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  1. #111
    Diapositivo's Avatar
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    I don't know the specificities of the US markets. Taxes and government favouring home buying might distort the market.

    When you invest a sum you invest it in something that intrinsically yields something. A sheep yields wool, a cow yields milk. A house yields a rent (if you live in your own house it yields a figurative rent) but that, historically, is far below the average return on capital on, let's say, the stock exchange. I mean the average sheep (or manufacturing etc.) historically yields more than the average house.

    When you invest money (let's say in the stock exchange, and you go for high-dividend shares, e.g. you buy utilities, oil pipes etc.) you diversify. It's easy to make a portfolio in which no single investment is more than let's say 3% of your capital. The "risk" of the wise investor is spread among various firms and various sectors and countries.

    If the mortgage is cheaper than the rent then there must be some force in the market distorting prices (for instance, tax deductions on the interest of the mortgage being higher than tax deductions on rent). I agree that if and when the mortgage is lower than the rent (no down payment considered) it would be foolish to rent.

    Your house needs a flow of money just to preserve its value. This is normally considered to be around 15% of the annual rent. You then have taxes normally (I don't know in the US).

    In my country the economic condition are set in deep favour of renting, yet we have one of the greatest percentages of home owners in the world and people consider rent to be "wasted money". It's entirely a cultural, prejudicial distortion in my view. There's a huge amount of second houses (mostly kept empty as "reserve of value" under the assumption that "houses always go up" which are now heavily taxed).

    The desirability of a house (quarter, zone etc.) is more unpredictable than the stock exchange. In the very long run, the stock exchange will inevitably raise in value (because Homo oeconomicus creates value, capitalism creates value) while house value is largely dependent on demographic phenomena and movements.

    In the last decades, all over the world people moved from the countryside to the town. That made the value of town houses to rise and, very importantly and frequently omitted, the value of countryside houses to fall. We have "phantom villages" in Italy as well, those houses are investments which was totally destroyed by demographic movements. We cannot exclude that internet will cause a contrary movement, from town to countryside, reversing the house value trend of the last decades.

    But my point was different. If you believe in real estate, normally (tax distortions and bubble busting aside) investing in real estate and renting will yield you more in any case. You mileage may vary depending on your local house market, your tax laws etc. obviously.
    Fabrizio Ruggeri fine art photography site: http://fabrizio-ruggeri.artistwebsites.com
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  2. #112

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    Quote Originally Posted by MattKing View Post

    We don't have access to mortgages with terms of 25 or 30 years here - 5 years is as long as the government mortgage insurance programs will cover. We use approximately the same 25 - 30 year amortization periods (the interest compounding is calculated slightly differently).
    So, are you stuck with balloons after 5? Most mortgages in the US are not insured by the government. VA and FHA used to be advantageous, but not so much any more.
    “You seek escape from pain. We seek the achievement of happiness. You exist for the sake of avoiding punishment. We exist for the sake of earning rewards. Threats will not make us function; fear is not our incentive. It is not death that we wish to avoid, but life that we wish to live.” - John Galt

  3. #113
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    Again where are you getting your info?

    Stock investments yield way less over a long period (10 years example) than home prices and the home prices are more stable and predictable than stock and MUCH more predictable than investing in commodities which can put you belly up if you invest in say corn and then the corn crop dies from an epidemic... (which happens a lot sadly).

    Home loan payments are less than rental for a number of reasons (it's not always true but often true) one reason being that the people who own the rental properties also have mortgages on the homes and so they have to cover the cost of the mortgage PLUS make some profit, so the rental price is higher than the mortgage price, it's just that many renters don't have the money for a down payment of 20% in order to get a mortgage, or don't have good enough credit to get a loan.

    I do believe in some diversity, that at least we agree on, but overall the home values are often much higher than stock value increases.

    Yes there are tax benefits as well, and they are significant in the US so that helps. You can also "roll" over your mortgage if you upgrade your house without paying any capital gains tax.

