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It’s no secret that we have opinions about housing. You know, completely unbiased ones about how owning is stupid, how you should always rent instead of own, and how we got here by NOT buying a house?
But today, we’re going to do a surprising reversal, and spot light someone advocates BUYING property. For those of you who don’t know Financial Samurai, he retired from the corporate world by cleverly engineering his own layoff and building a passive income stream of $70-80K/year. Sam is one of the biggest hustlers I know, because not only did he survive 13 gruelling years of working on Wall Street, he managed to make even MORE money after quitting his job. If you want to become a hustler like Sam, check out www.financialsamurai.com where he blogs regularly about buying rental properties, stocks, bonds, and CD’s so you can do it too.
So without further ado, take it away Sam!
Owning A Million Dollar Property Isn’t What Made Me Rich
I’m the antithesis of the Millennial Revolution. Instead of renting my way to financial freedom, I decided to buy a $580,000 condo in 2003 a week after my 26th birthday. Don’t hate me. The dotcom bubble had just collapsed and I didn’t feel like watching my paper profits go POOF all over again. At least with real estate, I could find some utility!
Yes, I lived like a pauper the first four years out of college, sharing a studio with a buddy for two years, aggressively saving 50%+ of my after tax income, and always working late in order to take advantage of the free cafeteria food after 7:30pm (I got into my finance job at 5:30am). But it was worth it! I saved up about $150,000.
My whole plan was to enjoy my condo for at least a couple years and sell it for a tax-free profit up to $250,000 as a single guy. In the US, not only can you deduct the mortgage interest from your income to save on taxes, you also get $250,000 or $500,000 in tax free profits, depending on the appreciation of your home and your marital status.
Check out this chart that shows how much in gross profits you need to clear at each tax rate to match the tax free $250K/$500K profits in real estate.
Because I don’t enjoy paying taxes, I thought buying a property in San Francisco was a no-brainer. I didn’t want to pay more than $2,000 a month living in a dark one-bedroom rental with my girlfriend anymore. Instead, I wanted to have the long hours at work provide something better. And that something better turned out to be the two bedroom, two bathroom condo in Pacific Heights I purchased with a lovely view of the park from my living room.
Holding On For The Long Term
Instead of selling the condo after a couple years and taking profits, I decided to try my hand at land lording in 2005. The experience was trying at times, but I don’t regret it. The rent started at $2,100 a month in 2005 and is now at $4,200 a month in 2016. What seems expensive today will sound cheap 10 years from now.
The inflation interest rate paradox is the reason why we must continuously invest in stocks, bonds, and real estate. Kristy and Bryce decided to go all-in with a 60/40 portfolio of stocks and bonds. At the time, I decided to go 60% of my net worth in real estate, 30% in stocks, and 10% in risk-free assets given what just happened in 2000.
But it’s not just the rent that has increased over the past 10+ years. The principal value of the condo has also increased as well, despite the financial crisis in 2008-2009. Here is a chart I created, tracking my mortgage balance and property value as assessed by Zillow, USA, and neighboring condos that recently sold.
In 2015, when the mortgage was finally put to rest, this property alone was worth over $1M. It’s not like the asset did anything spectacular either. By growing at less than 5% a year for 13 years, the property’s value went from $580,000 to roughly $1,200,000 before taxes and fees. But due to leverage, the annual returns are much greater because I only put $120,000 down (~20%).
Through mediocre growth, leverage, and steady principal pay down, this property was one of the EASIEST 10X investments ever. There was never really any panic during the economic downturn because rents were sticky and the property still stood every time I drove by it on the way to play tennis. It basically did its thing. Contrast the feeling of holding stocks during the crisis, and the fear felt much more visceral.
Related: A Long Road Home: Financial Samurai Passive Income Update 2017
Sticking With Things For As Long As Possible
The $1.2 million value of this property isn’t what made me rich. No, it was the motivation to keep working for eight more years that really provided a massive boost to my net worth.
