"DSK" wrote in message
...
So, who is actually the smart one here?


PocoLoco wrote:
NOBBY!

He's the one who will be pocketing the money while the rest of you are
telling
him how foolish he is!

If he can really afford a $5000/m home payment on an interest-only
mortgage, and is *gambling* that his home equity will rise fast enough to
both pay off the home and provide a good financial return, wouldn't he be
better off living cheaper and investing that $5k/m?

How would I pocket $5k/mo if I lived in some place cheaper? Even a cheaper
place would have a mortgage, taxes, and insurance. Perhaps you meant to say
"pocket a portion of the savings"?

A similar home to mine that is *not* on the water would run about
$550-600k. But the ones that aren't on the water are appreciating at half
the rate as the ones that are on the water. I'd wager any amount of money
that I couldn't save enough money living in a house off the water to come
anywhere near the amount of appreciation that I'm seeing by living on the
water.

Here's an example:
Suppose a million dollar house on the water appreciates 10% per year
(they've been averaging more than three or four times that rate over the
last 10 years though). That's $150k. Suppose the $500k home that is not
on the water appreciates 5% (once again, an extremely conservative figure).
That's $25k. So the equity of the guy on the water is outpacing the other
guy's equity by $125k each year. If the mortgage payment on the million
dollar home is $5k/mo. and the $500k home is $2500/mo., then the guy who is
not on the water can put away about $30-40 k more (the extra $5k is for
additional taxes and insurance) each year in savings. But that's still a
lot less than the $125k net advantage in equity growth for the waterfront
homeowner.




Hmm, this is one of those times when one should "do the math." It's clear
that you and Nobby haven't.

See above. And I didn't include the huge tax savings on the interest from
the million dollar home vs. the half-million dollar home.