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Real Estate

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Fortified- AKA Mungo Jerry April 23, 2014 at 08:28 pm
Sorry, wrong. But first, great for thinking beyond the headlines and conventional thinking. I am aRead More contrarian. But that means buying when everyone is selling, and are giving up. It also means selling when the buying frenzy is at hand. In 1945 the average salary was $2,500, and the average house price was $5,000. Most households were one earner. Now it would take seven average earners to buy that average house. The payments....All the interest is tax deductible lowering effective payments about 30% lower. Assuming a fixed rate, your payments remain the same, while rents keep rising. After 20-30 years, you are done paying, while rents are sky high. Real estate has been the greatest single wealth accumulator in America. Here in California, it has been twice that since 1945. The psychological effect of being able to paint what color you want, and be creative in your home Vs. knowing that at anytime in your life the landlord can evict you, changing your whole life at his will is huge for most people. Beyond single family homes, apartments are even better. Total cash flow, and overall returns are easily 15-20 percent per year if you know how to do it right. 10- 15% if you are new, or have others manage them for you. For the first time buyer, the best way to go is buy a duplex, or fourplex if you can swing it. The other unit(s) will pay for half to all of the mortgage payments, and is actually easier to qualify for the loan because they count the income as part of the qualifying. After an average of seven to ten years pull money out to buy more property. A lifelong path of this will end up making anyone a multi-millionaire with tons of income every month. Last point. Interest rates went up for thirty years, and now down for thirty years. This is the end of the low interest rates. Get fixed rate only. The biggest event in our lifetimes will be coming when the dollar collapses. Be prepared for things you never thought possible. Never be too leveraged. Oh wait...one more. You stated something about the house depreciating, while the land appreciates. Try telling that to a buyer in the old areas of Pasadena where the old 1920's houses sell at a premium compared to new ones. Flipping them are fun because of the character.