[quote=AN]CAR,no, taking 80% LTV does not mean I’m less likely to be underwater. Choosing to buy when everyone is selling and selling (or not buying) when everyone is buying makes me less likely to be underwater. I could have bought in 2005 w/ 20% down, but that would put be in major hurt and big time underwater. So, I made the calculated risk to wait. I leverage to bought my primary and I leverage to buy my investment property. Both are up significantly. There’s NO WAY I could have save that much that quickly without leverage and calculated risk. Beyond appreciations, I’m getting over 10% cash on cash for my investment, so every month, I’m getting paid to take that calculated risk and using both my capital and leverage to get me there. There’s absolutely no way I can retire early if I didn’t use leverage. I’m doubtful I can even retire at 65 if I don’t use leverage.
You like to count out housing/home loan but that’s a HUGE source of leverage. Again, you can’t say this: [quote=CA renter]The one difference I’ve noticed between successful people and unsuccessful people (my definitions, not necessarily mainstream) is that the successful people have tended to avoid debt at almost all costs.[/quote]and then remove the biggest source of leverage MOST American use. We’re talking about borrowing hundreds of thousands here, not just a couple of grand. You ask for data, just look at the past and tell me how many people gotten richer by leveraging and borrowing money to buy their 1st, 2nd, etc. house(s). We’re talking about hundreds of millions of people who each borrow hundreds of thousands of dollar and through inflation and fixed interest rates have been rewarded handsomely. I’m sure you can dig up the data if you don’t believe me.
You can disagree all you want but feel free to run the numbers and posted here. My number for financial independence is $5M (nice and round). How long and how much do you think I have to save to get me to that number without leveraging? Assuming I start from $0. A sure way to be broke is to not leverage and depend on the man (when you’re working) and the government (when you “retire”). I can guarantee you most who do both usually don’t have anything left to leave to their heirs when they die.[/quote]
AN,
The reason you and I probably don’t see eye to eye is because I have seen people use maximum leverage to “gamble” on various business proposals, investments (other than buying houses during a low point or in a “normal” cycle), etc. I have seen multiple people totally ruin their lives, and these are people who were once fairly high-profile and very wealthy who’ve lost their money, their houses, their families, etc.
As I mentioned above, using self-liquidating debt in a conservative way (minimum levels of debt that you can easily pay back, knowing what you’re getting into, and being in control of it) is fine, but that is different from leveraging up to buy multiple properties, stocks, futures contracts, or getting into “partnerships” or investing with fast-talking salespeople, etc. which is a recipe for failure more often than not, IMHO. And consumer debt is something that should be avoided whenever possible.
Right now, I think a lot of people and entities are using “cheap” leverage to get into a variety of asset classes because they are expecting inflation to “wipe away” their debts in the future. IMHO, we are still in an asset price bubble because the credit bubble that has been causing the asset price bubbles has yet to burst. Investors have been using more leverage to move further and further out on the risk curve and I don’t see how this can end well.
