How would you make money ?

[Concillian]

The best approach in the US at least is to go ahead and use the banks money, but size your loan such that your payment is extremely comfortable.  Then, I paid double my loan payments, and I made 13 payments per year.  That way I was able to pay off my 20 year loan in a much shorter period, and minimized the interest that I paid the bank. 

Houses clearly cost less as a proportion of income in Minnesota than in California. The house I bought ~6 months ago had a cost of about 6 times my gross salary, and this was the bottom of the barrel for a house you could actually move into without doing major repairs. 13 double payment a year on a 20 year loan?!? :blink:

But real estate is what my parents did, and the path I am following.

They bought their first house, lived in it like 5 years, then moved and rented out the old one. Then 20 years later they did it again. Now the income from the other two (paid off) houses pay more than the payment on the third, so they will be able to pay that one off in less than 10 years. The rental income from the other two, coupled with retirement savings, has lead them to a very comfortable retirement.

Oddly enough, paying down your mortgage (at least in the US where we get a tax break on interest from a primary residence) is not always a wise financial decision given the low rates on home loans and the tax break on interest. In my parent's case, they locked in a 30 year loan that was about 5%. Then inflation set in in the late 70s/early 80s. Bank accounts were making double digit interest rates. So by saving money that was not used in paying down their loan, they were able to lock in a long term CD at some ridiculous amount, like 15% or something. Given that the actual out of pocket of the 5% interest is closer to an actual of 3-4% after tax benefit, they were way ahead by NOT paying down their loan.

Only problem I'm having with following that plan is that when they bought their first house, the purchase price was about equal to my father's gross yearly salary.

But when in a situation where I had a large sum of money available (from stock options at work) I bought a house. Rarely is a house a poor investment. Even if it doesn't appreciate, when you finally pay it off, your living expenses go WAY WAY down.