Lot of $$ / Buy vs. Rent
10-28-2024 | 08:49 PM
#51
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Vacation pay, training pay, international pay, reroute pay, profit sharing, paid trip drops, 415C overage pay and GS's. I broke 600k easily on a 334 dollar an hour rate. I was not close the to the highest paid pilot in my category. The guy who was probably at the top was about 50% in category. Keep in mind that when most pilots quote their pay rate they use their W2. They omit things like their 401K contributions.
That 438 dollar an hour rate becomes 525 an hour after you hit the 415C limit on international pay. Many hit that at the end of the first quarter. A 4 day GS with 25 hours pay is worth 26,000.00 dollars. 1 of those a quarter boosts your pay 100,000 a year! Also keep in mind it boosts your disability over 4000 a month if you do that. Thats the best disability insurance you can get and you only need to fly those 4 extra trips 1 out of every 3 years.
Look at a low work tolerance 330CA. Flies a basic schedule of 960 hour a hear. First 6 months gets 214,000K and hits 415C limit. Second 6 months makes 250K. He is at 474,000. He only gets say 2 reroutes as they happen less on international. Say 40 hours pay. He gets two 3 day trips dropped and WS over it. Picks up another 40 hours. Gets 15 hours training pay and flies a bit extra in his 5 vacation months. Let's say 5 extra those months for 25 total. Could ba a lot more! That's another 55,000 or so a year in pay. He's at 524,000. 8% profit sharing puts another 41k in the mix. 565 K now and he flies 1 good GS that year. Boom! 600,000.00
That 438 dollar an hour rate becomes 525 an hour after you hit the 415C limit on international pay. Many hit that at the end of the first quarter. A 4 day GS with 25 hours pay is worth 26,000.00 dollars. 1 of those a quarter boosts your pay 100,000 a year! Also keep in mind it boosts your disability over 4000 a month if you do that. Thats the best disability insurance you can get and you only need to fly those 4 extra trips 1 out of every 3 years.
Look at a low work tolerance 330CA. Flies a basic schedule of 960 hour a hear. First 6 months gets 214,000K and hits 415C limit. Second 6 months makes 250K. He is at 474,000. He only gets say 2 reroutes as they happen less on international. Say 40 hours pay. He gets two 3 day trips dropped and WS over it. Picks up another 40 hours. Gets 15 hours training pay and flies a bit extra in his 5 vacation months. Let's say 5 extra those months for 25 total. Could ba a lot more! That's another 55,000 or so a year in pay. He's at 524,000. 8% profit sharing puts another 41k in the mix. 565 K now and he flies 1 good GS that year. Boom! 600,000.00
10-28-2024 | 09:07 PM
#52
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10-29-2024 | 04:27 AM
#53
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It’s not propaganda. Most Americans’ primary investment is their home.
not saying that renting is never the answer, but in most normal circumstances, home ownership is the much better long-term play. Unlike rent, At least some of your mortgage payment comes back to you in equity.
not saying that renting is never the answer, but in most normal circumstances, home ownership is the much better long-term play. Unlike rent, At least some of your mortgage payment comes back to you in equity.
It's a small bit of propaganda. Most Americans have just been told that buying your home is the American dream and the best financial decision of their lives, so many fail to actually run the numbers and see if that is such a great "investment. Youtube rent vs buy, there are tons of great breakdowns. I'm guessing many would be shocked to see the breakdown, especially with the higher interest rates today and if they plan on only staying 10-15 years. The equity you speak of is often washed away by the unrecoverable costs of owning the home and the opportunity costs lost with your down payment.
One small example, a $500k house bought with todays interest rates will cost ~$260k in interest, over the next 10 years. This is before you add in 10 years of property taxes (about $11k/yr on a house this size in my area), insurance, mx costs, renovations and the opportunity cost of dropping $100k on a down payment vs investing it in something. I think some on here think landlords can just suddenly go, welp, rent just went up $1k/month…that’s just not the case. They rent what the market allows. I'm seeing rents in my area on nice homes that you're probably better off renting. All of this doesn't even take into account if you used the down payment to buy a decent rental or two that help pay your mortgage.
