Yet another rent vs. buy thread

JuiceMan: about 3 months ago

"If you buy a house for $100,000, that's the amount that you're investing, just that you're borrowing part of it. So if the risk-free rate is 4.5%, your cost is $4,500 ($100,000 * 4.5%), not $900 ($20,000 * 4.5%). Where do you see "equity" or "down payment" in this?

i) the risk-free 10-year interest rate is 4.5 percent;
ii) the mortgage rate is 5.5 percent;
ii) the annual depreciation rate is 2.5 percent
iv) the marginal tax rate of the typical homebuyer is 25 percent;
v) the property tax rate is 1.5 percent;
vi) the risk premium is 2.0 percent
vii) the long-run appreciation rate of housing prices is 3.8 percent (expected inflation of 2.0 percent plus a real expected appreciation rate of housing of 1.8 percent, the average from 1980–2004 for the metro areas in our sample for this paper)

THE PRICE OF HOUSING IS THE PRICE OF HOUSING, NOT THE INVESTMENT IN IT. Otherwise, you wouldn't need the mortgage rate."

steve, have you actually done the calculations for your precious imputed rent theory / paper? Do me a favor, run the calculations for a $1.25M property and let me know what you come up with for "Annual Cost of Ownership". Use your numbers that you have quoted here and the formula from the "Assessing High House Prices: Bubbles, Fundamentals and Misperceptions" article you provided.

JuiceMan: about 4 months ago

Why 15x steve? Is 12x an overwhelming buy signal?

btw, I understand many things steve, but some of your posts require A.D.D translation services (do you offer that?). To say I don't understand you is not the same as understanding the content we are discussing, but you know that already. Oh and by the way, you have man tits.

stevejhx: about 4 months ago

See, even if you use the 20x figure - which isn't the case b/c of interest rates and other factors, including falling rent - you still have apartments priced 30% above current rents.

However, I might buy at 15x.

stevejhx: about 4 months ago

Well ccdevi, Juiceman has a problem with it - he doesn't understand it.

ccdevi: about 4 months ago

I said in 2 different posts that of course you should take into account the opportunity cost of investing in real estate. If you're not going to read the posts then whats the point?

Yes Steve I've never seen an amort schedule. Or maybe you haven't. 10 years into a 30 year loan, the interest is still over 80% of what it was day 1. Real short term. Not to mention loans of over 1 mil.

I have no idea what "your" formula is, and with regards to the one from the article you quoted, other than some questions I have with regard to how opportunity cost is calculated, I don't think I have any problem with it. Seems pretty straightforward and obvious to me.

stevejhx: about 4 months ago

"I answered that a long time ago."

What was the answer?

"why you refer to the mortgage deduction as a short term benefit?"

You've never seen an amortization schedule, I presume. You pay most of the interest up front.

With renting, you gain most of the benefit through accretion of your principal, which occurs at the end.

I've offered you a different formula from mine. Use it & let me know the answer.

ccdevi: about 4 months ago

yes i know. you ask a question (which as far as i can tell is based on a misrep of JM's positions), you hold it out there as this nugget of brilliance, i answer it, twice, and again you have nothing to say.

this is where you either go away or type another 8 paragraphs that seem intelligent but really don't make any sense.

vverain pegged you perfect a few posts back.

have a good night.

stevejhx: about 4 months ago

ccdeivi: LMA

It's all there.

ccdevi: about 4 months ago

same old same old. now we flip back to the strawman.

"Ignoring which rate to use, why should we ignore the long-term opportunity cost of not investing a down payment elsewhere, yet include the short-term benefit of the mortgage tax deduction, when we're dealing with a long-term asset?"

"They can't answer that, either."

I answered that a long time ago. Of course you don't ignore the opportunity cost, what a revelation.

Again I'll ask why you refer to the mortgage deduction as a short term benefit?

stevejhx: about 4 months ago

"Steve, your problem with having an argument with me is that I haven't taken any position about whether Manhattan residential real estate is overpriced or underpriced, or renting in the short term or long term is beneficial or not."

Vverain, I don't care what your position is, and I don't care if I have an argument with you. I respect JuiceMan much more than I do you because, like me, he states an opinion and says if he's wrong. You don't.

I have taken a position, and stated why, and even agreed to multiple ways of calculating it. If you calculate it as a p/e ratio it's 12x. If you calculate it as the Fed does, it's 20x. If you calculate it as 40x monthly rent or 28% of annual income, they're just different ratios using different numbers that give you the exact same answer. I will accept any provable way of doing the calculation, provided that it is grounded in historical data. What I won't accept is the spunky / houser / et al. comment that I'm blowing it out my arse.

