Comments on: Reader Mail: Relocating with Lots of Equity in my Home http://www.milliondollarjourney.com/reader-mail-relocating-with-lots-of-equity-in-my-home.htm Building Wealth through Saving and Investing Thu, 18 Mar 2010 04:30:35 -0400 http://wordpress.org/?v=abc hourly 1 By: just learnin' http://www.milliondollarjourney.com/reader-mail-relocating-with-lots-of-equity-in-my-home.htm/comment-page-1#comment-20978 just learnin' Fri, 28 Dec 2007 09:08:47 +0000 http://www.milliondollarjourney.com/reader-mail-relocating-with-lots-of-equity-in-my-home.htm#comment-20978 (-: you're going to be making good use of that washer and dryer with the baby on the way! Try to be patient while the bills go up. (-: you’re going to be making good use of that washer and dryer with the baby on the way! Try to be patient while the bills go up.

]]> By: just learnin' http://www.milliondollarjourney.com/reader-mail-relocating-with-lots-of-equity-in-my-home.htm/comment-page-1#comment-20977 just learnin' Fri, 28 Dec 2007 09:04:35 +0000 http://www.milliondollarjourney.com/reader-mail-relocating-with-lots-of-equity-in-my-home.htm#comment-20977 I think I still have to read about the SM a few more times before I get my head around it. I just received a copy of the Wealthy Barber in my stocking, so first things first. Having said that I just wanted to humbly offer a couple of useful links for anyone considering renting or buying. (This may not earth shattering news to everyone as I seem to be out of my league here, but perhaps it will be of help to someone.) http://www.smartmoney.com/home/living/index.cfm?story=rent http://www.getrichslowly.org/blog/2007/11/05/the-new-york-times-rent-vs-buy-calculator/ Merry Christmas! I think I still have to read about the SM a few more times before I get my head around it. I just received a copy of the Wealthy Barber in my stocking, so first things first.

Having said that I just wanted to humbly offer a couple of useful links for anyone considering renting or buying. (This may not earth shattering news to everyone as I seem to be out of my league here, but perhaps it will be of help to someone.)

http://www.smartmoney.com/home/living/index.cfm?story=rent

http://www.getrichslowly.org/blog/2007/11/05/the-new-york-times-rent-vs-buy-calculator/

Merry Christmas!

]]> By: FrugalTrader http://www.milliondollarjourney.com/reader-mail-relocating-with-lots-of-equity-in-my-home.htm/comment-page-1#comment-20944 FrugalTrader Thu, 27 Dec 2007 20:47:23 +0000 http://www.milliondollarjourney.com/reader-mail-relocating-with-lots-of-equity-in-my-home.htm#comment-20944 FP, I had to take advantage of the boxing day deals for appliances for the new place. So we picked up a new washer/dryer along with a new laptop. FP, I had to take advantage of the boxing day deals for appliances for the new place. So we picked up a new washer/dryer along with a new laptop.

]]> By: Jimmy http://www.milliondollarjourney.com/reader-mail-relocating-with-lots-of-equity-in-my-home.htm/comment-page-1#comment-20940 Jimmy Thu, 27 Dec 2007 20:23:29 +0000 http://www.milliondollarjourney.com/reader-mail-relocating-with-lots-of-equity-in-my-home.htm#comment-20940 I appreciate that, thanks Mike. I am not comfortable maxing out with leverage. I am thinking about long term, dividend paying 'aristocrats' more than anything else. I will then pay down my mortgage with these proceeds and reinvest with the corresponding increase in the LOC. I am in this for the long term and I am comfortable with the two mortgages I have. I think I am leaning towards buying and then investing a marginal amount in long term equities. Thanks for the comments... J I appreciate that, thanks Mike. I am not comfortable maxing out with leverage. I am thinking about long term, dividend paying ‘aristocrats’ more than anything else. I will then pay down my mortgage with these proceeds and reinvest with the corresponding increase in the LOC. I am in this for the long term and I am comfortable with the two mortgages I have. I think I am leaning towards buying and then investing a marginal amount in long term equities.

