Comments on: Opportunity Cost of Owning a Home http://www.canadiancapitalist.com/opportunity-cost-of-owning-a-home/ Helping you invest and prosper Sat, 20 Mar 2010 00:40:13 +0000 http://wordpress.org/?v=2.9.2 hourly 1 By: bob http://www.canadiancapitalist.com/opportunity-cost-of-owning-a-home/#comment-182646 bob Thu, 19 Feb 2009 19:37:59 +0000 http://www.canadiancapitalist.com/2007/11/07/opportunity-cost-of-owning-a-home#comment-182646 hi, Gene 's observation that you cannot leverage stocks to the same extent as real estate seems good. if you were buying either a house or stock with 100% of your own money then most comparisons would hold good.. but not while real estate's are leveraged.. hi,
Gene ’s observation that you cannot leverage stocks to the same extent as real estate seems good.
if you were buying either a house or stock with 100% of your own money then most comparisons would hold good..
but not while real estate’s are leveraged..

]]> By: The Costs of Home Ownership http://www.canadiancapitalist.com/opportunity-cost-of-owning-a-home/#comment-122366 The Costs of Home Ownership Thu, 20 Mar 2008 11:22:16 +0000 http://www.canadiancapitalist.com/2007/11/07/opportunity-cost-of-owning-a-home#comment-122366 [...] reader left the following comment on an earlier post: “For someone who frets over a difference of 50bps paid to a mutual fund company, I find it [...] [...] reader left the following comment on an earlier post: “For someone who frets over a difference of 50bps paid to a mutual fund company, I find it [...]

]]> By: Canadian Capitalist http://www.canadiancapitalist.com/opportunity-cost-of-owning-a-home/#comment-115831 Canadian Capitalist Wed, 20 Feb 2008 21:08:50 +0000 http://www.canadiancapitalist.com/2007/11/07/opportunity-cost-of-owning-a-home#comment-115831 TD: Regarding your point about how expensive owning a home is, I agree with you. It's not just the Realtor commissions (which, by the way, is paid only when you sell, not when you buy. i.e., it's 6% when you buy and then sell a house). There's property taxes, land transfer taxes, maintenance, insurance etc. But you have to compare owning with the alternative - renting. The choice is more a lifestyle decision than a financial one. TD: Regarding your point about how expensive owning a home is, I agree with you. It’s not just the Realtor commissions (which, by the way, is paid only when you sell, not when you buy. i.e., it’s 6% when you buy and then sell a house). There’s property taxes, land transfer taxes, maintenance, insurance etc. But you have to compare owning with the alternative – renting. The choice is more a lifestyle decision than a financial one.

]]> By: Canadian Capitalist http://www.canadiancapitalist.com/opportunity-cost-of-owning-a-home/#comment-115603 Canadian Capitalist Tue, 19 Feb 2008 23:04:21 +0000 http://www.canadiancapitalist.com/2007/11/07/opportunity-cost-of-owning-a-home#comment-115603 TD: I'm surprised that you think I deleted critical comments. I never delete comments, critical or otherwise, when it is relevant to the subject on hand. As a matter of fact, I even let through obvious commercial messages and the only time I've deleted comments is when the same commercial message is put on multiple posts. In the blogosphere, my only currency is credibility and I am really surprised you think I deliberately disallow comments. After all, if every commenter agrees with me, what's the fun in life :) That said, it sometimes so happens that legitimate comments are caught by the spam filter. I am usually proactive about recovering such comments but an occasional one might sometimes slip through. No malicious intent at all! I'm curious why you think I delete dissenting opinion? TD: I’m surprised that you think I deleted critical comments. I never delete comments, critical or otherwise, when it is relevant to the subject on hand. As a matter of fact, I even let through obvious commercial messages and the only time I’ve deleted comments is when the same commercial message is put on multiple posts. In the blogosphere, my only currency is credibility and I am really surprised you think I deliberately disallow comments. After all, if every commenter agrees with me, what’s the fun in life :)

That said, it sometimes so happens that legitimate comments are caught by the spam filter. I am usually proactive about recovering such comments but an occasional one might sometimes slip through. No malicious intent at all!

I’m curious why you think I delete dissenting opinion?

]]> By: TD http://www.canadiancapitalist.com/opportunity-cost-of-owning-a-home/#comment-115553 TD Tue, 19 Feb 2008 20:41:26 +0000 http://www.canadiancapitalist.com/2007/11/07/opportunity-cost-of-owning-a-home#comment-115553 CC, I find it interesting how defensive you become in your decision to purchase a home over renting. Seems this is a very emotional topic which is not surprising considering it is the largest purchase you will make in your lifetime. Not only do you become defensive but you have deleted some of the comments that were critical of your position in this post. Just wondering if this is a common occurrence with dissenting comments on your other posts? For someone who frets over a difference of 50bps paid to a mutual fund company I find it surprising that there isn't a mention of the 6% commission you pay to purchase the roof over your head and the 6% commission you pay to realize your profits at the time of sale. I'm not trying to be insolent or troublesome, I'm just wondering if this blog is such a great resource when contrary comments are deleted. CC,

I find it interesting how defensive you become in your decision to purchase a home over renting. Seems this is a very emotional topic which is not surprising considering it is the largest purchase you will make in your lifetime. Not only do you become defensive but you have deleted some of the comments that were critical of your position in this post. Just wondering if this is a common occurrence with dissenting comments on your other posts?

