Home as percent of net assets?

[james22]

28 minutes ago, Red Lion said:

Can you qualify to get a mortgage with 5% down and then refinance/pay it off down the road? 

 

Talking with a broker right now.

 

There'd still be some opportunity cost, but maybe worth it.

 

Would still leave exposed to the risk of monthly drawing from undervalued shares for an unknown time.

[bizaro86]

3 minutes ago, Xerxes said:

500% !
 

Probably same for me. Hard to remember now

 

Basically I put 20% down on a house, and thst 20% was approx. my entire net worth at the time. 

 

Of course, in my 20s when I did this the NPV of my future earnings/savings was very high relative to my financial net worth. 

[Redskin212]

2 hours ago, james22 said:

Thanks everyone.

 

I realize the volatile nature of my investable assets makes the housing percent not so meaningful.

 

The real issue for me is opportunity cost.

 

Any MSTR shares (55% off high) sold now to fund the place might otherwise might be expected to return me 50% or more by year's end.

 

I'm thinking It'd cost me less to approach the new owner then and offer them +$1M.

+This is the conundrum of real estate for value investors.  Fifteen years ago, I sold $250K of LULU (purchase cost $50K) for my down payment on my house. At the time I had a very good gain but thought better to invest in real estate and our family home.  Financially, probably the worse decision of my life as the LULU shares would be worth somewhere north of $7.5 million today. House is worth nowhere near that - maybe $1.8 million, but hard to put a price on where you live.

 

Definitely go for it.  Good luck!

[Gregmal]

2 hours ago, bizaro86 said:

 

For someone living 100% off investments (which I believe applies to James iirc) I'd use house price / net worth.

 

When I bought my current house as a young person that calc spit out ~500%. Now it would be more like 25-30%. And since I don’t plan to ever move but do plan to compound I expect it to continue to decrease.

Yea lol same boat. Was like 25 and just wanted a house. Didn’t have a ton saved so took all that and a couple 1099 paychecks in their entirety(so owed taxes against future income now too!) to fund a down payment. Now that house yields 10%+ against purchase price and is just waiting on the next cash out refi. 

[Buckeye]

1 hour ago, james22 said:

 

Talking with a broker right now.

 

There'd still be some opportunity cost, but maybe worth it.

 

Would still leave exposed to the risk of monthly drawing from undervalued shares for an unknown time.

Can’t you just use the yield from your BTC holdings to cover your mortgage payment? 

[james22]

3 minutes ago, Buckeye said:

Can’t you just use the yield from your BTC holdings to cover your mortgage payment? 

 

MSTR doesn't have their banking license yet.

[73 Reds]

26 minutes ago, Gregmal said:

Yea lol same boat. Was like 25 and just wanted a house. Didn’t have a ton saved so took all that and a couple 1099 paychecks in their entirety(so owed taxes against future income now too!) to fund a down payment. Now that house yields 10%+ against purchase price and is just waiting on the next cash out refi. 

IMO, what you pay for a residence should be an afterthought relative to your overall financial situation.  No matter where you are in life, it should probably not be viewed as an investment and the cost should not negatively affect any other aspects of your life.   

[Red Lion]

3 hours ago, james22 said:

 

Talking with a broker right now.

 

There'd still be some opportunity cost, but maybe worth it.

 

Would still leave exposed to the risk of monthly drawing from undervalued shares for an unknown time.

I can’t speak with any intelligence as to the prospects of MSTR or your portfolio, but a mortgage is great because it lets you borrow a much higher % of your portfolio value with no margin call risk.

So it seems to have less opportunity cost than either using margin or selling undervalued shares in my way of thinking.  

[james22]

5 minutes ago, Red Lion said:

I can’t speak with any intelligence as to the prospects of MSTR or your portfolio, but a mortgage is great because it lets you borrow a much higher % of your portfolio value with no margin call risk.

So it seems to have less opportunity cost than either using margin or selling undervalued shares in my way of thinking. 