    I don't know about your country, here... I'll just use my house as an example, the 2 family I have, in a dilapidated neighborhood, (which means the rental prices are actually good for renters and bad for landlords) my house mortgage per month is $2,300 on a 30 year mortgage, that includes taxes and insurance cost. .. the downstairs rent is $1,000 and the upstairs rent is $1,600 which yields $2,600 - $2,300 = $300 profit per month = $3,600 per year - $2,000 average maintenance = $1,600 net profit... this covers the home cost and then a little extra. 20 years from now that will sell for at LEAST $500,000 if not more and I've only invested $5,000 total to buy, fix up, refinance, and rent.

    NOW that is based on a 2 family house, but say I lived in the first apartment, I would only be paying even after maintenance $866 per month if I lived there instead of rented to someone.

    It's still cheaper than rent, and an investment in the future.

    I was pretty good at stocks too, but made way less than on the house.

    The market fell out everywhere and yes I lost my shirt, but in the long haul it will be better than having rented.

    Quote Originally Posted by Diapositivo View Post
    I don't know the specificities of the US markets. Taxes and government favouring home buying might distort the market.

    When you invest a sum you invest it in something that intrinsically yields something. A sheep yields wool, a cow yields milk. A house yields a rent (if you live in your own house it yields a figurative rent) but that, historically, is far below the average return on capital on, let's say, the stock exchange. I mean the average sheep (or manufacturing etc.) historically yields more than the average house.

    When you invest money (let's say in the stock exchange, and you go for high-dividend shares, e.g. you buy utilities, oil pipes etc.) you diversify. It's easy to make a portfolio in which no single investment is more than let's say 3% of your capital. The "risk" of the wise investor is spread among various firms and various sectors and countries.

    If the mortgage is cheaper than the rent then there must be some force in the market distorting prices (for instance, tax deductions on the interest of the mortgage being higher than tax deductions on rent). I agree that if and when the mortgage is lower than the rent (no down payment considered) it would be foolish to rent.

    Your house needs a flow of money just to preserve its value. This is normally considered to be around 15% of the annual rent. You then have taxes normally (I don't know in the US).

    In my country the economic condition are set in deep favour of renting, yet we have one of the greatest percentages of home owners in the world and people consider rent to be "wasted money". It's entirely a cultural, prejudicial distortion in my view. There's a huge amount of second houses (mostly kept empty as "reserve of value" under the assumption that "houses always go up" which are now heavily taxed).

    The desirability of a house (quarter, zone etc.) is more unpredictable than the stock exchange. In the very long run, the stock exchange will inevitably raise in value (because Homo oeconomicus creates value, capitalism creates value) while house value is largely dependent on demographic phenomena and movements.

    In the last decades, all over the world people moved from the countryside to the town. That made the value of town houses to rise and, very importantly and frequently omitted, the value of countryside houses to fall. We have "phantom villages" in Italy as well, those houses are investments which was totally destroyed by demographic movements. We cannot exclude that internet will cause a contrary movement, from town to countryside, reversing the house value trend of the last decades.

    But my point was different. If you believe in real estate, normally (tax distortions and bubble busting aside) investing in real estate and renting will yield you more in any case. You mileage may vary depending on your local house market, your tax laws etc. obviously.

  4. #114
    MattKing's Avatar
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    Quote Originally Posted by pbromaghin View Post
    So, are you stuck with balloons after 5? Most mortgages in the US are not insured by the government. VA and FHA used to be advantageous, but not so much any more.
    Not really a problem with balloon payments - the renewal market for mortgage loans is reasonably competitive in Canada. Market rates do fluctuate a bit of course, but if someone started a 5 year term 5 years ago, they would have signed on for about 3% per annum then, and their renewal will probably be around 3% per annum now.

    And of course at the end of the term, one can go out into the market and try to negotiate a better deal from a competitor, or try to negotiate a better deal on a renewal than that originally offered.