If it wasn’t for buying this property in 2003, I would have probably left my ass-kicking finance job shortly thereafter because I was completely unmotivated to work from 5:30am – 7:30pm+ after the horrors of 9/11 happened. It felt so empty going to work to try and make more money out of money.
Sure, speaking to smart people about where to invest in the Asian markets and taking trips to China every year was exciting. But everything gets old after a while. I would have rather gone back to Hawaii, found a low-stress $30,000 a year job and lived on my grandparent’s fruit farm in the countryside.
Taking on a $464,000 mortgage at 26 supercharged my motivation. The last thing I wanted to do was get fired with so much debt. Instead, I changed from being an ambivalent worker to someone who really gave every effort to serve my clients well and build a strong internal support network in order to get promoted and paid.
Even though it’s nice to say our investments are what made us a lot of money, for the majority of us early on, it’s really our day job income that provides the biggest boost to our net worth. Because life is relatively good in North America, with free internet, cheap technology, a growing social safety net, and a relatively safe environment, so many of us have the option of not having to do what our parents did and work for 40 years.
We’ve become soft over time. And blogs about early retirement and traveling the world aren’t helping people stick things out long enough to see the flowers bloom.
Related: The Dark Side Of Early Retirement
Think Bigger Than Yourself
Financial independence is just one step in a long journey. Once you’re able to sustain yourself without having to work, I recommend thinking about other people. Those people could include your aging parents who’d love to see more of you and who may need financial assistance. Those people may also include financially struggling strangers who could use your help. The biggest reward I’ve discovered after achieving financial independence is the ability to help other people.
Your life and your outlook are guaranteed to change as you grow older. You might get sick of traveling one day, as I am, and wish to start a family. Or, you might find that you can’t stand seeing your spouse 24/7 and want to work in a field you adore. Whatever the case may be, I highly recommend building your net worth in a diversified fashion so you have as many options as possible.
Related:
The First Million Might Be The Easiest
Buy Real Estate As Young As You Possibly Can
About the Author: Sam began investing his own money ever since he opened an online brokerage account online in 1995. Sam loved investing so much that he decided to make a career out of investing by spending the next 13 years after college working at two of the leading financial service firms in the world. During this time, Sam received his MBA from UC Berkeley with a focus on finance and real estate. In 2012, Sam was able to retire at the age of 34 largely due to his investments that now generate roughly $200,000 a year in passive income. He spends time playing tennis, hanging out with family, consulting for fintech companies, and writing online to help others achieve financial freedom.
*******
So there you have it! An example of someone who made it to Financial Independence WITH a house. What do you guys think?
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Sam is great, but I never dreamed he would be guest posting here. I kind of think of him as your direct opposite. Mr. Property! …who also happens to live in one of the most expensive, over priced parts of the country.
What are you trying to tell us here Millennial Revolution? Are you changing your tune?
Sam IS great, and unfortunately after talking to him we realized we actually like the guy despite the fact that he’s our arch-nemesis and if we were to ever meet in real life the universe would probably explode.
Serious answer: We wanted to shake it up a bit and give a more balanced view on this weird little blog of ours. We’re actually not anti-housing, we’re anti-stupid, and we wanted to showcase someone who figured out how to invest in housing and come out on top.
“we’re anti-stupid” — best response yet!
Very inspiring article. The real point here is not whether you should buy or rent in order to achieve FI faster (here I actually believe it depends on multiple factors; I’m trying to get to the bottom of it in my blog). The main message for me was what FI can allow you to do (travel, help people or even just keep on working stress free). I think then you have the chance to really show what kind of person you are. In a way this might be a bigger responsibility than a mortgage…
You mentioned something I’ve also noticed. Money doesn’t actually change you, but it does reveal what kind of person you truly are. I should probably write an article about that one of these days.
