Author Topic: Owning Your Own Home Doesn't Make You Rich; Owning Somebody Else's Does  (Read 1981 times)

elysianfields

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I came across this interesting article from the Washington Post profiling how the wealthy accumulate their wealth. 

My take: Starting and running a business or creating a portfolio of rental properties puts you well ahead of simply owning your own home in the US, and households renting remain at the lowest level of wealth accumulation.  The US has massive wealth concentration at the upper wealth levels, as do many other countries.

Owning Your Own Home Doesn't Make You Rich; Owning Somebody Else's Does


Askel

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Re: Owning Your Own Home Doesn't Make You Rich; Owning Somebody Else's Does
« Reply #1 on: November 12, 2018, 04:21:01 AM »
The 0th percentile numbers are the most interesting.  Lots of "homeowners" there, although I wonder how much home they actually own.  Also, it would appear that simple starting a business or renting property isn't really doing much for people at that level either.

chasesfish

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Re: Owning Your Own Home Doesn't Make You Rich; Owning Somebody Else's Does
« Reply #2 on: November 12, 2018, 04:23:53 AM »
I struggled to get past this part of the second sentence:  "And that club, blessed by capitalism, is becoming increasingly difficult to join."

We are creating victims by making a false statement that there's no mobility in this country.

A lot of the other facts were solid.  Home ownership percentages have flattened out.  Being a landlord or business owner (and owning financial assets in general) create more wealth than not owning them.  It comes back to the basics to get those financial assets, earn more, spent less, invest the difference

Maenad

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Re: Owning Your Own Home Doesn't Make You Rich; Owning Somebody Else's Does
« Reply #3 on: November 13, 2018, 12:53:31 PM »
I struggled to get past this part of the second sentence:  "And that club, blessed by capitalism, is becoming increasingly difficult to join."

We are creating victims by making a false statement that there's no mobility in this country.

They didn't say there's no mobility, they said it's getting harder to become wealthy, that mobility is decreasing. And there's plentiful data to show that's true.

It's not "creating victims" to acknowledge that there are headwinds that some people face and others don't. That acknowledgement doesn't automatically lead to "eat the rich".

jengod

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Re: Owning Your Own Home Doesn't Make You Rich; Owning Somebody Else's Does
« Reply #4 on: November 15, 2018, 09:27:49 PM »
this was interesting TY

LennStar

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Re: Owning Your Own Home Doesn't Make You Rich; Owning Somebody Else's Does
« Reply #5 on: November 20, 2018, 02:13:25 AM »
I struggled to get past this part of the second sentence:  "And that club, blessed by capitalism, is becoming increasingly difficult to join."

We are creating victims by making a false statement that there's no mobility in this country.


It is a fact that financial and social mobility in the US is one of the worst, even worse than in Germany, where your parents school results decide to 70% if you will study.
The countries with the most social mobility are the "socialist" Nordic countries. I think the top was Sweden, but I may err on that.

clarkfan1979

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Re: Owning Your Own Home Doesn't Make You Rich; Owning Somebody Else's Does
« Reply #6 on: November 21, 2018, 09:20:00 AM »
I totally agree with the title. I read this article a few weeks ago when it first came out. The title is very consistent with "Rich, Dad, Poor Dad" He considers your primary home to be a liability. However, rental houses are assets. I read this book at age 21. I'm now 39.

When I purchased a primary home in 2007 and 2012, I found homes that would make great rentals, after we moved on. My current home that we purchased in 2018 has a mother-in-law suite in the basement that we rent out.

The rental income doesn't really make us rich. However, because our assets appreciated, we can borrow against it to buy more assets. This is what the rich do. Nothing is ever out of reach. If you don't have any assets you have to save with your wages. During an economic boom, people will struggle to keep up with just trying to save wages. Owning assets makes it much easier.

Rich people who buy real estate mostly focus on location and appreciation. They don't really care as much about cash-flow because they already have money. When poor people buy real estate, they focus on cash-flow. When you do that, you are typically going to get less appreciation.   

