United States property is dirt cheap compared to other international real estate markets. The sooner you realize this fact, the better for your happiness and wealth. Since COVID, the U.S. stock market has been a huge outperformed compared to the rest of the world. Foreign money will pour back into the U.S. Therefore, you had best accumulate your fair share of U.S. real estate now before you get outbid by a foreigner.
One of the biggest conundrums today is trying to understand why the mass media and housing activists keep droning on about how expensive the United Stats property market is. When in reality, U.S. property prices are amongst the most affordable in the developed world.
I think one reason more Americans don’t realize the value of U.S. real estate is because only about 50% of Americans have passports. As a result, only half the population has a clear perspective on how good we have it compared to the rest of the world.
Recommendation: If you're looking to invest in U.S. real estate passively or diversify your holdings, check out Fundrise. Fundrise manages about $3 billion in private real estate investments, mainly in the Sunbelt region where valuations are lower and yields tend to be higher. With the Fed embarking on a multi-year interest rate cut cycle, there should be increased demand in real estate in the coming years. I've personally invested over $300,000 with Fundrise and they are a long-time sponsor of Financial Samurai.
Actively Investing In U.S. Sunbelt Real Estate In Particular
Cheap US property is why I'm actively investing in real estate crowdfunding deals all across the country. Cheap US property is also why I will hold onto my physical real estate until my children become adults.
Anybody who has actually spent time house hunting in Hong Kong, Singapore, Tokyo, Mumbai, Paris, London, Zurich, Stockholm, Sydney, Vancouver, etc. realize how cheap the U.S. is, including our post expensive cities, San Francisco and New York City.
Do you think I'm just going to London to eat strawberries and cream at Wimbledon? Of course not! As a personal finance blogger who writes from first-hand experience, I'm diligently pounding the pavement to research the truth to share with all of you.
One of the reasons why the housing market will continue to stay strong is because foreign capital will wisely try and buy up cheap United States property. Capital is fluid and capitalists are always seeking the best values around the world.
Look How Cheap United States Property Prices Are
If you don't believe how cheap United States property prices are, have a look at this chart by the OECD (The Organization for Economic Development And Co-operation) as of 2021.
America is one of the richest countries in the world. Yet, America doesn't come close to having the most expensive property in the world. With a median home price of only $340,000 in America, American property is very affordable in a country as big as ours. In 2024, the median U.S. home price is closer to $420,000, still quite cheap.
What makes New Zealand equal to United States property? Is the country's natural beauty, Lord Of The Rings, and fluffy sheep that valuable? New Zealand is the 69th largest economy in the world by GDP. No, it's clear that New Zealand property is in bubble land compared to United States property.
It makes no sense the 69th largest economy in the world has the most unaffordable real estate in the world according to the OECD? There must bee tremendous amount of policy mismanagement in the form of building restrictions, loose foreign investment regulations, and corrupt government officials who love receiving money under the table.
I'm not saying that all this shady stuff is happening in New Zealand, since they're consistently ranked one of the least corrupt countries in the world along with extremely expensive Denmark. I'm saying that something artificial is happening to cause such a pricing disconnect. Why else is there traffic around a toll road?
Why are Turkey, Hungary, Iceland, Mexico, Canada, Portugal and China more expensive than the United States? The GDP per capita in China is $10,300 versus $48,000 in America. American real estate is cheap relative to income.
House Prices To Rent Prices By OECD
Another way to demonstrate how cheap United States property is is by comparing house prices to rent prices. Once again, United States real estate is cheap in comparison to many other OECD countries.
Although United States property used to be cheaper on a global scale just five years ago. In the chart below, United States real estate is in the bottom third.
When prices are out of whack, a tremendous amount of social inequality occurs. When there's enough social inequality, a revolution isn't far behind (see Brexit, Trump, etc). The housing market will likely stay strong for years to come. It's up to you if you want to invest or not.
Platforms like Fundrise make it inexpensive and easy to do so. Personally, I've invested $954,000 through platforms like Fundrise to invest in the heartland of America.
Now let's take a deeper look at why the media continues to believe United States property is unaffordable. It sure seems like the media as an agenda and isn't looking objectively at the situation.