I’d say Sam here is a good example of how there really isn’t one right answer. We all have our road we take. The key here is that Sam knew what he was doing! He wasn’t one of those people who just buy whatever house they see because it’s “real estate and real estate always goes up.” Here in the Midwest for example, you saw a bunch of people buying McMansions out in the middle of nowhere because you have to buy a house. Now their homes are way out in the middle of nowhere, worth much less than they bought it for because no one wants to live in a McMansion way out in the burbs.
It’s those people that made a huge decision without understanding what they were doing, and my guess is, those are the people that shouldn’t be buying property.
Hope folks who are anti-housing and anti-work can see the benefits in this example of owning property.
Debt was a great motivation to keep on working to not pull the rip chord too early. Each year of earning, saving, and investing at an aggressive 50%+ rate equals 1+ year of financial freedom where you don’t have to do anything.
With the property market finally softening, there’s a window to buy over the next 2-3 years IMO. I’m waiting for a 10% decline in SF to potentially buy another property.
S
Both methods of getting to FI seem to involve cutting expenses and saving a significant portion of your salary.
Most methods you see on these blogs also involve astronomical salaries, but they’re usually brushed over quite readily. The average Joe will never save 50% of their after tax salary and will never be able to afford anything in San Francisco.
Fair play to FS for realizing San Fran was about to become a booming market though, but it’s not easy to predict that. Nobody saw the Vancouver market being what it is today 10 years ago and buying here now is all but a dream for most.
It was actually an ass kicking my first two years in New York City. My base salary was $40,000 a year, but studios near work cost about $1800 a year. I could have Live by myself, but I swallowed my pride and shared a studio for two years with my friend who is also working a lot of hours.
But you are right. A high salary certainly helps with the savings rate. I tell my readers if the amount they are saving each month doesn’t hurt a little they are not saving enough.
Vancouver property should be going down for the next 2 to 3 years, especially now that interest rates have Jack tire. Your window of opportunity may very well be coming up. Just aggressively save, save, and try to invest wisely.
It’s totally worth the sacrifice.
Sam
You don’t necessarily get the point here. Yes, of course with more income you can save more amount of money. But these blogs sites are not really about getting rich, but getting financially independent.
Forget about the amounts here and concentrate on the percentages. If you can save not 50, but 20-30% of your salary, you can achieve this status faster than someone with a 200k salary but with a 5% saving rate. It’s all about your lifestyle and the expenses that come with it. You might not have condos in SF, but you could eventually live the same lifestyle as you do now, without fully relying on your pay cheques.
True and I certainly appreciate the information and the concept. Most people could be a lot better off financially by just increasing their savings % to a manageable 20-30%, which is exactly what I’m doing.
That being said, not many people will be retiring in their 30’s with property in SF.
I absolutely love Vancouver and understand why you don’t leave an overpriced city. We found that owning Home in Vancouver with a million dollar price tag, often means hosting homestay students. Many families do this for example house with 6 bedrooms, if you need one (not sure if u have kids) you can host 5students and you can get 1000$ per student. This can reduce mortgage to 0 or depending on what you put down even pay you.
First of all you cannot get a 6 bedroom house anywhere near Vancouver for $1,000,000. Probably more like $2,000,000+ and even then it would not be a great house. Since the average house price here is around $1.5 million a 6 bedder anywhere near a University would be considerably more.
Second, what students pay $1,000 a month for a bedroom in a home stay? I have limited knowledge on the subject but this website does and shows a breakdown of returns (http://www.vancouverhomestayagency.com/rates.html). To get $950 you would need deluxe accommodation (Large private bedroom, private bathroom, 3 meals a day, high speed internet, tv, excellent public transit access etc.). You would not have 5 spare bedrooms like this unless you buy an extremely expensive 6 bedroom house, so the standard rate of $650 a month is more realistic.
The carrying rate of a $2,000,000 mortgage is around $9,500 a month (in these low interest times, if interest rate just went to 5% it would go to $11,500 a month). With 5 students paying $650 that brings it down to $6,250 a month. Nobody on average salary earns enough to pay that off.
