On the risk of investing in real estate for the long run

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thrifty++
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Joined: Sat May 23, 2015 3:46 pm

Re: On the risk of investing in real estate for the long run

Post by thrifty++ » Sun Oct 06, 2019 2:28 am

@flying_pan - It does tend to make them rich in a few ways:

- They no longer have big mortgages, or they shouldn't, so they have very low living costs.
- Because house prices have gone through the roof, people who bought big multi room houses for peanuts can charge very high rents when they rent out the rooms to other people or students or to travellers eg air bnb, this is while paying very low living costs for the house because you bought it for peanuts.
- Gives you the option of renting the whole house out on air bnb or more long term while travelling somewhere.
- Allows you to raise a lot of finance cheaply. This can be used for so many purposes making people wealthier or have a higher more comfortable standard of living and less dependency on actively earned income. The cheap finance could be used for consumption purposes. Or to fund business ventures. Or to invest in investments like equities.
- Allows you to use the equity in your house to buy units or apartments to rent out.
- Allows you to reverse mortgage your house into retirement to turn it into a very generous annuity if you wish.

All of these things can be used and are used to make people in inflated house prices very rich. Also even if they do none of these things it must be so much more comforting knowing you are sitting on a gold mine that you can sell or finance or rent whenever you want and access lots of money

George the original one
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Joined: Wed Jul 28, 2010 3:28 am
Location: Wettest corner of Orygun

Re: On the risk of investing in real estate for the long run

Post by George the original one » Wed Oct 09, 2019 12:45 pm

flying_pan wrote:
Sat Oct 05, 2019 2:59 pm
Can somebody please explain to me how you can get "very rich" without selling your very appreciated house?
Spare rooms & garages can be rented out for housing and storage. You can use your home as an office instead of acquiring an office. In my rural locale, I can use my property as a retail space and I can even use it for light industrial production. One can also move out of the house, collect from renters occupying the house, and rent yourself some place else to live.

It absolutely is an asset to be included in one's net worth because it can be sold and the gains used to pay a rent or purchase another home. If you don't wish to sell, there are reverse mortgages (not a recommended path, but the option is there). Valuing that asset is tricky, but it most definitely is an asset. THERE ARE MANY OPTIONS FOR HOW YOU USE YOUR ASSET!

My own plan is to sell our house when we begin to feel a bit feeble and move to an assisted living facility. Proceeds from the home sale will pay for assisted living.

flying_pan
Posts: 28
Joined: Fri Sep 27, 2019 4:06 am
Location: USA, Oregon

Re: On the risk of investing in real estate for the long run

Post by flying_pan » Fri Oct 11, 2019 3:13 pm

thrifty++ wrote:
Sun Oct 06, 2019 2:28 am
- They no longer have big mortgages, or they shouldn't, so they have very low living costs.
So do have other people whose houses haven't appreciated that much.
thrifty++ wrote:
Sun Oct 06, 2019 2:28 am
- Because house prices have gone through the roof, people who bought big multi room houses for peanuts can charge very high rents when they rent out the rooms to other people or students or to travellers eg air bnb, this is while paying very low living costs for the house because you bought it for peanuts.
Do a lot of people really do that? I can imagine it is pretty annoying, especially if you have kids, and you bought your huge mansion to have "your place" in the first place. I am not talking about financially savvy people, who are ready to hustle, rather regular folks.
thrifty++ wrote:
Sun Oct 06, 2019 2:28 am
- Allows you to raise a lot of finance cheaply. This can be used for so many purposes making people wealthier or have a higher more comfortable standard of living and less dependency on actively earned income. The cheap finance could be used for consumption purposes. Or to fund business ventures. Or to invest in investments like equities.
- Allows you to use the equity in your house to buy units or apartments to rent out.
- Allows you to reverse mortgage your house into retirement to turn it into a very generous annuity if you wish.
All these options look like reverse mortgages to me. How else can you raise money? Is it a common thing? Who will give you money for "equity"? Banks?

flying_pan
Posts: 28
Joined: Fri Sep 27, 2019 4:06 am
Location: USA, Oregon

Re: On the risk of investing in real estate for the long run

Post by flying_pan » Fri Oct 11, 2019 3:17 pm

George the original one wrote:
Wed Oct 09, 2019 12:45 pm
Spare rooms & garages can be rented out for housing and storage. You can use your home as an office instead of acquiring an office. In my rural locale, I can use my property as a retail space and I can even use it for light industrial production. One can also move out of the house, collect from renters occupying the house, and rent yourself some place else to live.
Well, not everybody is comfortable renting part of their house. Some people are fine, some people want these financial benefits, but majority have bought it to have their own place. So I am not sure how popular it is.
I use my home as an office, but it is just one room. Maybe to some people it is critical.
Retail space – depends on your location (nobody will go to the middle of nowhere and local code. Where I live, you can't do any business.
George the original one wrote:
Wed Oct 09, 2019 12:45 pm
It absolutely is an asset to be included in one's net worth because it can be sold and the gains used to pay a rent or purchase another home. If you don't wish to sell, there are reverse mortgages (not a recommended path, but the option is there). Valuing that asset is tricky, but it most definitely is an asset. THERE ARE MANY OPTIONS FOR HOW YOU USE YOUR ASSET!
I don't argue that it is an asset, but I also disagree that people view houses as pure investments. They become attached to both houses and area (likely there were attached to the area already), and are not very keen to sell it and move somewhere cheaper. So, yes, in case of need you can move and use your asset, but I think many do it reluctantly.

Mister Imperceptible
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Joined: Fri Nov 10, 2017 4:18 pm

Re: On the risk of investing in real estate for the long run

Post by Mister Imperceptible » Sat Oct 12, 2019 5:33 pm

Why The 2008 Housing Crisis Recovery Is Just An Illusion

https://m.youtube.com/watch?v=GFkkN2M3Y3c

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