Jump to content

Owning stocks vs. house


shootingstar

Recommended Posts

44 minutes ago, RalphWaldoMooseworth said:

Over 30 years stocks have appreciated way more than our hoose!  At least I think so.  Hoose only went up aboot 2.5 times original value.  And it was cheap, so it is snot that much money.

Well, clearly it depends city, neighbourhood where home is.  My place right now has depreciated..alot   :(  because of our local oil and gas economy that's been struggling for awhile (and having a provincial premier who is resolutely blind to solar and wind natural power sources in the prairies, doesn't help.).  But mortgage paid off, so less worries.

Vancouver and Toronto are very different stories, re homes.  A sister's home probably has appreciated nearly 3x, same for mother's.  Vancouver if one bought a condo downtown 15 years ago, it has appreciated approx. 4x  Yea, pretty shocking.  City has become a sleeper Hollywood north for celebrities and discreet rich.

Right now, feelin' abit of naked exposure to stocks...  it's hard to get rid of babies who have been crawling, then walking and then running.  

Link to comment
Share on other sites

Yeah real estate can be a crap shoot. As SS states a lot depends on where you live and the market.

We really got lucky in that we bought at about the lowest point of the real estate bust if 1997 and our property is worth about 5X what we paid for it.  My retirement investments haven’t done as well.

  • Heart 2
Link to comment
Share on other sites

Apparently a statement made to separate the wealthy from those they deem beneath them. Most wealthy people own homes. They may not consider it an investment for wealth, but they understand that it will also historically appreciate in value over time. 
Non-wealthy people own stocks in the form of a 401K if nothing else. The difference is they don’t have the safety net to take chances on stocks in the way that the wealthy do, nor do they have the inside information to play the game to their advantage so 401k becomes a savings account of sorts. 
My great aunt met Bill Gates at an event when he was getting Microsoft started and needed investors. She was comfortable upper middle class. She needed to check on an account she used for investments and called him back the next day, but said he had raised what he was seeking the night before. What she would have invested would have made her very wealthy and likely us by extension. She adored my dad and would have made sure he was included. 
I had just made a career change with a significant pay cut when Google went public. I had no safety net. If it had happened 6months earlier, I would be retired now with what I would have invested. 

Link to comment
Share on other sites

1 hour ago, shootingstar said:

I came across this in some finance news article:  

It is true for my low-income parents. But not necessarily true for others.  Of course, it's nice to have both.

image.png.cce4dcc97c1cb958e734f1d0b19ae4d1.png

Rich people have money. Poor people don't?

Truly poor people OWN nothing of real value. No way they own a house. Rarely even own a car. Probably have more debt than assets.

Defining "poor" or "rich" would really be important. If you consider the poor are the bottom 10% and the rich are the top 10%, then you get wildly different results than if you change it to the poor are the bottom 1% and the rich the top 1%. And then you could further muddle things by using income vs wealth. Or by using small or large geographical limits.  I think, vs the 7 billions folks on Earth, I'm pretty well off, however compared to the DC metropolitan area, I am average. I'd be "poor" in some zip codes relative to other folks.

  • Heart 1
Link to comment
Share on other sites

48 minutes ago, groupw said:

Apparently a statement made to separate the wealthy from those they deem beneath them. Most wealthy people own homes. They may not consider it an investment for wealth, but they understand that it will also historically appreciate in value over time. 
Non-wealthy people own stocks in the form of a 401K if nothing else. The difference is they don’t have the safety net to take chances on stocks in the way that the wealthy do, nor do they have the inside information to play the game to their advantage so 401k becomes a savings account of sorts. 
My great aunt met Bill Gates at an event when he was getting Microsoft started and needed investors. She was comfortable upper middle class. She needed to check on an account she used for investments and called him back the next day, but said he had raised what he was seeking the night before. What she would have invested would have made her very wealthy and likely us by extension. She adored my dad and would have made sure he was included. 
I had just made a career change with a significant pay cut when Google went public. I had no safety net. If it had happened 6months earlier, I would be retired now with what I would have invested. 

Clearly your aunt's story has made the family rounds..

A 401K sounds like a tax-free savings account on the Canadian side.  The govn't limits annual total contribution (this year it's $6,000) but one can invest in broad range of financial instruments. Withdrawal is tax-free.

Link to comment
Share on other sites

8 minutes ago, Razors Edge said:

Rich people have money. Poor people don't?

Truly poor people OWN nothing of real value. No way they own a house. Rarely even own a car. Probably have more debt than assets.

