
Where are you getting rent of $1500 in 1976? Did he live in a mansion?
That's my point. Going with a flat rate HIGHER than it would have ever been the entire time, even now, the rent number could never get high enough to make owning have made sense. He LOST a fortune by owning.
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@Dashrender said in Is Real Estate Actually a Good Investment on Average?:
@scottalanmiller said in Is Real Estate Actually a Good Investment on Average?:
@Dashrender said in Is Real Estate Actually a Good Investment on Average?:
lack of social interaction with peers - i.e. water cooler work.
Of course lack of #2 is good for the employer - should mean the employee is spending more time on the job...
That's awful for an employer. Employers don't make money by people not working nor from them "being at work". They make money from them working. Water cooler time isn't just bad, it's the absolute worst. Employees view it as "working" and the government views it as "working" and it carries all the costs of people working and all the risks and insurance problems... yet it has zero business value. Huge negative business value.
A smart employer wants the water cooler thing out the window more than almost anything. Water cooler time is loathed by productive employees who are there to work and it makes them disenchanted. It's mostly a tool to avoid work at the employer's expense.
Middle managers willing to sabotage their businesses for their own gains like water coolers because they make it easy to fool upper management that work is being done when really, everyone is lost and doesn't know what to do.
Did you miss where I said - "lack" of #2 is good for the employer?
Oh, must have, sorry. Yeah, lacking that is great.
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@Obsolesce said in Is Real Estate Actually a Good Investment on Average?:
Here's a real example.
I'm renting. I love the area we're in. There are other areas where we would enjoy living as well that are exactly the same.
I'm paying under $3K a month for rent. It's a large condo, 3BR 2Bath, wonderful area, 4 pools 4 hot tubs, awesome view, great location, great & quiet neighbors, great community.
Renting other places around here are similar priced, many are a few hundred $ more for now, but still in range.
We'd like to buy a house in our current area, or another area we like, and pretty much keep our current standard of living as we are in this condo, but in house form.
If we did that, the minimum mortgage payment we're looking at MINIMUM is $6.5K, that is with dumping a bunch of cash as a down payment... note that the $6.5K does not include insurance, PMI, taxes, closing costs, etc.
So you see, renting and owning a home is not the same thing. Just because I choose to rent, doesn't mean that I automatically will rent the same kind of house that I would want to buy. So it's just not logical to me to compare them like that. Typically, you rent to save money. Sure, I could rent a house for $8K a month, but wtf would I do that? I'd rather buy! Except, I don't want to buy, because I need the freedom to be mobile and choose where to live and not be stuck... I don't want to throw all my money into a house and live paycheck to paycheck and be forced to sell at the next higher bubble than is currently to make anything.
Yeah, we could move to a cheaper area, but we don't want to. There's no point because we just don't want to give up what makes us live happy and looking forward to the next day/weekend/time off, etc.
I'd rather keep renting, and saving money, and investing money, that I'm not throwing into a house that I may or may not get back plus more later, if life works out perfectly for home ownership. I'm very likely to move as well, need that freedom, while saving! We can't time our life according to the house, we need our housing to work for us.
What does your condo look like - more like a duplex or an apt building?
Condos have the advantage of shared resources, i.e. less land per unit so costs 'can' be lower compared to a single family home.
additionally - there is a huge value add to single family home compared to condo - so definitely not an apples to apples comparison.
What does a single family home rent for in that area?
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@scottalanmiller said in Is Real Estate Actually a Good Investment on Average?:
@Dashrender said in Is Real Estate Actually a Good Investment on Average?:
@scottalanmiller said in Is Real Estate Actually a Good Investment on Average?:
@Dashrender said in Is Real Estate Actually a Good Investment on Average?:
lack of social interaction with peers - i.e. water cooler work.
Of course lack of #2 is good for the employer - should mean the employee is spending more time on the job...
That's awful for an employer. Employers don't make money by people not working nor from them "being at work". They make money from them working. Water cooler time isn't just bad, it's the absolute worst. Employees view it as "working" and the government views it as "working" and it carries all the costs of people working and all the risks and insurance problems... yet it has zero business value. Huge negative business value.
A smart employer wants the water cooler thing out the window more than almost anything. Water cooler time is loathed by productive employees who are there to work and it makes them disenchanted. It's mostly a tool to avoid work at the employer's expense.
Middle managers willing to sabotage their businesses for their own gains like water coolers because they make it easy to fool upper management that work is being done when really, everyone is lost and doesn't know what to do.
