All Forum Posts by: James Free

I'd be careful about diluting BP's core mission, which feels like it's already started happening. Be the best at what you're known for!

Does Canada have massive mortgage rate fluctuations well beyond what's possible in the US? Because in the US is is extremely unlikely that rates could change that much any time soon.

Still not rendering.

https://medium.com/@corybooker/corys-plan-to-provide-safe-affordable-housing-forall-americans-da1d83662baa

I know we don't want to get too political here, but this one is just too relevant. Can you imagine the massive impact on the housing market that would occur in the (unlikely impossible) scenario where this got enacted? EVERYONE, no matter how low their income is, would be guaranteed the "right" to rent ANYWHERE at an out-of-pocket cost of no more than 30% of their income.

This would create unimaginable demand congestion in the most expensive areas, as suddenly everyone in the country can "afford" to rent there!

I don't know about you, but my new FI plan is to retire on a passive income of $2k/month and live in Malibu at an out-of-pocket rent of $600/month!

"Gentrification" is not wrong.

A neighborhood is either desirable or expensive or undesirable and inexpensive. It can move in either direction for a variety of reasons. 

Maybe a community loses its industry and there are no more jobs, so prices go down, but it's still a bad place to live because there are no jobs and no future. Maybe hot new industries come to town and the opposite happens.

Maybe crime goes up, and people who can afford to leave move away. Maybe crime goes down, and people who used to avoid the neighborhood start moving in.

The list goes on and on.

Suppose we have a low-cost area that is in reasonable commuting distance from high-paying jobs. Why is it low-cost if it's so well-located? The obvious answers include crime and dilapidation. There are two ways things can go from here: The conditions improve and the prices go up, or the conditions stay lousy and the prices stay low. The "anti-gentrification" crowd tells you that price increases are immoral, but are they really ok with crime-ridden slums? Of course not. They promote magical thinking - the idea that we can get rid of crime and fix up the buildings without increasing the prices, even though the only reason that the prices were low was the conditions!

All of this without even mentioning that everyone who OWNs in a "gentrifying" neighborhood wins the appreciation lottery.

Shorter commutes are more green. It's better for society as a whole if the people working the high-paying jobs live near them. People doing little to no work don't have any particular reason to prefer one area to another, nor should we pander to them. The idea that you are more entitled to live in a particular area if you "started out there" has terrible implications and quickly becomes oppressive. 

Finally, of course, the elephant in the room is identity politics. Most ant-gentrification rhetoric usually stems from toxic identity politics. People who get very angry when Identity Group A is displaced by Identity Group B don't care one whit when the opposite happens somewhere else. At best, such people are consistent in supporting the displacement of "richer" people by "poorer" people, or at least those they imagine to be so, while opposing the displacement of "poorer" by "richer." But adding emotional rhetoric doesn't change the facts above.

There is no good reason to keep crime in place, to keep dilapidation un-remedied, or to maintain filthy hovels when better alternatives are available. 

"I heard on NPR yesterday that a buyer's market is on the horizon."

No, you didn't. You heard someone's opinion. One of thousands floating around.

Real estate is local, and no one can predict the future.

There are two unique factors pushing multifamily prices beyond what's reasonable.

#1 is the 1031 exchange. People start a 1031 by selling a heavily-appreciated SFR, then have a limited time to identify a new property or else a $50k tax bill will come due. They try to use their sale proceeds to buy a larger investment property (a multifamily), but get outbid every time. Soon that 1031 deadline is looming, and they're panicking about getting stuck with the $50k tax bill. So what do they do? Overbid the next multifamily they see by $30k. Why? Because throwing away $30k is smarter than paying $50k in taxes. They can't afford to not win the offer.

Multifamilies are being bought by people who know that they're overpaying, but are losing less by overpaying than they are by not paying. It's an asset bubble being created by the government via the existence of the 1031.

#2 is the foreigner. When you live in a country like China or with a government that likes policies like those of recent Venezuelan vintage, fear of having your assets seized by the state is ever-present. Owning assets outside their reach is a valuable safety net. Even if you have to overpay for those assets.

Plus, currency exchange rates can make a "poor performing" US investment better than a high performing native investment in terms of native purchasing power. The internet made remote-buying possible and normalized it, and now we're competing with billions of people.

Start by posting on the internet that you're 22 years old and have 50 grand. Then wait for people to tell you they can invest it for you and give them all your money.

...

House hacking is the consensus recommendation here and it's a good one. But before actually starting on anything, it sounds like you should do some reading and work on writing with more polish. Being taken seriously is a struggle when you're 22, and you have to overcompensate.

I am disappointed to see that some of the early responders here criticized the question. It's actually one of the more valuable one's I've seen here recently. 

Time is money, and everyone here is trying to build the latter in order to ultimately have more of the former. We should absolutely be measuring our behavior against our objectives. It's part of the "Find your Why" conversation.

It is true that measuring profit per hour is most important for flippers and least important for people who are trying to hit an FI number ASAP. But even the latter people should be conscious of opportunity cost. If you're pursuing FI by making $3/hour on weekends, you should be doing something different!

More broadly speaking, most of us are capable of earning a decent ROI by putting our money in an index fund. This strategy is completely passive and leaves us with all of our free time for other pursuits. REI can beat the ROI of an index fund, but only because we supplement our capital with our time. Comparing the "surplus ROI" to the time spent earning it is a reasonable thing to do. You might not personally care to do it, perhaps because you enjoy REI (or perhaps because you're afraid of the answer), but it's not appropriate to attack people for feeling differently.

The truth is, whether the time required to improve returns is worthwhile depends on the person and stage of life. A friend of mine is in his 60s and quite well off thanks to decades of REI. He tries to discourage me from trading more time for money (cough, Kiyosaki), suggesting that I stick with simple, low ROI buy-and-holds and save my free time for recreation.

Maybe he's just wiser than me.

@Michael Norris It's not so much that I don't trust them up front (though they could easily sell me more insurance than I need), it's that I don't trust them to update the numbers over time as I hold the rental and the market changes.