Buying a House in 2 yrs - Realistic Numbers?

[surfstar]

Originally Posted By: Pop_Rivit
Originally Posted By: Jarlaxle
I'm renting for not much more than just the property taxes on my old house. And it is wonderful...no constant work maintaining the place, no yard work all the time, no giant bills for repairs (like a new furnace), no snow shoveling...wow, I didn't realize how much WORK a house was until I stopped doing it.


Pretty much verbatim what people who either can't afford a home, don't have credit good enough for a home, or are too lazy to actually do the work involved in owning a home. At the end of 15 or 20 years, at least you'll have that pile of rent receipts to keep you happy.


Real Estate prices, over the long, long term, barely provide more return than inflation.
If the goal is to accumulate more wealth, it makes sense to rent a small place for cheap and invest the difference in the stock market. After 30 years you'll have much more money with your investments.

Buying a house is NOT an investment. Buying multiple properties and becoming a landlord is, and is also a JOB. Its not free money.

Everyone likes to show how you get rich by owning a home. If you are not disciplined enough to save without a mortgage forcing you to, then it helps.

The insanely priced places we've been looking at here... We found a place that someone bought for $580,000 in 2003; now asking $725k (but overpriced and valued under $700k). That "appreciation" hasn't even kept up with inflation. No wonder whey they overpriced the place - they're trying not to loose money after holding onto it for 13 years!
If that same person had invested their 20% down payment, $116k, in the S&P 500 and made no further investments, after the same 13 years, they would have over $325k.

Which would you choose?

 

[oilpsi2high]

Originally Posted By: surfstar
Originally Posted By: Pop_Rivit
Originally Posted By: Jarlaxle
I'm renting for not much more than just the property taxes on my old house. And it is wonderful...no constant work maintaining the place, no yard work all the time, no giant bills for repairs (like a new furnace), no snow shoveling...wow, I didn't realize how much WORK a house was until I stopped doing it.


Pretty much verbatim what people who either can't afford a home, don't have credit good enough for a home, or are too lazy to actually do the work involved in owning a home. At the end of 15 or 20 years, at least you'll have that pile of rent receipts to keep you happy.


Real Estate prices, over the long, long term, barely provide more return than inflation.
If the goal is to accumulate more wealth, it makes sense to rent a small place for cheap and invest the difference in the stock market. After 30 years you'll have much more money with your investments.

Buying a house is NOT an investment. Buying multiple properties and becoming a landlord is, and is also a JOB. Its not free money.

Everyone likes to show how you get rich by owning a home. If you are not disciplined enough to save without a mortgage forcing you to, then it helps.

The insanely priced places we've been looking at here... We found a place that someone bought for $580,000 in 2003; now asking $725k (but overpriced and valued under $700k). That "appreciation" hasn't even kept up with inflation. No wonder whey they overpriced the place - they're trying not to loose money after holding onto it for 13 years!
If that same person had invested their 20% down payment, $116k, in the S&P 500 and made no further investments, after the same 13 years, they would have over $325k.

Which would you choose?


This is the most valuable post in this thread.

 

[SwampSurvivor]

I find it interesting that some are so vehemently opposed to owning a house. Really interesting. OilPsi2High must own or work for the management company from which I currently rent. I know they are making money hand over fist on me!

I don't have too much else to contribute. Other than I feel this was the right decision for me.

And since it's in a different county, property taxes are low (relatively speaking, for NY).


Like I've said a few times, I plan on being buried here. I'll make it work should something happen. Family ties, etc.

Plus not sharing walls/roof with someone else will be nice. You don't want to know what goes on at 3AM

Originally Posted By: surfstar
Stop depressing me.

We looked at a house last weekend, going for $699k, 1254 sq ft ALL original from 1959 pretty much. Figure it needs $80k.

Renting a 1BR apt still

(under-market at $1245/mo)

but I am about to leave and go surf


I pay $700 for my 1BR apartment. I can't even fathom paying that much for rent! Granted, there is probably more income potential there.