Biased Mass Media Manipulation
Take a look at this SF-based Wired magazine tweet. You don't have to read the article because it is the same populist verbiage about how it's becoming increasingly difficult for the middle class to afford homes now.
The magazine even goes so far as to write, “A family that makes $100,000 can't afford to buy a house in most U.S. cities.“
Are you kidding me? The median home price in America is around $340,000 today. Let's say you put down a typical 20%, or $68,000. Your $272,000 mortgage at 3% is $1,147 a month. Let's add another $200 for property taxes and maintenance for good measure.
Is Wired saying that a household who makes $100,000 gross, or $80,000 after taxes, can't afford $1,347 a month? $80,000 net a year equals $6,667 a month before any 401k contributions. Spending only 18% of your net income on housing is affordable.
Even if this household only put down 10%, a $306,000 mortgage at 3% still only costs $1,290 a month. Mortgage rates are very low today, which is why everybody should refinance if they haven't done so already.
I personally refinanced to a 7/1 ARM at 2.125% during the pandemic. I'm now paying less in mortgage payments than I was 10 years ago.
Myopic Point Of View Regarding United States Property
Now you know why there's such distrust in the mass media. Either the writer at Wired magazine is incompetent, doesn't understand basic economics, or the writer has an agenda or all three. One of the best media strategies is to tap into populist angst to make life better for themselves. The more enraged the population, the more views the article will get.
The great irony is that those people who can afford to go into the journalism industry probably don't come from poor families. If you were poor, you'd study an in-demand major like engineering or computer science so you could land a well-paying job out of college and help support your parents who sacrificed so much for you! Only the well-to-do can afford to study a soft major and willingly enter a struggling industry.
Besides having a populist agenda, Wired magazine is also disrespecting all of you who don't live in San Francisco, New York, Seattle, Miami, Boston, Denver, Los Angeles, San Diego, and Washington D.C.
That's right. If you guys don't live in one of the 10 most expensive cities in America, those of you who live in the other ~4,000 cities with over 10,000 people don't count.
What Wired and other media organizations writing about unaffordable housing are really trying to say is:
“Families making $100,000 a year have a difficult time affording a home in the top 0.01% most expensive cities in America.“
or
“Because I can't afford to buy a home where I work and live, most people can't either.“
Talk about being myopic. It's interesting how the largest media organizations in America who like to complain about high real estate prices are mostly based in New York City, Los Angeles, Boston and San Francisco. Their writing clearly ignores the 50% of you who do not live where they live.
Being biased is unavoidable. It's why organizations are so homogenous in their demographic makeup. I’m proud of most journalist who seek to report the news in a just manner. I’m annoyed at biased media who conveniently ignore facts, such as income and job growth as a reason for a fundamental rise in prices.
To consistently ignore the heartland of America is INSULTING. The brazen disregard for half of America is exactly why Hillary lost.
Why Some Americans Don't Understand How Good They've Got It
Here are reasons why I think Americans don't realize why United States property is so cheap. If Americans knew how cheap U.S. property is, they'd buy a lot more. At the moment, foreign real estate investors are buying up U.S. property.
1) They believe everything they read by the mass media.
If you live in one of the most expensive cities in America and only earn $48,000 a year as a journalist, then of course you're going to write about how unaffordable housing is, and extrapolate your situation with your company's platform.
If you start believing everything you read in the news, then of course you're going to take on their biases. Instead, it's up to all of us to read with a more critical eye. Be just as critical with my writing as well.
2) They haven't traveled around the world.
Once they get outside the country, they'll realize how truly awesome America is. Everything from real estate, to cars, to gasoline, is so much cheaper here in the States. Do you really want to pay $85,000 for a Toyota Corolla in Singapore? Do you really want to pay $1,500,000 for a 500 sqft studio in Knightsbridge, London?
If you don't have money to travel to London or Singapore to see how truly outrageous prices are, just surf the web and see for yourself. Supposedly, only 60% of Americans own passports.
3) They're too lazy to do any research.
Even surfing the web for comparison property prices in Stockholm takes moving your fingers about 50 times. Instead, it's much easier to just trust a headline. We expect everything to come to us in America.
