# No such thing as "good debt"



## My Own Advisor (Sep 24, 2012)

http://www.theglobeandmail.com/glob...s-no-such-thing-as-good-debt/article24359507/

Thoughts?

Personally, I see debt as a necessary evil for only a select few things in life. Credit makes the world go round and either you're a slave to it or it's your slave.

One example, I think debt is a necessary evil to own a home. I don't know of anyone personally who paid cash for their primary residence. 

Financing a new car, at 0%, with the intention to keep the vehicle for _at least 10-years_ is also not _that_ bad although I can appreciate the downsides of borrowing money to buy a depreciating asset.

Third, borrowing to invest in your human capital or to start a business can be very beneficial although you need to be selective about your a) human capital investment and b) what business you wish to be in.

Others?


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## none (Jan 15, 2013)

Yeah, that's idiotic. Debt is a tool - as long as it's used appropriately.

That's why the balance budget legislation that Harper has proposed to so amazingly stupid and misguided (at least he's consistent!)


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## Just a Guy (Mar 27, 2012)

Well, to be fair, I tend to agree with the examples in the article. Personal debt to buy "things" isn't good debt. Even if you buy a home, or pay for an education, the money still has to come out of your pocket and there is no guarantee of any appreciation on the investment. I've said before there's a difference between a home and an investment. 

Now, buying a rental property that cash flows (not many of those available these days) and getting someone else to pay back the loan, while making you money is a different scenario that wasn't mentioned in the article. Borrowing money to buy inventory for your business, or even to buy a business which makes money is also a different story.

There is good debt, but the author, like many people, probably don't know about it because they've been taught it's "too risky".


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## none (Jan 15, 2013)

As far as houses go I believe that they are investments whether you view them that way or not. They shouldn't get a quantitative assessment pass simply because you want to call it something else.

For example, if I bought 400K of apple stock and said I just like it that it's not an investment - would that be acceptable. I don't think so and I don't really see a difference.


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## Just a Guy (Mar 27, 2012)

If you borrowed $400k today and just bought apple stock, I wouldn't call you an investor either, I'd call you a gambler. If you did some research, and have some idea of where the stock was going, who the management was, what regulatory issues the company is facing, who the competition is, etc. before buying then I'd consider you an investor.

Just like if you buy a $400k home at the top of the market and agree to pay interest (more than doubling the purchase price over the life of the mortgage) only to see the value drop in a long term correction as a poor "investment". 

Not everything is an investment, even if you buy stuff that other people make money on...you may not be an investor, you may be more of a gambler with a "hope and pray" strategy...may as well "invest" in lottery tickets, or a trip to Vegas.


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## IFITSTOBEITSUP2ME (Mar 6, 2015)

MOA, I tend to be nowadays very debt adverse but with that said and done, have seen many friends and even ourselves in our younger years use OPM (other people's money) to accelerate our growth. For example if you have a guaranteed return of 6% on monies invested that you could easily liquidate if necessary to cover a purchase/investment done through 2% or less for financing of something you "need", then why wouldn't you?

Many businesses and first home buy purchases would never have come into being if it weren't for initially using OPM. So I do agree that there is good debt and bad debt, we just chose to remove ourselves from any debt as we've got older as the risk to resurrect ourselves as the chronological clock marches on gets too limiting in the event an assessed risk goes against us.


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## lightcycle (Mar 24, 2012)

IFITSTOBEITSUP2ME said:


> For example if you have a *guaranteed return of 6%* on monies invested


I'm all ears...


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## Oldroe (Sep 18, 2009)

Just media filler crap. The guy writes 365 days a year on this stuff. Some is just un realistic crap.


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## sags (May 15, 2010)

I think the author and a lot of people don't consider how low interest rates and inflation affect the equation.

Is it better for a government to finance infrastructure today at a low interest rate, or wait until they have the cash and pay a much higher price for it ?

Even with cars, is it better to buy a new car at 0% financing today, or save up for 7 years and pay a higher price in the future with cash ?

At 0% interest rates a person is paying cash, albeit over a period of years with future income.


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## none (Jan 15, 2013)

^ and if that borrowed money is losing 3% in inflation they are effectively paying you to take the money.

Saving sucks.


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## sags (May 15, 2010)

True enough...........

