3K a month for Rent.
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ringfinger
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PostPosted: Wed Oct 03, 2018 7:33 pm    Post subject:

LongBeachPoly wrote:
ringfinger wrote:
LongBeachPoly wrote:
ringfinger wrote:
LongBeachPoly wrote:
ringfinger wrote:
LongBeachPoly wrote:
ok, actually I'd like to ask another question.

Same scenario as question 3, with a slight change.

I buy House A for $3k mortgage, but I don't want to live in it. I go talk to my neighbor who owns House B. I tell him, hey, how about I go live in your house and you live in my house? His house has a pool and my house is right next to the golf course, so we both agree.

This time rental money exchanges hands. Every month he gives me $3k for my property and I give him $3k for his property.

IS this considered wasting money?


Yes. Unless you don't consider giving another man $36,000 per year a waste of money when you could instead be giving a bank $22,400 per year and yourself $6,600 per year, with those numbers shifting in your favor each and every year until the 29th year when it becomes somewhere around giving the bank $500 per year and yourself $35,500 plus interest.


ok, so I guess we found out where you have an issue with. You have an issue with the actual exchange of rental income. As long as it's a barter and no rental income is exchanged you're ok with.


Nope. The issue I have is with who receives the money you pay for your living costs.

You have a choice to give 100% of the money you're going to pay to live either to another person, or, you have the choice to give around 75% of the money you're going to pay to a bank and the remaining 25% back to yourself plus interest.

Which again, after 10 years, if you rent your neighbors house you will still be paying 100% of the money you're going to pay to that person, but if you buy, then you will be giving around 60% of that money to the bank and 40% of it back to yourself plus interest.

10 years after that, you'll still be paying 100% of your living expenses to someone else if you rent, but if you bought, you will instead be giving 40% of that money to a bank and 60% of it back to yourself plus interest.

So you'll have to figure out how you come to the conclusion that if faced with the decision to give 0% of the money you pay to live to yourself, or, pay some percentage of your living cost between 25% and 99% right back to yourself, you'd choose the former.


Let me rephrase, when my neighbor and I exchanged houses, with no rental income exchanging hands, you were ok with that.

When my neighbor and I exchanged houses, with rental income exchanging hands, you were not ok with that.

So you are not ok with rental income exchanging hands.


That's correct. Because when you just exchange houses, your cost to live is being 100% invested in an asset that will appreciate over time.

When rental income exchanges hands however, your cost to live is being 100% handed over to your neighbor.

Why would you rather give money to your neighbor, than just keep it for yourself when given those options?


Ok.

Yeah, seems like you're all for the barter system.


I honestly can't tell if you're trolling at this point.

I'm all for maximizing your spend. You have a choice to give all of the money it costs to live to someone else, or you have a choice to give some of that money back to yourself.

Why would you prefer to give all of that that money to someone else, instead of some of that money back to yourself?
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LongBeachPoly
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PostPosted: Wed Oct 03, 2018 7:38 pm    Post subject:

ringfinger wrote:
LongBeachPoly wrote:
ringfinger wrote:
LongBeachPoly wrote:
ringfinger wrote:
LongBeachPoly wrote:
ringfinger wrote:
LongBeachPoly wrote:
ok, actually I'd like to ask another question.

Same scenario as question 3, with a slight change.

I buy House A for $3k mortgage, but I don't want to live in it. I go talk to my neighbor who owns House B. I tell him, hey, how about I go live in your house and you live in my house? His house has a pool and my house is right next to the golf course, so we both agree.

This time rental money exchanges hands. Every month he gives me $3k for my property and I give him $3k for his property.

IS this considered wasting money?


Yes. Unless you don't consider giving another man $36,000 per year a waste of money when you could instead be giving a bank $22,400 per year and yourself $6,600 per year, with those numbers shifting in your favor each and every year until the 29th year when it becomes somewhere around giving the bank $500 per year and yourself $35,500 plus interest.


ok, so I guess we found out where you have an issue with. You have an issue with the actual exchange of rental income. As long as it's a barter and no rental income is exchanged you're ok with.


Nope. The issue I have is with who receives the money you pay for your living costs.

