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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: posthumousone who wrote (2014)	3/3/2002 1:22:43 PM
From: Box-By-The-Riviera™	Respond to of 306849

only works if you can keep making the payments and otherwise, beat the interest rate with the supposed investments you will make. one requiring constant and consistent cash flow the other.. some element of skill

To: posthumousone who wrote (2014)	3/3/2002 4:40:18 PM
From: patron_anejo_por_favor	Read Replies (2) \| Respond to of 306849

Here's the central fallacy in that article: Think about it. Your mortgage is probably costing you 8% or less. Over the next 30 years, can you earn (on average) at least that much from investments? Absolutely: Even long-term government bonds pay nearly that amount, and stocks have been averaging more than 10% since 1926. While "past performance is no indication of future success," these long-term performance records do provide some comfort that at least it's been done before. I don't know about you, but I'm happy to pay 8% out of my left pocket if I can earn 10% with my right pocket. This guy would have you making (in essence) a HUGE long term macro bet that inflation will resume and that ROR in other (presumably equity or bond investments) will exceed your loan service costs over a VERY long period. Not to mention whatever risks are posed to this strategy by a temporary disruption in cash flows (ie unemployment). Although I'm a bear on real estate, I'm a much bigger bear on debt. If we are indeed entering a period of sustained deflation/disinflation, the WORST possible place to put money would be in stocks or debt. Bonds would indeed do better (but very few financial planners have the cojones to reco buying Ten or thirty year treasuries right now...and if the dollar starts to decline, they'll go down with everything else). Second, your home will grow in value even if you have a mortgage. Think about it. Your home's value will rise or fall whether there's a mortgage or not. Therefore, owning your home outright is like having money buried under the mattress: None of that cash, in effect, is earning any interest. You wouldn't stuff ten grand under your mattress, so why stash two hundred thousand into the walls of the house? So which is it...will it rise or will it fall? If it falls and your levered up to the eyeballs, you'll be stuck with service on a fixed liability (debt). This guy is talking out of both sides of his mouth. RE is not a guaranteed rocket ride to the stars (indeed, when most "authorities" start reco'ing a particular strategy, it's usually time to RUN, not walk, the other way!) Stay liquid, stay out of debt. This guy is a menace, IMVHO.