What is the interest on a student loan these days ? 

It seems to me it is backwards. A new car should cost 8% interest and an education should be 0% financing.


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## gibor365 (Apr 1, 2011)

lightcycle said:


> I'm all ears...


Me too!!!
IFITSTOBEITSUP2ME , can you share?! For 6% guaranteed return, I'd sell 80% of my equities


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## gibor365 (Apr 1, 2011)

I agree with author .... there is no "good debt", byt sometimes you have to have it


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## My Own Advisor (Sep 24, 2012)

sags said:


> True enough...........
> 
> What is the interest on a student loan these days ?
> 
> It seems to me it is backwards. A new car should cost 8% interest and an education should be 0% financing.


I hear ya sags...


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## gibor365 (Apr 1, 2011)

> an education should be 0% financing.


 No way!!! Education should be FREE like in many European countries, like Germany or France!

Want a top notch college degree but can't afford it? Head to Germany
http://www.cnn.com/2014/10/22/world/europe/want-education-cant-pay-germany/


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## none (Jan 15, 2013)

gibor said:


> No way!!! Education should be FREE like in many European countries, like Germany or France!
> 
> Want a top notch college degree but can't afford it? Head to Germany
> http://www.cnn.com/2014/10/22/world/europe/want-education-cant-pay-germany/


Financed by tax payers I agree. Investing in the education of your population is one of the cheapest bangs for you buck.

With the creeping baseline of education requirements in today's economy it would be consistent with the base grade 12 that has been provided for the last few decades.


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## CalgaryPotato (Mar 7, 2015)

I disagree, just because house prices are high now and probably not a good investment in most of Canada does not mean they always have been and will be, when I bought my house it was close to break even with rent. 

I couldn't have done that without borrowing.


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## pooja.majorgainz (Apr 7, 2015)

But I have seen many rich people who could buy almost anything, in fact a house by cash, still they go for debt. They might be doing this in case reducing tax or maybe love their savings account more than anything.


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## Eclectic12 (Oct 20, 2010)

^^^^

It is puzzling why they would choose debt where they have the cash.

In the case of a house, it can't be to reduce taxes as the mortgage interest is not tax deductible in Canada. Where debt would reduce their taxes on income would be borrowing to invest or for a business.


Cheers


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## My Own Advisor (Sep 24, 2012)

"But I have seen many rich people who could buy almost anything, in fact a house by cash, still they go for debt."

I don't understand that, here in Canada, since mortgage interest is not tax deductible...


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## Just a Guy (Mar 27, 2012)

It is if it's an investment property.


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## MoreMiles (Apr 20, 2011)

My Own Advisor said:


> "But I have seen many rich people who could buy almost anything, in fact a house by cash, still they go for debt."
> 
> I don't understand that, here in Canada, since mortgage interest is not tax deductible...


Rich people don't just stash their money in cash in cardboxes in their basement. They often structure it in corporations, trusts, and tax sheltered investments. It is cheaper to borrow at today's rate and keep their asset sheltered, than to cash everything, pay a heavy tax, and run no debts.

Just look at Apples, that is exactly what they are doing.


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## My Own Advisor (Sep 24, 2012)

Fair point, borrowing for business purposes but I was interpreting from the other comment, many rich folks go for more debt vs. buying things outright as an odd conclusion. It would be interesting to see some stats on that since I don't imagine that's the scenario for personal properties or goods, I could see it for business purposes, but I could be totally wrong.


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## Frank Drebin (May 10, 2015)

Just a Guy said:


> If you borrowed $400k today and just bought apple stock, I wouldn't call you an investor either, I'd call you a gambler. If you did some research, and have some idea of where the stock was going, who the management was, what regulatory issues the company is facing, who the competition is, etc. before buying then I'd consider you an investor.
> 
> Just like if you buy a $400k home at the top of the market and agree to pay interest (more than doubling the purchase price over the life of the mortgage) only to see the value drop in a long term correction as a poor "investment".
> 
> Not everything is an investment, even if you buy stuff that other people make money on...you may not be an investor, you may be more of a gambler with a "hope and pray" strategy...may as well "invest" in lottery tickets, or a trip to Vegas.


Owning a home is an investment, when you are presented with the alternative.