 

[oilpsi2high]

I'm not opposed to owning a home. I'm opposed to owning a house while you're in debt. I don't care how cheap the mortgage payment is, there are so many other costs that people seem to be overlooking here.

Since the house is so cheap, I would just wait another 2 or 3 years and pay for the thing wish cash?

 

[SwampSurvivor]

I am currently throwing away quite a bit renting along with not being able to enjoy my hobbies and lifestyle. If I was the type that wanted to just sit on the couch and watch TV and eat potato chips, the apartment would work great.

I did grow up in a house, I know there are costs associated with them.

How is my remaining $20K in student loan debt, and $50 on a house any different than not having any student loan debt and going for a $70K mortgage?

 

[pandus13]

Originally Posted By: Miller88
I am currently throwing away quite a bit renting along with not being able to enjoy my hobbies and lifestyle. If I was the type that wanted to just sit on the couch and watch TV and eat potato chips, the apartment would work great.

I did grow up in a house, I know there are costs associated with them.

How is my remaining $20K in student loan debt, and $50 on a house any different than not having any student loan debt and going for a $70K mortgage?

i remember you are 24-25 and work in IT.
i think for your age, your head is (VERY) in it's place.

 

[oilpsi2high]

Originally Posted By: Miller88
I am currently throwing away quite a bit renting along with not being able to enjoy my hobbies and lifestyle. If I was the type that wanted to just sit on the couch and watch TV and eat potato chips, the apartment would work great.

I did grow up in a house, I know there are costs associated with them.

How is my remaining $20K in student loan debt, and $50 on a house any different than not having any student loan debt and going for a $70K mortgage?


Rent is not throwing $ away. You're paying for a service and it is merely an expense. When you buy a home, you now owe a principal payment in addition to your housing expenses that are now in the form of interest, maintenance, repairs, taxes, assessments, and fees.

Your remaining 20k in SL and 50k on a mortgage is different than a 70k mortgage without any other debts because if something were to happen to your income, you now owe money to two people instead of one.

 

[SwampSurvivor]

Opposed to renting on a year lease where I still owe money to two people instead of one.

I understand that you, for some reason, want me to keep wasting my time renting an apartment and not getting ahead but that's just not going to happen.

I, of course, won't be financing any new cars.

 

[JHZR2]

Originally Posted By: surfstar
Originally Posted By: Pop_Rivit
Originally Posted By: Jarlaxle
I'm renting for not much more than just the property taxes on my old house. And it is wonderful...no constant work maintaining the place, no yard work all the time, no giant bills for repairs (like a new furnace), no snow shoveling...wow, I didn't realize how much WORK a house was until I stopped doing it.


Pretty much verbatim what people who either can't afford a home, don't have credit good enough for a home, or are too lazy to actually do the work involved in owning a home. At the end of 15 or 20 years, at least you'll have that pile of rent receipts to keep you happy.


Real Estate prices, over the long, long term, barely provide more return than inflation.
If the goal is to accumulate more wealth, it makes sense to rent a small place for cheap and invest the difference in the stock market. After 30 years you'll have much more money with your investments.

Buying a house is NOT an investment. Buying multiple properties and becoming a landlord is, and is also a JOB. Its not free money.

Everyone likes to show how you get rich by owning a home. If you are not disciplined enough to save without a mortgage forcing you to, then it helps.

The insanely priced places we've been looking at here... We found a place that someone bought for $580,000 in 2003; now asking $725k (but overpriced and valued under $700k). That "appreciation" hasn't even kept up with inflation. No wonder whey they overpriced the place - they're trying not to loose money after holding onto it for 13 years!
If that same person had invested their 20% down payment, $116k, in the S&P 500 and made no further investments, after the same 13 years, they would have over $325k.

Which would you choose?


I agree that it is a fallacy to say that home ownership is a 100% guaranteed profitable investment. In some markets and situations it is, other times, not. And there are bills.

