[Flames Fan, Ph.D.]

I feel much of this is a digression, but still fun:

Originally Posted by blankall

1) Is a mortgage debt? What if the investment is owned by a corporation?

I own shares of the corporation. The corporation owns mortgaged properties. The assets in the corporation exceed the "debt". Therefore, the shares I own have positive value, and I personally have no debt.

Don't really see why it's different if the corporation isn't there. As long as you have positive equity, it's not debt, good or bad, in my opinion.

You're confusing the overall balance sheet with the individual transactions.

Also, I don't see the point of this example. The thread is about whether or not a single mortgage is debt, and whether it is good or bad. Not whether or not a REIT can turn a profit.

Also, if you have positive equity, that's only a snapshot in time and does not tell you if the debt is good or bad. If your mortgage got reset at 7% a couple of years ago and you're now in an environment wherein the rates are 4%, you got a bad debt on your hands regardless of whether or not you're cash flow positive.

Originally Posted by blankall

2) If you don't own then you have to rent. That factors into the decision as well. Also, people own houses for potentially many decades. It's not the value now or even 10 years down the road which is important, it's the value in 30 years. With stocks, the company you exist in can disappear. As long as I retain my job and can keep making the mortgage paymetns, my house will not disappear.

Absolutely. Which is why there are all those rent vs own calculators to determine at what point it is better to rent or to own. And the reason those calculators are available: because the mortgage can be bad debt in certain situations, and good debt in others.

That was my point as well, so I'm not sure I understand your counterpoint.

And yes, as long as you make the mortgage payments your house won't disappear insofar as the bank will leave you alone. But just because you can make payments doesn't mean it's good debt.

Originally Posted by blankall

3) Just because you can benefit from future interest rates, does not mean the equity in your home doesn't have value. The comparison between school debt and a mortgage is not apt. School debt is unsecured. A mortgage is secured against a piece of property. As long as you are above water, you can still sell the property for money. I cannot sell my degree for money. That's the big difference.

Secured debt, sure. But you're buying the home for its use, so why are you dismissing the reason why you're buying the education? For its use. And further and most obviously, you're certainly selling your degree for money. You just do it month to month in exchange for a salary rather than in one transaction in the form of a home. Simple as that.

Originally Posted by blankall

4) See 2. Everyone needs a place to live.

Sure, but that doesn't change the fact that you can assume "good" or "bad" debt in exchange for that need. So I'm not sure what the point is here.

Originally Posted by blankall

In fact, I'd take this all a bit further. As long as you have more assets than debts, you are not in debt. Obviously some of your investments and debts carry risks with them that could land you "in debt". A mortgaged property, as opposed to most stocks, has the potential to go underwater. Yes, that is a risk.

Again, you're running the balance sheet.