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  #43   Report Post  
D. Gerasimatos
 
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Default Buying a much bigger house
In article ,
Doug Miller wrote:

It's time to admit you haven't actually read the book, Dimitri.


I've read the book. It's time to admit that you read it, but did not
understand what it said. Your own quoted passages prove as much. If I
owned the book (I borrowed it) I'd be able to cite passages.


Dimitri

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  #47   Report Post  
D. Gerasimatos
 
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Default Buying a much bigger house
In article ,
Doug Miller wrote:

You clearly misunderstood what you read (if in fact you read it at all). And
you're unable to substantiate your claims.

Nice talkin' to ya.


Your own carefully culled quote says that 50% of wealthy people live in
affluent communities. Why can't you accept that?


Dimitri

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  #48   Report Post  
D. Gerasimatos
 
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Default Buying a much bigger house
In article ,
Speednxs wrote:
(D. Gerasimatos) wrote in message ...
In article ,
Al Klein wrote:
On Tue, 29 Jul 2003 17:07:20 +0000 (UTC),
(D. Gerasimatos) posted in misc.invest.real-estate:

Right now they are giving money away. I can get a massive loan at x% and
easily find a money market that pays x+%. That's free money.

This is quite exciting. Where are these money market (FDIC insured, I
hope) accounts paying higher than mortgage interest rates?
I've got equity that I could put to work and taxable income isn't a
big problem for me (lot's of lossses and deductions and new mortgages
will mean even more interest deductions).


Not FDIC insured, no. I'm not going to do all of your work for you, bud.

Here are some hints:


1. I never mentioned mortgage interest rates, although that is one
possibility if you are willing to take a nonconventional loan (i.e. not
a 15/30 year fixed).


2. My money market returned 4.72% last year and I have some high-grade (AAA)
bonds that did 8.74% last year.


3. Unsecured lines of credit can be had for as low as 2.9% FIXED. If you
borrow that money and invest it even only in a market index I practically
guarantee you that you will come out ahead over time. You can borrow
$100,000 for $240/month. When the markets eventually rebound it will be
nice to have $100,000 borrowed at 2.9%. If they never rebound (or it takes
many, many years) you will still have the capital to pay the loan back.
Just be patient.


Dimitri

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  #49   Report Post  
v
 
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Default Buying a much bigger house
On Wed, 30 Jul 2003 19:58:26 +0000 (UTC), someone wrote:


... it probably makes more sense to get a
nicer house he can afford today if that's what he's looking to do.

But he already has a place he can afford: the $200k condo.

And he is willing to stay there, until he gets what he really wants.

If he does stay there, he will be able to save up much quicker than if
he had to carry the bigger mortgage on the $400k place you and his
friend want him to buy NOW, which is not really what he wants anyway.

The very concept of savings is all about delayed gratification. You
*don't* spend now, in order to be able to get something you want more,
in the future.

If he gets the $400k place now, it may be all the longer before he
gets ahead enough to move up. Yes, *if* there is another real estate
boom, he will have lots of equity in his $400k place from
appreciation, but if that happens, then the $800k place will also no
longer be only $800k.

His willingness to not spend now, in order to get what he wants later,
is not deserving of the criticism he has been getting.

-v.
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  #50   Report Post  
Dan Campbell
 
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Default Buying a much bigger house
In misc.consumers.house Warren X wrote:
I argued that selling a home costs a lot of money in real-estate agent
commissions, legal fees, moving fees, renovation costs, etc.

He argued that the value of the houses increases at a rate that more
than compensates for these charges.

The long answer:
I have found, like most things in life, that the answer is "it depends".

It is a good exercise to make a spreadsheet and plug a bunch of numbers
in and see what you get.

What I have generally found, assuming anything resembling historic
trends on such things as investment returns, housing value increase
rates, property tax rates around my area, US tax laws (I dont know if
Canada has similar tax breaks on home mortgage interest as the US
does..?), local tax rates, etc, is this:

Your home is an expense.

Buying can be a better choice than renting, and thus make a reasonable
"investment" choice, but, unlike other things we think of as
investments, buying more generally does not increase your wealth over
time, it decreases it. There's nothing wrong with choosing to take on
this expense, of course. It sounds from your other posts like you
understand this and will make this choice eyes wide open later on in
life.

There are, of course, exceptions, especially when unusual market or
income conditions arise. You said the toronto market is hot, so maybe
this is one of them. If, for example, housing apprecation far outstrips
the return on the opportunity cost (other investments) of the money
you're spending, I can rig up a scenario where a 400k house beats a 200k
house + investments over 10 years. But it takes some pretty
historically unusual circumstances to come out that way.

