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Originally Posted by Dominicwasalreadytaken
Do I seem preachy? That's text for ya. I really don't mean to. Yes, I'm new to investing in real estate with borrowed money. I've never been in the position before to do what I'm doing now.
The first I agree with. I own two vehicles, one of them is an 87 Buick Century that I drive everyday and the other is a 95 Chevy Lumina APV minivan. I owe nothing on either because I refuse to pay car loans. Just a personal decision. As for the second, I borrow money every February to buy a schwak of RRSPs. I then pay the loan back when I get my tax return. I've picked up so much free money that way it isn't even funny. I know some people like the tax return because it's some kind of bonus, but I don't need it so I invest it. Why not?
I've stressed a couple of times in this thread that if you don't like risk, don't invest like I do. I would hazard a guess that the people in this study were looking for a quick easy buck, and didn't do enough research and math to figure out what they could handle. They probably hated debt, and only planned on being in debt for a couple of months before they raked in their millions. These people will always lose. Or maybe they'll get lucky and make their millions, but I'd attribute more of that to luck than proper investing.
Your statement I just found so ridiculous because I know so many people that have borrowed to invest and have made fortunes. I wouldn't have objected to your statement if it wasn't so absolute.
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You're right, investing in Real Estate is good, but that's not what the original post was about. If he said that he was going to take out a loan and invest it in real estate I wouldn't say anything. I just have a problem with people that think that stock markets will make everyone rich. People quickly throw numbers like 30% as to what they should expect. That line of thinking will get them in trouble.
What I see is this. He borrows 50 K at 6% (mortgage) and invests it. He will be lucky to average 8-10% on stocks. Likely he will do worse, most people do. So in essense he is getting a debt at 6% to "maybe" make 2% more in very risky investments. He could do better, even a lot better, but again, most people don't and some lose a lot. Is the 2% worth the risk? Not IMO.
It would as effective as saving the extra $200 a month you now pay for your now larger mortgage and investing it on its own. But here's the kicker. No extra debt and risk of housing to go down.
Housing is insane right now in Cgy. But can it continue? How long before all those people from MooseJaw, Saskatoon, Winnipeg etc sell their homes here and move back home with a small fortune? You know what they say, home sweet home...I know a guy that did just that. Sold his crappy house in Abbeydale and moved back home to Saskatchewan. He bought a house for himself for cash and has enough to buy another one and then some. He is thinking to buy a B&B somwhere where bird watching is huge, it apparently is :-) Plenty of people will see that life in Calgary is too expensive and going back home with a small fortune will improve their lives. Some will go back, but how many? You hope for none.
What kind of housing market would that create? Not a good one, that's for sure. If you have as little equity as he does it would't take long to slash your net worth in half or more. Maybe a year or two? What then? Back to square one...
Your statement I just found so ridiculous because I know so many people that have borrowed to invest and have made fortunes.
Yes, and there were many more that didn't and lost fortunes. It goes both ways. It isn't THAT easy guys.