[xchaotic]

It’s really simple- real estate is the only casino where you are almost guaranteed a leveraged payout in the long run. So as soon as houses became an investment, the way to maximise profit is not to go for the cheapest but for the most expensive house you can afford.

[DwnVoteHoneyPot]

I thought people stopped thinking like this after 2008/9. If not, maybe 2023/24 will teach them. When people buy a house and sell for more, they don't include property tax, mortgage interest costs, maintenance costs in their mental calc of profit. Sometimes they include renovations costs, sometimes not. They also don't factor in their next house they buy is inflated too.

[maccard]

> I thought people stopped thinking like this after 2008/9

Why would they? It's not like it stopped in 2008. If you bought at the _peak_ in 2007 and held, in pretty much every area in the UK you're currently _way_ up, particularly if you leveraged yourself.

> When people buy a house and sell for more, they don't include property tax, mortgage interest costs, maintenance costs in their mental calc of profit. Sometimes they include renovations costs, sometimes not.

And people who make this argument often fail to consider the alternative costs, e.g.renting (which here in the UK is likely to be ~30% greater than the cost of mortgage interested to cover affordability checks), and leverage. You know what beats a 10% return on a 20k investment? A 100% return annually on a 20k investment.

For a £200k property in the UK, you could buy it in 2017 with a 20k downpayment, ~£1000 in fees, on a mortgage with 2% interest rates, and it would _very_ likely be worth £240+k right now even without any renevation work.

> They also don't factor in their next house they buy is inflated too.

You're assuming that people are selling to buy bigger houses, or that the rises are spread equally across all pricing bands. If you take my parents as an example, they bought a family home in late 80s/early 90s, sat on it for 30 years, and then downsized to a smaller home. The "inflation" of their house was far more than the inflation of the house they moved into. Also, the ceilings are loosely capped with earnings (since 2008 here at least) - stress tests for lending mean that in practice for the last few years, banks have been lending a maximum of 4.5-5.5x of borrowers income, so the cap is loosely set based on that.

[bumby]

I never quite understood this, as housing is generally a market you can’t exit. So what’s the long term investment goal, to buy big now and downsize later for a profit?

[maccard]

Or equity release, but yes. Downsize/release equity for a sizable profit, and don't have to continue to pay market rents to continue living.