I love the comments section. Below is the first one. It's a gem.

"In the city I live in, landlords chop up houses into as many ridiculously small size apartments as possible to juice income. The houses are usually in terrible condition. I don't rent. I never have found a landlord I liked as a person. There is something about being one that makes you less of a person. I think it is because your intention is to extract wealth from another while doing as little as possible. It involves a lot of financial fraud as well in order to avoid paying a fair share of taxes."

SwordGuy

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Re: Owning Your Own Home Doesn't Make You Rich; Owning Somebody Else's Does
« Reply #7 on: November 22, 2018, 11:27:10 AM »
I love the comments section. Below is the first one. It's a gem.

"In the city I live in, landlords chop up houses into as many ridiculously small size apartments as possible to juice income. The houses are usually in terrible condition. I don't rent. I never have found a landlord I liked as a person. There is something about being one that makes you less of a person. I think it is because your intention is to extract wealth from another while doing as little as possible. It involves a lot of financial fraud as well in order to avoid paying a fair share of taxes."

Wow.   I'll agree that too many landlords aren't willing to do the repairs that they should do.    Damn foolish.  I've walked thru lots of homes for sale in my community that go for 1/3 what they should because the repairs weren't done.   I think it's a symptom of our "living paycheck to paycheck" culture.   Lots of folks spend all the rent money they get and when repairs need to be made, they haven't got the funds set aside.

We had to train the property management company that when something is broken, send someone out to fix it asap.  "If something needs fixing, get it fixed!"

As for being a bad person because you're a landlord, that's foolishness.   We've actually had our renters write us thank you letters.

This weekend we're going to be going out to our renter's homes and give them a check for 1/2 a month's rent as a thank you for taking good care of the homes they are staying in.   They are poor and on section 8 assistance, so sometimes they are a few days late with the rent, but they've done a good job of taking care of the properties.  (We factored this gift into the rent that we charge.  That way, if we get goobers, we've got an extra buffer to do repairs with.  If they are good folks, then they get a break because they aren't paying for the sins of others.)

And I have no idea where they get the idea about financial fraud.   Tax laws are great for landlords and there's plenty of money to be made. 

SwordGuy

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Re: Owning Your Own Home Doesn't Make You Rich; Owning Somebody Else's Does
« Reply #8 on: November 22, 2018, 11:48:37 AM »
Yeah, I'm such an evil landlord that I've contacted a family who got burned out in the fire in CA and offered them a free place to live for several months, plus free use of my wood and metal studio for the next year so they can keep working on their craft.  That would give them a chance to get their feet back under them while they wait for the insurance money to kick in.  It will end up costing me about $5k in extra costs - rush work to fix up some things that we would have done ourselves.

My wife and I absolutely ooze with evil.   So do our business partners, who leaped at the chance to help.  So evil.  Mwaaahahaaa.

flipboard

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Re: Owning Your Own Home Doesn't Make You Rich; Owning Somebody Else's Does
« Reply #9 on: November 24, 2018, 12:35:23 AM »
I love the comments section. Below is the first one. It's a gem.

"In the city I live in, landlords chop up houses into as many ridiculously small size apartments as possible to juice income. The houses are usually in terrible condition. I don't rent. I never have found a landlord I liked as a person. There is something about being one that makes you less of a person. I think it is because your intention is to extract wealth from another while doing as little as possible. It involves a lot of financial fraud as well in order to avoid paying a fair share of taxes."

Wow.   I'll agree that too many landlords aren't willing to do the repairs that they should do.    Damn foolish.  I've walked thru lots of homes for sale in my community that go for 1/3 what they should because the repairs weren't done.   I think it's a symptom of our "living paycheck to paycheck" culture.   Lots of folks spend all the rent money they get and when repairs need to be made, they haven't got the funds set aside.

We had to train the property management company that when something is broken, send someone out to fix it asap.  "If something needs fixing, get it fixed!"