B/C I do, in fact, understand the numbers, and I will, in fact, admit if I screw up. And most importantly, like a man, I will state what I think.

stevejhx: about 4 months ago

JuiceMan, I'd love to be on your side, & we're probably closer than we know.

There are multiple ways to calculate the fair value of purchasing vs. renting. I chose one way, the Fed chooses another, but the answer is the same though the ratios differ. I tried to pick something easy - simple economic opportunity cost using the down payment. The Fed went the long route, I don't think it matters, which is the premium over the risk-free rate for the entire purchase price, adjusted by the premium over the risk-free rate for owning (which has a risk) vs. renting (which doesn't).

I had read that article long before I made that post. mschlee brought it to my attention. My (not specifically stated but implied since it's now in the equation) theory is that the risk of investing in the S&P 500 OFFSETS the risk of owning real estate vs. renting it. Here's what I said:

"Were real estate a risk-free investment, then you would compare the opportunity cost of owning it to that of owning another a risk-free investment. In the long-term the S&P 500 is extremely consistent at an 8% real rate of return, since the end of WWII on a moving average basis. In the short-term it is more volatile than real estate only because real estate is less liquid. Real estate has other invisible risk factors built in, like the inability to sell a property when you want to, thus forcing you to maintain payments, or because of the illiquidity of the market, an inability to "time" it, at least in the simplest form of buying on the dip and selling on a spike. And you further cannot "dollar-cost average" real estate, which greatly reduces the actual risk of volatility. Not so much a factor for a down payment, but indeed a factor if you invest real-estate and common charges into the market over time, rather than paying real-estate taxes and common charges."

The Fed says the same thing in a different way: there is a risk in investing in the S&P 500 vs. real estate, there is a risk in investing in property rather than renting it. I say that those risks offset each other; the data bear me out.

Here's what it tells us: why should we ignore the long-term opportunity cost of not investing a down payment elsewhere, yet include the short-term benefit of the mortgage tax deduction, when we're dealing with a long-term asset?

Dude, if you understand CAPM as you say you do, the Fed's formula - being economic, not modern portfolio theory - is WAAAAY easier to understand. Let's agree on the inputs, the offset, and a way to calculate them. You can't aggregate - as you tried to do - all the many (and recognized) benefits of owning yet ignore the opportunity cost of not owning.

Sometimes, buying real estate - as a capitalized expense - IS THE BEST THING YOU CAN DO. Other times, when it costs you twice as much to own as to rent, it makes no sense.

So, agree to the Fed's formula, or mine, or state yours and answer my criticisms as I will gladly answer yours.

Else, become vverain or evillager. HELP!

VVerain: about 4 months ago

Steve, your problem with having an argument with me is that I haven't taken any position about whether Manhattan residential real estate is overpriced or underpriced, or renting in the short term or long term is beneficial or not.

I've merely taken a careful look at the way you construct your argument and have found misstatements, exaggeration, fallacious logic, and in some cases outright lies. Plus arrogance, silly bravado, excessive and unfounded ad hominem style of engagement, and a very strange manner of over-dramaticism.

JuiceMan: about 4 months ago

I'll happily admit that I don't understand the formula. We were talking monthly costs, then yearly, and now we are talking about the risk free rate * the price of the house. I'm not being snarky here steve, but what exactly does that tell us?

stevejhx: about 4 months ago

And JM is full of shit, which is why he doesn't answer:

PRICE OF HOUSING = (EQUITY * RISK FREE RATE) + ONE YEAR OF INTEREST PAYMENTS

If you plug that into the formula in the article (from the FED) you get a circular equation. It is impossible to come up with a purchase price of $240,000, as the article does, if you only use the equity w/o knowing what percentage the "equity" is of the house price.

It's all BS, just like evillager, verain, and all the rest. Financial mumbo-jumbo. If they want to use the Fed's formula, I'll do that. If they want to use my formula, I'll do that. Otherwise:

They can't answer that, either.

MANHATTAN IS IN FOR A HUGE PRICE CORRECTION, by anybody's formula. Which is why they won't engage me.

LOL.

VVerain: about 4 months ago

ooh, good come back.

Why use poor logic in your original argument to support a position? Because if you shout enough and type the same nonsense over and over, often in capital letters, maybe people will think you are right simply because you are there.