Not only that, how stressful of a life would it be to be required to fill your house with 5 students 24/7 for 25 years in order to be able to pay your mortgage? I probably wouldn’t sleep at night.
Also, who the hell wants to share their house with 5 students anyway? It takes a very particular family to want to do that, most likely a family struggling financially or one that has put all their eggs into real estate without a dime left over. That’s not how I want to live my life and it’s certainly not a way to live freely. It’s more like a lifetime of purgatory shackled to your house.
It sounds like I offended you, and that wasn’t my intention. Just thought I’d mention it in case it was a possibility for you.
2981 McGill st is up for the million mark as an example. The students generally are not university students, they are going to a school to learn English, which are located all around the city. Clearly doesn’t matter if it’s not what you want.
There are many homestay placements, and when you pick up and drop off from airport you also get paid for those things. I mention it because it is what we chose to do, and many other families in the area. It wasn’t without sacrifice, but for us it was enriching to get to know and help students from all over the world. Generally the students were never home but to sleep sine they wanted to see and do as much as they could when not in school.
That’s an important distinction. Getting rich vs FI. In fact, when I first stumbled on this blog (having read an article about these rebel millennials on the news), I thought it was going to be some new twist on a ‘get rich quick’ scheme. Fortunately I took the time to read a few blog posts to learn otherwise.
I’m currently saving about 45-50% of my after-tax income as a flight attendant. Needless to say, my income isn’t anywhere near six figures; it’s a little more than the average Canadian salary at ~$65k.
The girlfriend and I rent a small, but nice, apartment at $1,200/month, I study part-time, just got back from a week at an all-inclusive in Mexico, and have two old cars (one near-worthless beater that I use mostly for shopping or going to work at the airport, the other an old convertible that I classify as an entertainment expense), so it’s not exactly like I’m living in poverty.
Before anyone asks: I wouldn’t bother posting this if my girlfriend or I were getting any money from our parents.
Saving money is definitely possible if you’re disciplined about it.
Well done! Half the battle is having the right money attitude, no matter how much you make. Have this attitude long enough and financial independence is an INEVITABILITY imo.
Sam
“Most methods you see on these blogs also involve astronomical salaries, but they’re usually brushed over quite readily. The average Joe will never save 50% of their after tax salary”
LMAO….do you know how long after my grad degree it took me to crack $40K/year? But, the real value of that grad degree was that it enabled me to follow it up with a slave-wage CIDA internship that put into fine perspective how the other 80% live, i.e. $40K is practically luxurious depending upon whose shoes you’re in!
Yes, earning more can certainly be beneficial…but it can also can put self-limiting blinders on you too (hint: the Jones’ will ALWAYS earn/spend more).
I would hazard to say that a major theme that runs through these blogs is the attempt to be more critical and intentional about the whole purpose behind earning and spending in the first place. If one’s goal is to be happy, well, the earnings happiness curve starts to flatten at a lot lower $ level than one would think.
While you’re correct that “the average Joe will never save 50% of their after tax salary,” that doesn’t mean they can’t. My salary only recently (as in, this month) went over $50K per year (CAD), but I’ve been saving an average of 64% of my after-tax income, and I live in Greater Vancouver. It’s certainly possible, it’s just not likely because people don’t want to make the changes necessary to do so.
I have to see a breakdown of your figures for that before I believe it. At $50,000 your after tax income would be around $42,239. At 64% savings that’s $27,000, leaving you just $15,239 a year to live off of. That is barely even enough to cover rent in Greater Vancouver (I live here).
Either you are living at home, are sharing a dwelling with multiple people, or your rent is somehow subsidized, and most likely you don’t live anywhere near downtown (which is fine). Either way, this is not a long-term solution for virtually anybody.
I agree 50% can be done on an average salary (extremely difficult in a city like Vancouver) but you have to make significant sacrifices. Sacrifices the average Joe usually won’t make. You likely can’t travel abroad much (if ever), can’t own a car, can’t own a pet, don’t buy any luxuries (like new phone, tv, games console, clothes, whatever) and have very little in way of disposable spending.
