Posted on 03/12/2024 1:09:28 PM PDT by where's_the_Outrage?
Homeownership has long been a cornerstone of the American dream. It symbolizes independence, financial security and prosperity — but is it a dream worth chasing?
Not if you ask real estate investment guru Grant Cardone.
“Buying a home without a doubt is the worst investment people can make, yet it’s also the most common one,” he wrote in an Instagram post earlier this month.
“Is it because [of] the lack of knowledge people have when it comes to financial education? Or is it just because too many people are trying to fulfill their American dream?”
Whatever the reason, Cardone says he is on a mission to “change the trajectory.” Here’s what he thinks you should do instead of sinking deep into debt to buy a home......
He gave the example of spending $576,000 on a home that you keep for 10 years. On top of that huge total, Cardone said you’d also have to pay the following fees over a decade:
12%, or $69,120, in broker fees;
10%, or $57,600, in maintenance fees;
20%, or $115,200, in property taxes;
and 70%, or $403,200, to the bank
Those amounts add up to $645,120 — and when added to the original price of the home ($576,000), would bring the total to a staggering $1,221,120.
“A $576,000 home will have to be sold for $1.2 million in 10 years,” Cardone said. “You’re not going to sell it for that, to break even.” .......
Rather than buy a house, Cardone says you should rent where you live and use the money you've saved for a down payment to instead invest in real estate that generates passive income.
He advocates for residential real estate, which appears to have remained strong through the economic turmoil of recent years,
(Excerpt) Read more at moneywise.com ...
Thanks for the link. I couldn’t find the article.
Realtor fees are a thing of the past as well.
You're telling us that you live in a nice neighborhood.
See Post 54
One owner can ruin an entire neighborhood by being, or letting in, the wrong elements. Several individuals of such an element accelerate it. Many folks watched their parents get caught with properties of declining value that they couldn't sell. There are towns outside Rust Belt cities with more abandoned houses and lots than occupied ones.
The lucky ones were able to sell their house via lottery to a winner who would never have bought it at the price the buyer initially paid. The less fortunate owners were forced to abandon them.
Rather than buy a house, Cardone says you should rent where you live and use the money you've saved for a down payment to instead invest in real estate that generates passive income.
Thankfully investment properties don't have brokerage fees, maintenance, taxes or bank interest. < /eyeroll>
One thing nice about ownership is that it locks in the principal and interest. Unless you refinance, that big part of the monthly payment will stay the same while years of inflation would drive up your rental.
The other advantage is home buying is forced savings.
Even if a person could make more investing the equivalent money, almost no one actually does that. Most renters leave with their furniture and clothing. Most home owners also leave with a furniture, clothing AND a nice chunk of change.
These rich financial advisors are out of touch with how normal people live.
Suze Orman thinks you need 20 million dollars to retire! Sure Suze.
Grant is also out of touch, unless you’re single and can live in a van, you have to have somewhere. You may need to move to a more affordable place to buy a home. (After saving rent by living in your van for 5 years...)
And older folks with a little bit of cash looking for rental properties... Plenty of those along with Hsu’s, Patel’s and Garcia’s buying houses these days.
Just think of what an “investment” being homeless is. You can save all kinds of money.
Here is the big flaw in his calculations. He does not include any credit for rent saved or earned. His example assumes that you will buy a $576K home and that it will sit vacant for ten years, with you neither living in it nor renting it out.
If you live in it, you are saving rent you would otherwise have to pay to someone else. Also, your rent will likely increase every year, while a fixed rate mortgage will not. If you rent it out, then you will have income that should be sufficient to cover your mortgage payments. Either way, it substantially reduces the cost to you and makes buying a house a much better investment than he claims.
On top of that, there are significant federal income tax benefits for buying a house to live in. The interest is deductible and if you live in it for at least two of the past five years, you can exclude up to $500K in gains when you sell it ($250K if you are single).
We bought a house on several acres 25 years ago. Five years ago, we sold the house and one acre and were able to exclude all of the gain, which we used to pay off our remaining mortgage and build a new house on the remaining acres. If we live in the new house for at least two years, we will be able to exclude another $500K in gain (the house may not go up in value, but we bought the land 25 years ago and have very little basis left).
We also have a couple of rental properties (one office and one rent house), which have already earned enough rent to pay off the mortgages, and now pay more than enough to cover the property taxes, insurance and maintenance. Our biggest problem will be paying taxes when we sell them. We already depreciated out the building and other fixtures, so our basis in both properties is very low.
