You can build wealth without owning a home.

[Rigby5]

It can be, but it also requires a lot of your wealth to be tied down.

There is no one "best way", everyone is different.

If you own a home you are tied to it and if you need to move for a job it becomes much harder.

I remember reading one of the main reasons UE stayed high so long after the 2008 recession is that people could not move to where the jobs were as they were underwater on their homes due to the housing crash.

Disagree.
All you have to do if you want to move, is hire a management company and rent it out.
Being under water is temporary and you just rent it out to wait for the recovery.

 

[Rigby5]

Hard to have a family without 6 figures.

Lots of people have families with incomes under $50k.
You just can't live in LA or NYC.

 

[Rigby5]

If your rent would be less than your mortgage/taxes/upkeep and you put the difference into an investment account you could come out ahead by renting vs buying.

Rent is almost never less than mortgage, and you never come out ahead renting since real estate doubles in value about every 10 years.
If you want to remain mobile, hire a rental agent.

 

[MarathonMike]

Don't get married, don't have kids. Save your $. It can be done and more and more young people are figuring it out thankfully.

I know guys who did just that. They are financially secure and lonely.

 

[initforme]

I know guys who did just that. They are financially secure and lonely.

Lonely or insecure?

 

[initforme]

Lots of people have families with incomes under $50k.
You just can't live in LA or NYC.

True but it's not enjoyable squeaking by. 50k is dang near poverty wage. Hence why less and less people are having kids.

 

[rightwinger]

Rent is almost never less than mortgage, and you never come out ahead renting since real estate doubles in value about every 10 years.
If you want to remain mobile, hire a rental agent.

It is not just that, but if you put $50,000 down on a $400,000 house and it goes up 10percent this year, you make 10 percent of the $400,000 ($40,000) not 10 percent of your $50,000 investment ($5,000)

 

[iamwhatiseem]

Home ownership is expensive, much more than renting. Of course, there are many benefits of home ownership but there are better ways to build wealth. Just save and invest the difference between owning and renting and watch your fortune grow. It will grow faster if you're single as you can share space with others and save even more.

Short sided to say the least. You completely left out the part where you can make solid money in buying/selling a property.
My tale..
First apartment before I got married (1985-87)
The rent was $425/mo. So my housing cost for those 2 years was:
$10,200
Got engaged, bought a small house that needed a LOT of work.
Since it was first house, we did no money down. The house payments were a laughable $180/mo. We lived there for 8 years.
Expenses:
House pymnts $180 x 96 = $17,280
It was heated with a woodstove, wood was cheap back then, the water/elect wasn't close to $100 mo. So I figure all of that togther is about $8,800.
I did a ton of work, I know what the costs were because I have told many people about the benefits of buying a home that needs work. we invested about $8,000 in improvements.
Bringing the total housing cost to $34,080 for 7 years.
When we sold the house, after everything we made $22,000.
So at the end of 7 years, out total housing cost was $12,800.
A cost of $134/mo.
If we would have rented, the rent at that time would definitely at least be $500 a month. At least. So for the same time period our housing cost would have been $48,000.

Not even close - no brainer to buy a house over renting when you do it right

 

[Woodznutz]

Strongly disagree.
While mortgage payments may exceed rent at first, rents will increase while mortgages will not, so rent is eventually much higher.
The other thing is appreciation.
Real estate doubles in value every 10 years, so is huge profits without labor.

Even better is to be a landlord and rent it out.
Then you get huge tax breaks, like depreciation allowance.
All you need is to supply the credit rating for the mortgage, and the tenant buys the property for you

Appreciation depends on location. Not all regions have high rates. We're in a real estate bubble now and appreciation is unusually high. 3-5 percent is normal. Rates now are 8 percent in some areas.

Depreciation allowance for rental properties is "recaptured' and taxed when the property is sold, because the property doesn't really 'depreciate'.

Property taxes, insurance, and upkeep bite into home values. The cost of a new roof will erase years of appreciation gains and will add little to the value of the house (unless it's a fire-proof roof) Remodeling, repairs, replacements are expensive as well and add little to value as well.

That said real estate is great way to build wealth, especially rental property, and that's what I did. But there are better ways.

 

[Mr Natural]

Woodznutz

 

[Woodznutz]

Not even close - no brainer to buy a house over renting when you do it right

Renting is a no brainer if you do it right. I didn't get married until I was 32. Until then I rented with other guys, dirt cheap. I also worked part time jobs in addition to my full-time job. I was rolling in money, without a care.

 

[iamwhatiseem]

Renting is a no brainer if you do it right. I didn't get married until I was 32. Until then I rented with other guys, dirt cheap. I also worked part time jobs in addition to my full-time job. I was rolling in money, without a care.