I’m all for financial independence, but I don’t support severely sacrificing your quality of living to get there and to me, your quality of living must be exceptionally low to save 64% of $42,000 in Vancouver.
Props to you though, but I’d be surprised if you kept at that pace.
You seem determined to believe that it isn’t possible, which is fine, but I’d like to share the fact that it is possible so that other people don’t get discouraged unnecessarily.
I don’t live at home (grew up in Saskatchewan and moved to British Columbia at 18, supported myself financially even prior to the move and have since), I rent a suite that I share with my boyfriend. You’re right that I don’t live in downtown Vancouver, but I also don’t want to. My rent is less than $10K per year, split between 2 people (and my two cats, but they don’t contribute to the household finances, boo. But look, it is possible to have pets!). We have 2 relatively new TVs, an XBox 360 and PS4 (for the boyfriend – I don’t like video games myself), a car, and many other luxuries that we enjoy.
I calculate all of my numbers based on my own income and my portion of the expenses, because my boyfriend isn’t interested in FIRE. So using your estimates, which would give me about $1,270 per month to live off of, $400-$500 would go to rent/housing, leaving about $770 to spend on everything else. I think that’s a lot of money to spend on food, drinks, entertainment, transportation, whatever, for one person! I certainly don’t feel deprived.
If anything, my pace is only likely to increase, as my income should steadily increase over the next few years and I see no reason to increase my spending.
I’m sure I haven’t changed your mind, but hopefully somebody sees this and is encouraged by it.
Fair enough, and well done! I’m certainly not trying to belittle your achievement. You’re right, I am difficult to convince (still find it hard to believe but hey ho).
I do find it difficult personally when the dynamic in a relationship is one person to be FIRE focused and the other to not care at all. I’m the same with my wife and we share our finances. I’ve never agreed with partners separating finances, it’s very counter productive when it comes to planning your life together. Combining savings into one investment portfolio of TFSA’s and RRSP’s is far more efficient than one person doing it and the other having cash sat in a bank account.
That being said, a lot of couples do that. I have a friend couple who earn a lot of money, but know nothing about each others spending and savings and they each do whatever they like. I find it baffling personally but it’s their choice.
Let’s just say I’m very FIRE focused and my wife isn’t, so it’s a pretty constant battle of me monitoring spending and her being more laid back about it. If it were two people FIRE focused we would probably be hitting a 50% savings rate but we are closer to 30%. You have to compromise sometimes, we both need to be happy and she seems okay with our current level of spending and I can manage with the savings rate we are at, even though it could be a lot higher with a few lifestyle changes.
It is an interesting dynamic when one person in a couple is FIRE-focused and the other isn’t. I think part of what helps for us is that there isn’t some blackout wall between our finances (I know everything about his money and he knows everything about mine, we just don’t do anything with money jointly). He’s self-employed and I’m his accountant, so he’d have a hard time keeping many things from me, even if he wanted to.
We’re certainly able to have input into each others’ finances, and he’s not particularly spendy, either, so it works, even though our money doesn’t go into one single shared pool. When it comes to investments, he tends to defer to my advice, since I have more experience and more interest in that area. Basically, it’s the same as any other part of a relationship: As long as you communicate clearly with one another, listen to each other, and are willing to make changes if necessary, there’s no reason why having separate finances is inherently negative.
Funny how you said it can’t be done after I replied that I’m doing it. And I’m really not very special, as the others here who’ve saved more than me on lesser salaries confirm.
I have 2 cars, not worth much, but one is a near-pristine convertible with mild performance upgrades which I’ve run on the track. I just got back from a 4.5 star all-inclusive in Mexico. I study part time and pay the tuition on my own. A few weeks ago I bought a new iPhone SE (although I kept my last one for 6 years). I’ve been to 19 countries, though working for an airline certainly makes that easier. Just yesterday I bought nearly $400 in groceries – my girlfriend and I eat well, but always at home when we’re not out of town.
