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Life is short-enjoy every day. |
#62
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Working with others is a very successful approach in court and most of life. Jeff |
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#64
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In our area, home prices have been going up fast for over 5 years. I'm more thinking it's time to be a seller, not a buyer. So IMHO, I would be very careful what you pay now. Remember, contrary to previous thought for past generation or so, we now know home prices go both ways, not always up like some thought in past.
I've always been a home owner for past 45 years or so, but now believe home ownership may not be that great a deal.....always. When I add in taxes, insurance, and maintenance (and repair and replacement) on my current home, some opportunity costs on dead money in the house, I could pay a lot of rent.....and have my home equity providing income. Young families need/want home to raise their family, so ownership is probably right for them. Investment aspects not top priority. My advice is if you need a home because your family wants to put down some roots, and have a long term place for the family, buy a home. If you're doing it because you think renting is throwing money away, or because you think home ownership is a good investment, well.....be careful. Home bought right do make good investments if you renting them out, but to live in yourself.....be careful. Things have changed since 07-08. Last edited by Ralph; 10-21-2014 at 06:46 AM. |
#65
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07-08 was a culmination of the years that preceded the moment of reckoning. The housing over-supply will get worked out but in some regions it will never come back. And that is the crucial element - location. Over-supply is a very different phenomena in the northeast corridor where the OP is situated than other locales. The northeast will always have a market whereas some regions the over-supply propped up a market that did not or could not exist and therefore from nothing can it ever return from or get back to.
These conversations mean nothing without the context of regional specificity. There is no such thing as a free lunch. Buying into an attractive town or school district has its associate tax burdens. IMO school district attractiveness, and the test scores bragged about, is less a reflection of the quality and competence of K-12 public education as it is a consequence and predominance of underlying socio-economics and educational attainment prevalent via the parents. And integration into the town's social and cultural milieu will have its commensurate life-style issues and concerns. Buying the house is, in the bigger long-term picture, the easiest part. I don't think muddying the waters with scenarios of investment properties has any relevence to what is being discussed here. Nor does timing in the peaks and troughs of the real-estate market applicable for a desirable town in the post-Lehman environment. A house is bought to live in, raise a family or to live a life. It is but one piece of a lifelong accumulation of capital assets. For a regular person it is not an ideal growth vehicle for the amount of capital it ties up and the transaction costs. I'd readily admit I don't know anything about flipping houses. I think it absurd to enter into a house which would be considered a primary residence for the purpose of flipping it. If one is able, keeping your investment life seperate and distinct from your personal life is desired and preferable. |
#66
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I've had some pretty ishty rental situations the past few years, which in my younger days wouldn't have bothered me one bit, but having two small girls, I'm tired of putting up with less than ideal living situations. We have no outdoor space to have a bbq. We can't host the girls birthday parties. Our landlord, while better than he was the month we moved in, can still be a d!ck (asking me to keep my kid from running around the house -- I'm sorry, no, she hasn't learned how to step softly yet -- let alone riding the trainer!!). We moved out of our last place when it was clear the landlord was inept at dealing with the habitual smoking problem (cigs and weed) by the tenants in another unit that were affecting our quality of life.. A house is right for us. We don't want to keep trying our luck with landlords and tenants.. We want our roots to be pretty firm, want our girls to do whatever they please and be free to grow and be kids.. So we're gonna buy a house! Still waiting to hear back. Offer was formally submitted yesterday afternoon.
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bonCourage!cycling |
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Still waiting to hear back. Offer was formally submitted yesterday afternoon.
Awesome! |
#68
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^ Those are the best reasons one might have to doing what you are trying to do.
Take it one step at a time and it will work out in the fullness of time. Build your financial future one brick at a time. And building home equity rather than paying rent is a start. Best of luck. |
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Owning a home is a lifestyle choice, and like most lifestyle choices, it has many costs along the way. The great misconception of the American dream is that home ownership is a magical panacea of wealth creation. How many times have you heard someone say "my parents paid 12 grand for that house 40 years ago, and they just sold it for 200 grand!!!". That's like a 7% annual return before taxes and maintenance, so probably south of 5%. Not bad, but not the windfall that the numbers appear to be on the surface.
