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Mustang5ohMan

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After 2008, our residential RE took more than 10 years to recover to pre-2008 levels, and that was in a very hot market. Residential RE on average increases about 3% a year. Compare that to the 10% annual stock market average.

FCF analysis is important to determine one's financial health, but some folks don't look to this when planning on long-term purchases like RE. The focus is what is the monthly payment compared to rent and can we handle it. And any savings went to the down payment rather than an emergency fund. So looking forward, they are already in negative cash-flow territory once the closing occurs. It's only after do we see the house-poor situation when that raise/promotion didn't come in, etc., and other things must be changed in order to put food on the table.

Experience over the long term, with many mistakes, helped me to see that in general, residential RE is a poor investment. Yes, one needs a place to live and buying is better than renting. But for most, a primary residence is their largest single asset which only increases by 3% a year on average. Add in the cost of the loan, I won't tie-up much in such a slow/no gainer. Would rather be reasonably leveraged and look to other assets to increase wealth. .

By the way, in June, 2019 we'd been on the down-side of the business cycle for about six months. We'd been moving into less risky assets in anticipation of a mild recessionary period which China was already experiencing. During the March/April 2020 time frame, the portfolio lost about 24%. It's gained back half that as of last week.

All valid points. You are correct it took nearly 10 years to recover. However you have to remember that RE you don’t have use much capital... 20% max of the home cost... and that’s max. A 300k house and let’s say you make $300 a month from the tenant that’s about 1% (tad bit more) and you’re still getting your 3% return (give or take a few percents) and if you put up the 20% that’s roughly what 60k you put into it... the market if you’re getting a 10% return on 60k is 6k a year which is damn close to the RE Market... just depends how much money you got and how you choose to play.
Also remember if your credit is solid you can buy a house for as little as 3.5% down and still get the same roughly the same return. Plenty of multi millionaires in either game so they are both winners.
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Dave2013M3

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0% interest for 72 mos. no reason to payoff early.
 

Mustang5ohMan

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0% interest for 72 mos. no reason to payoff early.
exactly. Companies usually charge the majority of their interest up front anyways. I got a smoking deal on my Scat Pack Charger has 0% with a large sum off also! Then I went and traded it on my Scat Pack WideBody with 15k positive! Brought my WideBody down cheap, but then the WideBody got stolen...
 

Bull Run

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All valid points. You are correct it took nearly 10 years to recover. However you have to remember that RE you don’t have use much capital... 20% max of the home cost... and that’s max. A 300k house and let’s say you make $300 a month from the tenant that’s about 1% (tad bit more) and you’re still getting your 3% return (give or take a few percents) and if you put up the 20% that’s roughly what 60k you put into it... the market if you’re getting a 10% return on 60k is 6k a year which is damn close to the RE Market... just depends how much money you got and how you choose to play.
Also remember if your credit is solid you can buy a house for as little as 3.5% down and still get the same roughly the same return. Plenty of multi millionaires in either game so they are both winners.
But the key word is is the tenant paying the rent (and not trashing the place). My wife and I had up to three rentals going at the same time but we ended up cashing out. We ended up making a decent profit and avoided getting any of those places trashed, unlike what happened to my friend's parents. Also realize that leverage goes both ways, so while it amplifies gains, it also amplifies losses, and people that I personally knew went through bankruptcies and/or divorces during/after the 2008 RE crash due to this.

Articles and organizations like ones below make me glad that I got out of the rental business. A lot of renters out there think that landlords are Uncle Pennybags when in actuality, while they may seem rich on paper (provided that the RE didn't crash), many of them are over-leveraged and as cash poor as renters living in their properties.

https://www.nbcnews.com/politics/po...ds-brace-largest-rent-strike-decades-n1195751
https://www.wsj.com/articles/rent-is-due-today-but-many-tenants-cantor-wontpay-11588330801
https://www.rentstrike2020.org/

78e5cba2febce47c391dc46371cab485.jpg
 

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Mustang5ohMan

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But the key word is is the tenant paying the rent (and not trashing the place). My wife and I had up to three rentals going at the same time but we ended up cashing out. We ended up making a decent profit and avoided getting any of those places trashed, unlike what happened to my friend's parents. Also realize that leverage goes both ways, so while it amplifies gains, it also amplifies losses, and people that I personally knew went through bankruptcies and/or divorces during/after the 2008 RE crash due to this.

