High cost of living markets like New York, DC, or San Francisco could see rent/own spreads like that pretty easily.

How rural are we talking?

b0ridi said:

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TennAg said:

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Stive said:

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I'd like you to show your math on a 20-25% return on buying a house with 20% down.

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-Buy 100k house for 20 down.
-100k house appreciates annually at 5%.
-20k "investment" makes 5k

pretty basic stuff

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Monthly payment on a 30-year $80,000 loan at 4% is $384. That's $4584 per year. So you're "making" 5000-4584=$416/yr before taxes. 2% property taxes = $2000/yr, putting you at a $1584 loss. Pretty basic stuff.

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Are you implying the op would have no housing cost until he buys a house?

Stive said:

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But I can deduct the interest and taxes. That adds up to a 20% return right

/tennag

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Whether you own or rent, the carrying cost (including tax) gets paid by you, as does maintenance and utilities and everything else. If you rent, you also get the privilege of covering admin and marketing expenses, empties, and wear and tear at a clip above ownership averages.

It's more appropriate to group these under living expenses instead of in your roi calculus.

Pretty sure no one is arguing that.

I'd just like to see your math show a 20-25% ROR on buying a home.

That's exactly what he was arguing

Ahh....fair enough.

Let me rephrase. I'M not arguing that point. I'm simply and actively seeking these 20-25% ROR's I've heard about.

Small town east TX.

Curious if there is a market for a duplex. That would be a good start for him, but of course that wouldn't help you.

Quote:

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Curious if there is a market for a duplex. That would be a good start for him, but of course that wouldn't help you.

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If there was a duplex available, I'd buy it. : )

That would be a good idea for him, but not if he's not going to stay for awhile. No good property managers out here if he leaves + he's not super handy & maintenance would eat him alive on anything he could afford. It would be a great plan for him though wherever he lands. I wish I had done that in my 20's.

Use those funds to make your side hustle your full time gig.

You are at the best time in life to try entrepreneurship. You have very little to lose at this stage of life compared to in your future.

I make that recommendation from my own experience.

Don't buy or lease new cars

If you buy a stock and it drops more than 10%, sell. (Rule of thumb)

Turn of the Drips on solid stocks. (Cat, Boeing, PM, Apple, Pg). Dividend reinvestment

MPython43 said:

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Use those funds to make your side hustle your full time gig.

You are at the best time in life to try entrepreneurship. You have very little to lose at this stage of life compared to in your future.

I make that recommendation from my own experience.

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This is true. The opposite, save-save-save, is also true and the path we chose.

DINKs right out of college, STEM jobs, maxed all tax advantage space and saved more in taxable. Life is really on Easy Mode for us because of the saving rate we set on Day 1. We're 30 now and looking to start a family. Every avenue, full-time/part-time/stay-at-home, will be available to my wife without financial worry.

The specifics of where, 401(k) to match-Roth-Max 401(k)-HSA-Taxable, have been covered. However,

• Shovel as much into investments as early as possible
• Then, invest in yourself. Certs., license, more degrees and play the employment field - address income
• If traveling is your jam, no better time than DINK stage - so, visit r/churning

From ea1060

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If you have never invested before, and have no idea what you are doing, your best bet is to open an account with Vanguard or Fidelity and put your money in a total stock market index fund. Read forums like bogleheads.com everyday and get a better feel for investing, and look up the 3 fund portfolio. After you have some time in the market and experience some of the ups and downs of the stock market, then you will be better equipped to handle investing in individual stocks.

Look up dividend growth investing. You should invest in blue chip stocks that have a solid history of paying/increasing their dividends (dividend aristocrats is a good list of these types of companies). Seeking Alpha is a good source for this, and their daily articles are great to learn more about which companies to invest in.

2-3 years ago I had no idea of how to invest, or what to invest in. However, after doing the steps above I have now built up a sizable portfolio and have a pretty nice dividend income stream coming in every quarter/month. Investing is easy, its the financial advisers that want to make it seem extremely complicated.

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Seems legit

I knew I should have bought a $3 million home with 20% down in my late 20's when I had the chance. TennAg, where were you when I needed you?

IrishTxAggie said:

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Keep renting. Got it!

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I realize this strays far from the OP's question, but my personal opinion is that college grads probably shouldn't but a home - even if they have the financial means - under 25 (or so).

Your biggest wealth-building tool over your lifetime will probably be your income. In my experience, the biggest opportunity for young professionals to boost their income is to be flexible with work location and assignments. A few relocations and reassignments that net 6-10% raises between 22-26 make a huge dent to your lifetime earnings versus someone making your typical 2-4% raises.

Find the most successful people you know in real life and offer to buy them coffee or lunch and have this conversation with them. This thread might spark some good questions to ask them, but you have no idea if the "wisdom" you are receiving here is from 24 year old with negative net worth or a 40 year old with millions in net worth.

Find successful people -> emulate successful people -> be successful.

Fairly reasonable formula.

The vast majority on this board know much more than I do. About two years ago I decided to study the investment patterns of Warren Buffett. His model is pretty simple. Some basic Google searches will afford you the opportunity to learn about long term, value investing. I pretty much mirror what he does - if he buys then I buy and if he sells then I sell. Berkshire publishes their stock activity quarterly. Again a Google search will give you his recent activity. He's a long term investor - not a trader. He's averaged more than 20% return over the last 50 years. My thought is I simply don't have the time nor the expertise to to beat his numbers. He's got a team of elite researchers and has much skin in the game. Just something you might consider.