 

Certainly.

 

But I can only take a portfolio loan directly against my non-retirement account.

 

And they want to see I've been consistently pulling a higher number as income from my retirement account (which I haven't had to).

[Red Lion]

14 minutes ago, james22 said:

 

Certainly.

 

But I can only take a portfolio loan directly against my non-retirement account.

 

And they want to see I've been consistently pulling a higher number as income from my retirement account (which I haven't had to).

I’m going to send you a dm with a lender I’ve worked with who handles debt service coverage ratio loans and other non conforming portfolio loans. Could need worth a shot. 

[rkbabang]

I'd say go for it if it is a unique asset and a place you really want to own.  Buy it with as little down as possible and pay it off later with your MSTR profits. 

My home is about 16% of my net worth and my vacation home is about 10%, so a little over 26% in my homes.  I own them because they are places I love, not for investment reasons.  If this is where you want to live go for it. 

[james22]

46 minutes ago, Red Lion said:

I’m going to send you a dm with a lender I’ve worked with who handles debt service coverage ratio loans and other non conforming portfolio loans. Could need worth a shot. 

 

Help like this is why I posted here. And everyone else's advice.

 

Thank you, I really appreciate it.

 

I've decided not to go forward though.

 

I can live with being 80% MSTR as long as I've nothing riding on the outcome.

 

But I wouldn't be able to sleep if my home was.

 

I expect I'll regret it, but it takes jumping from my new condo off the table.

 

And who knows, maybe the new owner will be open to an offer next year.

[gfp]

1 hour ago, james22 said:

 

Certainly.

 

But I can only take a portfolio loan directly against my non-retirement account.

 

And they want to see I've been consistently pulling a higher number as income from my retirement account (which I haven't had to).

 

I could be wrong, but I feel like one of you is referring to "portfolio loans" as something that is secured by, underwritten or approved based on the value of an investment portfolio, while the other person is using the term "portfolio loan" as it is commonly used in finance - meaning the lender is going to retain the loan on their books - ie, not a conforming loan that shoots out the other end into the fannie / freddie machine.

 

 

 

 

[Red Lion]

3 minutes ago, gfp said:

 

I could be wrong, but I feel like one of you is referring to "portfolio loans" as something that is secured by, underwritten or approved based on the value of an investment portfolio, while the other person is using the term "portfolio loan" as it is commonly used in finance - meaning the lender is going to retain the loan on their books - ie, not a conforming loan that shoots out the other end into the fannie / freddie machine.

 

 

 

 

 

That's right, I'm referring to the second type, although some of those "portfolio loans" do take into account the value of an investment portfolio as well. 

[Eng12345]

1 hour ago, james22 said:

 

And who knows, maybe the new owner will be open to an offer next year.

Do you folks get attached to your buildings? Because my thought was it's probably not the only building with a corner loft if that's what you want to do in the future.

[james22]

23 minutes ago, Eng12345 said:

Do you folks get attached to your buildings? Because my thought was it's probably not the only building with a corner loft if that's what you want to do in the future.

 

The building is on the very edge of downtown.

 

In that way it's pretty unique.

 

Best views, closest to parks, and least downtown traffic to fight.

 

 

Before I looked at the place I was unconvinced I'd think it worth it to move.

 

Really like my current place and the freedom it being so inexpensive gives me.

 

But it was really stunning.

 

 

(This is a First World problem, I know.)

[schin]

2 hours ago, rkbabang said:

I'd say go for it if it is a unique asset and a place you really want to own.  Buy it with as little down as possible and pay it off later with your MSTR profits. 

My home is about 16% of my net worth and my vacation home is about 10%, so a little over 26% in my homes.  I own them because they are places I love, not for investment reasons.  If this is where you want to live go for it. 

 

 

@rkbabang - Can I rent your vacation home for two weeks when you're not there? LOL.  You are a true baller.

 

This discussion is comes down to ... if he wants a home or a house. 