Articles and organizations like ones below make me glad that I got out of the rental business. A lot of renters out there think that landlords are Uncle Pennybags when in actuality, while they may seem rich on paper (provided that the RE didn't crash), many of them are over-leveraged and as cash poor as renters living in their properties.

https://www.nbcnews.com/politics/po...ds-brace-largest-rent-strike-decades-n1195751
https://www.wsj.com/articles/rent-is-due-today-but-many-tenants-cantor-wontpay-11588330801
https://www.rentstrike2020.org/

78e5cba2febce47c391dc46371cab485.jpg

The market crashes too... let’s say someone purchased Ford 15/20 years ago and have been holding, they’d be pretty sad right about now. I get the diversify but some people spend a good deal on multiple shares, and when they drop they “hope” they recover.
 

ivantwilliams

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Anyone really close to paying off their car?

I know Covid-19 has probably put a kink in, for some. But...
 

Bull Run

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The market crashes too... let’s say someone purchased Ford 15/20 years ago and have been holding, they’d be pretty sad right about now. I get the diversify but some people spend a good deal on multiple shares, and when they drop they “hope” they recover.
It's much easier to diversify with stocks since instead of buying one house with $300K, you can invest in a wide range of companies via ETFs or mutual funds, such as ones based on S&P 500. Most of my gripe about RE is that many over-leverage because most of Americans accept debt as a way of life without fully realizing its danger, and it also applies to student loans. I know of success stories as well. My other friend's parents have only one rental house, so they weren't over-leveraged. It survived multiple crashes and is now paid off, providing them with a nice side-income during their retirement.

Back to the topic. I don't see issues with people buying new cars and if you are going to get a loan, getting one at 0% is a no-brainer. The issue I have is that some present it as a wise financial move by stating that they can save the cash and earn interest or invest. Here are my main counter arguments:

1. While some forum members managed to get around it, industry practice is no rebates or additional discounts with 0% financing, so 0% in this case isn't really free.

2. There's a reason why manufacturers only offer 0% for new cars, and in case of Mustangs, only for EBs and GTs, because they depreciate fast. You should only buy news cars because you want a new car, because it's not the most cost effective way.

3. The interest rate is near zero now and the current administration wants it lower. And stock market's starting to overheat again, and I'm saying this as a guy new believes in "don't fight the feds" and continuing to DCA into the market. Banks aren't going to cut your loan in half because your investment took a 50% hit. And this is the reason why I never invest on a margin even if when the market historically averaged 8%ish rerurns.

4. If you really want to make a smart financial choice and already have a good running car, why even get a loan to purchase a new car? Why not DCA more per month into your investments rather than making loan payments?

5. I have yet to see any articles, blogs, or books about "average" rich stating that getting a 0% long term car loans for new cars is a wise financial move. Most of them hate getting into debt unless it's to make money like businesses or RE.

6. Heck, purchasing Mustangs shouldn't be even be considered a smart financial decision in the first place, even for cheaper EBs, since there are plenty of cheaper (but boring) options to get you from point a to point b.

Again, this isn't aimed at people getting 0% interest rate loans in general, but rather to ones that are saying it's a good financial move.
 

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Mustang5ohMan

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I must of got lucky but in 2017 I purchased my charger and for 0% with about 10k off MSRP. Had 15k positive equity in that car after 2 1/2 years. And put it toward my WideBody challenger And when that was stolen and I got it back I put it towards my mustang which was 9.5k after winding it for around 6 months.
 
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IPOGT

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