Ragoo said:

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aunuwyn08 said:

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There is no flaw to the argument I made because I did not specify what the equity percentage was. As long as the cost of tapping equity is less than 100% of the equity my point remains true.

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if you have a fixed rent of 1500 a month and you have a variable cost of homeownership that is 2500 a month on average. Is the $500 towards your mortgage each month plus the 20% down payment really that valuable versus the $1000 in cash flow?

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This is not a good comparison. The house that costs $2500 to own is going to rent for more than $1500. For $1500, you are probably getting an apt, half the size, no garage, etc etc.

All those have value to people.

There are a few rent houses in my neighborhood, and the market for those rent now (not 4 years ago when I bought) is higher than my PITI.

Just remember; whatever you are renting, someone owns it and is likely making a profit off of you. Deductive reasoning tells you that you could own whatever you are renting for cheaper. This goes for just about anything in life.

Bobaloo said:

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The vast majority on this board know much more than I do. About two years ago I decided to study the investment patterns of Warren Buffett. His model is pretty simple. Some basic Google searches will afford you the opportunity to learn about long term, value investing. I pretty much mirror what he does - if he buys then I buy and if he sells then I sell. Berkshire publishes their stock activity quarterly. Again a Google search will give you his recent activity. He's a long term investor - not a trader. He's averaged more than 20% return over the last 50 years. My thought is I simply don't have the time nor the expertise to to beat his numbers. He's got a team of elite researchers and has much skin in the game. Just something you might consider.

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You missed the keystone to Buffett's strategy: cheap leverage through his insurance companies. Yes, you can leverage up like Buffet, but your cost will be much higher. If you want Buffett's trades; you're better buying brk.b than emulating his trades.

I agree with this advice as well. Adding to what Ranger Rick said, at this point in his career, Buffet also makes a lot of deals that you or I can't. See his GE recession play.

752bro4 said:

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You'll probably save the most money compared to your friends/peers by not chasing and dating women. I would hate to know how much I wasted* from ages 18-32.

* totally worth it though

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So true.

A wise professor at A&M continuously told our class "time is on your side."

Name that professor. It's one of the key lessons I learned at A&M and has stuck with me.

Don't neglect the effect of lifestyle choices. In the US, you have 5 basic needs:
1) Food
2) Clothing
3) Shelter
4) Transportation
5) Connectivity

If you overly neglect any of these, your ability to excel financially can be impacted. For example, you can't be a realtor and drive a crappy car. You can't be a lawyer and not own a suit. You can't be a stock trader or business owner without good internet.

However, beyond a certain point all of these areas involve lifestyle choices. In my situation, I made the following choices many years ago.
1) Eat out a lot at reasonable restaurants, but also learn how to cook.
2) No high end clothing; be content with levis/columbia/adidas...
3) Don't buy home more than 2x annual salary, to keep taxes, maintenance, and utilities low, and free money for travel
4) Only pay cash for cars and never more than $15K
5) Late adaptor of smart phones; good cable TV and internet because I like to watch my teams.

My son asked me if we were rich. I said no, because rich people don't have to make decisions like this. At your age, you can't pretend you're something you're not. Decide what's important to you, and establish a budget.

Finally, watch out for the "incidentals." Gym memberships, concert tickets, weekend trips, girlfriend gifts, pets - you name it. They will eat you alive. Budget for them. If they are critical to you, you may need to back down on one of the 5 things above.

Other than being a fool, the worst mistake you can make in your 20's is too much house. Right up there with it is too much car. But the incidentals will cost you so much, and you won't even realize it until you're 40 and your kids don't have any college savings yet.

Build the life you want, then save for it.

Interesting thread, buy a house with the plan of renting it when you move. 30 years worth of very cheap debt and as rental rates grow your payment remains constant.

I tried that idea, but you don't know what the rental market will look like years later when you move. When I found I could only get about 0.8%/month in rent, it made more sense to sell. The whole "passive income" is a boondoggle for most people. If you want to be a landlord, do it as a real job, not a side job. OP wanted an investment, not an extra job. Renting might bring a slightly higher return, but it has a significant opportunity cost in your labor.

Landlording one asset should not require much work. Obviously the rent amount dictates whether-or-not the investment is sound, but typically this strategy plays out well. I've done it, my parents did it. We did/do well

Unless it's a no-brainet opportunity, I'd pass. It's fool's gold most of the time. It looks good, like a garage sale, when you hold a stack of money in your hand at the end of the day. Garage sale - spend days getting ready, let half of creation traipse all over my yard, paw all over my stuff, and tick off my neighbors for a few hundred bucks, or just drop it off at Goodwill, itemize it, and save even more in taxes? Easy choice.

And you're right. Landlording one asset shouldn't be too hard. But it doesn't make much money either. To really make money you have to use leverage - the real estate equivalent of buying on margin. Probably a better proposition for a young single guy.

Start early. Don't touch it. Compound interest is your greatest ally.

I agree and there is leverage. Long term cheap fixed debt is an investor's best friend