As a result, we fail at speaking a second language fluently while many of our friends in Europe can often speak three languages quite well. Just look at 18X major champion Roger Federer. He's a professional tennis player, not a professional linguist, and he speaks three languages fluently (German, French, and English).
4) They want to believe what they want to believe.
Have you ever believed in something so hard, only to later realize it wasn't? Have you ever been so adamant in your belief that you disregarded reality? Like seeing the light after breaking up with your crazy girlfriend or boyfriend. What were you thinking?
Obviously, you weren't when you thought you were in love. Once we believe something to be true, it's really hard to change our minds.
5) They're frustrated at their own situation.
Just because they can't afford to buy a $1.6 million median-prices home in San Francisco or New York City on a $100,000 salary doesn't mean you can't buy an awesome middle class home for $350,000 wherever you live.
As we come out of the long pandemic, the demand for United States property has never been higher. Finally, Americans are waking up to how good they have it! Real estate is my favorite asset class to build wealth by the average person.
Long And Strong United States Property
The reason so many foreigners are rushing to buy U.S. property is because they realize how comparatively cheap U.S. property prices are. Foreigners also believe America offers one of the world's best lifestyles with the most upside opportunity.
Therefore, if foreigners realize the U.S. value proposition, it's a good idea for Americans to realize our own country's amazing value proposition by owning a piece of America too. Domestic institutional real estate investors are already trying to buy up as much U.S. property exiting the pandemic as possible.
To appreciate how cheap American real estate real is, Americans need to gain perspective. Go inhale some toxic air in Beijing for a month or hopelessly try to find a well-paying job in Milan. Or try and get a high-paying job in Canada while you freeze your butt off. Only then will we truly appreciate our good fortune.
If the U.S. housing market gets as hot as the Canadian housing market, I could easily see another 30% rise in U.S. real estate prices. Canadians come to America to earn higher wages, not the other way around.
So Why Is American Real Estate So Cheap?
The reason U.S. property prices are so cheap is because we have a large land mass, a stable government, a world currency, a deep bond market, strong IP protection, incredible productivity, a strong work ethic, property rights, human rights, a desire for equality, clean air, drinkable tap water, a deep education system, and innovative technology.
Not owning at least a primary residence in such a great country when foreigners are beating down our doors to buy is foolish long term. We're going to hear the same complaints from the same people 10 years from now.
Foreigners see U.S. coastal city property like U.S. coastal city inhabitants see middle America property: great overall value. But before the tidal wave of new foreign money comes crashing down on the heartland on top of fluid coastal city money looking for new opportunities, I want as much exposure to the heartland as prudently possible.
Easiest Way To Invest In American Real Estate
The easiest way I can do so is through a real estate crowdfunding platform like Fundrise, where you can invest as little as $10 per fund. Fundrise eREITs have performed well and with low volatility since the company began in 2012. The company currently manages over $3.3 billion and has over 500,000 investors.
You can also check out CrowdStreet, a real estate platform that focuses on individual deals in 18-hour cities. 18-hour cities have lower valuations, higher cap rates, and higher growth rates. The spreading out of America is a real trend thanks to technology and the pandemic.
Sooner or later the money is going to start pouring in. With inflation picking up post pandemic, the demand for real estate is heating up!
I've personally invested $954,000 in real estate crowdfunding to ride the wave and earn income 100% passively.
My International Background
For reference, I have lived in Manila, Lusaka, Osaka, Washington D.C., Taipei, and Kuala Lumpur for the first 13 years of my life. Then studied abroad in Beijing, Shanghai, Rio de Janeiro, and Sao Paulo for undergrad and business school. Traveled to over 50 countries (most recently Czech Republic, Austria, Hungary, and France) and speak Mandarin, English, and terrible Spanish. If you can't trust me, then trust Rick Steves! I'm always on the lookout for cost of living comparisons.
For more nuanced personal finance content, join 65,000+ others and sign up for the free Financial Samurai newsletter. Financial Samurai is one of the largest independently-owned personal finance sites that started in 2009. Everything is written based off firsthand experience.
