LIVING OFF DIVIDENDS & PASSIVE INCOME

I think the tax breaks are pretty much a myth these days. If not completely, then mostly. The standard deduction is so high these days, that you probably won’t be able to itemize unless you have an outrageously huge mortgage ( that you probably can’t afford in the first place ).

And of course, owning a home can be a real investment if you can rent out a room or two to help pay it off faster – once you own it clear, (or even before) you can always move out yourself and rent somewhere else, while continuing to rent out the property you own (or do home exchanges for travel, etc.). I personally am very attached to the idea of having one’s own house, even though I have a flexible lifestyle (not tied to one place, etc.).

Even with the bubble bursting, home prices are down to around 2004 levels. That means that people who bought homes ten years ago still have seen a positive return on their investment. Now ask someone who invested in say an index fund 10 years ago how that investment is doing.

Real estate is an incredibly valuable PART of ones investment portfolio. Of course just like anything else – if invested in unwisely, it will cost you.

I never heard of this guy – but his advice is poorly thought out and I suspect designed just to be inflammatory and get people talking about him.

I almost have to agree, it is crazy how much a house really costs you when you factor in 30 years of interest. It is a huge number. That being said, I love my home and am blesses to have a beautiful place to lay my head every night.
Thanks for sharing!
-TAM

Great post. Thing is, even if you own the house “free and clear” there are still lots and lots of operating costs, like property taxes and costs of upkeep.

It annoys me how retirees think that because they paid of the mortgage, they think their house should be free and that other people (i.e. working people) should pay their real estate taxes for them because they figured that once they had paid off the mortgage they had no further housing expense.

@Dividend Growth Investor – it is simply not true that Europeans have such high rates of home ownership. Only 40% of Germans own a home, rates are similar in Italy and Switzerland. Ownership rates are higher in the UK and Ireland. But in the UK much of the land is actually not owned “fee simple” but is actually a long term (99 year) lease. Private savings (invested in insurance products, generally) and rental real estate tend to represent the majority of household net worth.

[...] Living Off Dividends & Passive Income presented Home Ownership: A Marketing Scam? [...]

Good post;
There are so many intangibles with owning a home vs. renting that clearly don’t make it a scam though:
-If you rent, you have limits to what you can do in “what could/should be” your own home – upgrades, owning a pet, putting up a fence, etc. Imagine now, for existing homeowners, that you couldn’t do these things to your own house. Now that I’m an owner, I could never rent again.
-While the past few years have been a reversion to the mean (still more to go IMO), on a long term basis, owning a home can provide for leveraged returns unlike any conventional investment. For instance, when I bought my first house, I put down 5% (late 90s). Couple with closing, it was probably like 20K. Within a few years, I had over 100K in equity. Talk about ROI! Not that I’m expecting 8-10%/annum price appreciation again any time soon, but the same concept of leveraged returns applies.
-When considering mortgage interest deductions, it’s not really much cheaper to rent than it is to buy. Why would I rent a pay say, $1800 a month vs. a mortgage of like $2200 a month (oops, closer to $1900 post-deduction)?

I agree, this Altucher guy’s looking to stir the pot with a controversial topic.

The word Mortgage is from the latin Muerto which basically means death grip. However if you can do an owner finance then real estate can make sense. Either that or pay off your mortgage before the interest sucks the life out of you!

I’m about breaking even comparing monthly costs for my 1000-square-foot house with paying roommate compared to my old 660-square-foot apartment that I had all to myself. The repair and lawn-maintenance headaches are counterbalanced somewhat, for me, by being able to play the piano or dance around at all hours of the day.

I keep checking my old apartment complex, and even after 13 years they haven’t raised the rent much.

However, when I pay off the house, this will all change. Surely the taxes, insurance, and repairs will never exceed the rent on a one-bedroom, right? And if it does get too expensive, that will mean that it’s worth a lot of money and I can sell and move out of town if I have to.

If I were still moving a lot, I would never buy a house, but since I’ve found my favorite place to live, and I really enjoy not moving, then normally I think I didn’t make a mistake or if I did, it wasn’t a very large one.

What I want to know is how can renting be cheaper than owning but landlords still turn a profit.

Thanks. It makes sense that apartments would be cheaper to buy per unit than houses.

I think you’re a genius and an independent thinker. It’s unfortunate that people can’t handle their mirages being shattered by the truth. Marketers are fooling people into thinking that buying is good for you.

The same thing is happening to people trying to lose weight. They’re confused about what’s healthy, what works, and what’s good for them. They ignore common sense and hand over their money based on lies that are perpetuated by marketers and people trying to sell them something.

It’s really very sad. Here’s the bottom line: To have what most people don’t have (a slim waistline, financial security) you have to do what most people are not willing to do (rent, exercise and eat right, start passive income streams).

I enjoy living in the minority. Pick up a book on Thoreau.