You are paying it down exactly the same amount as a 3% mortgage. The answer however is not much. That is why I did 15 or 20 year loans. Or just add some amount to your payment each month. Any time I refied a loan I kept making the same payment as the original loan. Does the same thing.

A lot of people complaining about interest rates. 7% is close to the historical norm. The ultra low rates in the ‘10s were an anomaly due to an economy that has weakness in the fundamentals. That finally caught up to us.

Money costs money. Retail money costs more.

The problem is that these low rates dramatically inflated the values of the home and now that rates have gone up, the home prices are not dropping. A house I looked at in 2011, based on inflation, should be selling right around $125k. However, iit recently sold for $230k, with no real change since I looked at it. To make matters worse, insurance in increasing at a greater percentage, as are tax valuations. They auditors office just raise my tax valuation by 50% to over $100k more than I could dream of get for a selling price. Some of my friends had theirs raise by 65%.

Yep. Because so many buy payment and not price and sales market reflected that.

But big line must go up no matfer what.

So a house I easily bought as a LT in the Navy in 2010, for $170k, is now $330k with much higher interest rates, taxes and insurance.

Navy LT pay hasn't doubled in that time. But housing price has probably tripled.

I know my mortgage in 2010 was around $1150/mo

It's about $2800 today if I were to buy the exact same house. No upgrades. 10 years older.

This is what happens when the government runs the economy

your boomer is showing… beach front property in Malibu was going for $50K back in the 70’s and a whopping $192K in the 80’s.

a house sold in Peach Tree City sold for $600K in 2022 and is now listed for $899K… and it’s going to be sell in no time

I would not count on it selling fast. The market is correcting however I don't think it will be a deep correction. New construction is now having to offer deep incentives plus interest rate buy downs.

New construction is the place to be these days. Great deals going on with the excess inventory.

Correct.

The problem is the cost of housing hasn’t been CPI driven once people starting looking at it as an investment versus a living expense.

This is caused by a number of factors, but principally due because there was no safe place to put money. You always have to have a spot to park money where it is safe, and with interest rates at or near zero, there really wasn’t any where else for it to go. Too much money, too few venues.

The increase in home values isn’t a strict degradation in buying power that simple inflation causes, where everyone is a loser. In the case of housing, there is a winner, namely the owner.

Interest rates have crept back to normal. There’s now a place for safe cash, and maybe the pressure on housing will subside a bit.

Unless you have a fixed 10 year lease (not likely) you can count on your rent going up every 2 years by 10%ish. No landlord will lock in a rent for more than 2 years and no landlord is going to forgo an increase unless the market tanks and housing becomes significantly more affordable. I did 2 year leases and 10% on renewal, that's standard. Some did 2 year lease with a 5% or market increase at 12 months.

So there is a growing trend among some landlords that will forego rent hikes if they have an excellent tenat. In other words a good tenat may not be worth running off from a rent increase.

Again, the exception does not disprove the rule. Rents will go up over time, especially in the current market.

slumlord out here… my friend doesn’t raise prices on his tenants. He would rather keep a good tenant than be on the hunt every year to try and get more $$.. and rent prices went down in Austin, TX..

High housing costs go beyond low interest rates and investment dollars. Impact fees and government red tape stifle new construction. Local utilities that can't provide power and water further slow new construction. Municipalities will fast track projects that generate sales tax because they generate revenue with limited increase in city services. Housing, especially single family housing gets slow rolled because it increases demand for schools. The Econ101 supply and demand curve functions well and is keeping prices high.
​​​​​

They went down after soaring to new records. If your friend never raises prices rising costs will force him out of the business.

I don't disagree with your words, but keep in mind that some people don't view it as a business. Eventually they'll raise it as their mortgage raises and/or they sit down one day, calculate their costs and actaully look at their ROI. Some could take years to come to that realization. Some are accidental landlords (something I think we're seeing much more of today) and are happy to just cover the mortgage and mx items because it's a "long-term" investment. I'd wager that you see more of these types who how a single, SFH.

SFH owner management of rentals is a time investment. If you aren't compensated for your time, you are losing time and money. Annual or 2 year leases are designed to stay at market rates. If you let someone occupy at below market rates you are losing money and artificially suppressing the market. That's not runnning a business or investing.

I got out because my time was more valuable and the return on the capital was about the same as a diversifed large cap equity fund. I'm no longer responsible for or have to manage anything. I made the worst real estate buy ever... a hangar. I have one tenant and they barely cover the insurance. The best part is that I know it's not an investment and don't try to justify it as one. If you don't run it as a business, it's not an investment. Would you go to any advisor for investments and walk out of the office saying "this is great, I can get my principle back in 30 years and probably break even and all I have to do is find trustworthy people, manage thier payments, fix things at a moments notice any time of the day or night, pay interest, taxes, and insurance annually, hope for no cataclysms, and repeat as neccesary every 2-5 years." Nope, hard pass. That's not saying it's not doable, just not long term on a large scale. Eventually you're time constrained and off load the management duties. If that off load then makes you a passive investor, the investment class no longer matters.

This is a quality post. SFH rental is a loser unless you’re in to get big, which is essentially a second job. You either need to use sweat equity, which will soak up all of your time, or use hired management, which will eat away at cash flow. Spikes in insurance or taxes will wreck you because your time frame to recover is long, and the market may not even support it.

