bostonbubble.com

[Boston ITer]

This question is angled with the idea of discerning the attitudes towards ownership esp in and around metro Boston.

The idea here is that you got a bonus of $500K, perhaps you shorted the Euro using a highly margined position during the past weeks, or something of that sort, like you made a mint when your company divested a division or two.

For me, with half a million of pure cash, I'd clearly sit on it and find ways of growing it in forex, futures, or some other business. I'm also not convinced that the housing decline is over and won't put in a bid for a place in Burlington VT for a few more years.

[CL]

Boston ITer - contrary to popular opinion in this blog, I actually think if you have 500K extra cash, it's much better to buy a house then to put it into forex or stocks or future. Trust me, it's very, very hard to make money in those markets (actually I should say it's very very easy to lose big money in those markets). For most people, investing money in forex/futures/stocks is very similar to sports gambling (gambling thinking they know better than peers when they do not really have a clue) In housing, at least you are buying a real asset that have some intrinsic value and a established long term market. Without leverage, you will not be forced to sell. Which means worst case you can hold the asset forever and just get the (rent - tax&maintenance) yield. Long term you are talking about 2-3% yield, not a lot better than Treasury bond/GDP growth and a lot of hassle for the option of capital appreciation (or depreciation depending on your view).

If you already have a bright idea/patent, and have time to devote into it, then use the cash to finance it maybe a better way to spend the cash. That's really a career decision than an investment decision though. I think if you really believe you have a bright idea, you should not wait for that extra 500K to fall onto your lap. If you are not motivated to take risk/borrow for that new business, the idea probably is not that good in the first place.

If I have 500K, I will just stuff it into a diversified 401K and 529 Savings Plan and forget about it.

[admin]

I agree with CL - a house would be preferable to Forex, futures, and most investments, but not to low risk investments.

How about a follow up question: how much would you need to "win" in order to buy a house in the Boston area right now? $500K? $50K? $5M? $8K was apparently the answer for a lot of people recently (actually, it was just $8K up front, probably with a long term debt burden increased by much more than $8K).

I think that for me, at around $1M (for "winnings" + savings) I very likely would buy as that would be enough to mostly side step the issue of finding an affordable neighborhood. Otherwise, it would be a function of neighborhood prices. I would probably buy now if total cash were greater than or equal to the price of the house + $300K, for houses costing up to around $700K. I do think that there is a substantial risk of further price declines, but I wouldn't care with that size of a buffer.

- admin

[Boston ITer]