That chart of Canada is the most depressing and disgusting thing to see as a Canadian. This is worse for local canadians than being hit by a Nuclear bomb. Only two groups those who bought real estate 5 to 40 yrs ago and those who did not and never will and foreigners and new immigrants who bring money from asia. Our government needs to be lined up and shot in the face one by one. This crap has turned our standard of living in to a pure shithole third world level, as no one has anymoney left to spend on life outside of rear estating. DISGUSTING
Yes, I’m shocked Canadian politicians have allowed such runaway real estate inflation with laundered foreign money.
But is it possible the Canadian politicians are getting kickbacks from wealthy foreigners?
Where you live in the US really does make a difference. I live in a nice small-to-medium town away from any large cities. There are plenty of houses for sale here under $100,000, or you can pay in the range of $200,000 to $400,000 and get a very nice house. Those same houses would cost double or more in many large US cities.
And yeah, I’m sure that jobs don’t pay quite as much here. But there are some good-paying jobs, and remote work can be done from here as well as anywhere.
Great move getting that ARM
Thank you. I couldn’t believe I could lock in 2.125% for 7 years. Massive savings and I plan to sell the house or pay off the debt by the time the ARM expires.
Do you really want to pay $1,500,000 for a 500 sqft studio in Knightsbridge, London? – You can hardly compare the median house price in the USA to the highest priced place in the whole of the United Kingdom. And just because the USA has lower house prices in the OECD, does not mean that the house prices are not expensive, it just means that they are less expensive then the rest of the OECD, but still expensive.
But when you account wages. The USA is well off when it comes to property. The USA is second behind Saudi Arabia on the affordability index.
https://www.numbeo.com/property-investment/rankings_by_country.jsp
“To consistently ignore the heartland of America is INSULTING. The brazen disregard for half of America is exactly why Hillary lost.”
I agree that property in USA is very cheаp, compare to the rest of the world , especially HH, where rent by the bunk exists for single people.
I do not believe that heartland of America is a good choice for the investor on a margin from my experience. I do not believe in to upside for the investors. Inflation adjusted increase of property value could be 0.
I drove a lot through heartland. Once I stayed in April in a town with population 500 and 3 two story motels on one intersection. I had the selection out of 180 rooms, What would be the average occupancy and cash flow.?
My mom has a rental (500 sq foot, current market price-50000)in in the Old country. It is her inheritance from her parents. It is located in the industrial area. Average renter stays – 7 years. Average time between the renters-2 weeks. Median earned income in the city-700/month(country-500). Median income in IT- 1700-13% income tax/month. Her SS retirement check-200. Rent income after taxes -200/ month. But it is a country Capital with population of 2 mln out of 9 mln population .(Like DC+NoVA in comparison to VA). Landlord market.
In august of 2011 we bought a condo in VA as an investment. 1220 3/2 for 106 with a down payment-%25. Selection was incredible and I was ready that prices can go down another 3-5 %, but we wanted to buy for our son and his roommates before the school starts.
My wife picked that unit over the unit 1340/3/2-102 because of the view from the windows.
In July 2013 condo was ready for rent. I was able to rent it out for 1000 from the February 2014 тo IT worker (pay stubs for the last 6 months provided) with a recent bankruptcy. Herself and her 17 y/o son and her 36 yo brother. 9 month on the rent-market. 8.500 out of pocket direct losses.
After 3 month of payments she lost he job and she started to play the renter’s games. ( Her BMV SUV still was on a parking lot. No straggles) . I evicted her(and her brother and her son and her boyfriend) in January 2015. Unfortunately for me the whether was nice and warm. I wanted temperature -20 and 40 inch of snow. Another 5 th. out of pocket.
No competition. Bad market. To much of new construction. And no high paying jobs for lazy bums.
We sold this condo for 118 in the summer of 2015. I got a profit in a form of education.
Try living in Vancouver, Canada. The average house costs 2 million dollars. A brand new build is at least 3.1 million. A 1 bedroom condo is at least $450,000. Real estate in USA, except New York and Los Angeles, San Francisco is so cheap.
