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  1. #91
    Diapositivo's Avatar
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    Quote Originally Posted by StoneNYC View Post
    I don't know where you get your numbers, but it's cheaper to pay a mortgage than to rent something if the same size. It's just that most people don't have enough for a down payment. Also you can't "move around" too much.

    Still it's foolish to pay rent when the money is going into the owners mortgage instead of just paying your own. The homeowners game is long term, you don't see the benefit until around the time you hit the 10 year mark, then you really start understanding the increase in value and actualizing the profit as real estate values increase over inflation.


    ~Stone

    Mamiya: 7 II, RZ67 Pro II / Canon: 1V, AE-1, 5DmkII / Kodak: No 1 Pocket Autographic, No 1A Pocket Autographic | Sent w/ iPhone using Tapatalk
    I get my numbers from Financial Mathematics, a branch of mathematics, with its own inner financiary logic.

    The mortgage payment is always composed of two parts: the interest part, and the capital restitution part. When you pay a house with a mortgage, you payback your capital AND you pay interest on the capital which you have not yet paid back.

    If, on the other hand, you just save and invest, you will earn interest on your capital instead of paying it. The "interest" you pay is the rent. Rent is nothing more, in nuce, than the interest on the capital you rent (the house). In a normal house market interest on houses is somewhere around 3 percent of the value of the house.

    In a normal mortgage you pay much more than 3% on the capital you borrow. 5% is a much more normal rate.

    The "down" payment doesn't change the logic. If, instead of buying a house now (let's say $300,000 down payment and $300,000 mortgage) you just invest the $300,000 you have and you rent a house of a value of $600,000 you will find that you will more easily buy a house after X years (your mortgage duration) by saving rather than by buying on credit.

    As a banal example, the case may be that the $300,000 invested can give you 5% after taxes while the rent of the house will cost you 3% of the $600,000 house. That means the interest on the "down" payment will actually pay most of the rent. You will "save" the amount you would have spent for your mortgage and invest that. The "non-mortgage" minus the "rent not paid by active interest" is the actually "capital building" you make every year. You earn interest every year on that.

    The idea that real estate increases with time is a prejudice. Real estate can increase, decrease, or remain stable. That's like saying that paintings increase value over time, or porcelain. There is no guarantee that houses rise in value in real terms in the long term.

    The capital you invest will typically grow more than inflation for sheer economic reasons (we exclude particular, anomalous situations).

    Don't buy. Rent, and save as if you had underwritten a mortgage.

    Don't buy giving a "down" payment. Invest the "down" payment, rent, and save as if you had underwritten a mortgage (same logic applies).
    Fabrizio Ruggeri fine art photography site: http://fabrizio-ruggeri.artistwebsites.com
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  2. #92
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    The logic to buying any "luxury" good is this: if you "invest" up front in a better quality item, it will last you much longer than the cheaper item, and in that sense pay for itself by not having to be replaced as often. I state "luxury" in quotes because quality and luxury are not interchangeable, although the cost of quality often makes something otherwise utilitarian a luxury. I have a set of Calphalon pots and pans - I got them close to 20 years ago because they will in all likelihood be the last set I buy - I may add to the set from time to time, but I will never NEED to replace them. Before, I had some non-stick pots and pans that the coatings were wearing through every couple to three years and had to be thrown out. The same logic goes with cameras - Hasselblads are for most people truly luxury items, but first and foremost they are workmens' tools. A wedding pro who shoots 20+ weddings a year and several hundred portrait sittings will wear one out in a decade. The average user who buys one, though, will probably die with it still in good working order. Same goes with vintage Leicas (and standard production Leicas... the fancy-pants collector Leicas are just flat-out luxury goods and not really meant to be used), Rollei TLRs, and most view cameras. Stainless steel Rolexes and Omegas are in that same camp - rugged, accurate timepieces that will outlast the original owner. THAT is your investment - something you can buy once and use forever without having to replace it. That degree of "luxury" spending is entirely justifiable because it pays for itself over time.