Rent is forever, and appreciates with time. If you are paying $2000/mo rent now and choose to rent for the rest of your life, you will be paying $2000 a month in tomorrows dollars 25 years from now.

Where if you decide to purchase a home where the PIT is $2000/mo, 25 years from now you will be paying $300 or so in todays dollars for property tax and insurance.

Essentially buying a home is in a way financing a lifetime annuity for $1500 or so a month.

As for maintenance costs, those are more than made up for by the fixed cost of a mortgage vs the rising cost of rent, plus moving costs.


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## CPA Candidate (Dec 15, 2013)

Rob Carrick articles are for the most part are pretty bad. He doesn't understand the relationship between debt, interest rates and inflation. He views debt in absolute terms. He doesn't even believe in investing in yourself via education using debt.

He thinks renting is much better than buying a home because you avoid debt. He completely ignores the fact that paying monthly rent for the rest of your life is a huge future liability that just happens not to appear on your balance sheet.

Quick example-
In the past, businesses often liked to arrange leases to be mere rental contracts rather than capital leases (purchase plans) because it kept the debt off their balance sheet - it appeared better. But the fact is, if you are locked into a long term lease for the life of the asset, it is in economic substance a purchase contract and the future liability for all those "rents" should be shown on your balance sheet. Accounting standards changed to convert this operating leases into what they really were, capital leases (ie lease to own).

Being alive means needing a place to live and is an unavoidable expense. Every renter, in economic substance, has the present value of all future rental payments as a liability. Just because it's not on your balance sheet doesn't mean a liability doesn't exist.

The problem is most people think in accounting terms and not economic terms and it leads to bogus conclusions.


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## none (Jan 15, 2013)

^ Wow - that's so misguided it's hard to know where to start.

Renting a house from a person or a bank is *THE SAME THING*. It's all based on cash flows.

For example: "Owning" a million dollar house costs you about 80K+ ($6500) a month in opportunity costs and maintenance costs. You can rent million dollar houses for 3-4K per month.

I don't see how you can justify that with math in any way.

Go for the 'it's not an investment' rant or something but that's different. based on math alone - renting is a winner right now - that's why most people say that Canadian housing is so over valued. The only reason to pay more for an equivalent product is for speculation.


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## Westerncanada (Nov 11, 2013)

Oldroe said:


> Just media filler crap. The guy writes 365 days a year on this stuff. Some is just un realistic crap.


Exactly. He wrote a follow up today regarding how martians would view canada. 


What a waste


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## Frank Drebin (May 10, 2015)

none said:


> ^ Wow - that's so misguided it's hard to know where to start.
> 
> Renting a house from a person or a bank is *THE SAME THING*. It's all based on cash flows.
> 
> ...


I'm not sure where you live but if the rent and cost of owning are that far apart then of course you live in an overvalued market and it is smarter to rent. Would you mind showing me a million dollar house that rents for 3-4k a month? Call me skeptical, but...

I live in the Edmonton area and the typical SFH rents for $1800-$2400 and can be purchased for $300,000-$400,000. A 5% down payment mortgage runs from ~$1500-2000 (@ 3.5% fixed rate) and the other fixed costs (property taxes and insurance would be around $300 per month.) So owning costs are very similar to renting.

Now lets assume that when its time to renew in 5 yrs mortgage rates are back up to 5.5%, our mortgage payments will increase to 1750 (258k renewed @ 5.5% over 20 yrs) or 2350 (345k renewed @ 5.5% over 20 yrs). So $2100-$2700 per moth.

Meanwhile assuming rent increases 3% a year you will be paying between 2075 to 2875 per month for those same houses.

In those 5 years you would have paid down 42k and 55k respectively on the mortgages, meaning that you would have to see a 15% cumulative drop in RE values over 5 years to break even. Of couse there are RE transaction fees but the assumption is owning for the entirety of the mortgage vs renting for the entirety.


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## none (Jan 15, 2013)

I stand corrected. Here is a 1.5 million dollar house (3500 Mayfair drive): 
http://www.victoria-luxury-homes.com/list_properties_office.php?listing=sold

That is renting for $4200 a month:
http://victoria.craigslist.ca/apa/4991207593.html

I think it's fair to say that a 1.5 million dollar house costs you about 120K a year in opportunity costs + upkeep

Or you could rent it for 50K per year. See what I mean?


