Best locations for a vacation/rental property?

Matt Hostetler wrote: Mpech, I think your numbers are missing rental income and leverage (you can buy a 400k house for 80k down). Maybe you can assume the rent pays the mortgage and maintenance over 10 years and estimate the return based on the value of the house at the end of 10 years divided by the down payment. I am not knowledgeable about real estate so not sure if that's a reasonable assumption. But that would give a 760% return on the Boulder house. Leverage affects the return a lot.

On the other hand choosing Boulder in 2009 as the RE place seems kind of like choosing AMZN rather than SP500 - which would give ~3000% 10 year return without leverage. You'd be pretty lucky to pick the next Boulder.

yeah, my real estate math was pretty crude. 

A couple comments on your math:
1) you haven't accounted for property tax payments
2) I don't think it would be fair to compare the nominal return on a leveraged vs. unleveraged asset, because the risk profile is so different. Also, if you are going to allow leverage on purchasing the house, you should also allow leverage on purchasing the index funds, in which case the stock market would win again. 

Cpn Dunsel wrote:

One cannot live and reside in a stock certificate.

true, but the dude is looking for a second home, not a primary residence. 

also, one can use money generated from stock certificates to purchase things, like homes

Cpn Dunsel wrote:

A home IS an investment if done properly and the right property in the right location is purchased at the right time.  
Not every home can be one but many are.  Property is an investment, and a damn good one.  Unlike stocks, they are not creating any new land.  

Stocks do not do better than being mobile and moving from hot real estate market to market.  Socks cannot be leveraged to borrow greater capital to purchase more properties. Stock has greater liquidity and less transactional friction.  When stock tanks you lose money, when housing market tanks you live in the house until the cycle comes back on the upswing.

Purchasing property is the very best thing people can do for their retirement plans.  Owning a home later in life with no liens is a far better investment that pieces of paper.  

Financial people pimp financial devices.  Sagacious people buy real property.  Real wealth is made through real estate at a much greater rate than using paper devices.   

I wasn't arguing that real estate isn't an investment, i was just providing data that it gives a worse return than the stock market. this isn't controversial stuff. 

And you most definitely can use leverage to purchase stocks-- there are a variety of ways to do this. 

Karen Hammersmith wrote:

Ok Boulder Boomer

"OK Boomer"?  Wow.

"OK Elanor."

Are you not 1 year older than me?

Are you that TERRIBLE at math?  
Or maybe just can't read?
Or is ti that you just don't know the meaning of the words you use?
Or perhaps are just pretentious enough not to check your assumptions?

I'll vote for: 'E: all of the above.'

I hope van life suits you, because those things are needed to keep a steady job.

And who cares if you smile when you are out there "calling names" that don't even apply.
It isn't your face or your gender. It's your attitude.
But I did think it was pretty funny that you lashed out to Wendy about how guys don't like you when SHE said you were unpleasant.

Tony B wrote:

"OK Boomer"?  Wow.

"OK Elanor."

Are you not 1 year older than me?

Are you that TERRIBLE at math?  
Or maybe just can't read?
Or is ti that you just don't know the meaning of the words you use?
Or perhaps are just pretentious enough not to check your assumptions?

I'll vote for: 'E: all of the above.'

I hope van life suits you, because those things are needed to keep a steady job.

And who cares if you smile when you are out there "calling names" that don't even apply.
It isn't your face of your gender. It's your attitude.
But I did think it was pretty funny that you lashed out to Wendy about how guys don't like you when SHE said you were unpleasant.

Tony, your opinion doesn't count for anything. You're obviously just another Boulder Bubble Boomer. One more privileged person who just clips coupons and hasn't worked a day in your life. 

Cpn Dunsel wrote:

When stock tanks you lose money, when housing market tanks you live in the house until the cycle comes back on the upswing.

Un-huh, tell that to those whose house went underwater, couldn't pay their mortgage and had to declare bankruptcy.

The value of something is determined by what someone is willing to pay for; whether it's a physical widget or a service.

Matt Hostetler wrote: You'd be pretty lucky to pick the next Boulder.