And frankly, yes, to be an asshole, most of the average guys on here have no idea ... you seem like you know what you are talking about.

But you don't.

stevejhx: about 4 months ago

Verain, if ass were not naturally followed by hole, then you wouldn't be who you are today.

3+4 is not the same as 7+8.

Is it?

I say it's not.

Down 10% then up 5%
Down 5% then up 10%.

R not the same thing. Makes a huge difference in figuring out whether it's better to buy or to rent, since expectations of property price increases is part of the formula, and in that, Down 10% then up 5%
Down 5% then up 10% makes a HUGE difference.

Like JuiceMan's calculation of what property prices are. LOL.

Assh*le.

VVerain: about 4 months ago

I love Steve's logic.
>>I said:
Down 10% then up 5%
Down 5% then up 10%.
<<

Might as well have said: Renting is better than buying, or the NY Times rent calculator is wrong, or whatever other argument you enjoy making, by stating 3+4 is not the same as 7+8.

stevejhx: about 4 months ago

Thank you for your concern, I'm quite fine, thanks.

No, JuiceMan, the price of housing is not just the equity, but the full price of the housing: what it cost to buy. Or else, there would be no way to come up with their conclusion that:

"Leaving aside other differences between renting and owning, people should be willing to pay up to 20 times (1/0.05) the market rent to purchase a house. Hence, for example, a two-bedroom apartment that rents for $1,000/month ($12,000/year) should sell for up to $240,000."

You need to account for mortgage interest, capital gains and other taxes, which are not paid on the EQUITY, but on the full price of the housing, just like it says in the article.

If you buy a house for $100,000, that's the amount that you're investing, just that you're borrowing part of it. So if the risk-free rate is 4.5%, your cost is $4,500 ($100,000 * 4.5%), not $900 ($20,000 * 4.5%). Where do you see "equity" or "down payment" in this?

THE PRICE OF HOUSING IS THE PRICE OF HOUSING, NOT THE INVESTMENT IN IT. Otherwise, you wouldn't need the mortgage rate.

Admit you're wrong.

Then, my calculation of "opportunity cost" was done in an entirely different (and equally acceptable) way.

Then, there's this part missing from your "model": an additional risk premium to compensate homeowners for the higher risk of owning versus renting.

That you deny exists.

And: effective tax rate, not the marginal rate that you wanted to use.

Not everyone agrees with this model (Robert Shiller, for one) but I'll abide by it for the purposes of our discussion. If you'd like to calculate the disequilibrium using it, I'd be glad to abide by the result.

JuiceMan: about 4 months ago

steve, didn't I already agree with you that prices were out of "equilibrium"? Wasn't this whole exercise (before you spit the dummy) designed to determine a reasonable range for how far out of equilibrium we were for a given property? You are becoming delirious and I fear for your stability.

"The first component is the cost of foregone interest that the homeowner could have earned by investing in something other than a house. This one-year cost is calculated as the price of housing times the risk-free interest rate.

NOW WE SEE WHY JUICEMAN IS WRONG TO USE THE RISK-FREE RATE FOR JUST THE DOWN PAYMENT. IT IS THE RISK-FREE RATE FOR THE "PRICE OF HOUSING."

steve, I love this one. If I could highlight on this screen, I would highlight risk free rate. How is it that I'm wrong again? So you know it is me, I will type in caps. PRICE OF HOUSING = (EQUITY * RISK FREE RATE) + ONE YEAR OF INTEREST PAYMENTS

stevejhx: about 4 months ago

Remember, that formula is for the ANNUAL PRICE of owning. To be accurate for the purposes of what I have been saying, you need to do this every year over 30 years, the depreciation period. Calculate that rents increase at the exact same rate as home prices, because they do.

stevejhx: about 4 months ago

petrfitz, "the actual cash that an owner gets back doesnt mean anything to them because of his twisted logic."

What "cash back"? It's not "cash back." It's cash you never had to pay in the first place.

From that article written by the Federal Reserve and others about imputed rents, which you obviously didn't bother to peruse:

How Not to Judge the Sustainability of Housing Prices

To assess whether house prices are unsustainably high, casual observers often begin by looking at house price growth. Figure 1 shows that between 1980 and 2004, real house prices at the national level grew 39 percent, or 1.4 percent annually.

I WILL SPEAK NOW IN CAPS SO YOU CAN SEE WHAT I'M WRITING VERSUS WHAT THE ARTICLE SAYS:

SO NOW WE'VE SEEN HOW MUCH HOUSING PRICES INCREASE IN REAL TERMS, IN A 20-YEAR PERIOD. THE RATE IS HALF THAT SINCE WWII.

