Comments on: The Simple Dollar Morning Roundup: Wild Wednesday Edition http://www.thesimpledollar.com/2007/03/21/the-simple-dollar-morning-roundup-wild-wednesday-edition/ Simple, applicable personal finance advice for the modern world Fri, 19 Mar 2010 01:06:21 -0700 http://wordpress.org/?v=2.8.4 hourly 1 By: Jack G. http://www.thesimpledollar.com/2007/03/21/the-simple-dollar-morning-roundup-wild-wednesday-edition/comment-page-1/#comment-12900 Jack G. Sun, 25 Mar 2007 08:41:17 +0000 http://www.thesimpledollar.com/2007/03/21/the-simple-dollar-morning-roundup-wild-wednesday-edition/#comment-12900 Matt, I agree wholeheartedly with you. He didn't even take tax savings from mortgage interest into account, plus his idea of renters insurance vs. home-owners insurance compares apples with oranges. Intent was good, but his idea was not well-though out at all. Matt, I agree wholeheartedly with you. He didn’t even take tax savings from mortgage interest into account, plus his idea of renters insurance vs. home-owners insurance compares apples with oranges.

Intent was good, but his idea was not well-though out at all.

]]> By: Matt http://www.thesimpledollar.com/2007/03/21/the-simple-dollar-morning-roundup-wild-wednesday-edition/comment-page-1/#comment-12115 Matt Wed, 21 Mar 2007 14:26:49 +0000 http://www.thesimpledollar.com/2007/03/21/the-simple-dollar-morning-roundup-wild-wednesday-edition/#comment-12115 Re: Renting as an investment His argument is so flawed it's laughable. First, most people don't have the capital to do what he suggests. How many people buy a house without a mortgage? You would need $200,000 earning 12% (9% to pay the rent, 3% for inflation) to afford to rent a $1500/month house. ($1500/month is a more reasonable example than his $750 apartment, since his premise was that you could have the benefits of owning a home without the burdens. An apartment is not a house.) Most people don't have the money to put such a plan into action. Also, the market may return 12% annually over long periods of time, but in the short-term you can't rely on 12% each and every year. His scheme doesn't account for that and you will almost certainly end up using some of your principal in the first few years. In fact, his scheme relies on you getting a 1% return each month in order to avoid dipping into principal right from the start. Unless you are lucky and the first year sees incredible returns, you will have eroded some of your principal and you'll need higher returns or more capital to make up for it. The end result is that you're likely to end up with nothing left. Re: Renting as an investment

His argument is so flawed it’s laughable. First, most people don’t have the capital to do what he suggests. How many people buy a house without a mortgage? You would need $200,000 earning 12% (9% to pay the rent, 3% for inflation) to afford to rent a $1500/month house. ($1500/month is a more reasonable example than his $750 apartment, since his premise was that you could have the benefits of owning a home without the burdens. An apartment is not a house.) Most people don’t have the money to put such a plan into action.

Also, the market may return 12% annually over long periods of time, but in the short-term you can’t rely on 12% each and every year. His scheme doesn’t account for that and you will almost certainly end up using some of your principal in the first few years. In fact, his scheme relies on you getting a 1% return each month in order to avoid dipping into principal right from the start. Unless you are lucky and the first year sees incredible returns, you will have eroded some of your principal and you’ll need higher returns or more capital to make up for it. The end result is that you’re likely to end up with nothing left.

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