Not that complex, as an investment, actually.  You just look at the price bubble of this sort of area (one with geographical and political constraints on development), consider that the pressure is outwards, and get in front of it.
The complexity in this case stems not from the predictable rise in price, but rather from the set of constraints willed by the OP, most notably that it be in an area already popular enough to be supported by a ST rental market.
Add in that most places like Boulder are cracking down on ST rentals, (not to mention LT) and you are talking about fiscal risk associated with that plan that you can not control.
So add to factors to consider the degree of government you are going to get.  And in Boulder, like the Bay Area or Seattle, that is A LOT.  You'll get it, and you'll get it good and hard.

reboot wrote:

Un-huh, tell that to those whose house went underwater, couldn't pay their mortgage and had to declare bankruptcy.

The value of something is determined by what someone is willing to pay for; whether it's a physical widget or a service.

Not really.  You are mixing up Value and Price.  Price is NOW, but Value considers the LT and is situational.
Let's say I bought a house for $140k in 2009 and it could now sell for $490k.
What was it's price?  We all know that, it was $140k.
But what was it's value?  A lot more, clearly, than I paid for it.

You are all missing the fact you can deduct the interest paid on real estate mortgages.

Not only that, but if you form an LLC and take your rental property as an investment, well you can google it, huuuge tax breaks under the Drump.

Tony B wrote:

Not really.  You are mixing up Value and Price.  Price is NOW, but Value considers the LT and is situational.
Let's say I bought a house for $140k in 2009 and it could now sell for $490k.
What was it's price?  We all know that, it was $140k.
But what was it's value?  A lot more, clearly, than I paid for it.

The value of the house WAS $140k and is now $490k. That's no different than the value $140k of Amazon stock bought in 2009 vs whatever it's valued at today.

Cpn Dunsel wrote:

A home IS an investment if done properly and the right property in the right location is purchased at the right time.  
Not every home can be one but many are.  Property is an investment, and a damn good one.  Unlike stocks, they are not creating any new land.  

Stocks do not do better than being mobile and moving from hot real estate market to market.  Socks cannot be leveraged to borrow greater capital to purchase more properties. Stock has greater liquidity and less transactional friction.  When stock tanks you lose money, when housing market tanks you live in the house until the cycle comes back on the upswing.

Purchasing property is the very best thing people can do for their retirement plans.  Owning a home later in life with no liens is a far better investment than pieces of paper that can overnight be worthless.

Financial people pimp financial devices.  Sagacious people buy real property.  Real wealth is made through real estate at a much greater rate than using paper devices.   

Super wealthy people can do well with stock because they can stay in for the long haul.  The average person cannot.  It is a scam for the average person that does not have millions to be putting their money into stocks and securities.  The risk is very high, much higher than property.  Did you not pay attention to what happened to all the middle-class savings that got erased from the middle class and sent into the deep pockets of the super wealthy?

Stock play is for the super wealthy and the fools that think they can be and never will be.  

You would need to sell your home or take out money on a mortgage to tap principal for the "investment" to pay out. Stocks are much more liquid. 

A home is VERY much concentrating your risk. An index fund (great one is Vanguard Total Market) holds thousands of companies. Diversification. Owning a single stock is closer to owning a single piece of property. Might get lucky, might not. 
Anyone who thinks they can time and know a "hot market" and jump to the next one - in stocks or RE - is full of it. If you KNOW - why aren't you a billionaire? No one can reliably time when to buy and sell. They just can't. Can't do it with algorithms and huge computers either. "Here, buy my book/newsletter - I'll tell you how to get rich" -- whether stocks or RE, why isn't the author already rich and why do they need to sell something?

I guarantee you there are many more people with "paper" wealth than holding land. A few rich people will hold one or the other, but the vast majority of people with decent money will have it in stocks - usually a 401k or IRA.
Unless you plan on buying multiple properties and becoming a landlord - again that's a SECOND JOB, do not discount that fact - people will retire because of SS, pensions (rare now), 401k and IRAs. They won't retire b/c they own a house, free and clear. That doesn't get you shit, unless you sell it or do a reverse mortgage.

The fascination with holding something "real" is the same as gold bugs. Silly notion.

The average person is an idiot and won't accumulate money via RE or stocks. Smart people will save and invest throughout their lifetime and the magic of compound interest will make them wealthy in due time.

RE investing is a second job. Index investing is simple and easy. 

Buck Rio wrote: You are all missing the fact you can deduct the interest paid on real estate mortgages.

Not only that, but if you form an LLC and take your rental property as an investment, well you can google it, huuuge tax breaks under the Drump.

Buck there are plenty of tax "loopholes" for investing also. Taxable accounts can use losses to offset gains. Long Term Capital Gains tax can be 0% for certain tax brackets. 

