James Altucher Is Right, Retirees Shouldn't Own A Home

by: Roger Nusbaum

Summary

Could James Altucher's unusual ideas about home ownership help you?

It is good to read ideas from contrarian thinkers.

The manner in which people will retire must change as a financial reality.

Actually, I don’t know if he is right but he may have a point. If you are unfamiliar with James, he is an investor-turned-investment-writer-turned-lifestyle-guru-turned social media star. James and I overlapped and if I am remembering right, had a little bit of interaction at TheStreet.com (both alumni of the site). James was also kind enough to mention my blog in one of his earlier books. Our paths cross every so often on social media, he seems to like a lot of my pictures on Instagram as an example.

The tone of James’ writing is to take positions on issues that are very contrarian like not going to college, quitting your job today and not buying a house. He also doesn’t believe in renting, he stays in some combination of Airbnb (Private:AIRB), hotels and maybe with friends too. He explains his reasoning very articulately. The things he writes about in the outlandish idea category are not for me, but I believe there is tremendous value in reading someone with very different ideas from your own; you either learn to think about your beliefs differently or they can solidify your beliefs.

Last week we went on a road trip to New Mexico (we live in Northern Arizona) and as is often the case when we travel we stayed at Airbnbs. We spent one night in a tiny town near Gallup that cost $99 plus a $25 cleaning fee and three nights in Santa Fe for $108 per night plus a $50 cleaning fee.

While sitting in the husband zone of some store my wife was looking through it occurred to me that James has a point with how he lives, not necessarily the solution but an interesting point. Staying in an Airbnb you don’t pay for utilities and you don’t fix anything. How much do you spend per day on your house? mortgage, taxes, utilities, repairs? There will be circumstances where the numbers of transitioning from an expensive city mortgage to smaller/cheaper Airbnb cities could make economic sense. Business Insider reports the average mortgage payment in San Francisco is $3600 and then add on everything else compared to $109/night in Santa Fe.

I don’t read everything James writes so I don’t know if he puts it in these terms, but his idea makes it much easier to figure out a daily allowance; $109 for an Airbnb, $30 for food, $3 for a cell phone, $X for health insurance, $7 for gas for your car and $2 for insurance as examples.

What does that add up to and yes, I realize the list is a simplification but house expenses are off the table in this scenario. You could spend that $200 (or whatever) per day until your money runs out and that will work for some people; factor in Social Security which averages about $1200 per month or $2400 when each partner has their own benefit which works out to $80 per day or maybe 40% of the approximately $200 which makes any nest egg last longer. Next, layer in how much you might be able to earn in a day net of taxes or any other deductions. A part-time income of $15,000 (so no hit to Social Security for earning too much) would be about $40 per day, now has a drawdown from the portfolio of $80. Someone earning a full-time income can probably easily cover the $200 daily nut.

It is interesting because it is such a foreign way of thinking, too foreign for me but could make some peoples’ lives easier including James’.

I write about these off the wall ideas, some more off the wall than others, because aside from being fun and interesting, the manner in which people will retire must change as a financial reality.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: To the extent that this content includes references to securities, those references do not constitute an offer or solicitation to buy, sell or hold such security. AdvisorShares is a sponsor of actively managed exchange-traded funds (ETFs) and holds positions in all of its ETFs. This document should not be considered investment advice and the information contain within should not be relied upon in assessing whether or not to invest in any products mentioned. Investment in securities carries a high degree of risk which may result in investors losing all of their invested capital. Please keep in mind that a company’s past financial performance, including the performance of its share price, does notguarantee future results. To learn more about the risks with actively managed ETFs visit our website AdvisorShares.com. AdvisorShares is an SEC registered RIA, which advises to actively managed exchange traded funds (Active ETFs). The article has been written by Roger Nusbaum, AdvisorShares ETF Strategist. We are not receiving compensation for this article, and have no business relationship with any companwhose stock is mentioned in this article.

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