Now if you bring in the emotional aspect of own your home, that's intangible, so that's for everyone to decide for themselves. I don't deny that peace of mind has some value. However, just because you feel better by owning it doesn't make it a good financial investment. I'd wager that there are many on here who would be financially better off if they had rented, especially if they bought recently.
In my category at least, I think it's more about the 18-hour callout. Our staffing has diminished over the last year and at the same time we are seeing WAY fewer GS. GS are "down" because more people are taking longer GS. Fewer broken up trips means fewer GS and fewer PB days. With more people on reserve and not PB days, we're seeing a lot more reserve assignments of bid packet trips. The SS didn't help, but they were short lived, and I'd be surprised if we see them used anything like they did this summer. They're figuring out the scheduling piece and getting smarter on trip coverage. Trips aren't being broken up like they used to which is a bummer for many, so we're seeing a lot more short notice W trips. The game is changing, time to adapt. Before I get lambasted, this isn't an argument for/against, it's just what I'm seeing.
10-29-2024 | 05:04 AM
#54
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All this talk of how easy it is to make $600k makes me wonder about the $/QOL ratio.
Obviously this depends on the pilot, but when does the $ eaten by taxes vs. just enjoying time off become not worth it to you?
For me, it’s around the top of the 24% bracket. Add in state taxes (most but not all states), Medicare and it’s surcharge taxes, phaseout of the child tax credit close to the top of the 24% bracket (if you have kids) and once you’re in the 32% bracket you can very easily send close to 1/2 your income to Uncle Sam. With our ability to “manipulate” how much we work, it just doesn’t seem worth it to work yourself into the ground once you’ve made enough to cover your expense and savings goals.
I know for me, there is a tremendous difference in QOL working 8-10 days a month vs. 16-18. Like a huge difference. Just curious how others view it?
Obviously this depends on the pilot, but when does the $ eaten by taxes vs. just enjoying time off become not worth it to you?
For me, it’s around the top of the 24% bracket. Add in state taxes (most but not all states), Medicare and it’s surcharge taxes, phaseout of the child tax credit close to the top of the 24% bracket (if you have kids) and once you’re in the 32% bracket you can very easily send close to 1/2 your income to Uncle Sam. With our ability to “manipulate” how much we work, it just doesn’t seem worth it to work yourself into the ground once you’ve made enough to cover your expense and savings goals.
I know for me, there is a tremendous difference in QOL working 8-10 days a month vs. 16-18. Like a huge difference. Just curious how others view it?
I'm with you, I try to stay 10 days or less worked in a month and the QOL difference is massive. I'll occasionally go above that if there are some easy good deals or something pops up when the local wx sucks and/or we have nothing going on. You bring up a good point that I think many don't calculate...what do you actually need? Once I broke from the accumulation/stockpile mindset, my QOL has increased dramatically.
Last edited by crewdawg; 10-29-2024 at 06:02 AM.
10-29-2024 | 05:44 AM
#55
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It's a small bit of propaganda. Most Americans have just been told that buying your home is the American dream and the best financial decision of their lives, so many fail to actually run the numbers and see if that is such a great "investment. Youtube rent vs buy, there are tons of great breakdowns. I'm guessing many would be shocked to see the breakdown, especially with the higher interest rates today and if they plan on only staying 10-15 years. The equity you speak of is often washed away by the unrecoverable costs of owning the home and the opportunity costs lost with your down payment.
One small example, a $500k house bought with todays interest rates will cost ~$260k in interest, over the next 10 years. This is before you add in 10 years of property taxes (about $11k/yr on a house this size in my area), insurance, mx costs, renovations and the opportunity cost of dropping $100k on a down payment vs investing it in something. I think some on here think landlords can just suddenly go, welp, rent just went up $1k/month…that’s just not the case. They rent what the market allows. I'm seeing rents in my area on nice homes that you're probably better off renting. All of this doesn't even take into account if you used the down payment to buy a decent rental or two that help pay your mortgage.