We could sell them in a 1031 exchange, but then we would have to buy replacements for them, and we don’t want to trade properties we know for other properties somewhere else. If we still own them when I drop dead, then my wife can sell them tax free (in a community property state, if one spouse dies, the surviving spouse gets a step up in basis to the FMV as of the date of the first spouse’s death).
When you first rent, you usually pay about market value. If you are lucky enough to have a landlord who keeps the rent about stable, then you are in similar sitution to a mortgage holder who will have a fixed payment over the life of the mortgage. If the landlord adjusts the rent periodically, you will be in a situation of increasing expense.
you are exactly right, and he didn’t take into account appreciation which at a minimum would keep up with inflation. The home would be worth at least 50% more than when they bought it after 10 years and most likely a lot more than that if purchased in the right place.
Texas until about 10 years ago
of course he didn’t he choose the worst time frame for the life of a loan.
If he had looked at an entire adult lifetime and factored in paying off the home (especially if a more affordable home had been purchased to begin with) But he is just a moron who doesn’t know anything about money.
But as a landlord myself, I would idiots like him and have made tons of $$$ off of them paying off my properties for me :)
you would of had all of that AND all the profit your landlords made if you had bought something. You probably paid those rental units off 2 times over for your landlord.
As they say in the real estate business, the three most important factors to consider when buying real estate are location, location and location.
Japan has more than 37% of the population of the U.S., but they are packed into less than 4% of the land. Japan's real estate market is comparable to the real estate market in a state like New York, with a high-density population that has been declining for the past several years.
In the U.S., real estate values and trends are much different in some parts of the U.S. than they are in others. Back in the late 1980s and early 1990s, real estate crashed in most of Texas, due to the oil market crashing and causing a ripple effect from Houston to the rest of the state. California refugees poured in, selling their 2/1 houses on 50x100 lots in San Francisco and LA and buying 4/3 houses with pools on an acre or more in or around Austin for the same amount.
Currently, most large, democrat-controlled cities already look like Japan, due to the exodus of residents. Meanwhile, they cannot build new houses fast enough in most of Texas and Florida.
Real estate will continue to go up in value wherever people with money want to live and will continue to go down in value wherever people are leaving. This will still be the case even if the U.S. population growth flat lines (or is driven entirely by illegal aliens with no money).
The general idea is this: You put 20% down, but you get 100% of the increase in value when you sell. You pay interest/principal on the mortgage, but rents typically run higher anyway. So if you buy a $100,000 home with $20,000 down, and it earns just 4% a year (let's skip compounding), after 5 years that gets you to $120,000. So you sell for $120,000, pay off the mortage (~$72,000), pay 6% realtor fee ($7200), and walk away with more than twice your original down payment. That's not bad for a 5 year investment you get to live in. Yes, you have to change your own lightbulbs, but you also get the flexibility of being able to do what you want with your property without having to ask permission to put a screw in the wall.
But no interest to banks. No expenses for repairs or appliance replacement. No yard work.
I wrote to another that I moved every 4 or 5 years. So no buying and selling which costs fees and commissions.
It’s an individual choice. I did the math.
I’m in a unique situation for the last 25 years. I can fix up my place as I wish. I started at $900 a month and it’s now $1800. Convenient, good location, no kids,large rooms, closet space.
I can even walk to vote. Lol
Thanks for your input.
“So you should throw money away in rent rather than invest it in your own equity. No thanks.”
Absolutely right. I had $1600 month mortgage on a house I bought at $220K. I paid it off early and now I pocket the mortgage payment. Meanwhile the house is three times the original value. I am currently using my money to build wealth, and I also have excellent equity. Why would I NOT want to buy a house, especially when rent is twice what I was paying on a mortgage for a larger place? I agree with Like post #3…it’s like his opinion man…
it was 10 million and she said that in reference to “retiring early” not just normal retirement.
So... yeah.. if you are 30 something and have a couple of million that is NOT going to be enough to last you the rest of your life without working or investment income.
You could easily live another 60 years ... every 20 your money is worth half of what it was. So if you have 20 million at 30... that is only worth 1 million at 60 and 500 thousand at 80 etc.
He point was to find a way to make money that you LOVE and do it as long as you possibly can, because unexpected things happen and that isn’t going to be enough to last you forever IF you are retiring early. If you are 70 now.. yeah 2 million is enough.
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