Thanks for the comments…
J

]]> By: FourPillars http://www.milliondollarjourney.com/reader-mail-relocating-with-lots-of-equity-in-my-home.htm/comment-page-1#comment-20938 FourPillars Thu, 27 Dec 2007 19:35:45 +0000 http://www.milliondollarjourney.com/reader-mail-relocating-with-lots-of-equity-in-my-home.htm#comment-20938 Hi Jimmy, I might have been exaggerating a bit when I used the word "unbelievable" but from what I can see you have about $483k in debt which is quite a bit. As you point out however you have a long term rental which helps a lot. There's nothing wrong with leveraging for investment but you have to know what you are getting into. Things like interest rate risk, vacancy in the rental, possible unemployment can be harder to deal with if you have higher debt levels. It seems you have done quite well with your investments in the past. FT has suggested buying a house and leveraging that equity which is not a bad idea IF you are comfortable with more debt. I wouldn't suggest a true SM since that entails maxing out the leverage from your primary residence - just leverage as much as you are comfortable with. As someone who has moved twice in the last three years, I totally agree about not wanting to move for a few years! I also agree with FT about investing short term money (three years) in high interest savings rather than equity markets. I don't know what you should do in the future - it's up to you if you want to rent for a few years (perfectly acceptable option) or not. Mike p.s. - FT - what did you buy???? Hi Jimmy, I might have been exaggerating a bit when I used the word “unbelievable” but from what I can see you have about $483k in debt which is quite a bit. As you point out however you have a long term rental which helps a lot.

There’s nothing wrong with leveraging for investment but you have to know what you are getting into. Things like interest rate risk, vacancy in the rental, possible unemployment can be harder to deal with if you have higher debt levels.

It seems you have done quite well with your investments in the past. FT has suggested buying a house and leveraging that equity which is not a bad idea IF you are comfortable with more debt. I wouldn’t suggest a true SM since that entails maxing out the leverage from your primary residence – just leverage as much as you are comfortable with.

As someone who has moved twice in the last three years, I totally agree about not wanting to move for a few years!

I also agree with FT about investing short term money (three years) in high interest savings rather than equity markets.

I don’t know what you should do in the future – it’s up to you if you want to rent for a few years (perfectly acceptable option) or not.

Mike

p.s. – FT – what did you buy????

]]> By: Jimmy http://www.milliondollarjourney.com/reader-mail-relocating-with-lots-of-equity-in-my-home.htm/comment-page-1#comment-20934 Jimmy Thu, 27 Dec 2007 17:35:24 +0000 http://www.milliondollarjourney.com/reader-mail-relocating-with-lots-of-equity-in-my-home.htm#comment-20934 Thanks for all your comments. I do not intend to sell the rental house. It's worth in the region of $450K and so it has done well for me. It is fully rented out and I make a nice (small) profit from it. Mike - I am unclear what you mean by saying "Unbelievable amount of debt" . I have $675K in capital gain in real estate . My debt load is fully covered by long term rental and my mortgage payments ( we are good at budgeting!). Do you think that what I have done in the past was financially unwise? What do you suggest I do now? Also, the idea of buying again in three years would only happen if we were to rent and not buy now. If we were to buy now, I do not intend to move again with the next 5 - 10 years (too expensive). I appreciate all the advice I can get! Thanks for all your comments.

I do not intend to sell the rental house. It’s worth in the region of $450K and so it has done well for me. It is fully rented out and I make a nice (small) profit from it.

Mike – I am unclear what you mean by saying “Unbelievable amount of debt” .

I have $675K in capital gain in real estate . My debt load is fully covered by long term rental and my mortgage payments ( we are good at budgeting!). Do you think that what I have done in the past was financially unwise? What do you suggest I do now?

Also, the idea of buying again in three years would only happen if we were to rent and not buy now. If we were to buy now, I do not intend to move again with the next 5 – 10 years (too expensive).

I appreciate all the advice I can get!

]]> By: FourPillars http://www.milliondollarjourney.com/reader-mail-relocating-with-lots-of-equity-in-my-home.htm/comment-page-1#comment-20929 FourPillars Thu, 27 Dec 2007 14:56:28 +0000 http://www.milliondollarjourney.com/reader-mail-relocating-with-lots-of-equity-in-my-home.htm#comment-20929 I'm not clear on his plan - does "sell up" mean he will sell both his primary and rental residence? or just the primary? For a family of five with $100k in salary, they have an unbelievable amount of debt & risk (in my opinion). Whatever he does he should try to avoid that much debt in the future - I don't care if it's deductible or not. Mike I’m not clear on his plan – does “sell up” mean he will sell both his primary and rental residence? or just the primary?