Defining "poor" or "rich" would really be important. If you consider the poor are the bottom 10% and the rich are the top 10%, then you get wildly different results than if you change it to the poor are the bottom 1% and the rich the top 1%. And then you could further muddle things by using income vs wealth. Or by using small or large geographical limits.  I think, vs the 7 billions folks on Earth, I'm pretty well off, however compared to the DC metropolitan area, I am average. I'd be "poor" in some zip codes relative to other folks.

So true, truly poor people own nothing of real value that's sellable.

I was reading about some 30's yr. old people in the F.I.R.E. movement.  Ok, if you are young and quite healthy.  That works if:  a) one lives in a country with public health insurance system  b) even a) is true, the public health care system still will not cover dental, many ancillary health care services (physio, custom orthotics, medical supplies)….  I'm talking about in Canada.  Oh yea, this couple still works part-time...after trying to retire for a few yrs.

Link to comment
Share on other sites

13 minutes ago, Wilbur said:

Half the wealthy people I know, made it in real estate.  The other half made it on company stock. 

Meaning the companies (y) they owned or were employees...?

Depends how one looks at it: I know a woman who owns and has lived in her 2-3 (?) bedroom house in Toronto. A more humbler neighbourhood with a 15 min. walk to subway. Now there's a different 2nd station to the airport.  Then she bought a condo in Calgary, thinking she will retire there.  Well, not for next decade since she realizes...just more stuff to do in Toronto.  So she didn't buy 2nd to invest aggressively from a rental.

She doesn't own a car. She's been part of carshare for past...25 yrs.  She was way ahead of her time...she was transportation policy analyst before taking early retirement from govn't.  Yes, she does cycle also.  She doesn't have children.

You wouldn't know it...her "wealth".

Link to comment
Share on other sites

2 hours ago, shootingstar said:

I came across this in some finance news article:  

It is true for my low-income parents. But not necessarily true for others.  Of course, it's nice to have both.

image.png.cce4dcc97c1cb958e734f1d0b19ae4d1.png

I've seen this same b.s.  Of course, rich people own houses at a higher %age than poor people!

Ken Fisher, who runs a lot of ads for his financial advising company, wrote an article that people were better off renting than buying homes. That's beyond ridiculous and the article got a flood of comments refuting it.  Of course, there are locations like San Francisco and various situations where renting has an advantage.  But in most of the country, buying a home is a no-brainer.  The end of my mortgage was the reason I could retire at age 56 due to leg problems and have a stress-free six years until all my retirement income vehicles kicked in, which then resulted in more spending money than when I was working.  Paying rent would have ruined the whole situation.

Remember that with a mortgage you are leveraging the bank's money.  If you take out a $200K loan for a $210K house, you have $10K invested plus your monthly payments.  If that $210K house rises in value to $220K (about 5%) in one year, the bank gets NONE of that extra $10K: you get it all (leverage!), gaining $10K on your $10K plus, perhaps, $15K in mortgage + escrow payments.  You are NOT likely to get a $10K gain for a $25K investment - a 40% return - on stocks. You may never get an annual return like that from stocks.  But you'll get above average  returns like that in the early years of your mortgage with a house while not paying any rent at the same time!  If you prefer to look at it in terms of home equity, each year a greater percentage of your mortgage payment goes to reducing the loan balance while you keep leveraging what you owe and keep ALL of the home's value growth.

In most areas, by the time you're 7 years into a mortgage, your monthly mortgage payment is less than the avg. rental cost for a small house or large apartment. After 15 to 30 years, you have NO mortgage payment remaining and your monthly costs for maintenance, utilities, taxes, and homeowner's insurance is less than HALF of what you'd pay to rent a small apartment.

On top of that, you have clear ownership of a typical $200K to $300K asset while you have NOTHING while renting.

In today's dollars, the homeowner reaches retirement with at least a $500K more in assets than if he/she had rented.   Even if putting the same money in stocks resulted in better gains, you have to subtract your cost of renting from those gains before you could compare it to owning the home, and home ownership comes out on top by far.

 

Link to comment
Share on other sites

6 minutes ago, MickinMD said:

I've seen this same b.s.  Of course, rich people own houses at a higher %age than poor people!