There is no profit in it unless you are playing the equity game, which is a very long term play (and by no means guaranteed), or tax harvesting, which pre-supposes you have other income to shelter. I watched game players get absolutely wrecked in the collapse in 2008. Ive seen other people get wrecked with changes in local ordinances prohibiting AirB&B type short term rentals, which collapsed the local market.

That’s not to say there’s no “money” in rental, there is, but you need to be ready to play the long game, play the tax game, and that can be more hassle than you expect and is always subject to change.

It depends. There is also a cost to having to find new tenats because the rates increased and the previous tenats left because of the rate hikes. Not to mention the time and energy that goes into that process of screening new tenats.



This is very true. Real estate, if done right, has slightly better returns than market rates, but it's higher risk. Also it's more work (not really passive) and requires a downpayment usually. Not to mention it's not very liquid. But the advantage is of course that it can be leveraged if you're willing to take the risk, AND, ultimately someone else is funding it.

I find that well meaning comparisons of real estate to stock market returns vary based on personal experience more than careful analysis. Just as stock market investors can have wide variance in return, so do real estate investors.
​​​​​​
​​​​​​I've run into very few naysayers who have made >$1 million in real estate. The answer isn't to walk away from rental property because you had or heard about a poor experience. Find someone making bank in a way that suits you and mimic what they are doing. SFH are a convenient entry point into rental property, but there are multiple other options with different time and capital requirements. You can find one that works for you and adapt along the way. I've gone from personally rehabbing SFH, to directing a team of experts. The latter takes less time and pays far better, but takes time to establish. My wife and I have been paid market rate salaies from our real estate company to account for the time and the returns after wages still CRUSH our 401k returns. It's all in how you run it.

https://external-content.duckduckgo....cfd&ipo=images

You mean “tenant”? N-T… big difference.

(bonus points if you can name the movie)

LOL whoops... yeah clearly I'm not a landlord. Spell check didn't catch that one.

Yeah, and I did Google Lens on the image, Better off Dead. Maybe that's cheating heh

fixed rates, he does all the maintenance himself. Mortgage cost X, he charges Y. Has over 10 properties and little to no headaches.. it’s a long game and someone else is laying his mortgages and he’s making great money on some and only a couple hundred bucks on others until he refinances at lower rates. He doesn’t have any rising costs, they’re all fixed

I want my $2!

"The K-12, Dude. You ski a knarly run like that, and the chicks will go sterile just looking at you!"

Definitely cheating... 🤨

Iconic line.

Thought you guys might enjoy the ridiculous median in HNL. 1.1M
Carry on.

Way back when i first started flying a old pilot told me, pay off your house and go buy another one you will never regret it It was very difficult at times. Having your house paid off is unbelievable. If some thing goes wrong You can work at walmart for taxes and insurance. Saved me many times in my career.

It’s the best.

All the smart math guys here will rightly point out that you can might get better returns with leverage. But…Beautiful thing is you can do both lately. Take some risk off the table and sleep better at night.

taxes, insurance, repairs, etc all rise continually. he absolutely has rising costs.

Thats nice, I wish I could figure out how to get fixed rate property taxes and insurance plus the cost of appliances ect.. that he will certainly need to purchase.

we've switched our approach and are instead focused on going all in to pay the house off early. The idea is, we can pay this thing off completely in about 2-3 years. From there, I can save a boatload of money, buy another property in cash, and not even worry about having to rent anything out. I can literally have two homes before I'm 50 years old.

I remember when having two homes sounded like fun.

we're DINKs. Family is scattered all over the country, and neither one of us are particulary attached to any extended family, including our parents. There will be downsides, but there's downsides to every aspect of life.

A second home could certainly provide the happiness you think it might. Just wasn’t for me or many people I know. Clearly I don’t know you and your spouse. Long term attachment to a second piece of property might just be your jam.

Among those I’ve known who were awash in cash, no one got much more joy out of more stuff…nor stuff that requires even more stuff (furniture, decorations, time, attention). The people I’ve known to put their “excess” income to work for other people (e.g., sponsor a kid’s pilot’s license, buy a budding musician a nice instrument, fund a deserving kid’s summer camp, help a battered spouse find safety), have minimal or zero regret. Perhaps some of those lessons aren’t learned until you’re over 50, though.

you can get a washer/dryer for $100 on Facebook market place. And you act like appliances need replacing every year.. your boomer is showing lol

Every legacy airline pilot has seen double digit pay growth since covid. Thats not even including the 50k+ Most of us got in "retro".
The last 4 years have been my best ever in my life and i'm going to go out on a limb and say it's been that way for all major airline pilots.

Nobody here has it "hard".

Not every year but modern appliances have a 5 to 7 year life. Fridges used to last 20 years!

Im going to say a solid 10. I changed all my appliances last year as they all started to break between 10-11yr.

The stove we changed because we wanted, but it was pretty affordable $1,000 in sale with air fryer as part of the oven.

Anyone at a legacy right before COVID who was either on 1 or 2 year pay, switched to a WB or upgraded has seen their already upper middle class salary literally double. My salary more than doubled and I sit reserve and have had to leave my house an average of 7 days a month for work.

Also my 401k has doubled, and the equity in my house has increased several hundred thousand dollars.

How any of you people can be anxious about your current financial issues boggles my mind.

When we start facing headwinds and the country is embroiled in much more chaos airline pilots are going to be absolute balls of anxiety.

We will likely know in a week if that’s gonna be very soon or sometime later in the future for some other reason. But it’s gonna happen.