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Originally Posted By: Wolf359
Originally Posted By: SVTCobra
So since I own my first home I couldn't turn that into a rental property and move into the house I'm buying?
One of my buddies is buying up a lot of rental houses (6 or 7 already) and is deep in debt. I'd agree that his way is probably faster but I can keep buying houses as the cash becomes available and build up rental properties that way as well, albeit slower.
You just don't understand leverage. Sure you can pay cash for a rental property, but if you bought 4 rental properties and got a mortgage on all 4, if they go up 10% in value, it's really gone up 40% because you only put 25% down. Back in the 20's, they used to let you do that with margin on stocks, 10 to 1. Vast fortunes were made back then. And lost when the market crashed and now you can't do that anymore.
At first it was credit and now leverage? What do you think I'm referring to when I say that borrowing money is faster? Faster to actually owning the property and since he will take 30 years to pay it off, he can take the appreciation as he goes along compared to someone that saves money to pay for it. I don't like that approach because he has borrowed a lot of money and that is too much risk for me. It's fine for him and for the same dollars invested, he will have more money if everything goes to plan. Personally for me I don't like to worry about having to maintain a good job to pay for a good living. I'd rather be debt free in case I lose my job or become disabled.
Originally Posted By: SVTCobra
So since I own my first home I couldn't turn that into a rental property and move into the house I'm buying?
One of my buddies is buying up a lot of rental houses (6 or 7 already) and is deep in debt. I'd agree that his way is probably faster but I can keep buying houses as the cash becomes available and build up rental properties that way as well, albeit slower.
You just don't understand leverage. Sure you can pay cash for a rental property, but if you bought 4 rental properties and got a mortgage on all 4, if they go up 10% in value, it's really gone up 40% because you only put 25% down. Back in the 20's, they used to let you do that with margin on stocks, 10 to 1. Vast fortunes were made back then. And lost when the market crashed and now you can't do that anymore.
At first it was credit and now leverage? What do you think I'm referring to when I say that borrowing money is faster? Faster to actually owning the property and since he will take 30 years to pay it off, he can take the appreciation as he goes along compared to someone that saves money to pay for it. I don't like that approach because he has borrowed a lot of money and that is too much risk for me. It's fine for him and for the same dollars invested, he will have more money if everything goes to plan. Personally for me I don't like to worry about having to maintain a good job to pay for a good living. I'd rather be debt free in case I lose my job or become disabled.