MMM has at least two rental properties and is a phoney.
He can teach his kid to be a rentier by borrowing long and taking advantage of the separation between the value of labour vs assets when fiat money is over-issued by private banks.
And how to run a web-site about being frugal whilst deriving rental income from three families who cannot save because they are busy working hard to keep MMM pumping out half-truths on the internet.
Can we all take up three times as many houses as we need and live off the rental income siphoned off from the labour of others? No.
"MMM can teach his kid how to make money on investments in real estate and make profits from renting his owned (financed) assets.
He can also teach his kid how to share what he's learned about not over-spending on depreciating assets."
Then there's something in there about people who choose to rent being taken advantage of by people who choose to be landlords, but I don't understand it well enough to take your meaning.
I think you're being a bit unfair. I have no doubt he is pretty frugal. That said, I'm not a huge fan of his schtick but recognize that there are people who probably benefit from the over-the-top exhortations to avoid spending money. A lot of people fritter away a lot on things that they don't need and may not even especially enjoy. Which has been my main takeaway on those occasions when I've skimmed his site. Whatever works.
The frugal stuff is rubbish. He can be frugal because the main outgoing for any family is rent. He's taking in two rents. The rest is just a cheap show.
The reason why we are all suffering is because of rentiers. It's not because we have slightly expensive data plans on our phone. Rentiers are using this to explain away the real problem. This guy is along for the ride for the web-clicks.
Go on his site and ask a question that gives the info that he has two rental properties and see if he lets it through moderation. Be polite as you can. He won't. MMM knows where it's at.
It's "renters" BTW. [EDIT: Scratch the previous. I am, of course, wrong about the renters correction. Misread.] I'm not sure what he did to get your back up so much or when being a landlord became such a terrible evil. Also, "we" are not suffering. Yes he has a schtick and probably a pretty profitable one. His general advice is probably good for some but mostly isn't my thing because I like restaurants and traveling and that sort of thing. And I certainly don't care enough to go to his site and ask questions.
Ok you've really shown you have zero background in economics with that one. It's "rentiers", I can spell renters fine but it makes zero sense in the context above. Go read.
> when being a landlord became such a terrible evil.
It's not being evil per se, but being an economic leech of sorts. The only reason people need to rent is because of the requirements to own (down payments, emergency funds to cover your mortgage in tough times so you don't lose your equity). Its an arbitrage between someone on financially sound footing versus someone not so.
Disclaimer: My family has a landlord or two in it. I make my disdain for what they do known. If I had Facebook money, I'd create a B Corp to provide housing to people that gave them a non-transferable equity stake, co-op style. A small amount would be "off the top" for management of the organization and for upkeep of the properties. I would make the org fully transparent ("Buffer Style") and ruthlessly accountable.
> The only reason people need to rent is because of the requirements to own (down payments, emergency funds to cover your mortgage in tough times so you don't lose your equity)
So, in other words, the landlord is selling a service? In exchange for a monthly fee, you don't have to do any of the crap (down payments, mortgages, property taxes, maintenance) it takes to own a home?
Do you view farmers the same way? If it weren't for the fact that you need to eat to survive, you wouldn't have to buy their product! And what do they do anyway? Just plant some seeds in the ground and wait for them to grow! Those damn leeches!
I didn't quite get your comment. Did you have a problem that I'm trying to avoid using labor at all costs to achieve my goals? I don't think its wrong to give everyone what they need to survive without them needing to work if I don't need labor to do it. Perhaps you could enlighten me?
Not even having a lot of money. Their service is having a credit score high enough to obtain low-rate mortgages, which they then arbitrage against "market rate rent".
People complain we shouldn't subsidize people buying homes who can't afford them. Then why the f____ are we subsidizing landlords instead?
>>It's not being evil per se, but being an economic leech of sorts.
I'm not sure from where this kind of thinking arises. Any investment is supposed to be a vehicle where your money increases without you having to directly work for it.
I'm not sure you can argue MMM is trying to hide his rental situation given that he has published numerous blog posts discussing it in depth starting in 2011:
His whole message of frugality makes zero sense in the wider context of his behaviour. He's giving advice to everyone but if everyone behaved as he did the world would end because we can't have a world where every family derives a significant proportion of it's income from two other families for zero value added.
Of course you can't have a world where everyone becomes a landlord, but that doesn't mean this is a completely invalid form of income generation for some people (that's the benefit of being able to take a nuanced view of advice from others).
It seems like you are being reductive and misleading in characterising his position - First you argue he won't dare talk about rental income, then when examples emerge of him doing so you say that he is exhorting everyone to do it!
MMM talks at length about other sources of income generation too, but let's just ignore those:
As for frugality this may not be a path to financial security for many but it sure is a refreshing departure from the "more, more, more" of modern life.
No the more, more, more is from the rentier. They set the rent not at the cost to deliver but at the cost the market will bear. Which is the money left over after food/fuel which puts everyone living hand to mouth with no money in their savings accounts.
God he does p2p lending also. Yuk.