A Formula

The formula for the annual cost of homeownership, also known in the housing literature as the “imputed rent,” is the sum of six components representing both costs and offsetting benefits.

The first component is the cost of foregone interest that the homeowner could have earned by investing in something other than a house. This one-year cost is calculated as the price of housing times the risk-free interest rate.

NOW WE SEE WHY JUICEMAN IS WRONG TO USE THE RISK-FREE RATE FOR JUST THE DOWN PAYMENT. IT IS THE RISK-FREE RATE FOR THE "PRICE OF HOUSING."

The second component is the one-year cost of property taxes, calculated as house price times the property tax rate *t

The third component is actually an offsetting benefit to owning, namely the tax deductibility of mortgage interest and property taxes for filers who itemize on their federal income taxes. This can be estimated as the effective tax rate on income times the estimated mortgage and property tax
payments.

AGAIN WE SEE WHAT IS WRONG WITH JUICEMAN'S MODEL - IT IS THE "EFFECTIVE" TAX RATE, NOT THE "MARGINAL TAX RATE" THAT IS USED.

The fourth term reflects maintenance costs expressed as a fraction of home value.

AKA COMMON CHARGES AND SPECIAL ASSESSMENTS FOR US, AS WELL AS AMORTIZED TRANSACTION COSTS.

Finally, the fifth term, is the expected capital gain (or loss) during the year

WHICH, AS WE HAVE SEEN, IS 1.4% IN THIS MODEL, VERSUS 0.7% OVER A LONGER TERM, AND I THINK FALLING HERE.

And the sixth term represents an additional risk premium to compensate homeowners for the higher risk of owning versus renting.

WHICH JUICEMAN DENIES EXISTS - OWNING IS IN FACT HIGHER RISK THAN RENTING.

The sum of these six components gives the total annual cost of homeownership:

Equilibrium in the housing market implies that the expected annual cost of owning a house should not exceed the annual cost of renting. If annual ownership costs rise without a commensurate increase in rents, house prices must fall to convince potential homebuyers to buy instead of renting. The converse happens if annual ownership costs fall. This naturally correcting process implies a “no arbitrage”
condition that states that the one-year rent must equal the sum of the annual costs of owning.

"NATURALLY CORRECTING!"

NOW HERE IS WHAT WE CAN DISCUSS IF YOU WOULD LIKE:

Under these assumptions, the predicted user cost is 5.0 percent: that is, for every dollar of price, the owner pays 5 cents per year in cost. Leaving aside other differences between renting and owning, people should be willing to pay up to 20 times (1/0.05) the market rent to purchase a house.11 Hence, for example, a two-bedroom apartment that rents for $1,000/month ($12,000/year) should sell for up to $240,000. This price-to-rent ratio provides a baseline against which housing prices can be judged “too high” or “too low.” If price multiplied by the user cost exceeds the market rent, housing is relatively costly.

BUT THAT UNDER THESE ASSUMPTIONS:

Now this is me talking again. I agree with that - every word of it, except the 20x annual rent ratio necessarily, which is true in general - and was in 2004, the year this article was written - but not in the very expensive Manhattan market today for many reasons.

Here's the kicker, and why I hold my position:

House Prices are More Sensitive to Changes in Real Interest Rates in High Appreciation Rate Cities
We have thus far downplayed one of the most critical and least understood determinants of the user cost of housing—the expected growth rate of housing prices. Expected price appreciation is central to the debate over whether a housing bubble exists and, if so, where. Evidence suggests that expected rates of house price appreciation may differ across markets. Because expected appreciation is subtracted from the user cost, metropolitan areas where expected house price appreciation is high have lower user costs than areas where expected house price appreciation is low. Any given change in real interest rates, then, operates on a lower user cost base in high price growth cities, yielding a larger percentage effect. For example, if in the above example we had assumed that the expected real rate of appreciation on housing
was 2.8 percent rather than 1.8 percent, the predicted user cost would have been 4 percent instead of 5, and the potential price-to-rent ratio would have been 25 instead of 20. If we had assumed an even higher rate of expected price growth, say 3.8 percent, the predicted user cost would have been 3 percent and the implied price-to-rent ratio would have been 33.3.

This is me again. I think:

1) Interest rates are higher than 5% for jumbo mortgages, and far more difficult to get (not quantified in this model).