In your calculation you are missing opportunity costs. a 400K house I would estimate costs you probably about 40K per year in interest, upkeep, opportunity costs, averaged transaction costs over life of holding house. So there fore renting from a bank costs you $3200 a yeear compared to renting it for 1800-2400.


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## gibor365 (Apr 1, 2011)

> But I have seen many rich people who could buy almost anything, in fact a house by cash, still they go for debt."


 We always pay in Cash if we can, so we're not "rich" 
The only debt we had in Canada, about 100K whenwe bought house and we paid it out in 6 years.

Also, i find that you can get better discount while paying cash... for example , when buying new car, I'd negotiate price (let's say with 0% interest) and than ask what discount I can get if i pay cash... usually I get some


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## Frank Drebin (May 10, 2015)

Frank Drebin said:


> I'm not sure where you live but if the rent and cost of owning are that far apart then of course you live in an overvalued market and it is smarter to rent. Would you mind showing me a million dollar house that rents for 3-4k a month? Call me skeptical, but...
> 
> I live in the Edmonton area and the typical SFH rents for $1800-$2400 and can be purchased for $300,000-$400,000. A 5% down payment mortgage runs from ~$1500-2000 (@ 3.5% fixed rate) and the other fixed costs (property taxes and insurance would be around $300 per month.) So owning costs are very similar to renting.
> 
> ...


So to show I'm not talking out of my arse:

http://realtor.ca/propertyDetails.aspx?PropertyId=15327928

http://www.rentboard.ca/rentals/ren...&s20=53.59259&locid=7194&s9=5&s21=-113.395466


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## Frank Drebin (May 10, 2015)

@ none:

Obviously two very different markets. I agree with your analysis, but not for where I live.


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## Frank Drebin (May 10, 2015)

none said:


> I stand corrected. Here is a 1.5 million dollar house (3500 Mayfair drive):
> http://www.victoria-luxury-homes.com/list_properties_office.php?listing=sold
> 
> 
> ...


You are not factoring in mortgage paydown at all in your calculations. It is significant. Approximately 15% for the first 5 years of ownership.


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## none (Jan 15, 2013)

mortgage payment is just savings and should be omitted from the calculation. It's best to just focus on costs. If someone wants a 10 or 20 year amortization or save money and put it in the market (or wherever) just muddies the analysis

As for the $315K house. I would estimate that costs about 21-25K per year to own. You can rent it for 21K per year so it's a bit of a wash I suppose. Not nearly as bad I agree.

Still though, a house costing a third of a million in edmonton. Crazy, it's edmonton.


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## Frank Drebin (May 10, 2015)

none said:


> mortgage payment is just savings and should be omitted from the calculation. It's best to just focus on costs. If someone wants a 10 or 20 year amortization or save money and put it in the market (or wherever) just muddies the analysis
> 
> As for the $315K house. I would estimate that costs about 21-25K per year to own. You can rent it for 21K per year so it's a bit of a wash I suppose. Not nearly as bad I agree.
> 
> Still though, a house costing a third of a million in edmonton. Crazy, it's edmonton.


I question if you've ever owned a home. I've owned a primary residence for the last 14 years, or since I was 21. I also now own a second property.

As for the sleight on my city: Its where the jobs are. I actually rent to a BC guy.


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## none (Jan 15, 2013)

I don't see how whether I've ever owned a home is relevant or not. If it makes a difference, yes I have. I extracted my pound of flesh from the RE market.

I make more now investing in REITs with less work and less risk.

Sound like the BC guy is a smart guy. Enjoy your mall.


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## Frank Drebin (May 10, 2015)

none said:


> I don't see how whether I've ever owned a home is relevant or not. If it makes a difference, yes I have. I extracted my pound of flesh from the RE market.
> 
> I make more now investing in REITs with less work and less risk.
> 
> Sound like the BC guy is a smart guy. Enjoy your mall.


Its relevant because your estimates are way off, and plain wrong. Enjoy your landlord. Hope he's a good one. Don't let the bed bugs bite!


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## IFITSTOBEITSUP2ME (Mar 6, 2015)

Exactly Frank. Experience the same thing ourselves, but interest rates we are seeing are 2.85% and sometimes less right now (can negotiate with mortgage brokers to pay down a portion out of their commissions) so paying far less to own than to rent if one compares an apples to apples on size, location, type, style of properties. 

