Hmmmm. When I "designed" the two assets above, I was thinking about a
*house* for asset (1) - I know for sure mine has gone up in value over the
past 3 years at more than I've paid into it!
Heheh, yeah, I suppose that recent years have really made some nice
short-term gains with house prices
) I wonder, in hindsight, how much
of that rise could have been foreseen....but that's another topic
entirely.
Better than negative equity, that's for sure! I suppose all it takes is
for house values to rise more than your mortgage rate to turn a profit in
terms of wealth, but then you've got to factor in all the other associated
costs as well. All the same, it is going to be better than renting,
usually! Probably a short exercise worth doing one day on the back of an
envelope, to work out what level of mortgage would be advantageous for any
particular growth in the housing market.
[For you to be "skimming off the profits" from the asset1 house, I guess
you'd be increasing your mortgage amount - is that what you meant??]
Dunno how that'd work for a single house that grew in capital that way.
I suppose you'd have to think bigger - a real estate portfolio of
several/many properties with a turnover such that you could realise the
gains and expand the number of properties owned... Harder to think of
doing it another way (other than sitting pretty and chuckling about your
nest egg!). You could remortgage I suppose, pay off the original debt and
keep the excess (or put it somewhere else, whatever you fancy).
You _could_ sell, pay off the mortgage, and then buy another similar house
pocketing the profit...but of course every other similar house would
probably have also risen by the same amount, so your "profit" gets eaten
up with the next purchase. *shrugs*. You'd also have the minor problem
of moving house!
I tend to think in terms of semi-liquid assets like a share portfolio that
can get turned into 100% cash in a few minutes, the specifics altered to
suit (company X dumped in favour of company Y), and which can provide
growth of capital, income, and potential loss, and for which choice X has
little bearing on the value of choice Y (unlike the housing market where
they all rise together) as my model of a wealth vehicle. I don't know
enough about real estate to make direct comparisons - from the outside it
looks like a potentially nice way to increase wealth, but I don't think I
have the time or energy to do it justice. YMMV.
Bennett