Man to buy a decent house in aus that isn’t a run down shit hole nowhere near the city (3 or more hours) it is going to cost you 450k at best and that’s still not in the nicer areas and probably 2 hours nd to get a little closer let’s say an hour probably 800 and that’s for a 3-4 bed house that’s reasonably new well in Sydney this is the case but it’s just sky rocketing all the time lately
Ok, so usa is cheap. The question is: How can
foreigners buy so much real estate in our cheap
country, when usa people cant. Do foreigners make
So Much More Income than usa people or are usa
people taxed so high so much that foreigners can
buy our country and usa people can barely
survive. Thank for the opportunity to comment.
The real answer is that countries like Canada and Australia offer citizenship opportunities to wealthy Chinese and Russian investors and have no real capital controls or taxation schemes that that prevent foreign buyers from parking their money in real estate. London is also a favorite destination for this.
For the wealthy Russian or Chinese person, their fortunes are tied into Putins whims or in China whether there is a sudden anti corruption crackdown. In addition the pollution is insane in Chinese cities, for the same $2mm to buy a Shanghai apartment, the quality of life is incredible in Vancouver. So it is prudent for the wealthy elite to move as many assets they can abroad. And this has been systematically happening to exacerbate the affordability problems in these countries. In the US you can get a green card by financing a business more than $500K but that still has a few hassles compared to other countries. There are checks to make sure the business is legit etc and there is some fraud but the problem is not as widespread. I would say NYC has a lot of this (you can see lights off in most upscale new condos at night) with foreign billionaire types buying condos via LLCs. But that is a different buyer who looks at value at least somewhat and not someone wanting to escape their country.
The fact isn’t that we can’t afford them after we get a mortgage. It’s that we can’t afford to save the 10-20% down payment while most Americans spend more than HALF their income on renting. Not accounting for the absurd inflation of education and the difficulty finding a job that actually pays you what your worth(in a country where tipping is considered culturally mandatory to level out our lowest paid individuals incomes). I personally am a suicide intervention specialist(worth $16-24 an hour), I work at a chain store unloading trucks and stocking the store(making $12.25 an hour, before taxes which are 25% of my income. Not to mention the lack of accessibile health insurance my generation has been cursed with and even if we do have health care there are a limited number of providers for that specific insurance, particularly low income as providers are basically doing their work for half the price they’d be paid from private insurance. The fact is the poorer communities (over 50% of Americans) walk around on a daily basis with zero savings. Many Americans rely on public assistance to simply afford groceries.
Between the cost of living(which in my area no person working 40h a week minimum wage can afford to their own apartment even if they dropped 100% of their income into it. I reside in the lowest priced one bedroom in my city at $1070 a month), the cost of health care(I pay like $400-1000 a year on that and I’m actually insured privately through my parents until I turn 26), the cost of food(the government has calculated that each individual who has zero income to $800m only requires $150-195 a month), and the cost of basic necessaries like electricity water sewer and garbage(we’ll leave heat out because honestly most of us simply use blankets when we’re cold and leave the lights off as much as possible to avoid increased costs) (I sink like $200-300m into these basic necessities and I don’t even have air conditioning or heat in my apartment).
My bills usually add up to $1600-1800m and I make $10h after taxes. I’d have to work 45h a week to afford that not to mention my student loans I have to pay off because I decided at a young age that college was a good idea to keep myself out of poverty.
Unfortunately like most companies do mine keeps most of its employees under the 32h a week that would legally require them to give us benefits. So I make much less than my personal bills add up to, like most Americans which means my credit is shot, like many Americans who took out government loans to afford college, which my government decided my parents should have paid for…I was raised by the state so my parents don’t apply to the equation.
The simple fact is Americans are not buying homes because a the option isn’t accessible, not because it’s beyond our price point. Mortgages are much cheaper than rent. And renters know this so they jacked up the prices without laws or regulations and now no one can transition from renting to buying without being upper middle class or better.
I share a one bedroom with someone now…and I still sink 100% of my check into living expenses. It’s an economic problem that people are overlooking.
The reason why New Zealand has the world’s most unaffordable real estate is very simple. New Zealand has zero Land Tax.
When there is zero land tax there is nothing to suppress real estate speculation and there is no penalty for holding land vacant or under-developed.