Did you miss where I said - "lack" of #2 is good for the employer?
Oh, must have, sorry. Yeah, lacking that is great.
While I completely understand where you're coming from for this - from an employee moral point of view - it's often a big factor.
Makes me wonder if the work day shouldn't be something more akin to 36ish working hours and 4 dedicated BS hours - at least that way everyone knows what's really happening.. but the reality is that some will always bend it more, not matter how much you give them.
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@Dashrender said in Is Real Estate Actually a Good Investment on Average?:
@scottalanmiller said in Is Real Estate Actually a Good Investment on Average?:
@Dashrender said in Is Real Estate Actually a Good Investment on Average?:
@scottalanmiller said in Is Real Estate Actually a Good Investment on Average?:
@Dashrender said in Is Real Estate Actually a Good Investment on Average?:
lack of social interaction with peers - i.e. water cooler work.
Of course lack of #2 is good for the employer - should mean the employee is spending more time on the job...
That's awful for an employer. Employers don't make money by people not working nor from them "being at work". They make money from them working. Water cooler time isn't just bad, it's the absolute worst. Employees view it as "working" and the government views it as "working" and it carries all the costs of people working and all the risks and insurance problems... yet it has zero business value. Huge negative business value.
A smart employer wants the water cooler thing out the window more than almost anything. Water cooler time is loathed by productive employees who are there to work and it makes them disenchanted. It's mostly a tool to avoid work at the employer's expense.
Middle managers willing to sabotage their businesses for their own gains like water coolers because they make it easy to fool upper management that work is being done when really, everyone is lost and doesn't know what to do.
Did you miss where I said - "lack" of #2 is good for the employer?
Oh, must have, sorry. Yeah, lacking that is great.
While I completely understand where you're coming from for this - from an employee moral point of view - it's often a big factor.
Makes me wonder if the work day shouldn't be something more akin to 36ish working hours and 4 dedicated BS hours - at least that way everyone knows what's really happening.. but the reality is that some will always bend it more, not matter how much you give them.
He is also in one of the most unbalanced areas of the U.S. by choice . Most of the country does not have that type or rent vs mortgage disparity.
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I don't know what it's like in the US, but in the UK renting sucks. Landlords and letting agents are generally awful people. Trying to get a landlord to fix anything is often a nightmare. Standard contracts mean you can get evicted at any time with just six months notice, which is particularly awful if you have kids and are forced to move away, maybe twice a year. And then they will try and steal your deposit on spurious grounds. You generally can't have pets, decorate, or even put up pictures on the wall. Mostly, you're treated as second class citizens.
At best, renting is ok if you're young and don't have kids, which is just as well since it's pretty much impossible to afford a house here if you're under 30.
I believe it's a lot better in the rest of Europe.
Oh, and "water cooler" time is good for generating trust and forming bonds within teams, which is essential. Raj Choudhury has some good things to say on this subject here https://hbr.org/2020/11/our-work-from-anywhere-future
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Another market where people thought that there was no end to the meteoric growth... China.
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@Carnival-Boy said in Is Real Estate Actually a Good Investment on Average?:
I don't know what it's like in the US, but in the UK renting sucks. Landlords and letting agents are generally awful people. Trying to get a landlord to fix anything is often a nightmare. Standard contracts mean you can get evicted at any time with just six months notice, which is particularly awful if you have kids and are forced to move away, maybe twice a year. And then they will try and steal your deposit on spurious grounds. You generally can't have pets, decorate, or even put up pictures on the wall. Mostly, you're treated as second class citizens.
While that exists in much of the world, it is rare. That, I think, is a uniquely British problem. Definitely not like that at all throughout Latin America, EU Europe, or North America. No idea about Asian countries.
Landlords ARE often shitty in the US, but the law is a lot stronger here for renters.
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@Carnival-Boy said in Is Real Estate Actually a Good Investment on Average?:
Oh, and "water cooler" time is good for generating trust and forming bonds within teams, which is essential.
My experience is that it does the opposite. It creates cliques and promotes the idea of promoting for socialization rather than for results. I think good, skilled workers who want promoted based on merit see it as sowing distrust... a mechanism for those that aren't as capable or as ethical to avoid work while "schmoozing" the bosses.
Yes, if you want bad employees to trust each other, it's good. If you want to have employees you can trust to protect your business, it's bad.
