Hypothetical Finance.

[Yukon Cornelius]

[CgDs]

[noddy]

yes, i would expect he meant 1 fictional unit a year in rent.. if he didnt, its a no brainer :]

[Yukon Cornelius]

[Azrael]

You said that a new home costs 15 units. Is it worth 15 units, or less than 15 units? How more units would a new home be worth than your old one (10)?

Is it the case where a new home may cost 15 units but be worth less than it costs to build (and buy land for, etc.)?

It probably isn't a good idea to have too much of your portfolio in one asset class. So, you should only own one house and invest the rest of the units in other asset classes, such as no load, low expense ratio mutual funds. I would suggest, with what units you have left after your one house, put one third in bond funds (probably mainly in bank loan funds, which go up and down with the LIBOR) and two thirds in equity funds, mainly index funds.

[Alph]

[Yukon Cornelius]

Thank you guys -- one more thing.

As I laid awake a 2:00am this morning, it occurred to me that this is essentially a one-to-one proportion: I'd be taking on a 1 unit loan at 4.75%, while hoping to turn 6% on the 1 unit home. Is there a simple way of using the FVM/PVM equations to make sense of this as it plays out over time?

That is, perfect conditions in the real estate market assumed -- or just no disaster -- if there is moderate inflation this should make sense.


Or something.

[CgDs]

[Yukon Cornelius]

[Azrael]

I think that the consensus is don't become a landlord. Own the house you live in and put the rest of your units in non-real estate asset classes.

[Mr. Perfect]

YC there are any number of online calculators to punch out some scenarios, but I think the bottom line thing you should consider is if you buy the expensive house you are simply exposing more of your worth to RE, which violates some diversification principles.

For the layman investor right now, or the retail investor ie the nonprofessional investor, the highest priority (although obviously not the only priority) is liquidity. If you are worried about the dollar and want to add a degree of sophistication I would bone up on currencies and seek the currency preserving the greatest value for your units. Other non RE asset classes are at pretty rich multiples, thanks in large part to STPN, which means slaughter is possible at any moment. Although arguably RE is still pretty rich valuation wise. Trading stocks it trading stocks, but if one doesn't have a degree of ability at this point it is not necessarily the time to jump in. Even after all this time post implosion, with initial crash and the STPN bubble afterward, every evening I am ready to change my outlook the following morning. This probably won't change anytime soon. Too many shoes still to drop. Way too many.

That's not to say you shouldn't do it. There are other intangibles. Is it a dream home? Will your kids get better grades moving to a new/better house? Is it closer to a gym/church/school/work etc? Along these lines. Houses are not primarily investment vehicles, so of course keep that in mind.

RE land lording, you might look at it. Have had some people have good success recently renting to relatives. Of course they are good relatives.

[noddy]

[Alph]

[Yukon Cornelius]

So when you guys mention "currencies" you're talking about ETFs? CYB, and so forth? Or are you going straight to the source -- (whatever that would be.) I get the feeling that there is more out there than CDs and Shorting/Going long on stocks, ETFs, and closed-end funds (even something like EWG).

There has to be a non-huckster book out there that gives a neophyte a lay of the land, In terms of liquid assets. (Or can it really be mostly done with ETFs???)

[Mr. Perfect]

[Mr. Perfect]

[Colonel Sun]

[Yukon Cornelius]

Hmmm... so would you guys agree that there is a good deal of tacit knowledge involved in making a steady 3-6% in the markets?

Or is there a dirt-simple, dumb-dumb way of at least hitting 3% -- without much risk?

[Mr. Perfect]

[CgDs]

[Yukon Cornelius]

***several silent pensive nods***


That makes sense, thank you guys.