    Financial reversals can, of course make it difficult to get good terms from competitors, as can reductions in the market value of homes, but the marketplace seems to encourage renewals without re-qualification for anyone who has made all their payments on time.

    The government provided mortgage insurance is only directly applicable to high ratio mortgages, but it tends to have an effect on the entire market.

    The insurance (or privately available alternative insurance) is required by law for high ratio residential mortgages offered by Canadian chartered banks and credit unions. Borrowers are required to prove that they are financially capable before they qualify for that insurance - it is one of the major restrictions on banking operations in Canada that have helped keep our banks financially solid.
    Matt

    “Photography is a complex and fluid medium, and its many factors are not applied in simple sequence. Rather, the process may be likened to the art of the juggler in keeping many balls in the air at one time!”

    Ansel Adams, from the introduction to The Negative - The New Ansel Adams Photography Series / Book 2

  5. #115
    MattKing's Avatar
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    Quote Originally Posted by StoneNYC View Post
    Canada?


    ~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
    Yes, but more importantly in the Lower Mainland area of British Columbia, Canada (near Vancouver). If you are talking about single family homes around here, you will need a minimum of $500,000.00 to buy around here, and that is for small, old, and a longish way out in the suburbs.

    Markets vary greatly though across the country.

    There are a whole bunch of economic and taxation issues that influence this. For example, while residential mortgage interest is not deductible in Canada for our homes, we also are not required to pay capital gains tax on the increase in value of our homes.

    And in addition, the tax treatment of investment in rental properties means that few wish to invest that way, preferring instead to invest in development and sale of new stock.

    The paradox is that while it is cheaper to pay a mortgage for your own home then rent in one of our bigger metropolitan areas, it isn't possible to earn enough rental income from an investment property to pay the payments on the mortgage needed to finance the purchase of that property (assuming no large capital contribution).
    Matt

    “Photography is a complex and fluid medium, and its many factors are not applied in simple sequence. Rather, the process may be likened to the art of the juggler in keeping many balls in the air at one time!”

    Ansel Adams, from the introduction to The Negative - The New Ansel Adams Photography Series / Book 2

  6. #116
    Mainecoonmaniac's Avatar
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    "Photography, like surfing, is an infinite process, a constantly evolving exploration of life."
    Aaron Chang

  7. #117

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    The decisive factor for Leica and other 35mm cameras values, will be the continuing manufacture of film. We've already lost Kodachrome, infra red and high speed colour negative films, and are reliant on a single manufacturer for transparency material. All cult products are liable to tulip mania and long term investors should look at historic bubbles, especially against the current declining market.

  8. #118
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    Keep in mind that the OP wasn't asking if a Leica was worth the money, he was asking if the possible appreciation of the camera would offset credit card interest. I think most of us would agree that it won't.

  9. #119

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    Quote Originally Posted by JBrunner View Post
    Keep in mind that the OP wasn't asking if a Leica was worth the money, he was asking if the possible appreciation of the camera would offset credit card interest. I think most of us would agree that it won't.
    I certainly agree with all the comments here about debt, and credit card debt in particular. I would never suggest someone buy a camera on credit except in the unlikely situation where it was necessary for work that would lead to paying off the debt.

    Still, I don't know the OP's situation, and you have to figure in the cost of selling something and repurchasing it later. If I had a camera outfit that worked as I expected and suited my needs, I wouldn't be in a hurry to let it go. I would be inclined to find a way to pay it off promptly. Some creative thinking might even lead to a way to do that with photography, and promote yourself and your work at the same time. Maybe host a Leica payoff show with prints at reasonable prices. Or maybe your photography services as a Leica payoff promotion. I'm sure someone more creative than me could come up with other ideas.

    If that ain't gonna work, then yeah, get out of debt however you can.

  10. #120

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    Very few objects will outperform cost + interest in the short or medium term. Maybe house flippers in the boom and precious metal specialists came good but the safest way to collect is to buy something very few possess, and pay the going rate. If you see 'collectible', 'classic' or 'vintage' next to a sale, run a mile.



 

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