The Residential Real Estate Crash Index Message Board

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Strategies & Market Trends : The Residential Real Estate Crash Index

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To: Amy J who wrote (11793)	7/26/2003 10:25:14 PM
From: GraceZ	Read Replies (2) of 306849

I agree, I'm net worth oriented, always have been. But if you don't consider cashflow as well you can wind up with too much month at the end of your money. A rich guy told me very early on, that no matter what income you make you should live on half and invest the other half (whether it's stocks, bonds, a small business or investment real estate doesn't matter as much as that you save and invest early and consistently) and within 15 years, your investments will out strip your ability to grow your income. It took about 13 years for my investments to start earning more income than I could (maybe because I have the kind of profession that doesn't pay that well). At any rate, the worst thing you can do is lock all of that money you saved into a house. A house is consumption, yeah sure you can borrow it back out (it's still a loan) or sell it and live off the cap gain, but then you still have to live somewhere and most people don't size down until it's a toss up to size down or move into a nursing home. They tend to continually max out their income by moving up into more and more expensive houses. Bigger more expensive houses require more and more stuff. Years can go by and around the age of 45 I get people asking me how they can save for retirement or a kid's college (and I'm looking at a kid who is three years from college) and I just have to throw up my hands because for the most part they are screwed. For some, that house is what they will be eating in their old age so you could say they are lucky to have it....but OTOH you could say it wasn't such a smart idea to let the house suck up everything they made. It's a non productive asset that has an inflation element that may or may not follow general inflation. I do know when housing inflation gets ahead of the general price inflation you can expect it to revert to the mean...and that can be awfully mean on your net worth.

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