196 sats \ 11 replies \ @brxyz 22 Jun 2023 \ on: What’s your best investment (besides BTC)? bitcoin
I bought a house in 2011, and it's tripled in value since. While I have some philosophical issues with how much and how quickly it's appreciated, the fact is I've benefited from it tremendously. I was able to use the equity to remodel it, which then allowed me to rent it out for a decent price while I lived overseas last year. And after a refi, my mortgage is far less than rent for my area.
Did your house really triple in value, or is it the currency that’s measuring it lost 67% of it’s purchasing power in the real estate market?
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Tripled in price.
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Value. My house isn't on the market so it has no price at the moment. However, my local appraisal district is all too happy to tell me the "value" of my home.
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That's fair. I just prefer to look at value on a relative basis. If something tripled in value you should be able to use it to purchase 3x what you acquired it for. If every other house went up by 3x is it really more valuable?
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The real value of your home is measured in bitcoin which means it has been adjusted down something like 50,000% since you bought it.
No problem- you have to live somewhere but I wouldn’t be so excited about fiat prices
Property taxes are theft
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The problem with this argument is that you couldn't have borrowed that much money from a bank in 2011 to buy Bitcoin. Even if you could've you'd still need to live somewhere and pay back the loan. It's not realistic to think that way.
The real value of a home is that a bank will give you a loan to buy it. This leverage shouldn't be underestimated. Yes, it comes with taxes and other downsides but it also gives you somewhere to live and build equity while you accumulate Bitcoin.
So realistically, the best strategy, with the benefit of hindsight would've been to buy a house AND start accumulating Bitcoin as savings. Not so different to now.
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That’s not really the argument I’m making but good point
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And after a refi, my mortgage is far less than rent for my area.
Don't forget it's only the interest component of it that you should be comparing to rent. The principal repayments is just moving money from one pocket of yours (your bank account) to another (equity). It's a commitment to invest.
Which makes the purchase an even better investment than most people think.
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That's a really interesting way of looking at it.
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If you pay $1000 rent and stay put for 25 years, your rent only goes up; at the end of the term you end up paying maybe 3x that and owning nothing.
But if you pay a $1000 mortgage with a 25 year term:
- Your payments don't change (or only change slightly) in fiat terms; they go down in real terms.
- At the end you end up with outright ownership of the property (wealth!), which has appreciated greatly in fiat terms over that period.
- Let's say $300 of it is interest, $700 is principal. Your housing cost is $300, less than a third of what the renter pays at the beginning and less than 1/10 of what the renter pays at the end. The $700 is a commitment to invest in real estate on a monthly basis, BUT - and this is a very important "but" - at a price locked in at the beginning of the term. Towards the end of the term, those $700 monthly investments buy you ~$2100 worth of real estate.
As a renter, the lower the interest rates, the more the system steals from you. By taking out a mortgage you become a beneficiary of the system; you get closer to the money printer and claw some of those 'stealings' back.
This shows how the system benefits the richer - those who can afford a down payment - and makes the poor poorer.
It's not fair, but that's the way it is.
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Excellently explained. I actually tried explaining this to my parents after buying an investment property. Even though I knew in my mind what I was trying to say you've really solidified some of the finer points in your explanation. Thanks.
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