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Politics : Formerly About Advanced Micro Devices -- Ignore unavailable to you. Want to Upgrade?

To: Joe NYC who wrote (115207)	6/10/2000 2:11:00 PM
From: pgerassi	Read Replies (2) \| Respond to of 1571881

Dear Joe: Why do I need a home rather than an apartment? The advantages of a 2 bedroom house versus a two bedroom house are not related to money. Strictly as a financial investment, the house owner loses. The things one looks at as an investment in RE are not those who look as a place to live. Some people can exhibit the discipline required to make money in RE. I simply stated that one could satisfy the place to live and make more money in the stock market than from buying a house to live in. (Note to tejek: Did you make the money in RE by buying houses to live in or do you include land and apartments too?) Apartments cost less to the owner in capital costs per tenant, the tenants reap some of it in lower rent and the owner gets the rest. In the Milwaukee area, all those who do this tell me that eight unit apartments is the best point to get the most "Bang for the Buck". Here is how most, who make money, keep the discipline to do it. However, once you start talking about the money needed for "new" apartment development (all I talked to said they bought "used" apartment buildings (some of them bought from "newbies" who built new) only), you are better to go into the stock market. At 10% per year on average, in 30 years at $1000 per year yields $164,494. To pay off a loan of $100,000 in 30 years at 8% takes about $750 per month (roughly) or $540 after taxes per month. Now if rents are $700 per month (for 2 bedroom upscale in my area), minus the $350 in prop taxes, maintenance, heat, and water/sewer per month yields $350 per month or $4200 per year. Times the above yields a future worth of $690,870. The $11,000 downpayment plus $4,000 in transactional costs would yield $237,950 for a total of $928,820. Housing costs must rise at least 7.34% per year. The typical increase is close to the CPI or now around 3% to 4%. If inflation is higher, stocks go up faster than housing does. Thus, buying a home to live in is worse than to rent an apartment to live in and buy stocks with the difference. That is you have $928,820 rather than a possible $360,020 in housing now 30 years older. Now that assumes that you will not move, the area does not devalue, your house burns down, etc. Nor does that assumes that we have a great depression or one is not disciplined enough for the "smart" option. Since you have "tenants", you actually are running an apartment instead. Here you may be correct that buying an apartment makes more sense than renting one. In my case, I move around a lot going from one contract to another which means moving from one town to another. The transactional costs would quickly eat away any advantages. Pete