Ken Fisher, who runs a lot of ads for his financial advising company, wrote an article that people were better off renting than buying homes. That's beyond ridiculous and the article got a flood of comments refuting it.  Of course, there are locations like San Francisco and various situations where renting has an advantage.  But in most of the country, buying a home is a no-brainer.  The end of my mortgage was the reason I could retire at age 56 due to leg problems and have a stress-free six years until all my retirement income vehicles kicked in, which then resulted in more spending money than when I was working.  Paying rent would have ruined the whole situation.

Remember that with a mortgage you are leveraging the bank's money.  If you take out a $200K loan for a $210K house, you have $10K invested plus your monthly payments.  If that $210K house rises in value to $220K (about 5%) in one year, the bank gets NONE of that extra $10K: you get it all (leverage!), gaining $10K on your $10K plus, perhaps, $15K in mortgage + escrow payments.  You are NOT likely to get a $10K gain for a $25K investment - a 40% return - on stocks. You may never get an annual return like that from stocks.  But you'll get above average  returns like that in the early years of your mortgage with a house while not paying any rent at the same time!  If you prefer to look at it in terms of home equity, each year a greater percentage of your mortgage payment goes to reducing the loan balance while you keep leveraging what you owe and keep ALL of the home's value growth.

In most areas, by the time you're 7 years into a mortgage, your monthly mortgage payment is less than the avg. rental cost for a small house or large apartment. After 15 to 30 years, you have NO mortgage payment remaining and your monthly costs for maintenance, utilities, taxes, and homeowner's insurance is less than HALF of what you'd pay to rent a small apartment.

On top of that, you have clear ownership of a typical $200K to $300K asset while you have NOTHING while renting.

In today's dollars, the homeowner reaches retirement with at least a $500K more in assets than if he/she had rented.   Even if putting the same money in stocks resulted in better gains, you have to subtract your cost of renting from those gains before you could compare it to owning the home, and home ownership comes out on top by far.

 

Mick, you seem to be passing over other costs like, maintenance and interest. A $200k loan would pay $133K in interest over 30 years. Also how much did you spend on maintenance? New roof, furnace, flooring, remodeling, lawn care etc. How about time? Maintenance takes time. Time is money. 

Link to comment
Share on other sites

7 minutes ago, dennis said:

Mick, you seem to be passing over other costs like, maintenance and interest. A $200k loan would pay $133K in interest over 30 years. Also how much did you spend on maintenance? New roof, furnace, flooring, remodeling, lawn care etc. How about time? Maintenance takes time. Time is money. 

No, I'm not passing over the extra interest costs because the interest is in the mortgage payment that becomes less than rent payments in 7 years on average.  Remodeling is modifying the home and making it more valuable, so that's not a real cost.  Yes. time is money but would you, as a renter, take an extra job to make the money the homeowner spends time on by mowing the lawn, etc.? Not likely. It's more of a case that the time spent by the homeowner doesn't cost money.

I didn't get into maintenance, but even replacing roofs, furnaces, refrigerators, etc. hardly puts a dent in the $500K or more you save by home ownership, even if you do present-value calculations.  Since retiring in 2006, I've replaced my furnace and my roof.  Total cost: $5375 ($1875 and $3500).  My property taxes plus homeowners insurance come to about $250 per month.  That's for a single, 30'x30' Mini Cape Cod home with two bedrooms upstairs and a full basement on a 100' x 60' lot  To rent an efficiency apartment in a not-so-good neighborhood a mile from me is $700/month plus utilities.  That's $8400 per year!  Even in the years I bought the furnace and roof, I didn't pay $8400/yr. to maintain the house, pay taxes and insurance, etc.!

And note that if you buy a house at, say, age 40 as I did with a 15-year mortgage, it's paid off at age 55 and you have, on avg. 25 or so years of no mortgage payment compared to apartment rents that are 1.5 - 3 times the mortgage you were paying. over that span.

My brother is paying $600/month in mortgage payments on a house he didn't sell when he bought another that he rents out for $1200/month.  That extra $600/month is $7200 per year, $72,000 in 10 years, and far more than covers his expenses - he recently was bitching about having to replace a refrigerator for several hundred dollars. I pointed out it was a drop in the bucket.

Link to comment
Share on other sites

3 hours ago, shootingstar said:

image.png.cce4dcc97c1cb958e734f1d0b19ae4d1.png

You also need to define ‘own’.  I’d suggest that most people don’t ‘own’ their home, until the mortgage is paid off.   That means 60% of the homes are owned by the finance company. 

https://www.forbes.com/sites/brendarichardson/2019/07/26/nearly-40-of-homes-in-the-us-are-free-and-clear-of-a-mortgage/#6f69555747c2

Link to comment
Share on other sites

2 hours ago, MickinMD said:

 Yes. time is money but would you, as a renter, take an extra job to make the money the homeowner spends time on by mowing the lawn, etc.? Not likely. It's more of a case that the time spent by the homeowner doesn't cost money.

