Chapter 23 [The fate of buying versus renting after 30 years is very different!]

Source:https://www.facebook.com/100063294665283/posts/558047176315100/

[James: Origins and Today] Chapter 23 - The fate of buying a house and renting a house are very different thirty years later (04/06/2023)

• To buy a house in the United States for one million people to live in, the down payment is $200,000, the loan is $800,000, and the interest is 3.5% for 30 years. The monthly payment is $3592, plus the property tax of $1000 per month, the home buyer has to pay $4592 in monthly cash flow.

• If you rent a house, you can rent the same house for $3,000, and the rent will increase by 3% every year, but you can reinvest an additional $1,592.

• Thirty years later, a house buyer will have a thirty-year-old house worth $7.61 million (the house growth rate is 7%, and this has to be the egg yolk area, the area with the fastest appreciation).

Renters:

• The initial investment of $200,000 grows to $5.99 million with an annualized return of 12% over thirty years plus a monthly investment of $1,592. The thirty-year return rate is 12%. However, because the rent of $3,000 will increase by 3% every year, the return rate of $1,592 needs to be halved. Calculated at 6%, it grows to $1.55 million in thirty years. Total assets after thirty years are $155+$599=$7.54 million.

• At the end of thirty years, everyone retires:

• Those who bought a house had no cash for retirement, and the house could not be mortgaged, so they had to sell the house and pay the taxes, leaving $3.805 million (this does not include the cost of house repairs).

• Investors, $7.54 million left. Finally, by pledging the stocks, you can borrow the full amount to buy a house and only need to pay interest. Living expenses are also borrowed, and you don't need to sell a single stock or pay taxes. My own funds are still growing at an average of 12% every year as I work hard. Really something for nothing.

• The longer time passes, the faster the wealth of renters increases. It is truly a happy and joyful life for millions.

Based on my father’s experience in real estate in Taiwan -

The earliest one was in Wanhua, Taipei. It cost NT$80,000. It was sold for 40 years for $1.5 million, with an increase of 18 times and an annualized return of 7%.

Another one, a single-family villa on Xindian Mountain, cost more than 10 million yuan at that time including decoration. It is now valued at almost 25 million yuan. After 40 years, it has increased by 2.5 times and the annualized return rate is 2.3%.

There is also a building on Hangzhou South Road in Da'an District. It was purchased as a house allocated by the Telecommunications Bureau when it was purchased. It should have cost $1.5 million at the time. Forty years later, it is now valued at almost $25 million with an annualized rate of return of 7.2%. The egg yolk district in Taipei City is a rationed house with low cost and long-term return of about 7%. Now the house is leaking and in poor condition. Many neighbors have left it abandoned because the elders have left and the younger generations have no money to renovate.

The above different areas, the essence area, the egg yolk area, the good school area, the highest return for New Year paintings is 7%. If it is a mountainous area or a villa, then a return of 3% is considered good, and it must be sold. There is no market, and no matter how low the price is, you may not be able to find a buyer.

For a young person in Taiwan, it is impossible to buy the yolk area, so he will only buy areas with long-term low returns that are far away from the yolk area. Not only will the long-term returns be low, but there is also the risk of not being able to sell.

Therefore, buying a house for young people is not a good investment. Only rich people have the opportunity to make high profits in real estate (without using their own funds at all).