You have a choice to give 100% of the money you're going to pay to live either to another person, or, you have the choice to give around 75% of the money you're going to pay to a bank and the remaining 25% back to yourself plus interest.

Which again, after 10 years, if you rent your neighbors house you will still be paying 100% of the money you're going to pay to that person, but if you buy, then you will be giving around 60% of that money to the bank and 40% of it back to yourself plus interest.

10 years after that, you'll still be paying 100% of your living expenses to someone else if you rent, but if you bought, you will instead be giving 40% of that money to a bank and 60% of it back to yourself plus interest.

So you'll have to figure out how you come to the conclusion that if faced with the decision to give 0% of the money you pay to live to yourself, or, pay some percentage of your living cost between 25% and 99% right back to yourself, you'd choose the former.


Let me rephrase, when my neighbor and I exchanged houses, with no rental income exchanging hands, you were ok with that.

When my neighbor and I exchanged houses, with rental income exchanging hands, you were not ok with that.

So you are not ok with rental income exchanging hands.


That's correct. Because when you just exchange houses, your cost to live is being 100% invested in an asset that will appreciate over time.

When rental income exchanges hands however, your cost to live is being 100% handed over to your neighbor.

Why would you rather give money to your neighbor, than just keep it for yourself when given those options?


Ok.

Yeah, seems like you're all for the barter system.


I honestly can't tell if you're trolling at this point.

I'm all for maximizing your spend. You have a choice to give all of the money it costs to live to someone else, or you have a choice to give some of that money back to yourself.

Why would you prefer to give all of that that money to someone else, instead of some of that money back to yourself?


exchange of houses w/o money involved = bartering, which you're ok with

exchange of houses w/ money involved = you're not ok with

So, in this instance, you're only ok when it's a barter
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ringfinger
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PostPosted: Wed Oct 03, 2018 9:24 pm    Post subject:

LongBeachPoly wrote:
ringfinger wrote:
I honestly can't tell if you're trolling at this point.

I'm all for maximizing your spend. You have a choice to give all of the money it costs to live to someone else, or you have a choice to give some of that money back to yourself.

Why would you prefer to give all of that that money to someone else, instead of some of that money back to yourself?


exchange of houses w/o money involved = bartering, which you're ok with

exchange of houses w/ money involved = you're not ok with

So, in this instance, you're only ok when it's a barter


Yes, in THIS instance because in this particular instance those are the only two choices you've given.

In the end, it's not at all about barter vs no barter, it's about which situation puts you in the better position financially.

In your bartering scenario, 100% of your cost of living goes into an asset that appreciates over time.

In the bartering with rent exchange scenario, 100% of your cost of living goes into an non-asset that depreciates by a rate of 100% immediately.

That's not only not good, it's terrible. Financially.
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LongBeachPoly
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PostPosted: Wed Oct 03, 2018 9:59 pm    Post subject:

ringfinger wrote:
LongBeachPoly wrote:
ringfinger wrote:
I honestly can't tell if you're trolling at this point.

I'm all for maximizing your spend. You have a choice to give all of the money it costs to live to someone else, or you have a choice to give some of that money back to yourself.

Why would you prefer to give all of that that money to someone else, instead of some of that money back to yourself?


exchange of houses w/o money involved = bartering, which you're ok with

exchange of houses w/ money involved = you're not ok with

So, in this instance, you're only ok when it's a barter


Yes, in THIS instance because in this particular instance those are the only two choices you've given.

In the end, it's not at all about barter vs no barter, it's about which situation puts you in the better position financially.

In your bartering scenario, 100% of your cost of living goes into an asset that appreciates over time.

In the bartering with rent exchange scenario, 100% of your cost of living goes into an non-asset that depreciates by a rate of 100% immediately.

That's not only not good, it's terrible. Financially.


You do agree that the end result of both scenarios is the same?

1) You own House A
2) You pay $3k mortgage on House A
3) You live in House B
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Goldenwest
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PostPosted: Wed Oct 03, 2018 10:38 pm    Post subject:

ribeye wrote:
To be flippant, more than $3K month, but that doesn't answer the question.

At one point, one's house payment could not exceed much beyond 30% of one's income. Today, I thought it was something like 40% (probably pre-housing crash) but I found this:

Quote:
Monthly housing costs, which include mortgage payments, insurance, property taxes and condo or association fees, shouldn't exceed 28% of your monthly gross income. Monthly debt payments, including credit card bills and student loans, shouldn't exceed 36% of your gross income.


