If you’re in the wealth accumulation phase of your life, I think buying a home is a terrible decision (in most cases). Prove me wrong. Seriously. I’m not being rhetorical. I want to see if there’s math that says otherwise.
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Everyone forgets foregone rent in the calculus. The incremental cost of ownership in e.g. Manhattan is offset by mortgage interest deduction and equity appreciation plus the chance to flip to an incremental cash flow asset at 0 marginal cost when you move out.
What do you think would come out on top after 10 years :a $300k down payment on a residence in Manhattan plus other costs or $300k average investment property or stocks while renting $5k/month? Broad question. But what are you thoughts
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I think your logic makes sense. I think I agree. I don’t think most rent their primary residence though after. I also think you’re not even close to average.
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None of your followers aspire to average :) love talking this stuff and I imagine the reason the hustle crew got so engaged on your city choice decision is because at end of the day real estate captures everyone’s imagination
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You don’t have the 300k at the beginning of the calculation. That’s the thing. You build it during the loan. So if first loan payment is 2000$, that’s your portfolio value at the first month.
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Where I look to live, you need at least $300k down
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At the “end” of one of those paths I have a New York City real estate asset that can create rental income for me after it has already created some appreciation. The reasons I’m motivated to buy are:
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- LBO-style equity value creation. In no other asset will the market structure give me 80% LTV to acquire the appreciation and future cash flow potential of an asset. - Mortgage interest deduction. My effective tax rate in Manhattan is high; deducting interest expense
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How many times did they have to deal with rental inspections or an owner selling ... or had to ask permission to paint a wall. A home not just an investment.
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Will rent stay at $5k for ten years? Mortgage payments are known.
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NYC vs an 18 hour city. Go with the latter.
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Ave appreciation in Manhattan is 2.83%. In 10 years you pay down the mort $175K, & property would be worth $1.321M. Monthly you pay $3.1K vs $5K, in 10 years you also save $280K (w/ 5% APR). Your $300K down is now $1.077M—equivalent to 13.5% annual gain.
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