Augen said:
Wlakiz said:
... if you guys have taken out a mortgage before you would understand the concept.
Lets say you borrow $300k from the bank to buy a home . In the bank's perspective, they are happy because they get free money from charging you interest rate, and you are happy yourself because you get to live in a new house or w/e. With a stroke of luck, you win a lottery and you get $70k. You can either put that money into the first mortgage and cut your amortization period by 10 years or you can do something smarter and use that $70k to put in a second down payment and get a second mortgage. Whoa whoa, wait you say, you're just going into deeper debt, because you have two mortgage to pay now! Yep, that's true but you see when I get a new home I can rent it out and use the rent to pay the mortgage, so basically my asset doubled and I pay the same amount as before. |
Like many financial decisions there are not necessarily right and wrong ways to go, but to understand the markets and what you are getting yourself in to. In your example the critical aspect is stating "rent out the second home" as if it is a formality. Obviously markets vary region to region, but unless you're confident can have reliable tennants this proposition can be very risky. I knew someone who did exactly this, and it worked great for a few years, and then 2008 happened and suddenly they had an asset they could not offload unless they were willing to take a heavy loss and no income to pay the second mortage. It sat empty for months until they slashed rental rate by a third just to get bodies in there. My point? What you are suggesting can work out great, but it hinges on variables that are not set in stone and could potentially ruin you.
My advice? What is the rate on your mortage and do you think you can invest your money at a better rate of return than that? If so, go for it, post I quoted is possible avenue. If not, do the conservative thing and give yourself breathing room by paying down your mortage.
I'm not arguing, just giving greater context I hope to your valid point.
On Sony...yeah I am not touching that stock anytime soon.
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Of course there are risks to investments, if there are no risks then everyone would be fighting to invest on it. But my point was to address the mentality that once you're in debt you should not invest/buy things. I don't agree with it. The banks and creditors won't love you more because you pay off their debt tomorrow; in fact, they are less likely to invest on your business if your prioritize paying off your debt instead of growing your business. Their only concern is your ability to pay them back through valuation or revenue, nothing more.
As for Sony stocks. I bought a bunch around $16, I am losing about $300-400 ish but you know what? The loss is probably less than the people who bought apple around 600 or 700. The lesson of the day is Bears make money, Bulls make money but Pigs get slaugtered. Invest on market trends and not on greed. If I have a bit more cash in hand, I wouldn't mind investing a bit more in Sony and buying a bit of those convertible bonds. They are making progress in cutting their losses and their diverse investments gives them a bit of resilence to market shifts.
In any case, if you're looking for places to put your money, investing in energy and resource is always a better bet than investing in technology even on 'winners' like Apple and Google.