For someone who frets over a difference of 50bps paid to a mutual fund company I find it surprising that there isn’t a mention of the 6% commission you pay to purchase the roof over your head and the 6% commission you pay to realize your profits at the time of sale.

I’m not trying to be insolent or troublesome, I’m just wondering if this blog is such a great resource when contrary comments are deleted.

]]> By: Life-Quotes.ca http://www.canadiancapitalist.com/opportunity-cost-of-owning-a-home/#comment-83237 Life-Quotes.ca Mon, 19 Nov 2007 16:27:20 +0000 http://www.canadiancapitalist.com/2007/11/07/opportunity-cost-of-owning-a-home#comment-83237 Great article! For anyone contemplating buying a home, a term life insurance policy may be alot cheaper than the coverage offered by the lender. Term life also allows the buyer the financial control of naming the beneficiary (instead of automatically having the lender name itself). Another bonus is that a term life policy doesn't decrease in value; mortgage insurance offered by the lender usually only covers the current existing balance. Talk to your broker about your options. Great article!

For anyone contemplating buying a home, a term life insurance policy may be alot cheaper than the coverage offered by the lender. Term life also allows the buyer the financial control of naming the beneficiary (instead of automatically having the lender name itself). Another bonus is that a term life policy doesn’t decrease in value; mortgage insurance offered by the lender usually only covers the current existing balance. Talk to your broker about your options.

]]> By: Gene http://www.canadiancapitalist.com/opportunity-cost-of-owning-a-home/#comment-80926 Gene Thu, 15 Nov 2007 02:28:21 +0000 http://www.canadiancapitalist.com/2007/11/07/opportunity-cost-of-owning-a-home#comment-80926 The opportunity cost between stocks and real estates can't be directly compared because most people can easily get mortgages where they only put up 20% equity, but it is difficult to find the same kind of leverage when investing in stocks. The opportunity cost between stocks and real estates can’t be directly compared because most people can easily get mortgages where they only put up 20% equity, but it is difficult to find the same kind of leverage when investing in stocks.

]]> By: Canadian Capitalist http://www.canadiancapitalist.com/opportunity-cost-of-owning-a-home/#comment-77991 Canadian Capitalist Fri, 09 Nov 2007 04:04:46 +0000 http://www.canadiancapitalist.com/2007/11/07/opportunity-cost-of-owning-a-home#comment-77991 FJ: Here are the numbers taking tax into account. I'm assuming that the portfolio is liquidated after X years and a capital gains of 20% is paid at that time. At 6% after 10 years, the after-tax return becomes 5.02%. After 20 years, it is 5.22%. But, if you consider inflation runs at 2%, the real return after the same years decreases to 4.8% and 5.1% respectively. FJ: Here are the numbers taking tax into account. I’m assuming that the portfolio is liquidated after X years and a capital gains of 20% is paid at that time.

At 6% after 10 years, the after-tax return becomes 5.02%. After 20 years, it is 5.22%. But, if you consider inflation runs at 2%, the real return after the same years decreases to 4.8% and 5.1% respectively.

]]> By: Canadian Capitalist http://www.canadiancapitalist.com/opportunity-cost-of-owning-a-home/#comment-77964 Canadian Capitalist Thu, 08 Nov 2007 23:45:17 +0000 http://www.canadiancapitalist.com/2007/11/07/opportunity-cost-of-owning-a-home#comment-77964 FJ: Yes and I hoped no one would notice! Let me do some spreadsheets and post the numbers later today. FJ: Yes and I hoped no one would notice! Let me do some spreadsheets and post the numbers later today.

]]> By: FinancialJungle.com http://www.canadiancapitalist.com/opportunity-cost-of-owning-a-home/#comment-77957 FinancialJungle.com Thu, 08 Nov 2007 22:44:40 +0000 http://www.canadiancapitalist.com/2007/11/07/opportunity-cost-of-owning-a-home#comment-77957 CC: You have a good point regarding the tax on inflation. It's totally unfair. Just another minor quibble on your math. Holding an investment for X number of years straight and then dock 20% off the final capital gain is not the same as cutting your annual return by 20%. I believe that's what you did when you reduced the real return from 6% to 4.8%. CC: You have a good point regarding the tax on inflation. It’s totally unfair.

Just another minor quibble on your math. Holding an investment for X number of years straight and then dock 20% off the final capital gain is not the same as cutting your annual return by 20%. I believe that’s what you did when you reduced the real return from 6% to 4.8%.

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