You can keep making excuses about why things aren’t possible, or you can figure out how people are doing them.
I’ve never even responded to you, let alone say “it can’t be done”, but thank you for clarifying your financial position to me, I hope you now feel validated in your success.
I responded to Katrina saying she saved 64% of a $50,000 salary in Vancouver, not 45-50% of a $65,000 salary in an unspecified city.
As well as starting as early (young) as possible and working your tail off.
Haha, you picked a perfect guest post to get the opposite take. Really glad to see Sam here offering his thoughts. He’s not shy about expressing an opinion and neither are you. Maybe you can start a new series “Point / Counterpoint” where you can cover the different ways.
yup, totally agree. Even though we disagree on a lot, we respect the Hell out of each other and that’s why we’ve been showing up on each other’s blogs.
This article is a little harder to follow than your typical articles for me. It is interesting to see your exact opposite. However, it feels like a very typical American attitude of work until you pass out mentality which is just no longer attractive for me.
Sam subscribes to the philosophy that debt can be a psychological tool to keep you productive. We subscribe to the philosophy that working for the sake of working is stupid. Both viewpoints are valid but one is CLEARLY better 🙂
What are the reasons why you think that I am a strong believer in working until you pass out when I left corporate America at 34 years old and no longer work nearly as hard?
You have achieved your goals and i respect you for that but WHAT IF you got laid off after that financial crisis. Did you have a plan B?
Sam’s one of the most unique voices in the personal finance world, and that’s why I love reading his stuff, even if I disagree with a lot of it.
In the end, all roads lead to Rome. Lots of ways to make money and invest, lots of ways to use debt (or avoid it). What matters is that people get where they want to go, financially, not just how they get there.
Exactly. Property and financial independence are not mutually exclusive as FS demonstrates. You’ve just got to be as smart as him to pull it off. 🙂
Property ownership certainly isn’t for everyone. It’s also crazy how high prices have gotten in so many parts of the world along with a lot of other things. I personally love real estate and am a big fan of Sam’s. I respect that everyone’s personal finance journey is unique and sometimes it includes buying property and other times it simply doesn’t whether that’s by choice or due to financial limitations. Great guest post.
I find it amusing that a SF guy is calling Vancouver’s housing market stupid. That’s not a good sign.
Between Sam, MMM, and this site, you more or less have all your financial perspectives covered.
Glad you think so. Never thought we’d be mentioned in the same sentence as FS and MMM. *blushes*
Here is a treasure for those of you that are in your early 20’s still. Get the book the Slight Edge. You actually don’t need to buy the book…go to page 39. It will show you that as soon as you are of age to open an IRA, do so. If you were to invest in your IRA for the next 7 years in a 6% paying dividend stock and allowed it to compound until retirement, it should gross 1 million dollars, without doing anything. However, if you continue opening an IRA every year after the 7 years, it will obviously accumulate more income for you.
ALERT: You must turn the IRA into a Roth so that the money that is accumulated will be tax free. Sooner the better. ALSO, find a stockbroker or investment company you trust. You have to do this in your 20’s in order for the compound effect to work up to 1Million dollars. In the book, he doesn’t share about turning the IRA into a Roth. Very important.
I wish you all happiness. I wish I was in my 20’s when I learned this information. Kim
Why would you open a new IRA every year? And you don’t need to turn it into a Roth to make it grow tax free. That’s not how anything works!
It’s all a matter of location and timing. Sam bought his condo with leverage during a lull in the hottest real estate market in the world. Buying at a different time in the last decade would not yield the same results.
And that’s why you hate Canadian real estate at this moment in time. Had you bought 10+ years ago you’d be gung-ho real estate now too.
The timing was definitely good. But generally so has any time been in history if you hold on for at least 10 years.
The timing is gone yet people continue to think real estate can only go up. Those days are over.