Taking care of your home costs money. Lawn care, shoveling snow, plumbing, painting etc. I don't understand the rest of your argument.

What about your utility bills? $330 and you brag that is cheap. I've never paid anything close to that. Even when I had a 2 story, 2 bd condo, my highest bill was $125 in the winter and I live one of the coldest states in the U.S. In my last apt $56 was my highest bill. Now it's included in my rent. Apt living is way more efficient for utilities.  

I spend my weekends having fun. I skied Fri and Sat. I rode my bike today. Now I'm going to make beer. I don't do any home maintenance. My time is mine. 

I'm not arguing against home ownership. I'm not saying it's better or worse than renting. If you want to buy, buy. If you want to rent, rent. Around here a single family home starts around $1 mil. 

Link to comment
Share on other sites

3 hours ago, Bikeguy said:

You also need to define ‘own’.  I’d suggest that most people don’t ‘own’ their home, until the mortgage is paid off.   That means 60% of the homes are owned by the finance company. 

https://www.forbes.com/sites/brendarichardson/2019/07/26/nearly-40-of-homes-in-the-us-are-free-and-clear-of-a-mortgage/#6f69555747c2

For my mother (father is no longer alive) she is at poverty line:  but she owns her house. The mortgage was paid off over a decade ago.  It's the only asset she has that is significant and we would have to sell for nursing home costs. it's that simple and very clear in terms of money needed near end of life. 

None of us ever expected inheritance from parents from the beginning. And it's a shame any child should ever expect that from parents who worked and spent money to raise children.

1 hour ago, dennis said:

What about your utility bills? $330 and you brag that is cheap. I've never paid anything close to that. Even when I had a 2 story, 2 bd condo, my highest bill was $125 in the winter and I live one of the coldest states in the U.S. In my last apt $56 was my highest bill. Now it's included in my rent. Apt living is way more efficient for utilities.  

I spend my weekends having fun. I skied Fri and Sat. I rode my bike today. Now I'm going to make beer. I don't do any home maintenance. My time is mine. 

I'm not arguing against home ownership. I'm not saying it's better or worse than renting. If you want to buy, buy. If you want to rent, rent. Around here a single family home starts around $1 mil. 

Well, in some areas of a country it is that expensive.  In our depressed local economy, you can buy a newish, nice 2-bedroom home around $430,000CAN and well under.  (In Vancouver, it's probably close to $1 million, Toronto just same or a little less than $1 million  by $30,000).   But you must be prepared to live out in the suburbs, further away from services and being willing operate a car (which means more cost. Being wedded to a car dominant area is not great especially when one can no longer drive. I carefully tune out when retirees talk about going into the country/far from services. They have to solve their access problems to services when they can no longer drive. Sorry.)

I knew a single woman who owned her own home for several decades in Toronto.  Then in her 7th decade, she sold her condo and rented.  Towards in end of life, she told me...she was running out of money.  She was living in Toronto and in her final rental before she died, she was in a triplex or something.  She didn't like it at all.

I'm glad my mother does NOT live in a rental in Toronto.  The choices in that city for her income, would be crappy...unless she moved in a subsidized rental for seniors that needed 24 hr. nursing care. Those buildings have long waiting lists.

Just my opinion-- it is best to somehow kill off the mortgage within 10 years of purchase. I did a reverse mortgage which ploughed all the mortgage interest into self.  This is perfectly legal by asking the bank for a reverse mortgage, explaining what you would like done, and yes, risky. You just have to be certain that your job is secure or you have savings somewhere, if lost job.

Link to comment
Share on other sites

1 hour ago, dennis said:

I spend my weekends having fun. I skied Fri and Sat. I rode my bike today. Now I'm going to make beer. I don't do any home maintenance. My time is mine. 

Sure, same for self for a long time. I have fun on my multiple bikes 'cause no car.  I couldn't live in the country because of the driving that would be necessary for car ownership. Unless a town had great transit.

I'm also a woman who hasn't bought any makeup for past 14 years, no pedicures, manicures, 1 pr. of new shoes or boots annually. Plus additional $300.00 or less annual on garments.