But its also a fallacy that you avoid those costs in apartment/rental, as it is perfectly obvious that the costs of depreciation, upkeep, taxes, maintenance, etc. are built into the rent and rent increases.

 

[Wolf359]

Originally Posted By: oilpsi2high
Originally Posted By: Miller88
I am currently throwing away quite a bit renting along with not being able to enjoy my hobbies and lifestyle. If I was the type that wanted to just sit on the couch and watch TV and eat potato chips, the apartment would work great.

I did grow up in a house, I know there are costs associated with them.

How is my remaining $20K in student loan debt, and $50 on a house any different than not having any student loan debt and going for a $70K mortgage?


Rent is not throwing $ away. You're paying for a service and it is merely an expense. When you buy a home, you now owe a principal payment in addition to your housing expenses that are now in the form of interest, maintenance, repairs, taxes, assessments, and fees.

Your remaining 20k in SL and 50k on a mortgage is different than a 70k mortgage without any other debts because if something were to happen to your income, you now owe money to two people instead of one.


About 40% of the population isn't really cut out to be owners. You just have to do the math and not make blanket statements. If you're planning on moving in 2-3 years, renting is probably cheaper. In some hot markets, even people who buy for 2-3 years end up making money, but that's probably not going to be the case with the OP. It's also a lifestyle choice. You have more options when you're the home owner. I've sold lots of houses and many people seem to like customizing their house like people like to do with their cars.

Owing money to two people vs one is a pointless point.

 

[Mr Nice]

I bought my first house (3 bedroom, 2 bath, 1 car garage) at 23 years old when I was in Gainesville, Florida. It can be done but you have to budget your money wisely... I sold the house and made a nice profit. Renting would have been a waste of money.

Even without VA loan I would have zero problems paying mortgage, taxes, insurance, utilities... etc..

 

[surfstar]

Miller88 - we're not completely opposed to owning, but try and look at it as practically as possible.
If we need to move into a 2br, then it actually makes sense to buy something, despite how overpriced our market is!
A garage would be wonderful, but for now, we make do and save as much $ as possible.

Our market is quite different than most. I can't imagine a situation where mortgage was LESS than rent. We'd have no trouble buying at that point!

You buy a house b/c you want a home to live in and one that you have control over. You rent b/c you can save money, have less commitment, etc. Its always a personal decision, along with financial.
Housing as "investment" is a dream sold by those who benefit - RE agents, brokers, etc.

 

[SwampSurvivor]

Originally Posted By: surfstar
Miller88 - we're not completely opposed to owning, but try and look at it as practically as possible.
If we need to move into a 2br, then it actually makes sense to buy something, despite how overpriced our market is!
A garage would be wonderful, but for now, we make do and save as much $ as possible.

Our market is quite different than most. I can't imagine a situation where mortgage was LESS than rent. We'd have no trouble buying at that point!

You buy a house b/c you want a home to live in and one that you have control over. You rent b/c you can save money, have less commitment, etc. Its always a personal decision, along with financial.
Housing as "investment" is a dream sold by those who benefit - RE agents, brokers, etc.



With the downpayment and sell price of this house, the mortgage, insurance and taxes are going to be ~100 less a month. Yes, I know there's extra upkeep and utilities included with that. Getting my hands dirty is okay.

 

[Pop_Rivit]

Originally Posted By: surfstar


Buying a house is NOT an investment. Buying multiple properties and becoming a landlord is, and is also a JOB. Its not free money.


As is typical of those who really don't understand investing, you fail to factor into the price of a home that you are also living in that home. That in itself provides significant value, and unlike renting, at the end of your 10 or 15 year mortgage you have more to show for it than a pile of rent receipts. You're cherry picking parts of the whole equation and pretending to make decisions based on partial facts.

So not only are you making an investment that (if you invest wisely) will be worth more in a couple decades, but you're providing a roof over your head at the same time. Of course, you could choose to live under a bridge or live with mommy and daddy while you're investing your money in other things. Otherwise you still have to pay to live somewhere.