You can easily see the effect of Land Tax in the different states of USA.
The healthiest economies in USA tend to be in the states that have Land Tax rates above 1.5% pa, such as New Hampshire – recently ranked as #1 by Politico.
California, thanks to Proposition 13 (1978) has average Land Tax of 0.8% per year and now has four of the ten most unaffordable cities in the world. In the 40 years since Proposition 13, California’s economy has not thrived. When wealth goes into land prices the there is less wealth available for the productive economy. California’s pre-college education raking has fallen from top 5 to bottom 10, simply because the cities are prevented from collecting revenue to fund education. Several cities in CA have filed for bankruptcy.
Most of the world’s unaffordable cities have Land Tax rates less than 1%.
In Australia there is no land tax on primary residence and there is also a 50% tax concession on capital gains (fixed rate since 1999). Sydney and Melbourne used to be affordable, but have climbed into top 10 most unaffordable cities since 1999.
Housing affordability is no mystery. Look at the way the government taxes Land and you will always find the reason.
It’s all government policy. Therefore it can be changed.
Ping! You’re spot on here, Tony. David Ricardo, Adam Smith, JS Mill and Henry George had it pretty right when they said unearned land rent needs to be taxed away for markets to be able to work properly. The neoclassical economics taught in our universities no longer accepts this, though: “Nothing is unearned!” So, we have the phenomenon of tax regimes favouring private capture of land rent–especially by banks–generating increasingly greater bubbles in land prices. By definition, of course, land price bubbles have a habit of bursting. Seems we’ll have to wait for the next bust for our kids to be able to afford a home. Or, we can cut taxes on labour and capital and capture more land rent via land value taxation.
Finally, after reading dozens of responses, I,Ve now found one that acknowledges the real reason for high prices. It’s the land that increases in price, due to scarcity, amenity, services and accessibility. A house, like any building, will deteriorate over time, and become worth less, unless maintained. Not so the land. It’s just there! And, with increased population, it will become more valuable. But the landowner hasn,t created that value. It’s the community around him that cretea the value, so it could be taxed away with no loss to the owner, and great benefit to the rest of the public, including buyers.
Interesting that so much of the commentary is on San Francisco prices. It was there that Henry George first proposed these ideas. Check out the Prophet of San Francisco. You will find your answers.
No loss to the owner? Do you have any idea how much face any self respecting billionaire on this planet would loose, if it ever got out that he didn’t double his billions every 10 years doing nothing? Just what kind of planet to you think those billionaires are running here? heh heh
This is a great comment. Unfortunately, governments are hard to change b/c people are hard to change. Once you give people incentive or a break, they will ALWAYS vote to keep such a break.
Prop 13 will never go away in California.
That said, I did sell my SF rental house in 2017 (bought in 2055). The price was too good to pass up, and although there is a RELATIVELY low property tax amount, I was still paying $23,000 a year! NO THANK YOU!
Instead, I used the proceeds and diversified into the heartland through real estate crowdfunding for a potentially higher return.
I’m so much happier not having to pay huge taxes and deal with PITA tenants!
Sam
Tony, Im sitting here in San Antonio Texas, where property taxes are among the highest in the nation at about 2.2 percent with median home prices among the lowest in the country, and possible THE lowest amoungst thriving economies(2.8% unemployment) I can vouch for the validity of your comments. Are road are new, and increase in size BEFORE they reach traffic jam status and always have been in the 60 years ive been here. Never any water or electric problems either. I’m always bitching because our city government never quits finding new parks or public uses for my tax money, they’re RICH by most large city standards (7th largest in US). I want to thank you for your post because I had no idea why new zealand was so desirable that people wanted to spend 4 times as much (income/housing cost) for a home there. your answer (THEY DONT!,BILLIONAIRE speculators are forcing them to!) explains it all. thanks for keeping my from scratching my few remaining hairs out, trying to figure out what the F was going on! -and giving me a whole new appreciation for what local government has done to PROTECT me with high taxes. It never occurred to me that I might never have been able to afford the nice house I live in if it weren’t for those taxes keeping billionaire speculators OUT of this market.
