Posted on 02/28/2011 10:58:00 AM PST by STD
Dear FReepers,
I'm looking for advice about taking the equity out of my vacation home. As I watch real estate plummet, is it time to cash out of that house while I can still get value out? After applying for a home mortgage; 30 years at 4.3% they are willing to give me 650K. Taking that money and putting it into commodities, I think I can grow my out of this economy. What do the rest of you guys think about this idea? I would also appreciate advice on where to invest this 650K? Thank You FReepers, my valuble brain trust
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Huh? Where is your house...Fifth Avenue?
why not!
its only moeny
maybe you can get a bailout if it fails
(siver and copper look good)
Do you rent out your vacation home, and if so, what kind of ROI do you get? If it is anything over 4% YOY(year over year) in this market, that is good money and as safe as one can get right now.
take the cash, but sit on it for a few months till this mkt sorts itself out.
“investing” in commodities on borrowed money doesnt sound prudent to me.
Remember what commodities did in 2009...they can go down.
I myself, sold some assets even though I knew i would take a loss because I was nowhere near prepared for a total economic collapse-I put that at about a 2-5% chance of happening. Did I take a loss? Yes. Did I mind? Nope. I'll be fat, warm, and well protected for a good 6 months.
Do you really think that commodities are going to continue to rise if everything else falls to pieces?
I sure hope that your vacation home isn’t on Long Island. But thinking of Long Island, that could be an investment opportunity for someone, setting up a holding company that holds the deeds to big vacation properties for out of state owners so that they can escape the New York state income tax.
If your job is at risk, you might survive renting your primary residence and living in your vacation residence. Or vice versa.
I think you should take $375K of your money and buy my vacation house. LOL
Where is the home? Do you still plan to use it? What is the rental income potential? What’s the balance you owe? How far into the loan are you? What would the sales costs be in commissions, repairs, etc? Do you need the money right now? What are comparable sales vs your original costs?
Personally, I believe the best time to buy anything is when its price is depressed and that ain’t the stock market right now. You’d be buying at a peak, not a trough.
No market stays depressed forever. If it isn’t costing you too much to keep it, maybe hanging on to it would have a better upside potential.
If you make money on the sale you’ll face capital gains since it isn’t your primary residence so that will be on top of real estate commissions, surveys, repairs etc.
Unless you have figured out the Nostradamus code and can predict the future, borrowing money to invest in “commodities” - with high commissions going in and coming back out - seems very foolish
Read Harry Dent’s book “The Great Depression Ahead” and watch his videos. He makes a strong case for demography being destiny, even with natural and manmade disasters aside
Investing in being self-sufficient and insulated from social upheaval would be my choice, whatever it takes
I think real estate prices will stabilize in the next couple of years. Partly because a lot of foreclosures will have been taken care of and partly because we've been under-building nationwide for the past couple of years. Demand should drive prices higher.
Unless you know what you are doing in commodities or even commodity ETFs the answer is no.
Do you have experience trading commodities? If not stay the hell away from that market, it’s not for beginners. Not everyone can be like Hillary C. and turn a $1000 investment into $100,000 on cattle futures. Most people get their butts handed to them.
One more thought. Commodities are where the big boys play and they have a bunch more money to burn than most of us. Remember, the last time oil went way up it crashed and burned in a week. If BHO tries to buy votes by releasing strategic oil reserves, or if things settle down in the middle east or if the Saudis really do start pumping like there’s no tomorrow a lot of latecomers in the market will get creamed!
hmmm. lemme think. the commodities market would have to rise 4.3% per year just to break even. add the taxes the taxes you incur each year, plus the cost of the risk, and you’ll see what return you’d need to make this plan work. off the top of my head, I’d say 9% or greater just for you to break even.
my bet is that this is a losing proposition. assuming your vaca home is paid for, you have it’s value in a market that will not stay this depressed for the amount of your mortgage. and you’ll have a lien on your property. if the commodities fails to yield the return you need, then not only do you lose your money, but also your house.
bird in the hand versus one in the bush...
just my thoughts.
Don’t remortgage. Sell the place. $650,000 (or whatever you can get for a place that nice) buys a lot of hotel rooms for your future travels. Spread the money around to various conservative investments, and relax with the peace of mind that comes with a nice cushion like that.
This is leverage, and it cuts both ways. Suppose both house prices and commodity prices go down? You will still owe the money, but you will not have the assets that you pledged to borrow it. Don’t think that can happen? It can.
Take the $650K, buy 26,000 shares of Altria (MO) and generate about $40K per yr in dividends. And reinvest the divs of course.
I’m no financial expert, but if I had substantial cash available right now I’d be looking at good quality rental properties, i.e. apartment buildings. I’m a little nervous about commercial (mostly because I don’t know the market), but all these folks bailing out of their underwater homes have to move somewhere.
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