WSOP Windfall... What is a boy to do?!?!

[bigbootch]

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Right now I am leading towards buying a house with a very small mortgage. That way while my money may not grow exponentially in the house if poker went downhill I would have a hard asset which would be all but paid off, which would be super attractive to me. That way no matter what I really do after poker I wouldn't have to worry about huge living costs, so the decline in revenue wouldn't be such a huge hit to me.


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this, but liquidity is only 1 issue. you need to consider what you could do with your money (say $100k) instead of paying down a mortgage. the historical appreciation of equities, and even bonds, is much higher than real estate.


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Jurollo, KB4Z's point is a very solid one that you should consider. Yes, an almost-paid-off house is a solid hard asset that you would have if anything went bad. But remember that having 200k in a money market is no less solid, that's your money that no one can take away and it is earning you 5% (or whatever it may be in a few years) RISK FREE. Ditto for bond index funds, although those are not quite risk free.

Basically, this is the equation you should consider:

A = total EV from renting = Interest (or expected earnings) from the 200k that would not be tied in the house minus your rental payments

B = total EV from owning = Expected returns from the house appreciating minus property taxes minus assessments (or maintenance)

Now you compare A vs B, and see which one you think would be better. Note I'm talking strictly dollar EV right now, I'm not talking about the many personal factors that may come into play that I mentioned earlier.

If you consider that the expected returns from the real estate is historically poor, and that depending on where you live you can expect to pay 2%/year on property taxes and assessments, B is not looking so good.

Anyway, my real point is this: base your decision on the numbers, your own estimates of what you believe A and B are. Do NOT base it on a vague notion like "I don't want any debt" or "I want to own something solid and tangible."