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danzig6661394224dThat‘s why I don‘t own a credit card... My boss wanted me to rent cars for work travel, but I always answer: sry, got no credit card! If u want that, gimme a company card 😬
No credit cards for me, either.
If I can't afford something, I can't afford it and won't buy it.
Credit cards are just a convenient way to get into debt. Debt is bad. Don't do it, kids.
@Root here’s the catch. Not all debt is bad. If you are gonna live in the same place for a long time, 7 years or more, it’s way better to own a home than rent. Plus now it a prime time to practice house hacking to make passive income. So it pains me when I see responsible people not hack the debt system. Delaying gratification is important, but not always the best ROI.
@jeeper Not all debt is bad. That is definitely true; however, most of it is, and it's much easier (and accurate enough) to simplify that to "debt is bad" instead of trying to explain the differences because that isn't always easy or straightforward. I'm commenting on devRant, not holding a financial seminar 😋
But debt that doesn't let you earn money is bad, and most won't.
Also: Many mortgages are for 30 years, and have interest rates high enough that you're not actually paying anything towards the principal within the first 15 years. With those mortgages, the poor souls owning them end up paying 3-4 times the price of the house. Seriously, it's that bad. (And if you miss a payment or two...). Mortgages are absolutely terrible.
If, however, you could pay off the loan in its entirety in 7 years, that is a hell of a deal on a mortgage. (but in the end, you've still paid considerably more for the house than it cost, so you'd better hope it appreciated pretty well.) For those insane 30 year loans, it is absolutely better to forego the mortgage entirely, take what would have been your down payment, and invest it instead. Without using real numbers since i'm on my phone, that down payment earning 10% a year (and it's damned easy to earn 10% a year) for 30 years would net you likely 150-175% of the cost of that house -- for doing basically nothing. You could buy the house for cash, own it outright on the first day, and have 50-75% more cash left over. And what's more, in the interim you wouldn't be tied down and basically forced to live there. You would have had your freedom for the full 30 years, and made a sizable profit to boot -- all from an easy 10%/year.
How is 10% easy?
- REITs make it no-effort. Literally pay and forget.
- 1% a day is trivial in crypto.
- 1-2% a week is very easy in the stock market, and decently easy in currency exchanges.
So: while not all debt is bad, almost all of it is. Also: mortgages are the worst kind of debt ever.
@jeeper House hacking / flipping is a crapton of work for really only a few percent profit.
If it takes you more than a month to finish your repairs and re-sell, you lost that much of your income.
But you said "passive income," so you mean renting. Have you ever rented before? Having tenants is a nightmare. They damage your house(s), things break and require maintenance, toilets overflow, you have to collect rent (and they're ofc never on time), ... . It isn't passive. It's basically a full time job. And... for what? A small profit on top of your monthly mortgage payment?
Now, if being a handyman is your thing, that's great. But what if your house sits empty? That small profit on top of your mortgage payment doesn't cover a full mortgage payment. It might take five to ten of them to cover it, so each month your house sits empty eats five to ten months' profit, and finding tenants isn't always quick.
All of this sounds a lot less like passive income and a lot more like a stressful nightmare.
No. Passive income is where you still make money if you decide to move to the beach for a year.
If you want to get actual passive income from real estate, research REITs. You give them money, they purchase and maintain properties and do all of the work, and they pay you dividends just like with stock. You can cash out at any time, too, so your money isn't tied up, such as with buying a house to rent out, for example. 😋
(True, REITs will pay you less than you could make, but it's literally zero work on your part.)
@Root firstly I appreciate all the advice.
There are a few considerations that make mortgages a bit less evil than you are making them out to be. 1 is that your house usually appreciates at a rate faster than inflation. Now like any other investment, this depends on the market, but your 4-5% interest is offset by 2% or so appreciation. Additionally, you are gonna spend a third of your income living somewhere!! Might as well live somewhere you own. Big down payments are helpful leverage when you want to sell with but not always needed to make owning better than renting.
Also, do you think your landlord is annoyed with you? Are you clogging the toilets and causing problems? I suspect not. Most tenants average 1hr of work per month. Now over a year that might be 0.2/h for 11 months collecting rent and then one month 5h fixing some particular thing, but that comes with the territory.
In House hacking your goal is to live for free. So your other unit of your duplex, triplex, whatever, those rents should equal your mortgage and fees. So if your rent would normally be 1/3 of your income, which in many places it’s like 1/2, you are making at least 33% ROI per month.
@Root Moreover, if you are going to have a mortgage payment on a rented property, the rule of thumb is to shoot for 80-100% profit margin. And if you move away or go away there are property management companies who will take care of everything related to the property for about 10% of the rent. Now once those properties are paid off, then the real money starts flowing. And the goal is to have those be paid off before you retire. Now all that profit you made goes into other investment vehicles or more real estate.
Now I think your strategy is pretty good and it’s the direction I’m basically going. I’m up to my eyeballs in debt and I will be working on paying that off first of course. Just saying that RE investment isn’t all bad and most tenants aren’t horrid, just the bad ones get all the attention.
@jeeper That volatility is what makes it so profitable. One of the coins went up 70% this week!
Earning 3% a day is easy, and if you're good at technical analysis, you can catch those huge pumps a good amount of the time. Imagine tossing $10k in a trade like that, and/or using 10x leverage!
It requires a lot of discipline and attention to detail, but meep.
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