Also those that retire with a paid off small home typically are normally way better off than those that are renting (subsidized housing aside!), as let's face it there would be no landlords to rent from of any significance if they couldn't cover their costs of ownership and gain either on equity, cashflow or preferably both. A retired person(s) that might only be eligible for OAS & GIS would struggle moreso having to pay rent than living in a paid off affordable home. Again, if we are going to compare, then we have to compare apples to apples.


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## none (Jan 15, 2013)

Again, you guys are ignoring opportunity costs. That's the kicker.

My estimates are pretty bang on if you guys could math right.

My landlord is a woman and she actually just cut my rent by $40 a month because I'm such a great tenant. This allows me to save about $1500 a month which I plan to use to buy a house in 3-5 years IF it ever makes sense. As I've illustrated, currently it doesn't. If not, no biggie, I'll have over a war chest for retirement. I win either way.

Enjoy 'living' in Edmonton.


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## Frank Drebin (May 10, 2015)

none said:


> Again, you guys are ignoring opportunity costs. That's the kicker.
> 
> My estimates are pretty bang on if you guys could math right.
> 
> ...


How long have you been waiting to be right for? 10 years? You're forgetting home appreciation. What have home prices done while you've so smartly sat on the sidelines?


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## none (Jan 15, 2013)

I sold in 2008 - I was living in the states until 2011. At that point I moved back and I did the math on the Victoria Market and it didn't make sense. Indeed, the victoria market is down ~8% (corrected for inflation) from it's peak in summer 2010.

Based on renting & investing I'd say I'm up about $120-150K more than if I had bought when I moved here.

Anyway, not sure how you math but that sound like it worked out pretty well for me.

http://1.bp.blogspot.com/-AwG4DP2al-c/VSTA_wI8uvI/AAAAAAAABNA/6Uhqe2WPqoc/s1600/marchyearly.png


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## Frank Drebin (May 10, 2015)

none said:


> I sold in 2008 - I was living in the states until 2011. At that point I moved back and I did the math on the Victoria Market and it didn't make sense. Indeed, the victoria market is down ~8% (corrected for inflation) from it's peak in summer 2010.
> 
> Based on renting & investing I'd say I'm up about $120-150K more than if I had bought when I moved here.
> 
> ...


If I lived where you do I would have most likely looked at renting as well. Market conditions dictate whether or not it is wise to buy or rent. I'm not sure where the conversation took a bad turn but I apologize for being snippy.

Owning a home has served me very well in my life, but I have purchased and sold at the right times.

It just rubs me the wrong way when someone speaks in absolutes, and I suppose that I am guilty of that in this conversation too.

Would you agree, that providing the initial purchase price/market conditions makes sense, it is a wise long term financial decision to buy vs rent? I cannot concede that it is smarter to rent for the long haul. To wait out a housing bubble? Absolutely. 

FWIW I would absolutely love to live in the area where you are. Two things keep me here, in order: 1. Family. 2. Work.

If things go as planned I hope to have the means to live comfortably wherever I want by the age of 55, while travelling, enjoying life, and living in a nice house (that I own) in the meantime.


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## none (Jan 15, 2013)

Agreed. We all come from our own little bubble of reality. I also apologize.

As far as owning a house being a good decision - it's hard to say simply because housing in general is a pretty bad investment as housing general increases in value on par with inflation (with recent notable exceptions). The true benefit of owning a home is simply it's a forced savings plan (which is not nearly as powerful with HELOCs) and not that they increase in value.

http://www.forbes.com/sites/jamieho...rm-investment-and-why-you-should-buy-anyways/

So basically, if you don't have your crap together and can't control your cash flow - force your hand and buy a house. If you really want to retire well - rent an equivalent place and have the difference taken off your paycheck and invested appropriately. 

For me I have no love for housing although i will concede that moving is one major pain in the arse. I won't buy a house until it makes financial sense and for that to happen house prices will have to fall 30 or so percent here. If that happens great but if not that's OK too. like I said before, I win either way.