I suspect rent could push this a bit, but not much.


One would have to be making 10,000 per month - net. Or somewhere in the neighborhood of 180K per year gross. What is the average yearly salary in LA these days? 60-70k?

50% on rent is more realistic, but with the rising cost of everything else (food, clothing, household items) that's a tight living. No wonder retail stores are closing and retail in general is suffering. Hey, but our pres says the economy is the best its ever been. I hope not too many people are buying what he's selling, and see the situation for what it really is; pretty dire.
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ringfinger
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PostPosted: Thu Oct 04, 2018 6:04 am    Post subject:

LongBeachPoly wrote:
ringfinger wrote:
LongBeachPoly wrote:
ringfinger wrote:
I honestly can't tell if you're trolling at this point.

I'm all for maximizing your spend. You have a choice to give all of the money it costs to live to someone else, or you have a choice to give some of that money back to yourself.

Why would you prefer to give all of that that money to someone else, instead of some of that money back to yourself?


exchange of houses w/o money involved = bartering, which you're ok with

exchange of houses w/ money involved = you're not ok with

So, in this instance, you're only ok when it's a barter


Yes, in THIS instance because in this particular instance those are the only two choices you've given.

In the end, it's not at all about barter vs no barter, it's about which situation puts you in the better position financially.

In your bartering scenario, 100% of your cost of living goes into an asset that appreciates over time.

In the bartering with rent exchange scenario, 100% of your cost of living goes into an non-asset that depreciates by a rate of 100% immediately.

That's not only not good, it's terrible. Financially.


You do agree that the end result of both scenarios is the same?

1) You own House A
2) You pay $3k mortgage on House A
3) You live in House B


Nope. It's basic math. We're talking 3 scenarios, here's how it breaks down.

Scenario 1 - Buy House, Live In It
Amount Paid to Bank: $2,200 (over time this moves to $0)
Amount Paid to Yourself: $800 (over time this moves to $3,000)
Amounted Generated from Rental Income: $0
Amount Paid to Landlord: $0

Scenario 2 - Buy House, Live Somewhere Else for Free
Amount Paid to Bank: $2,200 (over time this moves to $0)
Amount Paid to Yourself: $800 (over time this moves to $3,000)
Amounted Generated from Rental Income: $0
Amount Paid to Landlord: $0

Scenario 3 - Rent Out House, Rent Another House
Amount Paid to Bank: $2,200 (over time this moves to $0)
Amount Paid to Yourself: $800 (over time this moves to $3,000)
Amounted Paid to Yourself from Rental Income: $3,000
Amount Paid to Landlord: $3,000

This is not even taking into account that the moment you rent out your house, you are subject to income taxes on the rental income making the effective amount of new rent you're paying higher than $3,000 by that amount.

The amount of money in the underlined, is money that is not working for you. You have zero opportunity to retain that money let alone generate interest off of it.

If you're in a situation where you own a home but decide to move to a new area with a similar cost of living, the optimal strategy would be to either sell the first home and invest the proceeds and buy the second home, or just keep the first home, rent it out, and buy the second home. This way, your living costs are always sitting in a vehicle that generates interest over time.
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LongBeachPoly
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PostPosted: Thu Oct 04, 2018 7:36 am    Post subject:

ringfinger wrote:
LongBeachPoly wrote:
ringfinger wrote:
LongBeachPoly wrote:
ringfinger wrote:
I honestly can't tell if you're trolling at this point.

I'm all for maximizing your spend. You have a choice to give all of the money it costs to live to someone else, or you have a choice to give some of that money back to yourself.

Why would you prefer to give all of that that money to someone else, instead of some of that money back to yourself?


exchange of houses w/o money involved = bartering, which you're ok with

exchange of houses w/ money involved = you're not ok with

So, in this instance, you're only ok when it's a barter


Yes, in THIS instance because in this particular instance those are the only two choices you've given.

In the end, it's not at all about barter vs no barter, it's about which situation puts you in the better position financially.

In your bartering scenario, 100% of your cost of living goes into an asset that appreciates over time.