If you are at all numerically inclined, I encourage you not to take any
of our words about it, and run the numbers yourself. Make sure to
remember to include: mortgage, interest, taxes, PMI if applicable,
insurance, some estimate on insurance, homeowner/condo asscn fees if
applicable, opportunity cost of extra earlier spending (i.e. if your two
options are a $1500 payment, and a $2000 payment, if you took the lower
payment, would you invest the $500 diff? If so, that money will grow in
investments, etc), housing appreciation, capital gains tax if
appropriate, and..."transition" costs (closing on one more mortgage,
commission on selling one more home, one more set of
moving/painting/setup/prep-for-selling costs). Not all of these things
are knowable in advance of course, but if you put this all in a
spreadsheet you can play with the variables to see how the differences
play out.


Short answer:
unless things are really unusual there and they stay that way for 10+
years, you're almost certainly better off staying put until you are
ready to take on the 800k place (which will cost more later, as someone
else pointed out).

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  #58   Report Post  
Al Klein
 
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Default Buying a much bigger house
On 29 Jul 2003 17:51:31 -0700, Darryl Okahata
posted in misc.invest.real-estate:

(D. Gerasimatos) writes:

Our home is 6-bedrm 4-bath 3-car garage 3,300 sq ft with 4-whole people living
here.

You are a model of frugality. We should all "make do" with houses like yours.

Responses in this thread seem to be ignoring the reality of
geography. In parts of the country, a house like the above *is* a
"luxury mansion".

While in other parts it's servants' quarters for the more
underprivileged servants.
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  #63   Report Post  
D. Gerasimatos
 
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Default Buying a much bigger house
In article ,
Mary Shafer wrote:

[snip!]

We don't drive luxury cars or wear designer clothes or anything. We
have traveled a lot, but we've also invested and saved. Our income
has always exceeded our outgo. Frequently substantially.

Now we're retired and we're financially secure. We may be rewarded in
Heaven, but we're going to live it up in retirement first.


I am happy things worked out well for you. Personally, I think it doesn't
make a lot of sense to wait until retirement to "live it up". You may never
get there and if you do you may be too old or sick to do some of the things
you wanted to do when you were younger. Who wants to work for 60 years
to have 10 years of fun?


This isn't directly at you personally, Marilyn. You did say that you
traveled a lot, which is indeed a luxury.


Dimitri

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  #64   Report Post  
Mary Shafer
 
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Default Buying a much bigger house
On Fri, 1 Aug 2003 02:45:14 +0000 (UTC),
(D. Gerasimatos) wrote:

In article ,
Mary Shafer wrote:

[snip!]

We don't drive luxury cars or wear designer clothes or anything. We
have traveled a lot, but we've also invested and saved. Our income
has always exceeded our outgo. Frequently substantially.

Now we're retired and we're financially secure. We may be rewarded in
Heaven, but we're going to live it up in retirement first.


I am happy things worked out well for you. Personally, I think it doesn't
make a lot of sense to wait until retirement to "live it up". You may never
get there and if you do you may be too old or sick to do some of the things
you wanted to do when you were younger. Who wants to work for 60 years
to have 10 years of fun?

Thirty years, not sixty, for me and forty for my husband. I expect at
least thirty more years of retirement.

Besides, we both had a tremendous amount of fun while we were working,
both on the job and elsewhere. We've pretty much done what we wanted
to do. NASA paid both of us to do things that were incredibly fun,
too. Flying in an F-104 Starfighter, for example. Watching the
Shuttle return from space. Neat stuff like that.

This isn't directly at you personally, Marilyn. You did say that you
traveled a lot, which is indeed a luxury.

It's no more a luxury than are children. Actually, it may be less of
an expense than are children, at least while the kids are at home or
in college. Different sort of return on investment, though.

Someone, probably Robert Benchley or Dorothy Parker, once said that
there are two kinds of travel--first class or with children. There's
some truth in this, because the kind of travel that families usually
do is quite different from the kind of travel the childless do. Not
better, not worse, just different. So is the way you spend your
money.

Mary

--
Mary Shafer Retired aerospace research engineer

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  #66   Report Post  
v
 
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Default Buying a much bigger house
On Thu, 31 Jul 2003 20:54:17 -0700, someone wrote:


I gues I disagree with both "sides" here, at least as far as the first
2 posters:

"The Millionaire Next Door" illustrates well the fact that wealthy
folks do not generally live in the most expensive homes. cut

The key here is the use of the word "generally". That and, that cause
and effect should not be confused in either direction. All this says
is that *some* people's tastes didn't change a lot as they got
wealthier. As I recall, the book in question pointed out that a large
proportion of millionaires were people of ordinary backgrounds, who
had built up modestly successful small businesses. They have a few
million, not hundreds of millions.