However let's get this straight, there are plenty worse than him out there but I do hate to see his holier-than-tho "be frugal" when in fact he's a rentier who can be "frugal" because he's a rentier.
Except that it's not rubbish. Most people do spend large amounts of their paycheck on things they don't need. Just because he makes good money doesn't mean his concepts of saving a large percentage of what you earn aren't sound. They apply to all income levels, even more so for the lower ones.
Following his advice and sticking to a budget has gotten me from saving nothing every month to saving at least half of my take home on the same salary. Most people spend their money without thinking and then look for external sources to blame when they run out.
He's not playing it straight. He's deriving income as a rentier but saying we can all live like him. We can't because rentier income by definition is income with zero value added.
These guys hiding in the grey area are very damaging. Maybe you were a total fool with your money, but for most people they are on the breadline not because houses are expensive to construct, not because fuel is expensive but because they have to pay a significant portion of their labour to rentiers.
People like this put the blame on the individual. No - it rests with the rentier.
You are starting from the inexplicable premise that these properties he rents out were somehow ill-gotten, and not the direct consequence of him saving significant amounts of his income while he worked a totally normal job and investing them intelligently in property.
And of course landlords (since you're obviously using rentier as a pejorative) DO provide a valuable service: housing to people who either value the flexibility of renting or don't have the finances to buy housing where they live.
Your apparent disagreement with the entire system of rental property around the world is certainly principled, but singling out Mr. Money Mustache as some kind of hypocrite for earning money off his investments is absurd on its face. Are you also opposed to people buying dividend-issuing stocks?
> Most people do spend large amounts of their paycheck on things they don't need.
Maybe. Or maybe they're spending their paycheck on things that they do need because they have to work for a living, they can't live by renting out their assets like MMM can. Example from the other branch: MMM can say "buy a bike instead of a new car" because he had the privilege of putting his "job" (rental properties) as close as he liked to his house. Most people don't have that option.
Yes, we all have bills that need to be paid. But many people (especially those who aren't making great money) continually and stupidly buy stuff they don't need, not even realizing they can't afford it. You make 35k a year? Then you really shouldn't be buying a brand new iPhone with a large data plan, or a new car with monthly payments that eat away at your already limited income. Or maybe instead of going out for lunch everyday for work, you should pack something. People love to complain about not having money without taking any responsibility for their spending habits.
Also, if you've read more of his stuff you'd know he worked for a decade before he retired, saving up a significant portion of his income by staying frugal. He didn't just magically have two houses to rent out.
I'm not sure where the insane hatred towards renting out a property is coming from. A lot of the time the landlord doesn't actually make much money off of it. Even if the rent covers their mortgage payment (which it often doesn't), if something serious breaks or needs to be repaired, they're on the hook for that and may end up losing money on it that year.
I'm really not sure how this thread turned into a honeypot for "Kill the landlord" types. Especially given how things turned out the last time public policy decided to make it relatively easy to get mortgages even for people who were a bit shaky on being able to make regular payments and cover upkeep.
Again this is totally the wrong end of the stick. We have loose credit, that's what rentiers love. Credit is a claim on your labour and they can issue it with zero effort.
Sub-prime hurt the poor, since 2008 with QE we've seen the gap widen as more banker credit is created and flows into land prices.
You're right that I don't know MMMs specifics. But I think at this stage I'm justified in being skeptical of anyone who claims to be self-made - far too many people gloss over their inherited advantages. It's possible he's one of the exceptions.
No doubt much of his advice is correct, and all of it well-intended. But one has to be careful about advice from people in very different circumstances. They can get it disasterously wrong.
Landlords absolutely do make large, unearned amounts of money. Think about it for a minute: MMM is a finance expert, why would he put his money there if it didn't generate the best return. The idle rich (rentiers) in general are hated, but landlords in particular make additional money through sharp practices. The profession inherently involves (legal) tax avoidance, because a landlord makes a lot of their money through appreciation of their properties which is not taxed, and their rental income is usually taxed at a lower rate than ordinary earnings. Finally, while it's unfair to pin this on MMM, many landlords take advantage (wittingly or not) of their tenants' ignorance of their rights.
Finally, when a rich person says "it's easy to make money", it's a very small step from there to "the reason I have more money than you is that I'm smarter/more self-controlled/etc." Which is often a lie; often inherited privilege has a much bigger impact than personal qualities.
We're all embedded in an economic infrastructure, that's unavoidable. Its not black/white. Everything from the internet to traffic lights helps speed commerce, and all of us inherit benefits from society.
So circumstances are everything, that part rings true. We're born into a good bit of that, and trained into the rest. From accent, to attitudes about race and religion we spend our lives accumulating advantages and albatrosses.
> their rental income is usually taxed at a lower rate than ordinary earnings.
Not in the US. Rental income is income. I think you may be referring to deductions, which exist, but are not nearly as advantageous as taxing rental income at a lower rate outright.
I don't see why it's an issue that he owns two rental properties. Of course he has investments of one kind or another, that's his shtick. Save money, but income-yielding investments, retire. Whether you buy properties or live off the dividends of your XOM shares (or more sensibly, do both) is immaterial.