In the bartering with rent exchange scenario, 100% of your cost of living goes into an non-asset that depreciates by a rate of 100% immediately.

That's not only not good, it's terrible. Financially.


You do agree that the end result of both scenarios is the same?

1) You own House A
2) You pay $3k mortgage on House A
3) You live in House B


Nope. It's basic math. We're talking 3 scenarios, here's how it breaks down.

Scenario 1 - Buy House, Live In It
Amount Paid to Bank: $2,200 (over time this moves to $0)
Amount Paid to Yourself: $800 (over time this moves to $3,000)
Amounted Generated from Rental Income: $0
Amount Paid to Landlord: $0

Scenario 2 - Buy House, Live Somewhere Else for Free
Amount Paid to Bank: $2,200 (over time this moves to $0)
Amount Paid to Yourself: $800 (over time this moves to $3,000)
Amounted Generated from Rental Income: $0
Amount Paid to Landlord: $0

Scenario 3 - Rent Out House, Rent Another House
Amount Paid to Bank: $2,200 (over time this moves to $0)
Amount Paid to Yourself: $800 (over time this moves to $3,000)
Amounted Paid to Yourself from Rental Income: $3,000
Amount Paid to Landlord: $3,000

This is not even taking into account that the moment you rent out your house, you are subject to income taxes on the rental income making the effective amount of new rent you're paying higher than $3,000 by that amount.

The amount of money in the underlined, is money that is not working for you. You have zero opportunity to retain that money let alone generate interest off of it.

If you're in a situation where you own a home but decide to move to a new area with a similar cost of living, the optimal strategy would be to either sell the first home and invest the proceeds and buy the second home, or just keep the first home, rent it out, and buy the second home. This way, your living costs are always sitting in a vehicle that generates interest over time.


First off, if you want to get into taxes, you do understand that bartering is also considered taxable income by the IRS?

But, since we haven't brought taxes into the equation from the beginning (for good reason, it gets complicated, let's leave it out for simplicity sake)

Ok, let me rephrase the question.

Is it true that in relation to:
1) total out of pocket expenses
2) total houses purchased
3) houses living in

Then all scenarios are the same:
1) paying $3k mortgage for House A
2) own House A
3) living in House B

yes or no is fine
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ringfinger
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PostPosted: Thu Oct 04, 2018 1:20 pm    Post subject:

LongBeachPoly wrote:
First off, if you want to get into taxes, you do understand that bartering is also considered taxable income by the IRS?

But, since we haven't brought taxes into the equation from the beginning (for good reason, it gets complicated, let's leave it out for simplicity sake)

Ok, let me rephrase the question.

Is it true that in relation to:
1) total out of pocket expenses
2) total houses purchased
3) houses living in

Then all scenarios are the same:
1) paying $3k mortgage for House A
2) own House A
3) living in House B

yes or no is fine


No. All scenarios are not the same.

When you chose to rent out the other house, you made a poorer decision than if you just lived in the house you own.

Now, your living costs are depreciating at a rate of 100% immediately, instead of working for you over time.

This is basic stuff. If you don't get it by now, you just might not ever get it.
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LongBeachPoly
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PostPosted: Thu Oct 04, 2018 2:30 pm    Post subject:

ringfinger wrote:
LongBeachPoly wrote:
First off, if you want to get into taxes, you do understand that bartering is also considered taxable income by the IRS?

But, since we haven't brought taxes into the equation from the beginning (for good reason, it gets complicated, let's leave it out for simplicity sake)

Ok, let me rephrase the question.

Is it true that in relation to:
1) total out of pocket expenses
2) total houses purchased
3) houses living in

Then all scenarios are the same:
1) paying $3k mortgage for House A
2) own House A
3) living in House B

yes or no is fine


No. All scenarios are not the same.

When you chose to rent out the other house, you made a poorer decision than if you just lived in the house you own.

Now, your living costs are depreciating at a rate of 100% immediately, instead of working for you over time.

This is basic stuff. If you don't get it by now, you just might not ever get it.


Maybe you didn't understand the question, so I'll ask it another way. I'll just break it down into 3 questions. And these are simple yes or no questions.

Is it a true statement that in all 3 scenarios, you own House A?
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