Now if you bring in the emotional aspect of own your home, that's intangible, so that's for everyone to decide for themselves. I don't deny that peace of mind has some value. However, just because you feel better by owning it doesn't make it a good financial investment. I'd wager that there are many on here who would be financially better off if they had rented, especially if they bought recently.
One small example, a $500k house bought with todays interest rates will cost ~$260k in interest, over the next 10 years. This is before you add in 10 years of property taxes (about $11k/yr on a house this size in my area), insurance, mx costs, renovations and the opportunity cost of dropping $100k on a down payment vs investing it in something. I think some on here think landlords can just suddenly go, welp, rent just went up $1k/month…that’s just not the case. They rent what the market allows. I'm seeing rents in my area on nice homes that you're probably better off renting. All of this doesn't even take into account if you used the down payment to buy a decent rental or two that help pay your mortgage.
Now if you bring in the emotional aspect of own your home, that's intangible, so that's for everyone to decide for themselves. I don't deny that peace of mind has some value. However, just because you feel better by owning it doesn't make it a good financial investment. I'd wager that there are many on here who would be financially better off if they had rented, especially if they bought recently.
10-29-2024 | 06:02 AM
#56
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I think some on here think landlords can just suddenly go, welp, rent just went up $1k/month…that’s just not the case.
Agreed. but eventually the rent will go up to cover the costs or else the landlord(unless of course he has an older loan/intrest rate) is in a negative cash flow position.
All of this doesn't even take into account if you used the down payment to buy a decent rental or two that help pay your mortgage.
So you are going to go out and buy a coupla of cash flow negative properties to help pay your nut? Not sure I understand how this works. Can you explain it to me like I'm stupid?
Agreed. but eventually the rent will go up to cover the costs or else the landlord(unless of course he has an older loan/intrest rate) is in a negative cash flow position.
All of this doesn't even take into account if you used the down payment to buy a decent rental or two that help pay your mortgage.
So you are going to go out and buy a coupla of cash flow negative properties to help pay your nut? Not sure I understand how this works. Can you explain it to me like I'm stupid?
10-29-2024 | 07:15 AM
#57
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We're going way down a rabbit trail here but... Like I said, there are times, individual circumstances, and/or locations where renting is the wiser choice. But if you exclude the outliers, and look in the aggregate over the long term, there is no question that owning is the clear winner for the (vast?) majority of folks over time. And again, for most people, their home is their largest single investment.
Like many former military, I've owned a lot of houses over the years. I've made a solid return on every single one of them except one, and that was due to the 2008 housing crash that was unlucky timing with a set of PCS orders, where I had to come up with some cash to close. Suck... After 30+ years of home ownership (and a few 80/10/10 mortgages), I've got well over half a mil equity in my 'forever' home. My Dad was also career military, and did the exact same thing - my widowed mom owns her upper middle class home outright as a result. And that's across 60+ years and coast-to-coast housing markets...
So while I agree there are individual circumstances where renting might be the better choice, exceptions (like nutty CA market) don't disprove the 'rule'.
Like many former military, I've owned a lot of houses over the years. I've made a solid return on every single one of them except one, and that was due to the 2008 housing crash that was unlucky timing with a set of PCS orders, where I had to come up with some cash to close. Suck... After 30+ years of home ownership (and a few 80/10/10 mortgages), I've got well over half a mil equity in my 'forever' home. My Dad was also career military, and did the exact same thing - my widowed mom owns her upper middle class home outright as a result. And that's across 60+ years and coast-to-coast housing markets...
So while I agree there are individual circumstances where renting might be the better choice, exceptions (like nutty CA market) don't disprove the 'rule'.
10-29-2024 | 08:56 AM
#58
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There are plenty of great YouTube videos or articles that explain it better than I type out. WRT to buying investment properties, not all class of investment properties are created equal. A triplex may cash flow nicely while the SFH breaks even. Also remember that many of landlords bought at much better terms and thus their rent isn't as high. If you look at the data, many of the small-time landlords have rents well under market because they either don't know the market or are scared of a vacancy washing out their profits. Anyway, if your kids are looking to buy a house that they plan to spend less than 10-15 years, it's worth exploring both options.