As for being a bad person because you're a landlord, that's foolishness.   We've actually had our renters write us thank you letters.

This weekend we're going to be going out to our renter's homes and give them a check for 1/2 a month's rent as a thank you for taking good care of the homes they are staying in.   They are poor and on section 8 assistance, so sometimes they are a few days late with the rent, but they've done a good job of taking care of the properties.  (We factored this gift into the rent that we charge.  That way, if we get goobers, we've got an extra buffer to do repairs with.  If they are good folks, then they get a break because they aren't paying for the sins of others.)

And I have no idea where they get the idea about financial fraud.   Tax laws are great for landlords and there's plenty of money to be made.
Regulation and easy access to the justic system has strong influence on standards and maintenance. In the country I live, regulations  and courts are strong, and it's easy to protect yourself as a renter. It's very common to get a rent reduction if there's a more significant issue with your rental property, and this has been backed up by courts multiple times. There's enough case law that letters to your landlord are now enough to get things fixed or to get money back, followed by your city's renter-dispute office, and if that fails there's a local renter's association that takes care of more complex cases (including going to court if appropriate - which only really happens for new scenarios where there's no good court precedent yet).

The legal aspect goes both ways: it's not that hard for a landlord to throw out delinquent renters. They do need to give appropriate notice (generally one month if someone's not paying the rent - shorter for other major transgressions), but they can then get you kicked out good and final. Equally, if the landlord tries to throw you out with a bogus reason without evidence, that generally won't get very far either. Keeps both parties on their toes : ).

The other aspect is that landlord's can deduct maintenance costs from taxable income. The tax authorities are however quite strict: maintenance is covered, upgrades that can lead to higher income are AFAIUI not deductable. They will check your receipts as a landlord.

Overall, because of the specific property market, the competition, and because of house valuations, landlords don't make a huge amount of profit here, but I think it's still a reasonable and steady return.
« Last Edit: November 24, 2018, 12:37:05 AM by flipboard »

SwordGuy

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Re: Owning Your Own Home Doesn't Make You Rich; Owning Somebody Else's Does
« Reply #10 on: November 24, 2018, 08:01:36 AM »
As a landlord, I think it's great when the laws protect both sides from the other.

I need to be able to promptly get rid of people who don't pay their rent and I need to be able to make them pay if they trash my place.

They need to be able to force the landlord to provide a decent place to live at the agreed upon price.

Seems fair to me.


My wife and I, back when we were poor, rented from a doctor who didn't repair things.   We went on an nine month rent strike to get him to fix things.   It didn't end until my wife took polaroid photos of the bathroom to his doctor's office and explained that in one month it would be the 1 year anniversary of her bathroom looking like this.  She explained that she would be bringing a birthday cake and the polaroids to his doctor's office and give a birthday party for her bathroom with his patients.

We got a lot of things fixed after that.


Leverage.  It's not just for buying rental property...

LennStar

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Re: Owning Your Own Home Doesn't Make You Rich; Owning Somebody Else's Does
« Reply #11 on: November 24, 2018, 11:01:28 AM »
It didn't end until my wife took polaroid photos of the bathroom to his doctor's office and explained that in one month it would be the 1 year anniversary of her bathroom looking like this.  She explained that she would be bringing a birthday cake and the polaroids to his doctor's office and give a birthday party for her bathroom with his patients.
ROFL
I like that!
Don't forget to ask the patients for donations for the poor doctor who cannot afford repairs!

SwordGuy

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Re: Owning Your Own Home Doesn't Make You Rich; Owning Somebody Else's Does
« Reply #12 on: November 24, 2018, 01:16:49 PM »
It didn't end until my wife took polaroid photos of the bathroom to his doctor's office and explained that in one month it would be the 1 year anniversary of her bathroom looking like this.  She explained that she would be bringing a birthday cake and the polaroids to his doctor's office and give a birthday party for her bathroom with his patients.
ROFL
I like that!
Don't forget to ask the patients for donations for the poor doctor who cannot afford repairs!


Good one!