You also choose to live in one of the worst housing markets in the country-that's a choice you make. Most areas are not a reflection of California, and there are a lot of areas where housing is a good investment, and over the 30+ years you live in a home the value can do better than inflation.

 

[surfstar]

Pop, our pile of rent receipts will include a large helping of cash + investments on the side.

Housing barely beats inflation. This is a fact. Your local market may be different, but its a gamble and overpaying for a house is concentrating your assets in one area, possibly risky.
If you can rent a lower cost place (not everyone 'needs' a house), invest the difference, and come out ahead. Some of us would rather have the cash to travel and 'rent' wherever we want to, on trips, instead of sitting in a paid off house when we retire.

http://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html?_r=0
that is the best calculator I've found that takes into account the true costs of renting and owning and gives you a number to work with. For us, its IS worth buying a crazy overpriced house/condo, etc, if we "need" a 2+ bedroom place to live here. Right now we don't. You can't 'buy' a 1br apartment, so we rent one, at a huge cost savings and instead of blowing the money on eating out or fancy cars, we save it. Most Americans can't grasp that concept, and a mortgage is 'forced' savings for them and actually beneficial.
So yes, I do understand investing and home purchasing. Opportunity costs, etc. We pour over the details with such a large decision. Eventually we might buy, but not for an "investment", that's for sure.

 

[Mr Nice]

Some areas of the country are too expensive to buy a house when you look at person's income level.
PBS (terrible media bias) did a segment on San Francisco and younger residents
Gen X and Gen Millennials not able to afford housing.

Why the heck do these idiots move to SF and expect affordable
housing ?


http://www.pbs.org/newshour/bb/the-san-francisco-activists-who-say-please-build-in-my-backyard/

 

[doitmyself]

Originally Posted By: Miller88
I feel this was the right decision for me. I'll make it work should something happen.

Good for you. Enjoy your new home. This is a personal decision based on many personal circumstances. Renting vs. buying vs. alternative opportunities can all be the correct and best choice for an individual. Why is this such a difficult concept for some here to comprehend and why do some insist that their chosen lifestyle is the one and only correct one for everyone else?

 

[Wolf359]

Originally Posted By: surfstar
Housing barely beats inflation. This is a fact. Your local market may be different, but its a gamble and overpaying for a house is concentrating your assets in one area, possibly risky.
If you can rent a lower cost place (not everyone 'needs' a house), invest the difference, and come out ahead. Some of us would rather have the cash to travel and 'rent' wherever we want to, on trips, instead of sitting in a paid off house when we retire.


The thing that people don't get about housing is that you can use leverage there where you can't really in the stock market, you're limited in using margin. Basically when you put down 10 or 20%, even if housing is only going up 1-2%, if you just put down 10%, that means that if housing is only up 1%, you're actually up 10%. If you pay cash for the property, then you might only get average inflation. It also depends where you buy. In my areas, people who bought in the suburbs lost money when the market tanked, people who bought in the city didn't really lose much money, didn't go up but it was stable. Then when the market took off, the city went way up and the suburbs just recovered to where they used to be. It all goes back to location.

 

[Shannow]

Can't get investment loans over there ?

My boss a few years ago had one where with 10%, he could leverage the stockmarket, interest payments only (deductible), and having ten times as many shares, got ten times the dividend payments, and ten times the upside.

Then 2008...

 

[Wolf359]

Originally Posted By: Shannow
Can't get investment loans over there ?

My boss a few years ago had one where with 10%, he could leverage the stockmarket, interest payments only (deductible), and having ten times as many shares, got ten times the dividend payments, and ten times the upside.

Then 2008...


That's what lead to the great depression. You can kinda do that with options, but if they expire out of the money, they're worthless. Basically for margin it's only 50% and if it drops too much, you get a margin call and if you can't come up with the cash, they just sell out your position so you can double your losses or more.