2) More importantly, property prices are going to fall, therefore lower the price to rent ratio from the current astronomically high level.

Here's why. Go to that paper:

www2.gsb.columbia.edu/faculty/cmayer/Papers/Assessing_High_House_Prices.pdf

Look at the chart on page 17, for the Imputed-to-Actual-Rent Ratio versus Price-to-Rent Ratio for New York.

It hovers around 1, as it should. "Naturally correcting." Look where it was in 1988, just before the last property bust. This chart ends at 2004, which I maintain is in equilibrium, and it is at about 1. Prices doubled since then, rents did not. As they always do, on the way down they will overcorrect.

Go to Table 3, User Cost-Based Assessments of House Price Levels, then Markets where the imputed rent-rent ratio peaked in the late 1980s and had a trough in the 1990s.

Look at NY's figures.

Go to the conclusion on page 19/20:

"Of course, in Boston, New York, Los Angeles, San Diego and San Francisco in the late 1980s and Denver, Miami and Houston in the mid-1980s, a high imputed-to-actual-rent ratio was a prelude to sizable housing downturns. Hence, our methodology successfully identifies prior periods of excessive valuations in the housing market."

So, JuiceMan, this argument is now over. I wanted to make it somewhat simpler than what the paper presents, but since you refused to answer me, I've provided you with the proper answer.

Do your model according to what you get from the paper. The link is there. Imputed rent right now, at these levels, are far higher than market levels, tax benefits, risk-free rates (used properly - on the cost of the property, and including the greater risk of owning which you deny exists) do NOT outweigh the extra financial burden of owning. Property prices are no longer rising at astronomical rates, and I know very people who expect them to do anything but fall. Interest rates on jumbo mortgages are far higher than the 5% used in the sample: 50% more, in fact. We do have higher effective tax rates, but that's a double-edge sword: it makes the monthly carrying costs effectively cheaper, but capital gains are taxed as regular income tax in NY, making AMT more likely. Amortized transactions are also very high, as are labor costs.

And then there's AMT.

So do your math this way, tell me what you get from it and what assumptions you're using.

We will fall to 12, and then climb back up. UNLESS rents correct from where they are as well - which seems to be happening - in which case we might reach 18ish, since Manhattan is a relatively expensive market.

I've made a few concessions to you, JMan. Your turn.

ccdevi: about 4 months ago

yeah I'd figured you'd be done. its about this point when people cut through the blather, dissect your words and call you on them that you go away. is it for good? alas i suspect not.

petrfitz: about 4 months ago

Steve is done and hasnt supplied us with 1 credible person who supports his claims.

His logic is flawed, comes apart at the littlest variable, and only applies to the aggregate of of all RE. He doesnt take into effect locality, location, etc etc etc etc.

Steve is renting his way to wealth! Genius!

stevejhx: about 4 months ago

First, I'm not stevenj. That was spunky, now banned.

Second, I'm done discussing this. Bye.

petrfitz: about 4 months ago

http://www.streeteasy.com/nyc/talk/discussion/3500-renting-is-always-financially-more-beneficial-over-time-than-owning

TheFed he says is over and over again.

TheFed: about 4 months ago

As vocal and eccentric as steve can be, I don't believe he ever stated "RENTING IS ALWAYS BETTER THAN BUYING"

ccdevi: about 4 months ago

oop again, what wrong with me...."Or are you really talking about mortgage TAX (which I have to admit I didn't even think was deductible but its so small who cares anyway?)"

petrfitz: about 4 months ago

ccdevi - Steve takes "imputed rent" twists the logic and claims that the principle essentially zeros out the effect of tax exemptions and deductions. He thinks that his principle means that the actual cash that an owner gets back doesnt mean anything to them because of his twisted logic.

I got a tax refund of $36K that I would not have if I rented. But according to Steve's logic, I didnt really get that cash back.

ccdevi: about 4 months ago

oops, thats "should not" count principal...

also, petrfitz is right you didn't prove Orman is with you, in fact you proved the opposite, she says 20%, no recovery until 2010. you have said 50% and I've seen you say its a permanent impairment.

ccdevi: about 4 months ago

oh my.

"that's just the mortgage principal"

I think you meant the mortgage payment (principal and interest). You should count principal (except to the extent of the opportunity cost going forward). Also to get your number, you must be using 8.5% interest. Really no need to go on, that's just insane and absolutely ridiculous.

"Add them in and you get 2x"

Well no actually you don't.