As far as renting is concerned, in a market with a decent rental inventory, renting vs. owning should be pretty fairly priced. If you rent, and invest your down payment elsewhere (safely), subtract taxes, insurance, maintenance, market risk, and transaction costs you should come out pretty even with ownership. It feels like you are "paying someone's mortgage for them" but it's not that simple. There aren't really any easy arbitrages in life. Towns with very little rental property can command a rental premium, though. |
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Ain't that the damned truth.
"Honey, I just farted a Meivici." "Huh? You did what?" "Oh nevermind, the HVAC guys were here this afternoon." |
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You are approaching this from the perspective of a real estate investor, not a home owner. An investor should posses a level of expertise (hopefully) that your normal homeowner does not. Most landlords make money via appreciation rather than return on rent, so timing the market is important. If someone started renting a house 3 years ago in my town and invested what would have been the down payment in the S&P, they would have doubled their money. In three years. The equity in the house would be flat at best.
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I am a homeowner too. I bought my house because I wanted to live off a lake, near my family and in a nice neighborhood. It's tripled in value, but that's a coincidence (maybe). You don't need to be an investor to buy a home. No serious landlord I know (and I know over a dozen) make money (other than maybe 10%) via appreciation, other than as a happy coincidence... Which is why some of them buy 2 bedrooms, which I refuse to do. Anyone in this business during hard times asks another landlord "do you have cash flow?" My Father had apartment buildings he designed, built and managed and was concerned with only thing: his return after his expenses. That's what pays the bills, supports hobbies and vacations and funds retirement. If you're not in it for cash flow/return on investment, you can't pay taxes, insurance, repairs, including a new roof, windows or furnace when necessary, or weather the 3 months it takes to evict, turn and re-rent. You're also going to buy bad properties. Flippers make money via appreciation. G-d bless them. Timing has zero to do with it. I buy homes that I can get a $800-950/month return on a $25-35,000 total investment. I don't like big houses and I don't like too small houses. 3 bedrooms, at least 1 1/2 baths. Good roof. Solid mechanicals. Good neighborhood. My houses are generally "paid for" in ~ 3 years. In the last week I turned down 3 nice $30k properties with only $600 rents each. Way too low. Appreciation doesn't pay the bills. I buy properties that will appreciate, but I make money from rent. First of the month. Every month. No matter where I am. I bought a house first week in August and 3 weeks later a tenant wanted to prepay the rent for a year with a cashiers check. Hot damn!!! Tenant asked me if it was easy to be a landlord. I answered "Today it is!". The "appreciation" I am interested in is rental increases. Appreciation will come, but might not be there if I need to sell in an emergency, because of a down turn or tightened credit for buyers. THAT'S why only being interested in appreciation (unless you are doing short term flips) is foolish. I had a tenant who didn't want to sign a lease extension and was always telling stories to get a rent reduction. "My basement is flooded!" 6" puddle around drain that was .00001mm deep. "Can't open windows!" One of 12 cranks broke. "Window is broken! emergency repair needed!" Small glass 2" x 10" pane on security door broken by him. I finally sent him a Notice to Quit. Then he suddenly changed his tune. Too bad. Pack and leave. Costs him $2000 to move, more than the rent reductions he would have gotten from his stories in 10 years. I wonder how much he likes renting.... Read again what Nooch just posted. Last edited by 93legendti; 10-21-2014 at 10:59 AM. |
#74
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I never said you have to be an investor to buy a home. All I am saying is you absolutely cannot say that for someone looking for a place to live, buying is always the better financial decision. Timing has a lot to do with that. I am currently bidding for a house that sold in 1999 for 200k more than the current asking price, and that is in southern Connecticut, an hour from NYC. Your house tripling in value is great, but how long did it take? What was the annual return on your equity after taxes and maintenance? Because you could have doubled your money in 3 years in the S&P (again, timing). Around here, in the land of the 600k starter home, my landlord friends do ok with rent returns, but any serious money they've made has been through appreciation. Look, I'm with you. I'd much rather live in my own house, but I'm not deluded into thinking it's a guaranteed great investment. It's a happy event if it is, but I just view my house as a nice place to live and expect to pay for the privilege. |
#75
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For a professional real estate owner, you can make money in any of three basic ways. 1) cash flows, 2) tax advantages and 3) price appreciation.
It is a pretty straightforward spreadsheet calculation to determine where your returns are coming from.
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And we have just one world, But we live in different ones |
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