I Just buy wasteful lattes and snacks. ;)  It really adds up. That's my sin vs. driving a car 1-10 kms. daily somewhere....

Link to comment
Share on other sites

4 minutes ago, shootingstar said:

Sure, same for self for a long time. I have fun on my multiple bikes 'cause no car.  I couldn't live in the country because of the driving that would be necessary for car ownership. Unless a town had great transit.

I'm also a woman who hasn't bought any makeup for past 14 years, no pedicures, manicures, 1 pr. of new shoes or boots annually. Plus additional $300.00 or less annual on garments.

I Just buy wasteful lattes and snacks. ;)  It really adds up. That's my sin vs. driving a car 1-10 kms. daily somewhere....

I'm not really sure what your point is. I own bikes and ride them daily. I bike to work and use them for running errands.

I don't buy make-up, no manicures or pedicures. My last pair of new shoes was in 2018. I bought a pair of jeans in 2018 too. Nothing last year.

No lattes, no daily driving.

Is this a competition? 

Link to comment
Share on other sites

32 minutes ago, dennis said:

I'm not really sure what your point is. I own bikes and ride them daily. I bike to work and use them for running errands.

I don't buy make-up, no manicures or pedicures. My last pair of new shoes was in 2018. I bought a pair of jeans in 2018 too. Nothing last year.

No lattes, no daily driving.

Is this a competition? 

You live a thrifty life, dennis.  Even for someone like myself, who by comparison to many women (because there are certain expenses/indulgences), lives frugally, I blow some money on other things that add up.

Link to comment
Share on other sites

I say own both.  BTW, I am not a rich person.  I am just incredibly frugal and smart with finance and investment.  

Renting forever is not something I would want to do.  Unless, I just had to be free and mobile.  Then, owning makes owning feel like being tied down.  Renting is great when you get to the point of paying off the home. Yes, you still have taxes and insurance, but this is way cheaper than rent.  To rent this home, you would pay over a thousand dollars.  My property taxes and insurance is about $175 a month.  With a mortgage, it eventually goes away and you stop paying that.  Rent increases forever.  

Link to comment
Share on other sites

Renting if it's a just 1 person or 2 people works fine for awhile.  

It gets more complicated when there are several children. It's doubtful landlords like kids banging up stuff in a rental..

Guess what:   my parents and little baby me as their lst child (before 5 others)....were living in a converted garage.  It was in a tiny town of 1,000 people in Ontario. It was too drafty, so would have been early spring or late winter. So after 1 month, they moved elsewhere.  I didn't know about the garage thing until just 6 months ago. (after not know for 60  yrs.).  I think it was an awful time my parents don't want to remember.  My parents were poor ….for a long time.

 

 

Link to comment
Share on other sites

On 2/2/2020 at 1:48 PM, MickinMD said:

You are NOT likely to get a $10K gain for a $25K investment - a 40% return - on stocks. You may never get an annual return like that from stocks. 

Actually you can, it just takes time.  The money I invested in my 401K 25 years ago when the S&P was at 450 easily makes that annually.

Link to comment
Share on other sites

I have always considered my house to be the conservative portion of my investments.  I built my own homes to acquire sweat equity and always treated as an investment.  Several years ago the Federal gov't eliminated gains from the sale of your primary residence from capital gains taxes.  What other investment is as secure, you get to use and enjoy while it continues to increase in value (except for that 2008 - 2010 period) that you don't have to pay taxes on?

I own a business.  There is no greater investment risk that that.  Not only do I have money invested in a small business where most of them fail, my weekly income is tied to the same source (and my weekly income would be the first to not be paid).

Highly conservative on the one hand and very risky on the other.

  • Heart 1
Link to comment
Share on other sites

16 minutes ago, Kzoo said:

I have always considered my house to be the conservative portion of my investments.  I built my own homes to acquire sweat equity and always treated as an investment.  Several years ago the Federal gov't eliminated gains from the sale of your primary residence from capital gains taxes.  What other investment is as secure, you get to use and enjoy while it continues to increase in value (except for that 2008 - 2010 period) that you don't have to pay taxes on?

I own a business.  There is no greater investment risk that that.  Not only do I have money invested in a small business where most of them fail, my weekly income is tied to the same source (and my weekly income would be the first to not be paid).

Highly conservative on the one hand and very risky on the other.

Whorehouses never fail. You are good!  :) 

Link to comment
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
  • Recently Browsing   0 members

    • No registered users viewing this page.
×
×
  • Create New...