This post, in no way, answers a single point I made, but ignores all of them.
Two facts -
1) Renting will always cost money, no matter what circumstance are applied.
2) Buying can give a buyer the opportunity to not only live there for free - but even earn money.
Renting, under no circumstances, can ever do that.

 

[ReinyDays]

Appreciation depends on location. Not all regions have high rates. We're in a real estate bubble now and appreciation is unusually high. 3-5 percent is normal. Rates now are 8 percent in some areas.

Depreciation allowance for rental properties is "recaptured' and taxed when the property is sold, because the property doesn't really 'depreciate'.

Property taxes, insurance, and upkeep bite into home values. The cost of a new roof will erase years of appreciation gains and will add little to the value of the house (unless it's a fire-proof roof) Remodeling, repairs, replacements are expensive as well and add little to value as well.

That said real estate is great way to build wealth, especially rental property, and that's what I did. But there are better ways.

You're doing something wrong ... land is never depreciable ... but buildings held for the production of income are ...

Residential rental property is depreciated using the straight-line method, mid-month convention for a 27.5 year class life ... c.f. IRS Form 4562, line 19h, columns (d)-(f) ... there's no recapture for property depreciated using the straight-line method ...

You're flat wrong about installing a new roof ... I spend $30,000 for a roof, then my property is worth $30,000 more ... and that's added to the property's basis ... if it's rental property, I can deduct that expense, just not all of that money all in one year ... the roof will last 27.5 years, so I have to divide up the expense into 27.5-year chunks and deduct that amount every year ... or $1,090.91 per year ...

Again, we can't use any accelerated depreciation methods, so we never have to recapture any accelerated depreciation ... the adjusted basis is your capital, if we sell for anything above that then we pay capital gains taxes on the gain over the adjusted basis ... simple ...

You're doing something wrong if you're not recapitalizing on your improvements ... if your local market will sustain a 10-year recap rate, then you'd add $250 per month to the rent ... ($30k roofs a BIG house mind you) ... the extra $3,000 per year in revenue is offset some by the $1,090 tax deduction ... you should still be $1,910 ahead before income taxes ... 3 to 1 is about right for margins ...

The number 1 problem with real estate as an investment is it's ... by definition ... il-liquid ... we can't just off the property and use the money in a better investment, we're stuck with property that might take years to sell ... it's a shame to get offered Apple stock at $2 a share but have all your money tied up in an apartment building ... five years later when you sell is too late ...

 

[Woodznutz]

This post, in no way, answers a single point I made, but ignores all of them.
Two facts -
1) Renting will always cost money, no matter what circumstance are applied.
2) Buying can give a buyer the opportunity to not only live there for free - but even earn money.
Renting, under no circumstances, can ever do that.

One doesn't exclude the other. Both are good ways to accumulate wealth. My point is that owning property isn't necessary, that there are other means.

 

[ReinyDays]

One doesn't exclude the other. Both are good ways to accumulate wealth. My point is that owning property isn't necessary, that there are other means.

My brother found wealth ... and promptly married her ...

 

[Woodznutz]

My brother found wealth ... and promptly married her ...

My brother's wife ran him into debt. My wife was quite frugal.

 

[Woodznutz]

Lonely or insecure?

I'm much happier single than married. Although I'm delighted to be a father.

 

[Woodznutz]

Add this to the mix. Whereas prepaying the mortgage is a form of investing many borrow the accumulated equity in their homes.

Disadvantages​

The main problem with home equity loans is that they can seem an all-too-easy solution for a borrower who may have fallen into a perpetual cycle of spending, borrowing, spending, and sinking deeper into debt. Unfortunately, this scenario is so common that lenders have a term for it: reloading, which is basically the habit of taking out a loan to pay off existing debt and free up additional credit, which the borrower then uses to make additional purchases.

How a Home Equity Loan Works, Rates, Requirements & Calculator

A home equity loan is a consumer loan allowing homeowners to borrow against the equity in their home.

www.investopedia.com

 

[sealybobo]

Home ownership is expensive, much more than renting. Of course, there are many benefits of home ownership but there are better ways to build wealth. Just save and invest the difference between owning and renting and watch your fortune grow. It will grow faster if you're single as you can share space with others and save even more.

Why did you wait until now to give this advice? When Biden was president all you ever did was cry about how expensive homes were. Now that Trump is president, you don't actually want to bring the prices of homes down now do you? And you don't want landlords to charge lower rent. You just said it. The low cost of renting leaves you money to invest. So renters are doing just fine?

Man how fast you have flip flopped.

 

[sealybobo]

I'm much happier single than married.

Me too. I have nice single lady neighbors but I'm not lonely enough to want to live with any of them.

I think a lot of people in relationships have settled because they don't want to be alone. Either both of them settled or one of them has. Half marriages end in divorce. How many that don't are marriages of convenience?