If your point is that it doesn't scale because its literally impossible for everyone to have two investment properties -- well, yeah. Frugality doesn't scale well. If everyone else stopped buying shit they don't need and working more than they needed to, production would go down and yields of all investments would suffer. So it's not actually a good idea to persuade everyone to quit buying shit they don't need, but it's advantageous for every individual to do so.
How does owning rental properties invalidate his message of "avoid rampant, unnecessary consumerism"? Certainly, not everyone can derive their retirement income from rentals (the numbers don't work out). But lucky for you: There are other forms of investment.
BTW: I currently rent. It's the financially prudent thing to do in my situation, and I certainly don't begrudge my landlords for it -- they're the ones locked into an illiquid, overvalued asset.
Because rampant consumerism isn't the issue. Most families are responsible with their money. Their greatest expense? Rent/mortgage which is pushed up by:
1. bankers issuing insane amounts of debt that out-pace wages
2. speculators borrowing from said banks to "invest" in pushing up living costs for families (ie people like MMM)
The media loves to portray people as feckless idiots but the real problem is economic rent extraction by people who are adding zero value to society. That is the rentier - they generate no wealth merely appropriate it.
Sorry to break the bad news to you, but rampant consumerism actually is the issue.
>>Most families are responsible with their money.
No, in fact their spending decision don't even remotely reflect any sense of responsibility.
>>Their greatest expense?
If you think, smaller delta spending doesn't matter. Alas, I'm sorry that's the whole point behind indulging into consumerism without even realizing you are.
>>Rent/mortgage which is pushed up by
Demands.
>>bankers issuing insane amounts of debt that out-pace wages
You always have the option to move to the city outskirts, where houses are affordable. It will take more effort to commute and all, but cheap has to count for something. And you could save money to borrow less.
>>real problem is economic rent extraction by people who are adding zero value to society.
Houses don't get build out of fairies dropping suitcases full of money outside people's houses. They earn it, work for it. And make investments.
You are all welcome to invest and grow. But just because you don't want to, it doesn't make others greedy and evil.
Housing money is not earned. It's made out of nothing by banks and then used to put a claim against a significant portion of a person's salary. As lending standards get looser prices go up.
Land speculators and money men capture all productivity growth.
I'm not sure what you are talking about. Price of a house is not some thing banks get to decide, at least not directly. They only get they to decide the amount of interest they should collect to stay profitable after lending you money that you borrow to purchase a house.
Price of a house apart from the raw materials depends on various thing like supply-demand factors. But that is the case with any investment.
If you are having problems with investments in general where people can get rich by starting small but growing non-linear with time, then you are literally ruled out to ever be rich.
If you work at say Target 40 hours a week, squeak in the occasional overtime and work on every holiday you take home about 12-15k a year after taxes that's about half of what MMM gets from rent.
MMM hasn't come within ten grand of frugality in his life.
It doesn't strictly invalidate his message but it's a grain of salt that should not be forgotten.
Yes you get it. And guess what? When they put the minimum wage up the rentiers will all put the rent up. All productivity gains are captured by the landlord in a system of land enclosure.
Land value tax now. Do away with income tax and let people keep the value they add.
I get that he earns a lot from rent. But I still don't understand the animosity. Would you be equally up in arms if he just invested in municipal bonds -- the bonds that pay for your parks, roads, fire stations, police upgrades, and schools? There are reasonable tax-free bond funds (eg. PMF) that pay >6% annually.
I've read most of his posts. He harps on things like biking instead of buying a new car. Or "why spend $150/mo on a cellphone bill when you can use Google Fi for half that?" Using that latter example, that's a difference of $900/yr -- or 8% of your Target family's net annual income; enough to make a downpayment after just a few years.
To be honest: It seems like y'all are taking away the wrong message. The problems you see are legit, but directing your animosity at a guy providing free, online insights and advise seems misguided. YMMV.
The animosity isn't specifically at MMM. People who think "have you tried spending less" is insight, thats what who we hate. Believe me poor people are way ahead of you on the spending less money idea.
That advice isn't aimed at people who are genuinely poor, it's aimed at middle class whiners who earn middle-class money and still complain that they "can't get ahead" and "will never be able to retire".
MMM has never claimed to be frugal -- indeed, he likes to talk about the "extravagance" of his $25K pa spend for a family of four.
poor people are way ahead of you on the spending less money idea
not always true.. I know quite a few who still smoke, own a car even if they don't really need it, buy the extra expensive, small can of coke, and generally follow convenience over financial planning.
these things do add up. will they help them buy 3 houses and live on the passive income? don't think so, but it definitely would help them pay for their home faster
He can teach his kid to be a rentier by borrowing long and taking advantage of the separation between the value of labour vs assets when fiat money is over-issued by private banks.
And how to run a web-site about being frugal whilst deriving rental income from three families who cannot save because they are busy working hard to keep MMM pumping out half-truths on the internet.
Can we all take up three times as many houses as we need and live off the rental income siphoned off from the labour of others? No.
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