We're going way down a rabbit trail here but... Like I said, there are times, individual circumstances, and/or locations where renting is the wiser choice. But if you exclude the outliers, and look in the aggregate over the long term, there is no question that owning is the clear winner for the (vast?) majority of folks over time. And again, for most people, their home is their largest single investment.
Like many former military, I've owned a lot of houses over the years. I've made a solid return on every single one of them except one, and that was due to the 2008 housing crash that was unlucky timing with a set of PCS orders, where I had to come up with some cash to close. Suck... After 30+ years of home ownership (and a few 80/10/10 mortgages), I've got well over half a mil equity in my 'forever' home. My Dad was also career military, and did the exact same thing - my widowed mom owns her upper middle class home outright as a result. And that's across 60+ years and coast-to-coast housing markets...
So while I agree there are individual circumstances where renting might be the better choice, exceptions (like nutty CA market) don't disprove the 'rule'.
Like many former military, I've owned a lot of houses over the years. I've made a solid return on every single one of them except one, and that was due to the 2008 housing crash that was unlucky timing with a set of PCS orders, where I had to come up with some cash to close. Suck... After 30+ years of home ownership (and a few 80/10/10 mortgages), I've got well over half a mil equity in my 'forever' home. My Dad was also career military, and did the exact same thing - my widowed mom owns her upper middle class home outright as a result. And that's across 60+ years and coast-to-coast housing markets...
So while I agree there are individual circumstances where renting might be the better choice, exceptions (like nutty CA market) don't disprove the 'rule'.
I'm 100% with you on the long-term aspect, I just see too many people who listen to the old adage that buying is better and that's just not always true, especially in today’s market. Depending on who you believe, the average American moves every 8 to 13 years. In that case, which isn't so uncommon for airline pilots, it's not so cut and dry. WRT your properties that had solid returns, did you account for your mortgage interest paid to that point, real estate taxes, insurance, repairs, closing costs, inflation, etc...? On a 3-year hold your down payment money being in the market is admittedly small, but it's not nothing and something worth considering. Clearly this is a bigger factor the longer you stay.
I'm not saying this is you, but so many people just go, I bought it for $350k and sold it for $450k... I killed it! That's just not the whole story. Never mind that with inflation, $350k in 2021, is $421k in today’s dollars. With the interest rates of 2021 (assuming 2.5%), they spent $20k on interest, so they're back to break even. Now add taxes, insurance and repairs. This is best case with 2.5% interest, which we'll be lucky to ever see again. Let’s look at a more relevant example of today...
Since you brought up military, I went and looked in the neighborhoods that I've seen some of my AF buddies have lived in while based at Nellis. I found a nice 3bd/3ba house renting for $2300/month. A comparable house just down the street recently sold for $430k. A mortgage on that is about $2700/month (guessing low on re tax/insurance). With current interest rates, in a 3-year assignment, they'll have spent $70k, just in interest. That's a lot of appreciation to overcome and this doesn't factor in RE taxes, insurance, mx, closing costs on both ends, realtors, etc... The cost to rent over the same 3 years...$83k and your spouse didn't have to deal with that hot water heater failure as you boarded the charter plane, headed out on a deployment (true story lol). Is this an extreme scenario, maybe, but we're in really odd times in the housing markets. All I'm saying, is do the math.
Last edited by crewdawg; 10-29-2024 at 09:26 AM.
10-29-2024 | 09:14 AM
#59
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Since you brought up military, I went and looked in the neighborhoods that I've seen some of my AF buddies have lived in while based at Nellis. I found a nice 3bd/3ba house renting for $2300/month. A comparable house just down the street recently sold for $430k. A mortgage on that is about $2700/month (guessing low on re tax/insurance). With current interest rates, in a 3-year assignment, they'll have spent $210k, just in interest. That's a lot of appreciation to overcome and this doesn't factor in RE taxes, insurance, mx, closing costs on both ends, realtors, etc...