I honestly can’t agree with you more Sam. Americans really have it good.
I recently wrote a post comparing the average income of $50k in the US can easily afford a house worth $200k, but it is not the case with average income in China of $20k to afford a $500-$1M condo in Shanghai or Beijing.
Now that’s reality.
Im in Australia and a basic 3 bedroom home with 2 bathroom is 1.5m in the outer suburbs of Sydney. Car registration is $1200 per year. Petrol is $1.50 a litre and my wage is 65k per year. I wish we had US house prices.
Maybe it’s the down payment that is unaffordable for Americans? Heck, one can buy a 3BR house in my area with a mortgage payment lower than rent on an average 1BR apartment, but there’s no way I’m going to come up with an adequate down payment or mortgage-worthy ratios in the foreseeable future.
I think it’s mainly because United States have so many investment alternatives. People have a lot of faith in the stock markets compare with other countries. In countries especially the BRIC countries, people don’t believe in stock market. People jump in for a short-term speculation, and jump out to dump all their money in the real estates.
I think this also contributes to the recent low market volatility. I’m starting a humble tiny blog, mainly jotting down my own thoughts on investing. Reading your blog has been huge inspiration for me.
Read Picketty’s book on Capital in the 21st century. He offers several reasons why income/capital ratio is demonstrably lower in the U.S. than around the world from a long-view economic perspective (though admittedly I don’t remember most of them).
One I believe had to do with relatively high immigration to U.S.; immigrants may earn salary but not have accumulated enough capital overtime to afford investment (or maybe moved here out of persecution and don’t trust illiquid investments). There were a few others I can’t recall offhand.
Sam,
Your blog site has the best resource and I have been learned a lot. Thank you very much. Recently my credit union just approved $750K HELOC at 4.25% on my primary home in Fremont. I am going to use the fund to purchase a SFH rental property all cash. My question is that can I write off the HELOC interests on my primary home? How much interests maximum for tax write off? Should I go ahead to refinance the $750K HELOC of my primary home with lower interest rate? Thanks advance for the answers.
Hi Sam! My first question here. Really like your blog and you do a very good job so appreciate your insights. Talking about platforms like Realtyshares, how do you go about evaluating if a certain property is a good investment? I am not a real estate investor yet but have money saved that I want to invest for a decent return (dont we all!). I have a hard time justifying to myself that all investments advertised on these platforms will pan out as planned and there could be a risk to return of capital. One option is obviously to diversify preferring the heartland – but given two options in say the Midwest, how to determine which property is a better bet on a risk adjusted basis. Thanks!
Good question. I’m working on a real estate crowdfunding framework on how I plan to vet my deals. Stay tuned.
Awesome. Looking forward!
On related lines platforms such as Realtyshares seem somewhat too good to be true. This is a gut feel not based on any data. When Yale endowment is generating meager returns with highly paid experts, why would they not put more money buying into such platforms squeezing out retail investors like myself?
The endowment returns are pretty miserable this year. They have a lot of exposure to international markets which did poorly.
One of the reasons why the Yale endowment wouldn’t get into real estate crowdfunding is because the size of the market so far is too small. Real estate crowdfunding is for the retail investor.
With over 25 billion in assets under management, even allocating 1.4% of Yale’s fund would take up the entire capital markets supply of RS so far! They just announced raising $300 million on their platform.
Good post Sam. US real estate is relatively cheap compared to not just OECD countries but many developing markets as well. I give an example about Bangalore, India in one of my blog posts – didn’t want to post the link here in case you have a policy against it. It’s hard to imagine a 3 bedroom apartment being sold for $500K in Bangalore, where average income is around $500 a month and poor infrastructure and regulations stifle the economy. Yet, quite many are buying there! Is it a bubble? Who knows, that’s what they were saying for the last 10 years, no sign of bursting yet.
The biggest reason is the world is queuing up to buy American debt so cheap, in addition to all other valid reasons you mentioned. It doesn’t mean we all should run to buy Midwest real estate befor the foreigners. High paying Jobs and aesthetics (or snob) value determine premium real estate and comsidering that, a $2 million SFH in the Bay Area may be far more promising as an investment than a $200K similar property in Kansas or Idaho.