The good times are definitely over for real estate. I’m thinking 2 years of a a downdraft. Higher interest rates, prices too high, increase in volume. Time to correct by ~10%.
As a landlord, the good thing is that rents are sticky on the way down. I’ve never had to lower my rent in the past 13 years. During the crisis, it just stayed flat for two years, then moved up again. Sticky.
Sam
rent in Victoria is insane, and yes, keeps going up, with a 0.6 vacancy, buying a rental almost makes sense, but I already have a house, and rent a room (like you did) and that is enough exposure for me.
I will own my home for another 10-15 years, dont’ care what the market does in the next 2 years, stats show it eventually corrects and the average over the last 30 years is about 6-7%. If the value drops, rents will keep going up, or stay the same, I will continue renting a room and make a dividend. Anybody in the US that kept their home is fine now. Just had to wait it out.
My message is, it has to be right for you, in your financial state, in your city, in your country.
I was just promoted to a Business Analyst, I have worked hard, why? I have a mortgage, picky wife, and 2 teenagers entering University. Our best investment is ourselves, our outlook, and our education. Many just quit because its too hard, and call it “Retirement”. And dies soon after… how sad.
I love my job, but I didn’t always. Sitting on a beach with no friends and nothing to do? If thats retirement then count me out… I will work till I die…
But being able to choose what you do… thats the key to life.
cheers
D.
Lets speculate, interest rates have plummeted for years, 1980-2016, and are at now going up, that stimulus is gone. Boomers are retiring or dieing in record numbers and dumping properties on the market, a negative stimulus . Vancouver got screwed over…
FC and Wanderer are not going to have 6 kids… (Population Decrease ?) (how about 1 at least ?)
So ya, all the factors that have kept the average growth at 6-7%, are gone… I think your crystal ball is telling the truth.
So happy to see Sam posting here 😀
I wonder how high Toronto’s real estate can go before it corrects. The real estate market in major cities in China are crazy and the last time I heard it hasn’t corrected itself yet. Shanghai and Beijing keep on going higher despite the growing number of ghost towns in other cities.
Seems like real estate is so location and city/ country dependent. If you bought a house in Vancouver like my folks did 40 years ago then you are sitting on a $1-2 million goldmine if you cash out. Same for cities like San Fran, NY, London.
But then so many people got burned in the US during the mortgage and sub-prime crisis in 08-09. They just stopped payments and had the bank foreclose rather than carry massive paper losses which may never recover. Florida was hit hard and it’s a desirable place to live, warm climate and lots of oceanfront places….so why did it tank?
America sold them the hype of home ownership so well.
I guess the luck of the draw is really where you were born or educated. Someone in South America or Africa or rural Asia has it much harder. there’s no housing bubble in any of those places. Even developed countries like Spain, Australia, Ireland had housing crisis’..
Others hit the jackpot without even knowing it. I remember friends here thinking $750k for a detached home was way too expensive less than 10 years ago. That same home here now goes for double.
In suburban Detroit you can buy homes for less than the price of a BMW.
What a world.
Vanouver Brit
It has to be right for you, yes i understand your dilema, I fought the good advise of people for years, but finally decided buying a house, and renting to students, was right for me, in the city that I live. (Victoria) I crunch and recrunch the numbers, way too much. After 5 years in this market, the gamble has paid off, but that is more luck than good decision making.
D.
Sam is right on a number of fronts: (1) real estate when treated as a business, can make you rich – he bought a business that generated income, not a McMansion for himself to wander around in, (2) early on your salary is important so work your tail off and save lots (like you 2 engineers saving $100K+ annually while under 30! Amazing!), (3) put your money to work for you – invest over the long term – and diversify (stocks -and- real estate, not either/or).
I think you and Sam have a lot in common actually. Sam didn’t buy an over-priced, single family home that consumed all of his salary… and neither did you. Very anti-stupid, and richer for it!
“Anti-stupid and richer for it!”
This needs to be on a T-shirt or a bumper sticker!