[LC]

I've got a rule with art, that might apply here: if you love it, buy it.

But only if you love it - not "like it" or "really really like it" or "think its great" etc. If you love it, buy it.

[Gregmal]

You want overlap. Every property I own is something located in a good area and something I theoretically would live in. 
 

Dream homes are overrated unless you’re doing full custom SFH or brand new trophy kinda thing on the condo side which imo is running you minimum $2m+ and takes years to design and build. Those? Sure those are purely for personal gratification and enjoyment and not investment in any way, but I’ve never looked at an existing home that someone else built and others painted, furnished, designed etc, and was like wow all those people know me so well! This is exactly what I’ve always dreamed of!
 

Being in a good area is really all that matters and in that case it’s typically both a good investment and a good place to call home. 

Edited 18 hours ago by Gregmal

[bizaro86]

One way to raise money for a few years cheaply assuming you still want all the MSTR exposure would be to go synthetically long. Buying a call and selling a put at the same strike gives you full MSTR exposure, and releases almost all of your cash. Obviously it uses margin so you want to be reasonable, but the effective rate is quite low and it's locked in for the life of the options. 

[73 Reds]

13 hours ago, LC said:

I've got a rule with art, that might apply here: if you love it, buy it.

But only if you love it - not "like it" or "really really like it" or "think its great" etc. If you love it, buy it.

Does art have maintenance costs?

[rkbabang]

13 hours ago, schin said:

 

 

@rkbabang - Can I rent your vacation home for two weeks when you're not there? LOL.  You are a true baller.

 

This discussion is comes down to ... if he wants a home or a house. 

 

We don't rent it anymore.  We originally bought it to rent it and it was more profitable than we expected.  But after 3 years we decided that we liked it too much to rent it.  We had problems with cleaners (doing a poor job, robbing us blind, not showing up, etc...) and some guests disrespecting the property, we couldn't have nice things there.  Also we didn't realize how much we would like the place.  So we stopped renting, fixed it up in a way we never would have if we were still renting, and now we basically stay there almost all summer, and 2-7 days per month the rest of the year. Things don't always go as originally planned.  If I'm going to invest, I'm going to stick with stocks and Bitcoin, real estate investing isn't my thing I guess.  I end up not being able to deal with how others treat my property.  

[LC]

1 hour ago, 73 Reds said:

Does art have maintenance costs?

 

Everywhere you live - even if you rent, you will have maintenance costs. What is your point?

[james22]

14 hours ago, Gregmal said:

Dream homes are overrated unless you’re doing full custom SFH or brand new trophy kinda thing on the condo side which imo is running you minimum $2m+ and takes years to design and build. Those? Sure those are purely for personal gratification and enjoyment and not investment in any way, but I’ve never looked at an existing home that someone else built and others painted, furnished, designed etc, and was like wow all those people know me so well! This is exactly what I’ve always dreamed of!

 

1.

 

This place is all of that ($2M+), but more than worth it (to me) for something you didn't mention: the view.

 

It'd be an experience living on top of the world.

 

2.

 

And I'll be able to buy a place purely for personal gratification and enjoyment and not investment in any way at some point, but not yet.

 

Goes back to the Eff You Money thread - I'd argue people have both a Number AND sense of opportunity.

 

If you've hit your Number, it's not so terribly hard to quit the game if you're stepping down from your expected 15% individual stock picking returns to 7% index/treasury returns. 

 

It's another thing, even if you're above your Number, to walk away from an opportunity better than 15%.

 

Even if you've little use for the money, it seems irresponsible not to take advantage.

 

A form of Golden Handcuffs.

[Red Lion]

51 minutes ago, james22 said:

This place is all of that ($2M+), but more than worth it (to me) for something you didn't mention: the view.

 

It'd be an experience living on top of the world.

 

I was going to mention the only way I’d put a third of my net worth in a house would be a sweet view. I’m more partial to ocean than city, and a decent ocean front house in California is way out of my price range, so I’ve got a long way to go.