You are ignoring the huge discrepancy in home prices within the USA. Places such as SF and NYC are unaffordable even for people making $100k. Yes there are places in the USA such as the rust belt where the prices are cheap, but there are no decent jobs there.
Did you read the entire post?
*snicker* Sorry, some of the prices noted here for other parts of the country just make me laugh… or is it cry? Went to a couple of open houses this past weekend. The one in the kick-ass location up in the hills (but just barely) featured 2 bedrooms and 1 bathroom. It has a carport rather than a garage. The “front door” opens directly from the carport into the kitchen, and the washing machine is directly behind the door when you open it. Where’s the dryer, you ask? Why, out in a shed in the carport, just a few steps outside that front door!
Now, granted, a great location, and a lovely large, level back yard with a couple of planter boxes and a hot tub. The open living room/kitchen half of the house features one wall that is completely windows— breathtaking! With a bit of a view across the Bay to the East Bay hills.
The asking price: $1.05 million. What will it likely go for? I’m guessing $1.2m, easy.
I hate Facebook. And Google. And Apple. But especially Facebook.
I Love you site. I am a 29year Old lady from Kenya.
I am learning alot each day.
God Bless
While I agree with the sentiment of your post (that we need to read critically with an eye out for bias, and not assume that every click-bait article applies to us), I have to disagree with you on this point:
“If you were poor, you’d study an in-demand major like engineering or computer science so you could land a well-paying job out of college and help support your parents who sacrificed so much for you! Only the well-to-do can afford to study a soft major and willingly enter a struggling industry.”
If only that were true! Being on the edge of poor meant that my family didn’t really know how to advise us kids on what college major to pick, or what college to go to. They just strongly pushed that we should go to college, full stop. I think they were actually glad to hear that I had decided to be a film major, because hey, Hollywood is where the money is, right?
The problem is that poor people tend to think of getting rich in terms of celebrity – you get rich through sports, or by becoming a wildly famous actor, or something like that. They can’t rightly advise their children to pick lucrative, safe majors when that’s the baseline for making money that they understand. Journalism may sound like a good major to some parents because, hey, if your kid is good at writing, they’ll make the most money doing what they’re good at, right?
You make a good point. Hopefully more and more parents and students will do some due diligence on in-demand majors / jobs / companies / fields to make better financial choices, if earning more money is important to them. The internet should serve to provide free and easy color on what provides the best return on investment.
All my friends who studied journalism, writing, and art for their college majors come from financially stable to wealthy families because they could afford to pursue their passions. They knew that if all else failed, they had their parents to back them up. And their parents also encouraged them to pursue their interests.
Conversely, the large majority of my friends who are engineers and software engineers come from middle class to lower income families. Many are immigrants whose parents wanted to come to America for a better life. The demographic may just be b/c I live in SF and the area is so diverse.
I’ll check out your story!
Thx
I have always wondered why Germany is so cheap housing wise. Cheaper than US even.
Its because Germany’s population is declining. As a result housing supply exceeds demand, therefore prices drop
“The reason U.S. property prices are so cheap is because we have a large land mass, a stable government, a world currency, a deep bond market, strong IP protection, incredible productivity, a strong work ethic, property rights, human rights, a desire for equality, clean air, drinkable tap water, a deep education system, and innovative technology.”
Shouldn’t most of these factors contribute to expensive prices, given the desirability of the US as a place to live?
Exactly. Therein lies the conundrum and the opportunity. A good investor must step back and try to see what other people are not seeing. If you can recognize a trend, things get much easier. Let’s revisit this post 20 years from now.
Life in smaller cities sucks. I lived in the Midwest and could afford a giant house but instead I got a modest 1,500 ft house and saved tons of money. Money was great but I’ve nowhere to spend that money.
I moved and am now living in NYC, double my income, and save as much. I managed to buy a modest 1,200 ft house but my life is now super entertaining.
Love NYC! Just kinda hard to truly save money there until you start making some big bucks.
So much to spend money on!
See: https://www.financialsamurai.com/how-do-people-to-live-a-comfortable-life-making-less-than-100000-in-expensive-cities-like-new-york/