Originally posted by: Budmantom
Originally posted by: 5LiterMustang
Originally posted by: Budmantom
Originally posted by: FlyLice
Originally posted by: Budmantom
Originally posted by: rh71
Originally posted by: Pliablemoose
The author is also assuming that if you do this, you'll invest the extra $ or pay off high interest CC debit.
Most consumers do neither and wouldn't.
You missed his point about rising salaries while your interest remains the same.
The author assumes your salary will always rise, it's easy to get 8% on your investments and that your house is a great tax shelter.
My income increased much in the last 5 years, my investments have taken a beating(not real estate) and even when I owned 3 houses the tax benefit was not substantial (even if you include depreciation).
Tom
It's very easy to earn 8% on your investments over a 30 year period. Just put it in Ticker symbol: SPY.
It is easy but is it guaranteed?
Tom
It's not guaranteed in real estate either
My savings is guaranteed.
Tom
Not so fast.
You have to keep the house in tip-top condition in order to sell it for it's full value. There is time and money involved there, which if you don't have a job, then you are going to take a loss on selling a distressed house. Also what is not mentioned anywhere here is that selling a home takes time, and if sell quickly because of loss of job, you are going to get less than full market value. On the other hand, you could take a line of credit, but there are costs associated with that, and now you have a loan you have to pay off again. Better get another job quick!
Also, is it guaranteed that the neighborhood and school system around you will remain at their levels? Remember real estate is much about location, and I can name you several areas around my town where real estate prices have shrunk considerably due to the bad element moving in, which leads to lower tax revenues, which leads to weakening schools and community services, which leads to lower property values leading to lower again tax revenues... it spirals out of control.
I would also like to point out that if you lose your income, and are house rich but cash poor, and do not pay your property taxes as a result, the local municipality has the right to take your house and auction it off, at WELL below the market value to savvy investors, to pay off the debt. I have attended such auctions and have seen homes sell for 50% of their market value. Ouch!
In the cases above, it would help to have a more liquid investment which you could tap in case you lost your income, especially when you get older and it is harder to find reliable employement. That investment in your home is not as guaranteed as you thought.