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## CalgaryPotato (Mar 7, 2015)

I think the thing that can make real estate a good investment depending on the house prices to rent ratio is the high yield. Again using myself as an example buying a few years ago before the prices went insane, I bought a house which would have cost around $1700/month in rent for $160K. Even factoring in, insurance, maintenance etc, I was basically getting 10% yield. I don't think factoring in the interest makes sense, because that ignores the opportunity cost of getting the yield instantly rather than adding to the investment monthly on the buy vs rent savings. (which again for my case would have been virtually a wash).

Even if my house didn't appreciate a dime, it didn't matter because of the yield. My only regret is that I wasn't in the position to get a couple of rental properties at the same time.

But now the house prices to rent has swung to the other side... this is why you can't take an absolute position on whether real estate is good or bad. It can vary between great and terrible realistically.


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## My Own Advisor (Sep 24, 2012)

none said:


> Agreed. We all come from our own little bubble of reality. I also apologize.
> 
> As far as owning a house being a good decision - it's hard to say simply because housing in general is a pretty bad investment as housing general increases in value on par with inflation (with recent notable exceptions). The true benefit of owning a home is simply it's a forced savings plan (which is not nearly as powerful with HELOCs) and not that they increase in value.
> 
> ...


The renters dividend none, well done: "If you really want to retire well - rent an equivalent place and have the difference taken off your paycheck and invested appropriately."

Buying a house, while a math decision is also an emotional decision. Seems like you've made both.


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## Eclectic12 (Oct 20, 2010)

none said:


> ... The true benefit of owning a home is simply it's a forced savings plan (which is not nearly as powerful with HELOCs) and not that they increase in value.


YMMV ... depends on what the HELOC is used for as the results. Using the HELOC to kill the mortgage faster, converting non-deductible interest into deductible interest and having a growing investment portfolio using OPM can work out nicely. 

Just like renting to free up cash to invest ... the opportunity is there - the million dollar question is what people do.




none said:


> ...So basically, if you don't have your crap together and can't control your cash flow - force your hand and buy a house. If you really want to retire well - rent an equivalent place and have the difference taken off your paycheck and invested appropriately.


Interesting that the Forbes link is matching what I've observed over the years of those who talked about renting/investing (and it appears to be the opposite of those here on CMF) ...



> ... despite many academic arguments and conceptual arguments that renting should increase wealth faster than owning, a review of the existing research by Harvard University’s Joint Center for Housing Studies shows that time and time again, even after controlling for sociological, economic, and other differences, those who buy homes tend to increase their wealth faster than those who rent.


It makes me wonder if it is similar to "pay yourself first" were people grasp the concept when talking about it but when they are knee deep in doing it - all sorts of possibilities that were dismissed before become acceptable.

... maybe CMF should sponsor a study to look into it? :biggrin:


Cheers


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## sags (May 15, 2010)

This is kind of a lame debate because...........

Anyone who bought a home years ago will be fine. They have equity coming out their wazoo.

Those who bought within the past couple of years are likely facing a fall in the value of their home or a rise in interest rates and their payment...........or both.

So both sides of the same coin can be debated and both sides can be right.

It just depends on when you bought..........where you bought..........what you paid...........how much you earn........and if you keep your job.


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## none (Jan 15, 2013)

^ agreed - i would think that the question (as I was approaching it) is whether to buy now. I don't get why people bring up the past with houses. We don't talk about buying apple stock based on a run up 3 years ago. It's weird.

i should clarify that my math above was based on a fully paid off house. So instead of having a million or 1/2 mill or whatever sitting in a house it could be making 7% in a potato (opportunity costs) plus the costs of taxes maintenance etc. I'm a huge advocate of home owners not touching more than 50% of the principle. Pay down to ~50% then go interest only. At these interest rates at least.


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## sags (May 15, 2010)

We bought our first home in 1980.

We paid 79,000 for it. Today it would sell for around $250,000.

In 1980 I bought a new Camaro Z28 for $9200. Today a new Camaro would cost $45,000.

The house went up 3 times in cost. The Camaro went up 5 times in cost.

House inflation has been less than Camaro inflation.

I should have stayed renting and bought 8 Camaros and put them away and never bought another car................LOL


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## CalgaryPotato (Mar 7, 2015)

none said:


> I don't get why people bring up the past with houses. We don't talk about buying apple stock based on a run up 3 years ago. It's weird.