However, that many millionaires don't live in the most expensive
houses, does *not* mean that none do, or even that the most expensive
houses are not owned by millionaires. "Generally" just means that
most don't; others probably do indeed. And the most expensive houses
likely generally *are* owned by "millionaires", just those few who are
extreme millionaires. How many poor poseurs manage to carry a $5
million to $10 million (or more) house just for appearances? Those
are the "most" expensive homes.

But the cause and effect part is, that while buying a bigger house
will not make you a millionaire, neither will buying a small one and
then waiting for the riches to miraculously appear. Like any delayed
gratification, buying small may give one some more money to invest,
but it is a lot more complicated than just claiming that "millionaires
don't have expensive houses". I seriously doubt that many people
become millionaires on the difference in monthly payments between
their house and the next more expensive one. OTOH a lot of people
have become millionaires through investment in real estate.

This poster seems to me to be exaggerating the virtues of what should
be its own reward.


Most who are "technically" millionaires are cheap pathetic misers who aren't
enjoying a dime they are hoarding away.

Ohhh, dunno about that. Spouse and I have been "technical"
millionaires before (probably not one today, stocks down and business
slow this year) and I don't think we're like this at all. Let's see,
we have a big house, plenty of cars and motorcycles (all bought new),
season ski passes, travel, etc. etc. What does this poster think is
fun, blowing your pay on beer and scratch tickets and looking for
excuses why he is not rich?


If you count the present value of our retirement annuities, assuming
the actuarial life span, we're multimillionaires, by the way.

Mary

Hey Mary, enjoy your retirement!

-v.
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  #67   Report Post  
Al Klein
 
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Default Buying a much bigger house
On Thu, 31 Jul 2003 20:51:38 -0700, Mary Shafer
posted in misc.invest.real-estate:

Someone, probably Robert Benchley or Dorothy Parker, once said that
there are two kinds of travel--first class or with children.

Sounds like Erma Bombeck.
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  #73   Report Post  
Mark
 
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Default Buying a much bigger house
(D. Gerasimatos) wrote in message ...
In article ,
Mary Shafer wrote:


I am happy things worked out well for you. Personally, I think it doesn't
make a lot of sense to wait until retirement to "live it up". You may never
get there and if you do you may be too old or sick to do some of the things
you wanted to do when you were younger. Who wants to work for 60 years
to have 10 years of fun?


C'mon, if anyone has to work 60 years in order to enjoy 10 fun years
of retirement, he/she has made some terrible decisions during those 60
years. If you save & invest & budget wisely, you only need to work 20
years MAX, then you can live it up for 40 years. I had the means to
retire after 8 years of working although I chose to keep working a
little longer because it meant I could afford a nicer lifestyle in
retirement. I plan to retire after 11 years of working.

The book that stirred this discussion has excellent tips, although you
only need to read a couple of chapters. The rest of the book is
redundant.

Save & invest, then enjoy the compounding. Don't bother with retarded
4% CDs and MM's until much later. If you work for someone else it's
especially important to invest. My salary was never extraordinary; it
was the savings and investments that did all the work (and stock
options helped too . Buy a used car equivalent to 2 weeks salary.
The $30k you save on that car can become $125k in 10 years. I drove
the ****tiest cars for many years before upgrading. Your average 17
y/o flipping burgers at McDonalds probably owned a nicer one than I
did.

It's all about deferred gratification. Unfortunately, most people want
instant gratification, that's why they have to work 30-50 years.

Mark
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  #74   Report Post  
D. Gerasimatos
 
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Default Buying a much bigger house
In article ,
Mark wrote:

Completely untrue. When do you think Beverly Hills will decline into a ghetto?


After the Revolution!


Dimitri

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  #75   Report Post  
D. Gerasimatos
 
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Default Buying a much bigger house
In article ,
Mark wrote:
(D. Gerasimatos) wrote in message ...


2. My money market returned 4.72% last year and I have some high-grade (AAA)
bonds that did 8.74% last year.


You'll be lucky if that MM (if it's truly a MM and not a short-term
bond fund) will return anything above 2% this year. There are better
ways to make money with low risk.


It's over 4% again this year, but thanks for your concern. I'm just
pointing out to the OP how to obtain money for free. If you have other
methods feel free to post them for all to share.


Dimitri

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  #76   Report Post  
D. Gerasimatos
 
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Default Buying a much bigger house
In article ,
Mark wrote:

Save & invest, then enjoy the compounding. Don't bother with retarded
4% CDs and MM's until much later.


When you are borrowing hundreds of thousands of dollars that belong to
someone else then 4% doesn't seem too retarded, does it? I think you missed
the entire premise of why I mentioned "retarded" CDs and MMs.


It's all about deferred gratification. Unfortunately, most people want
instant gratification, that's why they have to work 30-50 years.


Deferred until when? I die? There is a middle ground here.


Dimitri

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