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post #30 of Old 05-19-2010
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While I can understand and agree with your point of view, I'll have to disagree with the view that the right piece of real estate is not a good investment. You're quite correct that market timing is very important in all investments, that is why I earlier suggested to not wait more that 2 or 3 years in real estate. I could be wrong since I don't own a crystal ball, but I believe this market recovery is going to take awhile this time around, especially considering what is now going on in Europe. The right real estate is a good investment bought at the right time for the right price, and even though you never completely own the property as you point out, taxes and repairs/improvements should be considered as a cost of doing business. I don't think you have to be lucky with market timing in real estate, if you spend some time understanding what is going on in that market. Historically real estate goes through boom and bust periods, with the boom almost always longer than the bust. Booms generally run for about 7 to 10 years, and busts generally last a 2 or 3 years. One key indicator to be watching is what percentage of the population can afford real estate, or how affordable is real estate to the population. If the affordability starts decreasing, then that is a tip off that the market is reaching for the top. Saying that, I think this time around the bust is going to break the norm, and appreciation is going to be slow for some years to come...but this can be a good thing. The upside to slow appreciation is it makes real estate ownership more affordable to the masses, and a good time to get into real estate before the market starts to take off again. Notice that I talk about real estate investing as an investment, not in the vein of making a home. Turning the investment into a home that you own forever will not make you any money, except if it can be rented out at a profit when not being used.

I'm completely on board with your plan to be a live aboard, but I see nothing wrong with investing at the right time in the right vehicle.

Originally Posted by eryka View Post
Given this info, buying a house makes even less sense: why would you want an investment that isn't guaranteed to do better than anything else, that's hard to liquidate on your schedule, and then factor in closing costs at both sides??? And don't believe the "you need a tax deduction" hype: even if you're in the top income bracket, you get back what, a third of the money you spent on interest? The other 2/3 went to the bank and made THEM money, not you. If you're only going to be in a location for 3 years you're very early in the mortgage; look at the amortization schedule and you'll realize almost NONE of the money you spent on payments goes against principal. That means that you won't have accumulated any savings in the house. I still believe that the only way to make money on a house (greater than the rate of inflation long-term) is to be extremely lucky with market timing, or to invest a lot of sweat equity. This from someone who has bought and sold about a dozen houses, moving whereever Uncle Sam sent us (and that meant we had the added bonus of all our closing costs being covered as part of the relocation package) and owning a kitchen-bath remodel business so we had the inside track on the sweat-equity "investments." Now living on the boat for the past 8 years and we have far far more disposable income than we ever did in the house. Also more free time to play instead of mowing the lawn and cleaning leaves out of the gutters.

That you're asking the question may be it's own answer. Live on the boat, enjoy the boat! Buy the house ONLY when there's no question in your mind that you really, really, want to own a house because it suits your lifestyle at the time...but not as an investment, not because it's the thing you "should" be doing now.
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