The low-income and the working class make up the majority of the society and the world. If they had the kind of money and financing options to dish out that much money to buy and/or flip houses, at that very moment, housing prices will be super low as a flood of supplies will flood the market and money will be worth a lot less because everyone now somehow have money. I’m not talking about a primary residence which yields a lot of tax benefits when owning. I’m talking about investment properties and/or flipping houses. The whole system works the way it works now because only a selected few are wealthy enough to do this. Even if a regular person can take out large loans to get financing for a few houses for long-term investment or flipping, one wrong move or one unfortuitous event will derail all of it. Buying houses and maintaining houses including its land cost money to maintain. Plus all you need is one bad renter to make you think twice about renting. The thing regarding real estate deals is you typically need a large sum of starting capital to get thing moving in this business. All the cycles in real estate can be long and cumbersome.
The cyclical nature of real estate means cash flow is king. If you are not able to be sufficient in cash flow, this is probably not the business for you especially you can’t dedicate at least a decade working in this business. When people realize how much property tax they have to pay just to own a property even if they don’t live there, all the potential maintenance costs, mortgage interests, government mandated property upkeep costs, potential decrease in property value, opportunity cost just on the time value of money tied up in down payments and all the energy they have to exert into the well-being of the property, they might think it’s the best investment for them. As for flipping houses, I doubt someone who just started out could do this as most of the time cash is needed to buy the property outright. Plus who you think will be responsible to fix the properties? You think renting out numerous rooms do not take much effort? What about dealing with unfriendly neighbors or a changing neighborhood? How about dealing with the HOA?
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Here is what I wrote about this and similar topic(s) previously:
“When you own a home and have a mortgage most of the cash flow you get as a common person go to the mortgage with little to invest into anything else. Sure you can rent our rooms or the whole house but regardless you will have maintenance cost to home ownership and a lot of other cost like your time and standard of living. The housing market also have these cycles and is highly linked to the economy, neighborhood well-being, interest rates and treasury. I just think you should only buy a house for non-money reasons as there are much better investments that such up less cash. Real estate is more of a heirloom thing for the mega rich not really how the common person get mega rich. If you think fixing up TLC houses will make you rich because you are a handyman, you may need to think twice because repairing is only a small part of the business. This business requires knowing people and being a people person, lead generation, cash flow financing management, knowing the law and regulations and a very calculating business sense. Most people are mistaken when they say buying is cheaper than renting. Without wasting all of our times with item by item calculations, I will just say most couples do not need four bed rooms and 2,000 square feet and front and back yards to live comfortably. If you are single or in a relationship and do not have kid(s), depending where you are, likely you can get a room for less than $1,000 USD.
Owning a house include a lot of additional costs renting do not have such as property tax, mortgage interest, trash fees, mowing lawn fees, repair fees and much higher utility fees. Put it this way, a $300K USD mortgage for 30 years at 6% will cost about over $300K in interest alone in addition to the principal. All the closing cost plus the loan origination fee is probably at least a few thousand extra. Property tax for a $500K house at 2% is about $10K a year. Some people will argue that this amount is actually an investment into the local system that spurs additional investments into the local economy in term increase housing value. There are also special assessments. The average historical house price is about 4.5% compounded in the US and even more recent appreciate rates which are significantly lower than this which is significantly lower than the average compound return of US stock market at 10%. Yes, there are tax exclusion benefits (250K and 500K on profit exclusion for single and jointly tax filers respectively when you sell your primary residence), however, when you figure the intangible and tangible net benefits versus 401(k) (even considering SDIRA, Solo 401K or borrowing/withdrawal from 401(k)), I think overall is just not worth it. I mean if you significant other pressure you to buy a house even though you don’t want one because you think rationally and not emotionally, perhaps you should reconsider your life’s choices. Plus tying people down with more sink cost and increase their switching cost are mostly tactics used by those who are trying to depose of depreciating asset which you know I for sure won’t elaborate on.
I think this generation of people have made a different life choice with increasingly more DINKing, staying single and prenups. You got to learn that anything unpopular is typically due to vested interested preventing it from being popular. Over time, the proof is in the pudding. As long as you don’t feel embarrassed by your own decision making, the clown is the OPP. Being a permanent contrarian will always yield a higher return because all higher returns are made by those who venture into something that no one else is doing that yield huge margins and set them apart. Of course to be a permanent contrarian you have to constantly adapt to changes. Though I consider myself as a third wave vanguard permanent contrarian who contra others actions just before a new industrial revolution. This lowers my cost of contrasting without spending on R&D while seeing the clinical trials of others and study the results. All great revolutionaries rode on the backs of the pioneers. I’m the permanent contrarian equivalent of buying the house just at the edge of Beverly Hills near South Central and Skid Row right after I hear the word regentrification, NIMBY and zoning change but just before everyone else hear those words and can process those words into information and taking investment actions.”