Re:How housing became the world’s biggest asset class
by hinkley on Wednesday January 22, 2020 @03:39PM
(#22121756)
You can get some of these benefits by setting up an automatic transfer each month to another account.
Money in your house ends up abusing the inability of people to reason about compound interest and inflation.
Making 2x inflation per year on your house is not a terrible rate of return, but it leaves you at the backend believing you've doubled your money when you haven't, and you lose much of that to property taxes. At the beginning when you own 20%, your property taxes are 1% of the assessed value of your house, which is going to be between 3-5% of the purchase price. And that's at the beginning before inflation and compound interest.
Then 6% for the purchase and sale... and now taxes if you don't roll it into a new house...
And then there's home improvement. I figured out at one point that renting an apartment for a few hundred bucks more a month for a nicer kitchen/bathroom was cheaper and potentially less disruptive to my life than having someone tear apart my kitchen for weeks at a time and the dust and noises and people around all day.
Money in your house ends up abusing the inability of people to reason about compound interest and inflation.
Making 2x inflation per year on your house is not a terrible rate of return, but it leaves you at the backend believing you've doubled your money when you haven't, and you lose much of that to property taxes. At the beginning when you own 20%, your property taxes are 1% of the assessed value of your house, which is going to be between 3-5% of the purchase price. And that's at the beginning before inflation and compound interest.
Then 6% for the purchase and sale... and now taxes if you don't roll it into a new house...
And then there's home improvement. I figured out at one point that renting an apartment for a few hundred bucks more a month for a nicer kitchen/bathroom was cheaper and potentially less disruptive to my life than having someone tear apart my kitchen for weeks at a time and the dust and noises and people around all day.