10-29-2024 | 09:16 AM
#60
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There are plenty of great YouTube videos or articles that explain it better than I type out. WRT to buying investment properties, not all class of investment properties are created equal. A triplex may cash flow nicely while the SFH breaks even. Also remember that many of landlords bought at much better terms and thus their rent isn't as high. If you look at the data, many of the small-time landlords have rents well under market because they either don't know the market or are scared of a vacancy washing out their profits. Anyway, if your kids are looking to buy a house that they plan to spend less than 10-15 years, it's worth exploring both options.
I'm 100% with you on the long-term aspect, I just see too many people who listen to the old adage that buying is better and that's just not always true, especially in today’s market. Depending on who you believe, the average American moves every 8 to 13 years. In that case, which isn't so uncommon for airline pilots, it's not so cut and dry. WRT your properties that had solid returns, did you account for your mortgage interest paid to that point, real estate taxes, insurance, repairs, closing costs, inflation, etc...? On a 3-year hold your down payment money being in the market is admittedly small, but it's not nothing and something worth considering. Clearly this is a bigger factor the longer you stay.
I'm not saying this is you, but so many people just go, I bought it for $350k and sold it for $450k... I killed it! That's just not the whole story. Never mind that with inflation, $350k in 2021, is $421k in today’s dollars. With the interest rates of 2021 (assuming 2.5%), they spent $20k on interest, so they're back to break even. Now add taxes, insurance and repairs. This is best case with 2.5% interest, which we'll be lucky to ever see again. Let’s look at a more relevant example of today...
Since you brought up military, I went and looked in the neighborhoods that I've seen some of my AF buddies have lived in while based at Nellis. I found a nice 3bd/3ba house renting for $2300/month. A comparable house just down the street recently sold for $430k. A mortgage on that is about $2700/month (guessing low on re tax/insurance). With current interest rates, in a 3-year assignment, they'll have spent $210k, just in interest. That's a lot of appreciation to overcome and this doesn't factor in RE taxes, insurance, mx, closing costs on both ends, realtors, etc... The cost to rent over the same 3 years...$83k and your spouse didn't have to deal with that hot water heater failure as you boarded the charter plane, headed out on a deployment (true story lol). Is this an extreme scenario, maybe, but we're in really odd times in the house markets. All I'm saying, is do the math.
I'm 100% with you on the long-term aspect, I just see too many people who listen to the old adage that buying is better and that's just not always true, especially in today’s market. Depending on who you believe, the average American moves every 8 to 13 years. In that case, which isn't so uncommon for airline pilots, it's not so cut and dry. WRT your properties that had solid returns, did you account for your mortgage interest paid to that point, real estate taxes, insurance, repairs, closing costs, inflation, etc...? On a 3-year hold your down payment money being in the market is admittedly small, but it's not nothing and something worth considering. Clearly this is a bigger factor the longer you stay.
I'm not saying this is you, but so many people just go, I bought it for $350k and sold it for $450k... I killed it! That's just not the whole story. Never mind that with inflation, $350k in 2021, is $421k in today’s dollars. With the interest rates of 2021 (assuming 2.5%), they spent $20k on interest, so they're back to break even. Now add taxes, insurance and repairs. This is best case with 2.5% interest, which we'll be lucky to ever see again. Let’s look at a more relevant example of today...
Since you brought up military, I went and looked in the neighborhoods that I've seen some of my AF buddies have lived in while based at Nellis. I found a nice 3bd/3ba house renting for $2300/month. A comparable house just down the street recently sold for $430k. A mortgage on that is about $2700/month (guessing low on re tax/insurance). With current interest rates, in a 3-year assignment, they'll have spent $210k, just in interest. That's a lot of appreciation to overcome and this doesn't factor in RE taxes, insurance, mx, closing costs on both ends, realtors, etc... The cost to rent over the same 3 years...$83k and your spouse didn't have to deal with that hot water heater failure as you boarded the charter plane, headed out on a deployment (true story lol). Is this an extreme scenario, maybe, but we're in really odd times in the house markets. All I'm saying, is do the math.
best $$ I’ve heard of is renting out a beach house. But obviously a lot more headache and insurance
