When is it ok to buy a depreciating asset?

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When is it ok to buy a depreciating asset?

David J.
Investor · shawnee oklahoma · Member since 2017 · 194 posts · 148 votes

HI,
I have been a real estate investor for many years now. I have been very disciplined with my investing strategies, making sure to budget, and invest as much as I can. 

I now have about ~ $4M RE portfolio, ~$240K in stocks, and decent monthly cash flow.  I am about 70% leveraged or less.

For years I have been driving an old beat up pontiac that now has 250K miles on it. (still runs great)

I am now in my 40's and for some reason getting an itch to buy a nice car that I totally do NOT need. Even though it's 5+ years old It most certainly would continue to depreciate and goes against any advice I would give to someone else. I don't know how to ditch the urge. It seems to be growing stronger with each passing day.

When is it ok to buy something stupid?

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Greg ScottPro Member
Rental Property Investor · SE Michigan · Member since 2014 · 4k+ posts · 6k+ votes
5y

Congrats on your success.  Seems to me there's no point in building wealth if you don't do something with it.  Live a little.  Give to charity.  Help someone out. Buy a car.

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  • Greg ScottPro Member
    Rental Property Investor · SE Michigan · Member since 2014 · 4k+ posts · 6k+ votes
    5y

    Congrats on your success.  Seems to me there's no point in building wealth if you don't do something with it.  Live a little.  Give to charity.  Help someone out. Buy a car.

    15Reply
  • David J.
    OP
    Investor · shawnee oklahoma · Member since 2017 · 194 posts · 148 votes
    5y
    Originally posted by @Greg Scott:

    Congrats on your success.  Seems to me there's no point in building wealth if you don't do something with it.  Live a little.  Give to charity.  Help someone out. Buy a car.


    I appreciate the advice. For whatever it's worth I should note that over the past few years there are several charities I am actively involved with and make recurring contributions toward. Those I have no regrets over because I know they are going to a good cause.

    It's the spending on myself I struggle with. I've really never done it because my mind is so programmed in one specific way, that splurging feels like an utter waste. Opportunity costs soar through my mind. The investor mindset once locked in is a beast to tackle.

     

    2Reply
  • Jaron WallingPro Member
    Rental Property Investor · Indianapolis, IN · Member since 2018 · 4k+ posts · 4k+ votes
    5y

    @David J. For you it's probably been a good time to buy something "stupid" for years. You have a good mindset about investing, great assets, and that's something to be proud of. I'd love to be in your shoes by the time I'm 40's.

    Are you into classic cars? It's a great alternative purchase that doesn't usually go down in value. You could also give it to family. You can make more connections with investors and collectors attending car shows. It's a wonderful community. I'm a avid car guy my self. As I grow older I'm constantly trying to mingle with successful people. You'll find a lot of them at events like that. Cheers. 

    6Reply
  • Wendy PattonBusiness Member
    Real Estate Consultant · Clarkston, MI · Member since 2009 · 864 posts · 350 votes
    5y

    Rewards must come with hard work.  I drove a pretty cheap car until about 8 years ago - in my 40s.  Now I drive nice cars but I do still buy them about 2 years old.   

    Michigan Real Estate Investors540 Reviews
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    3Reply
  • Terrell Garren
    Rental Property Investor · Concord, NC · Member since 2016 · 1k+ posts · 3k+ votes
    5y

    You deserve to enjoy life. I buy work clothes at Goodwill, have bought two used trucks in 35 years, have bought tires off Craig's List, do my own PM, etc.  But I have a Ducati and Harley in the garage. A man has to have some pleasures.  Financial freedom is great but it is not the endgame.  

    4Reply
  • Jon KellyPro Member
    Investor · Bethlehem, PA · Member since 2016 · 929 posts · 951 votes
    5y

    @David J. whenever you'll feel you won't regret the decision. What do you value more, buying a property with $200/mo in cashflow or a new car? Maybe buy both 

    2Reply
  • Marcus Auerbach
    Investor · Milwaukee - Mequon, WI · Member since 2010 · 5k+ posts · 7k+ votes
    5y

    Money is good for the good it can do. You could get hit by the bus tomorrow. Buy a car.

    A good rule of thumb is when you can't buy it twice, you probably can't afford it. But the whole point of making money is to buy something for it. Spending is also good for the economy! 

