Sorry, but I don’t get the trade up scenario. Say you buy a condo at the bottom (good luck calling the bottom though). Then it appreciates and you walk away with $200k in profit. Then you go to buy your dream home. Well, guess what, while your condo was appreciating your dream home was appreciating too, and maybe even at a faster rate than your condo.
You are 100% correct. I don’t understand why people think that it easy to trade up with appreciation. If your condo goes up $100k, your dream home goes up 200K. OK you have $100k to put down, but you’re still going to borrow a $100k more then if you purchased the dream home from the beginning. The key to my statement earlier was to “pay down” the mortgages. This may take 5 or 10years, but as long as appreciation doesn’t get out of hand, you can trade up. I was also assuming that a buyer can almost afford the dream home, but can take the financially safer route of purchasing two lessor older homes for $500k each and eventually trade up for lets say a $1,000,000 dollar home. Your rental income in most cases should cover insurance, taxes, interest. Basically the cost of the two properties should come out to about the same, and you can use the rental income to pay down the mortgages. But like I said the key is to pay down the mortgages. You can also accomplish the same thing by renting and saving money for a large down payment, but you can be leveraged out if appreciation goes up.