"why should we ignore the long-term opportunity cost of not investing a down payment elsewhere, yet include the short-term benefit of the mortgage tax deduction, when we're dealing with a long-term asset?"

Of course you should factor in the "cost" of the downpayment. Why do you call mortgage interest deductions, short term? Or are you really talking about mortgage interest (which I have to admit I didn't even think was deductible but its so small who cares anyway?).

"And regarding the "tax deductions" - which are factored into market rents by definition anyway"

What the heck does that mean? Answer...nothing. Its nonsense. The topic was coming up with a formula to compare rent with purchase cost, there is absolutely no reason to ignore any factor that affects purchase cost.

petrfitz: about 4 months ago

how did you prove that Suze Orman or Schiller agree with you?> You havent. You pointed to a statement about a specific period of time "the time of the current crediut crisis" and claimed that it supports your ALWAYS over time. It does not.

Steve it is easy to see through you.

Steve logic with the statements above are the same as "if I am hungry at 2:01 pm, then I must be hungry all the time for my entire life"

Nope - Steve you are a dope.

petrfitz: about 4 months ago

Steve please provide a link where Schiller specifically supports your claim. Your interpretation of his research does not count. If it is so clear cut there should be a statement, paragraph, or something where he states support for your premise.

Send us the link where he says that "Renting is ALWAYS better than owning"

stevejhx: about 4 months ago

Okay, so I proved to you that Suze Orman is on my side in this market, and so is Robert Shiller. Glad you came around.

RENTING IS ALWAYS BETTER THAN BUYING is if you look at residential real estate as an asset, rather than as a capitalized expense (rent), which it is.

Robert Shiller proved with real numbers that since the end of WWII owner-occupied residential real estate increased at 0.7% real per annum. On a moving average basis, the S&P 500 increased a real 8% per annum during the same time frame.

That is for OWNER-OCCUPIED residential real estate. Investment real estate is a different animal, and because it produces income (rather than substituting for an expense) you can make money on it.

now it's your turn: why should we ignore the long-term opportunity cost of not investing a down payment elsewhere, yet include the short-term benefit of the mortgage tax deduction, when we're dealing with a long-term asset?

petrfitz: about 4 months ago

"Suze Orman said that she would not be buying in this current housing market" - does not in any way say that "renting is ALWAYS better than buying"

"Robert Shiller, of Case-Shiller fame, who recently said that this housing crisis will be worse than the Great Depression's" - says nothing about "renting is ALWAYS better than buying"

We just want someone else to support your claim Steve. Just one credible person. Just one.

petrfitz: about 4 months ago

Please provide proof that either Suze Orman or the others support your claim that "RENTING IS ALWAYS BETTER THAN BUYING"

The "proof" you supplied above in each case only speaks to the time during the credit crisis not ALWAYS.

Also the survey is the only way of proving it and you know that it would easily disprove your "hypothesis"

stevejhx: about 4 months ago

The survey wasn't worth commenting on.

Suze Orman said that she would not be buying in this current housing market, because she thinks it's going down another 20%, and won't recover until at least 2010. She said it last Saturday night.

Any "credible economist" might be Robert Shiller, of Case-Shiller fame, who recently said that this housing crisis will be worse than the Great Depression's.

Is that enough?

petrfitz: about 4 months ago

Ok so any credible economist, Suze Orman, Jim Cramer, TV personality, anyone with any credibility.

Steve anyone with notarity or credibility who agrees with you.

Also you have no comment on the survey Steve.

jordyn: about 4 months ago

Why aren't fee-based (as opposed to commission-based) financial advisors credible?

stevejhx: about 4 months ago

petrfitz, recognize this first: there is no such thing as a "credible Financial Advisor." Like realtors, they are sales people, and will sell you whatever they think they can.

You most likely have a universal life policy or a whole life policy, laden with fees that never make you any money, with tax-free assets inside of them when the policy itself is tax-free.

And you still haven't learned your lesson: the tax benefits are factored into the price. Perhaps you haven't learned it because you're listening to real estate agents telling you what a great investment real estate is, while they make a 6% commission off of you.

why should we ignore the long-term opportunity cost of not investing a down payment elsewhere, yet include the short-term benefit of the mortgage tax deduction, when we're dealing with a long-term asset?

petrfitz: about 4 months ago

Steve's comment will be that the last 10 years are an outlyer. Then adjust the years to 20, 30, 40 whatever you want Steve and the results will be the same. Renters net worth will be dramatically less.