  3. #93
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    Quote Originally Posted by TheFlyingCamera View Post
    The logic to buying any "luxury" good is this: if you "invest" up front in a better quality item, it will last you much longer than the cheaper item, and in that sense pay for itself by not having to be replaced as often. I state "luxury" in quotes because quality and luxury are not interchangeable, although the cost of quality often makes something otherwise utilitarian a luxury. I have a set of Calphalon pots and pans - I got them close to 20 years ago because they will in all likelihood be the last set I buy - I may add to the set from time to time, but I will never NEED to replace them. Before, I had some non-stick pots and pans that the coatings were wearing through every couple to three years and had to be thrown out. The same logic goes with cameras - Hasselblads are for most people truly luxury items, but first and foremost they are workmens' tools. A wedding pro who shoots 20+ weddings a year and several hundred portrait sittings will wear one out in a decade. The average user who buys one, though, will probably die with it still in good working order. Same goes with vintage Leicas (and standard production Leicas... the fancy-pants collector Leicas are just flat-out luxury goods and not really meant to be used), Rollei TLRs, and most view cameras. Stainless steel Rolexes and Omegas are in that same camp - rugged, accurate timepieces that will outlast the original owner. THAT is your investment - something you can buy once and use forever without having to replace it. That degree of "luxury" spending is entirely justifiable because it pays for itself over time.
    Scott,

    You are quite right, I agree the most economy can usually be found in the highest quality, however componding credit card interest on that quality item as the OP proposes makes that economy a moot point, just as it will handily obliterate any appreciation. Giving $8000 for a $2000 camera (or whatever) doesn't sound like a very good investment to me.

  4. #94
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    Quote Originally Posted by Diapositivo View Post
    I get my numbers from Financial Mathematics, a branch of mathematics, with its own inner financiary logic.

    The mortgage payment is always composed of two parts: the interest part, and the capital restitution part. When you pay a house with a mortgage, you payback your capital AND you pay interest on the capital which you have not yet paid back.

    If, on the other hand, you just save and invest, you will earn interest on your capital instead of paying it. The "interest" you pay is the rent. Rent is nothing more, in nuce, than the interest on the capital you rent (the house). In a normal house market interest on houses is somewhere around 3 percent of the value of the house.

    In a normal mortgage you pay much more than 3% on the capital you borrow. 5% is a much more normal rate.

    The "down" payment doesn't change the logic. If, instead of buying a house now (let's say $300,000 down payment and $300,000 mortgage) you just invest the $300,000 you have and you rent a house of a value of $600,000 you will find that you will more easily buy a house after X years (your mortgage duration) by saving rather than by buying on credit.

    As a banal example, the case may be that the $300,000 invested can give you 5% after taxes while the rent of the house will cost you 3% of the $600,000 house. That means the interest on the "down" payment will actually pay most of the rent. You will "save" the amount you would have spent for your mortgage and invest that. The "non-mortgage" minus the "rent not paid by active interest" is the actually "capital building" you make every year. You earn interest every year on that.

    The idea that real estate increases with time is a prejudice. Real estate can increase, decrease, or remain stable. That's like saying that paintings increase value over time, or porcelain. There is no guarantee that houses rise in value in real terms in the long term.

    The capital you invest will typically grow more than inflation for sheer economic reasons (we exclude particular, anomalous situations).

    Don't buy. Rent, and save as if you had underwritten a mortgage.

    Don't buy giving a "down" payment. Invest the "down" payment, rent, and save as if you had underwritten a mortgage (same logic applies).
    Please check your assumptions:

    1) mortgage interest now stands at around 3.67% (national average for 30 year fixed) here in the US.
    2) just as there are no guarantees that real estate values increase, so to, there is no reason to expect investment values to increase.
    3) you've completely ignored the tax advantages to owning a home - which are substantial here in the US.
    4) "safe investments" no longer pay any significant interest....the interest rate paid on certificates of deposit, for example, is now well below 1%
    5) rent invariably goes up. One has total control over his mortgage payment...which stays fixed over the term of the loan and can go down if one refinances.