You still have to pay $1 in mortgage interest to a bank to be able to deduct 22 cents - that isn't making you money. You don't get $ back from property taxes either. And thanks to the new tax "cuts", you may no longer get to deduct those anyways. 

Tony B wrote:

"OK Boomer"?  Wow.

"OK Elanor."

Are you not 1 year older than me?

Are you that TERRIBLE at math?  
Or maybe just can't read?
Or is ti that you just don't know the meaning of the words you use?
Or perhaps are just pretentious enough not to check your assumptions?

I'll vote for: 'E: all of the above.'

I hope van life suits you, because those things are needed to keep a steady job.

And who cares if you smile when you are out there "calling names" that don't even apply.
It isn't your face or your gender. It's your attitude.
But I did think it was pretty funny that you lashed out to Wendy about how guys don't like you when SHE said you were unpleasant.

Man, that elanor person still has a king size bed in your head after all these years! 

M Mobes wrote:

Man, that elanor person still has a king size bed in your head after all these years! 

OK , this is a softball....its because she mindfucked him so well.

Matt N wrote:

Buck there are plenty of tax "loopholes" for investing also. Taxable accounts can use losses to offset gains. Long Term Capital Gains tax can be 0% for certain tax brackets. 

You still have to pay $1 in mortgage interest to a bank to be able to deduct 22 cents - that isn't making you money. You don't get $ back from property taxes either. And thanks to the new tax "cuts", you may no longer get to deduct those anyways. 

I own vacation property that is a second home for us. Once upon a time it was a "good" deal since we really didn't have any other deductions and it was appreciating.  Tax law changes make is less good, but I only pay a total of $1200/year RET on 2 acres with 100 ft frontage to a 2500 acre lake.

You have to sell the asset in order to realize losses or gains, so unless you are actively trading individual stocks, we aren't talking about the same thing. Individual stocks are fickle and you can lose all of your principal. Funds don't allow you to offset gains with losses within the fund as far as I know.

Lakeshore property is a no brainer in MN. They aren't making any more of it, and everybody want some.

Real estate can be risky, especially if you dont either live there for a while or research the fuck out of it. Being in the right place at the right time helps but I'm pretty sure I could buy a place in bf Nebraska and make an easy 10% in 6-12 months if done properly. Living in a vacation rental town has opened my eyes to all the tourists who think they can make money or break even from buying a place, spending a month there every year and renting it the rest of the time. They almost always get really sick of it.

reboot wrote:

The value of the house WAS $140k and is now $490k. That's no different than the value $140k of Amazon stock bought in 2009 vs whatever it's valued at today.

If you want to discuss the markets in stock Vs real estate, OK.  I mean, I do both, yeah.
My point was more about the difference between price and value in either arena.

Your equivocation above is correct, but your definition is not.  You keep saying value.  The correct term is PRICE.
VALUE determines investment outcome, and profit is related to the difference between price and value.

If I offer you a junker car for $30k and you are foolish enough to buy it, you have determined that this was the PRICE.
But it wasn't the VALUE, you just got ripped off, that's all.

Thought experiment:
Try to sell a horse in a dog auction.  Ask everyone there for their highest bid.  You determined a price.
Now go to the horse auction with a different room full of people.   Ask everyone there for their highest bid.  You determined a different price.
Did the horses value change between those rooms?  Or just the price?

M Mobes wrote:

Man, that elanor person still has a king size bed in your head after all these years! 

Perhaps, but calling her a person is still an exaggeration.  She is many people.(*)

(*) = If you don't get it, maybe you just don't get it, and that's OK.

Tony B wrote:

Perhaps, but calling her a person is still an exaggeration.  She is many people.(*)

(*) = If you don't get it, maybe you just don't get it, and that's OK.

You weren't in a fraternity in college by any chance were you? Frat boys always hate women that dont agree with them. 

M Mobes wrote:

You weren't in a fraternity in college by any chance were you?  Frat boys always hate women that dont agree with them. 

Nope.  Not my thing at all.
You seem to know something about that though?  
Mitch Zimmerman(*) (**) knew about everything else, and was also many people.

(*) = If you don't get it, maybe you just don't get it, and that's OK.
(**) = But assuming you do... now that's the problem.  It's not what you don't know that gets you, it's the things you know that just ain't so.

You weren't an idiot in college by any chance were you? Idiots always assume they know something about people that don't agree with them.