I brought it up because you were saying real estate is almost always a bad investment because of poor growth potential. I was just pointing out that back in the days before house craziness, yield was the reason to buy real estate, not growth, and it may again someday be. 

You're right, I can't show yield being a good reason to buy a house right now in Canada.


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## 1980z28 (Mar 4, 2010)

My Own Advisor said:


> http://www.theglobeandmail.com/glob...s-no-such-thing-as-good-debt/article24359507/
> 
> Thoughts?
> 
> ...


I would be in a bad place without borrowing

Example is in 2008 I borrow xxx,xxx.xx to invest up 2 time from that point to date,also borrow for mortgage in early 80`s for first mortgage,all cash deals after that ,,,,

But guess I was lucky


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## lonewolf (Jun 12, 2012)

sags said:


> se...........Anyone who bought a home years ago will be fine. They have equity coming out their wazoo.
> 
> .



Going into the 2000 top in the Nasdaq which was the real top in terms of CPI & gold there was an add where a guy was being rushed to emergency. He was being rushed to emergency because he had so much money coming out of his wazoo.


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## AlexM1359 (May 19, 2015)

Debt is a necessary evil in our consumerism society, not many people can afford a debt free lifestyle. Not to mention who's going to be able to dish out the price of a house or condo in Toronto in cash with the average price of houses in Toronto reaching 1 million dollars.


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## LBCfan (Jan 13, 2011)

Like anything else, debt can be good or bad. 

Borrowing to buy RE in TO in 1983? was good. In 1989, not so much. Today, WTFK. Vancouver similar.

Borrow $250K to get an MD? Probably good. A PhD in basket weaving, maybe not.

Borrow as much as possible to get into the oil patch today? In 3 years it will be either a "no-brainer" or "exactly how stupid are you" thing.

I avoid debt (and yes I paid cash for my first house). I've been lucky. Others have been lucky by taking on debt. YMMV.


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## james4beach (Nov 15, 2012)

AlexM1359 said:


> Debt is a *necessary* evil in our consumerism society, not many people can afford a debt free lifestyle. Not to mention who's going to be able to dish out the price of a house or condo in Toronto in cash with the average price of houses in Toronto reaching 1 million dollars.


I highlighted the word "necessary" in your message, because I think you and I have different opinions regarding what is necessary.

Who can afford a million dollar home/condo, you ask?

Solution: don't buy a Toronto condo then. I didn't -- and good thing too, because I lost my job shortly after.

My banker insisted that I could "afford" a condo via a huge mortgage. I disagreed, due to the debt I'd have to take on, and my concerns about being able to reliably service that debt. It turns out I was correct, and thank goodness I evaluated it myself and took the conservative route.

You don't _have_ to buy any of these things (not even a home). If you can't afford it, you can't afford it. I think the core problem is that people refuse to accept that fact.


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## james4beach (Nov 15, 2012)

1980z28 said:


> I would be in a bad place without borrowing
> 
> Example is in 2008 I borrow xxx,xxx.xx to invest up 2 time from that point to date,also borrow for mortgage in early 80`s for first mortgage,all cash deals after that ,,,,


And the US is littered with people who are ruined _because_ they borrowed, pre-2008. They borrowed to buy homes they couldn't afford, during a weak economy, and then it all came crashing down on their heads. Many of them are under water, and their home has ruined their lives.



> But guess I was lucky


Yes, exactly. You got lucky. Debt and leverage just amplifies the result. What the result is, comes down to randomness -- factors like timing of your entry and exit.


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## RBull (Jan 20, 2013)

My Own Advisor said:


> http://www.theglobeandmail.com/glob...s-no-such-thing-as-good-debt/article24359507/
> 
> Thoughts?
> 
> ...


Sure you do! 

I own debt but the returns aren't really high enough to call it a slave right now. each:


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## My Own Advisor (Sep 24, 2012)

@RBull. Once the mortgage is done, we'll be in a MUCH better place 

@james, you know, I couldn't agree more with the comments, re: many folks under water in the U.S. They are there largely because they didn't think it would happen to them. That's just not being a) realistic or b) risk aware. Life is full of surprises and all good plans hedge risk to some degree. 

Being out of debt will not rid ourselves of all of life's concerns but a few big ones.


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