For a family of five with $100k in salary, they have an unbelievable amount of debt & risk (in my opinion). Whatever he does he should try to avoid that much debt in the future – I don’t care if it’s deductible or not.

Mike

]]> By: CanadianDollars http://www.milliondollarjourney.com/reader-mail-relocating-with-lots-of-equity-in-my-home.htm/comment-page-1#comment-20923 CanadianDollars Thu, 27 Dec 2007 13:55:26 +0000 http://www.milliondollarjourney.com/reader-mail-relocating-with-lots-of-equity-in-my-home.htm#comment-20923 I agree with choice #2. It's a good balance of yield and risk. I agree the reader is in very good financial shape!! I agree with choice #2. It’s a good balance of yield and risk. I agree the reader is in very good financial shape!!

]]> By: FrugalTrader http://www.milliondollarjourney.com/reader-mail-relocating-with-lots-of-equity-in-my-home.htm/comment-page-1#comment-20915 FrugalTrader Thu, 27 Dec 2007 12:32:49 +0000 http://www.milliondollarjourney.com/reader-mail-relocating-with-lots-of-equity-in-my-home.htm#comment-20915 Northerner: I just got back from Futureshop myself.. $2500 later... :) Great comments! Northerner: I just got back from Futureshop myself.. $2500 later… :)

Great comments!

]]> By: Northerner http://www.milliondollarjourney.com/reader-mail-relocating-with-lots-of-equity-in-my-home.htm/comment-page-1#comment-20912 Northerner Thu, 27 Dec 2007 11:18:30 +0000 http://www.milliondollarjourney.com/reader-mail-relocating-with-lots-of-equity-in-my-home.htm#comment-20912 MDJ, man you are up early. I'm visiting NL and got up at 5:15am this morning to make the Future Shop rush and you're still out ahead! The only thing I wonder about this situation is how the assets were accumulated in the first place. With moderate income, the advice would be much difference if the majority of the equity came from increases in the real estate market versus mortgage payments. In this situation, I'd be assessing the current real estate climate in the area I'm moving, as well as the location of my future dream home. Being invested in the housing market may be a good idea, though it appears the rental unit could provide a solid hedge. Another thing to consider would be to sell the current home, pay off the non-deductable debt, and buy a home of almost equal value in the new location, keeping the payments the same, but the load of the current additional debt removed. With no current investments (none stated at least), I would not be jumping into today's market with a large LOC leveraged investment in stocks. Leverage can be risky when you have the assets to cover, but in this case, the assets would be completely tied up in a home. Given that the money from the house sale, if not invested in another home, would be a short term investment (until the dream home is purchased, presumably in only a few years), I would be wary of putting that money in the market in a lump sum. Sorry if my thoughts seem jumbled, the 5:45am standing in line at Future Shop has frozen my brain. Cheers all. MDJ, man you are up early. I’m visiting NL and got up at 5:15am this morning to make the Future Shop rush and you’re still out ahead!

The only thing I wonder about this situation is how the assets were accumulated in the first place. With moderate income, the advice would be much difference if the majority of the equity came from increases in the real estate market versus mortgage payments.

In this situation, I’d be assessing the current real estate climate in the area I’m moving, as well as the location of my future dream home. Being invested in the housing market may be a good idea, though it appears the rental unit could provide a solid hedge.

Another thing to consider would be to sell the current home, pay off the non-deductable debt, and buy a home of almost equal value in the new location, keeping the payments the same, but the load of the current additional debt removed.

With no current investments (none stated at least), I would not be jumping into today’s market with a large LOC leveraged investment in stocks. Leverage can be risky when you have the assets to cover, but in this case, the assets would be completely tied up in a home.

Given that the money from the house sale, if not invested in another home, would be a short term investment (until the dream home is purchased, presumably in only a few years), I would be wary of putting that money in the market in a lump sum.

Sorry if my thoughts seem jumbled, the 5:45am standing in line at Future Shop has frozen my brain.

Cheers all.

]]> By: Dunamis http://www.milliondollarjourney.com/reader-mail-relocating-with-lots-of-equity-in-my-home.htm/comment-page-1#comment-20899 Dunamis Thu, 27 Dec 2007 07:53:12 +0000 http://www.milliondollarjourney.com/reader-mail-relocating-with-lots-of-equity-in-my-home.htm#comment-20899 Great question and answer - very helpful... cheers! Great question and answer – very helpful… cheers!

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