    In summary, Stone is correct...buying a home is much preferred here in the US - especially now, and especially if you are smart enough to buy in a region of the country that has and will continue to have strong employment.
    Last edited by BradS; 01-04-2013 at 12:01 PM. Click to view previous post history.

  5. #95

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    Diapositivo, your calculations are ignoring a very large factor - risk.

    The purchase of a home hedges the risk (borne by a renter) of rising home values and hence, rising rent. There is value in having one's housing expenses relatively fixed for a number of years, as provided by a mortgage. Further, in assuming your investments will be profitable, you also dismiss the risk of your skill in choosing investments that will (as you do recognize in the case of land) go up, down, or stay the same.

    There is another thing to be said for real estate - they ain't making any more of it.
    A politician is a man who will double cross that bridge when he comes to it.

    Oscar Levant

  6. #96
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    Quote Originally Posted by JBrunner View Post
    Scott,

    You are quite right, I agree the most economy can usually be found in the highest quality, however componding credit card interest on that quality item as the OP proposes makes that economy a moot point, just as it will handily obliterate any appreciation. Giving $8000 for a $2000 camera (or whatever) doesn't sound like a very good investment to me.
    I wasn't really addressing the question of credit card interest. That all depends on how quickly the buyer can pay it off- 12% interest, or even 21% interest, is a relative moot point if you're going to pay the thing off in say 3-6 months. If you're carrying the debt for multiple years, then yes, it's stupid.

    I'll amend my original statement then to say "buy the best you can afford", and not carte-blanche "buy the best". Like buying a Rolls or a Rolex or even a Leica or Hasselblad, all mechanical things require service to keep them running properly. It doesn't matter that you can afford the entry price - don't buy it if you can't afford the upkeep. Not as big a deal per se with cameras, which unless used heavily (or very rarely) don't require much upkeep, other items do require EXPENSIVE routine servicing. For example, there are quite a few vintage Rolls-Royce and Bentley automobiles (in good working order) available out there for under $25K, about what I paid for my brand-new Honda Accord. But if you should need routine service on the suspension, well, Rolls-Royce designed their suspensions to require a proprietary tool. The servicing, which is recommended every 50,000 miles or so, costs over $1000 per wheel, and must be done at the Rolls dealer (note the proprietary tool). Rolex recommends a servicing every 3-4 years, which costs nearly $1000.

    Please note that I own neither of the above brands of product - they're just cited as examples, point being take into consideration ALL the costs of owning something before buying it.

  7. #97
    BradS's Avatar
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    I think it also important to recognize that Luxury is not synonymous with quality.

  8. #98
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    Is the Leica an "Investment?"

    Diopositivo,

    The others said what I would have said. The only other thing I would add that after say 10 years of renting, that house will most likely not be $600,000 any longer, even in a terrible market like right now, the prices won't drop long term and the 600,000 house is now $800,000 or more.

    Anyway if you don't understand you won't agree and I wish you luck with renting.


    ~Stone

    Mamiya: 7 II, RZ67 Pro II / Canon: 1V, AE-1, 5DmkII / Kodak: No 1 Pocket Autographic, No 1A Pocket Autographic | Sent w/ iPhone using Tapatalk
    ~Stone | "...of course, that's just my opinion. I could be wrong." ~Dennis Miller

  9. #99

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    This doesn't always happen and may be an extreme example, but the increase in value of my last home completely paid for the principle and interest over the 9 years we lived there.
    A politician is a man who will double cross that bridge when he comes to it.

    Oscar Levant

  10. #100
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    Is the Leica an "Investment?"

    Quote Originally Posted by pbromaghin View Post
    This doesn't always happen and may be an extreme example, but the increase in value of my last home completely paid for the principle and interest over the 9 years we lived there.
    +1


    ~Stone

    Mamiya: 7 II, RZ67 Pro II / Canon: 1V, AE-1, 5DmkII / Kodak: No 1 Pocket Autographic, No 1A Pocket Autographic | Sent w/ iPhone using Tapatalk
    ~Stone | "...of course, that's just my opinion. I could be wrong." ~Dennis Miller



 

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