    Be smart about it, buy something that is a year or two old. Also talk to your CPA. My daily driver is a Audi Q8, I bought it a year old used and I paid cash for it, it's also a tax write off and it makes me happy (and safe, thanks assistant systems) every time I drive it. I have a fun car for the weekend and nice days. My wife drives an Audi, she also bought it a year old and it came with zero percent financing for 36, so she opted for that and paid it off. It still looks new, so she wants to keep it a few years longer.

    When you are in your 40's you are in the second half of your life. If not now, when?

    4Reply
  • Account Closed
    Investor · Singapore · Member since 2013 · 1k+ posts · 3k+ votes
    5y

    Take a step back and ask the most important question in investing (and life). WHY? Why did you invest? Why did you accumulate what amounts to just a set of numbers in some computer or spreadsheet? What is the purpose of wealth? To me the answer is freedom and security. Having all my time to do what I want. A lot of what I want involves spending money. If I didn't spend it the whole thing would have been utterly pointless. Im not saying an expensive car is a good or bad idea. But if its something YOU want then go ahead and get it. You know you can afford it. Its not a depreciating asset. Its not an asset of any kind. Its a lifestyle cost like food and travel or anything else.

    The only truly depreciating asset you have is time! So making the most of your time is the most important thing you can do.

    7Reply
  • Damaso Bautista
    Rental Property Investor · Hawthorne, CA · Member since 2018 · 655 posts · 900 votes
    5y

    @David J.

    I always look at spending money in this light.  If it doesn't make me go bankrupt or hinder my ability to provide a warm safe home for my family and to put food on the table.  I have no problems spending money.  As long as it is something I want to spend it on. 

    You look like you have done well for yourself.  My advice buy your new car.  It will be just like everything else in life.  

    It looks great from afar but once you have it in hour hands it isn't as spectacular as you imagined.  

    Good luck!!!

    3Reply
  • Joe S.Pro Member
    Investor · San Antonio · Member since 2020 · 3k+ posts · 3k+ votes
    5y

    At this stage in your investing if your net worth and cash flow is what you say it is having a nicer car could be a good move for you From an emotional standpoint.

    1Reply
  • Joe S.Pro Member
    Investor · San Antonio · Member since 2020 · 3k+ posts · 3k+ votes
    5y

    looks great from afar but once you have it in hour hands it isn't as spectacular as you imagined.

    @Damaso Bautista That is a very true statement sir. 

    1Reply
  • Jonathan R McLaughlin
    Rental Property Investor · Boston, Massachusetts (MA) · Member since 2016 · 2k+ posts · 2k+ votes
    5y

    @David J. you rock, and you have the satisfaction of having spent money on others before yourself. Drive it proudly.

    2Reply
  • Henry ClarkPro Member
    Developer · Member since 2020 · 4k+ posts · 4k+ votes
    5y

    Go rent a similar car for a week or month.  Don't worry about the car itself, but see how you feel or appreciate it.  Have a Toyota Corolla with 360,000 miles, with dents on three sides, for my day car.  We rent a nice vehicle whenever we have a trip.  Then decide to buy or not.

    I could say don't do it, but hey.  My son and I rebuilt my wife's family's original farm truck.  It mainly sits.  Cost a lot to rebuild.  But its a lot of fun and worth it.

    4Reply
  • Jeff S.
    Specialist · Portland, OR · Member since 2010 · 3k+ posts · 1k+ votes
    5y

    @David J.I understand where you are coming from. My '82 Ford work van runs great and young people think it is cool. We were driving on a California freeway in an '89 Acura with 120k on it when it broke down. We were in our 60's. We were alongside the freeway for a couple of hours. When I got home went and bought a new 2011 Camry (reliable) and still have it. You can regret not enjoying more. I have an old Pontiac too. It is a '65 GTO that I just spent 16k on a new paint job. It was worth every penny.

    1Reply
  • Kseniia Churiumova
    Member since 2021 · 1 post · 0 votes
    5y

    I've read heard / read somewhere recently: you can add "Blow money" field to your budget plan and allocate the amount you can spend on some extra nice things you want. It might be easier for a person who has issues / feels guilty with spending money on things he / she doesn't really need.

    0Reply
  • Dennis Wayne
    Member since 2020 · 339 posts · 356 votes
    5y

    I’m strictly into asset collection and being Frugal in my personal life . However I’m aggressive in building wealth in my business ventures , we aren’t here forever and your money is just dirty pieces of green paper till it’s actually used .. normally this would go against everything I stand for but based on the numbers your telling us ...Just buy the darn car dude !

    1Reply
  • John Clark
    Member since 2018 · 1k+ posts · 1k+ votes
    5y

    Let's look at the data, shall we? You said:

    "For years I have been driving an old beat up pontiac that now has 250K miles on it. . .  Even though it's 5+ years old . . . . "

    So you're putting 40,000 or 50,000 miles a year on that car, right? Are these highway miles? You need a reliable car in any event. What cars are out there that can take that kind of wear and tear, for how much money?

    There's then the value of your time. City breakdowns can get you serviced fast, so a breakdown won't cost your time. Highway? You could be waiting hours for a tow and a look-see, then the guy has to get parts.

    Now you can convince yourself that you "need" a nice, reliable, car.  Son, go buy that two year old, low mileage Lexus.

    You're welcome.

    1Reply
  • Jacob Bohrer
    Rental Property Investor · Canton, OH · Member since 2020 · 58 posts · 22 votes
    5y

    @Jason J.

    My vote is for a Tesla model 3.

    1Reply
  • Account Closed
    Investor · Singapore · Member since 2013 · 1k+ posts · 3k+ votes
    5y
    Originally posted by @Damaso Bautista:

    @David J.

    You look like you have done well for yourself.  My advice buy your new car.  It will be just like everything else in life.  

    It looks great from afar but once you have it in hour hands it isn't as spectacular as you imagined.  

    Good luck!!!

    I don't agree..I bought my first luxury car in 2010, a BMW 535i. I loved that car and enjoyed every moment of driving it. I had it until last week when it got into an accident and the insurance company decided to total it. I wish they would have fixed it (body damage only) but since it was over 10 years old they decided not to. So some purchases can give many years of satisfaction..

    0Reply
  • Valerie Poole
    Member since 2021 · 1 post · 0 votes
    5y

    @Jason J.

    My two cents. You can allow your family to enjoy the wealth you've built when you depart this earth or you can enjoy it while you're still here. What's the point in living if you deny yourself happiness! One thing for sure is you can't take it with you when you go!

    0Reply
  • Ken Naim
    Investor · Lake Worth, FL · Member since 2016 · 233 posts · 140 votes
    5y

    @Jason J. Short answer is when you can afford it. If you can afford 5 of them, you can buy 1 9f them. I bought a Porsche Macan S, a few years back and love driving it every day. Stupid purchase financially but worth it. Paid cash for it with profits from real estate. My net worth was similar to yous at the time

    Money is meant to be spent but only after it is earned.

    0Reply
  • Henry Lazerow
    Real Estate Agent · Chicago, IL · Member since 2017 · 2k+ posts · 2k+ votes
    5y

    I have a corvette and it was worth every penny. Makes day to day errands fun. Be smart though how you buy, I bought lightly used where it already had bulk of depreciation taken by first owner. Never buy a car new where it loses money when you walk off the lot. I also put up cash for over 50% of purchase price as personally not a fan of paying significant interest on depreciating assets. 

    1Reply
  • Account Closed
    Rental Property Investor · Torrance, CA · Member since 2016 · 724 posts · 1k+ votes
    5y

    @Jason J. I’m with @Jaron Walling. Buy a classic! Best of both worlds. Cool car without the depreciation, and they’re super easy to work on if your into that kind of thing.

    1Reply
  • Joe SplitrockPro Member
    Moderator
    Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
    5y

    You came here looking for one of two answers. Pick whichever you were looking for:

    1. Don't waste your money on a car. You are better off to invest and achieve financial independence. That will buy you time which is the only limited resource in life.

    2. You only live once and you earned the right to enjoy your money. Don't wait until you are old or dead. What is the purpose of having money if you can't buy yourself luxury.

    2Reply
  • Account Closed
    Rental Property Investor · San Antonio, TX · Member since 2021 · 15 posts · 7 votes
    5y

    @Jason J.

    One thing you could consider is to buy a car that’s already seen most of its depreciation. Many cars hit that point in about 3 years. So maybe a 2018 model?

    0Reply
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