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If I were you, I wouldn't want to be spending any more money that I absolutely have to since you are dead set on buying a house. That means I would move out of my apartment, move into a bigger apartment and take on roommates in order to save the maximum amount of money possible.
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Jan 31, 2011 16:26
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Dbhjed posted:Also the furniture is interest free for 4 years and it will be paid off long before that.  Dbhjed posted:So in closing since I am getting tired of beating a dead horse: Dead Pressed posted:I just want to say that I understand where you guys are coming from, but its REALLY disheartening/HARD to read as I'm (somewhat) in the same boat as Db. In May I graduate one Saturday, get married the next, and then I'm moving to Lafayette, LA to start my full time job (64k) at one of the world's largest privately owned companies.
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Jan 31, 2011 16:51
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Dbhjed posted:So the big red flag about owning a place with out the 20% would be for the extra oh crap stuff (and wasting 150-200 a month on the PMI)? 20% gives you the leeway to leave at any point unless housing values continue to crash without having to show up at closing with a big check because you are underwater. Dbhjed posted:Would the 900 a month apartment also reflect better on if i can pay 1050 mortgage once I have the 20%? Not really. You might be able to pay that $900/mo but that doesn't really point to whether you can afford another $150, plus higher utilities, plus maintenance. Looking at your salary and debt I don't see any reason why you can't afford a $1050 mortgage payment if your wife is making $30K if you pay off your credit card and furniture debt and live a reasonable lifestyle. I assume you are going to be bringing home $4500-5000/mo and that is well within your means. This also means you could be living in a $900 townhouse and it wouldn't be out of the question for you to be able to sock away $1000-1500/mo for 2 years and come out with a proper downpayment and emergency fund. My wife and I have eerily similar salary & bills (minus the credit card/furniture items) and I would not feel excited about upping my housing bill $300/mo but mostly because that would cut into me throwing $1200 into my savings each month. If I wasn't trying to save money for home projects I could manage it sure, but its unexciting living paycheck to paycheck.
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Jan 31, 2011 16:53
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gvibes posted:Wait wait wait - you had to borrow money to buy furniture, and you are thinking of buying a home? Correct me if I'm wrong, but doesn't it make sense to always jump on a 4 year interest free setup for a sizeable purchase? It makes it cheaper in the long run as inflation climbs but your payments still stay at the original purchase price. I went to the furniture store with $6000 in the bank intending to pay cash, but when I saw they had a 4 year interest free financing option, I jumped on it anyway. No sense in putting out that money right away when you can spread it out and save some money doing so.
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Jan 31, 2011 17:10
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some_weird_kid posted:Correct me if I'm wrong, but doesn't it make sense to always jump on a 4 year interest free setup for a sizeable purchase? It makes it cheaper in the long run as inflation climbs but your payments still stay at the original purchase price. I went to the furniture store with $6000 in the bank intending to pay cash, but when I saw they had a 4 year interest free financing option, I jumped on it anyway. No sense in putting out that money right away when you can spread it out and save some money doing so. Sure, if you actually have the money and are just going to plop it in a savings account instead of sinking it into furniture then yes you can go earn a few hundred bucks (at best) putting the money into a savings account. The pitfalls: A) If you accidentally miss a payment, you will get back charged every bit of interest that would have had to make on it, losing you thousands of dollars because you wanted to try and make $300 over 4 years. B) You lock up the money in something not liquid (CDs) trying to get another point of interest, lose your job, and are forced to miss a payment or not be able to pay it off in full on time. Back interest again. C) You didn't have the money in the first place, miss payments, see above. D) The monthly payments appear on your credit report, directly affecting your Debt to Income ratio, a very important number when purchasing a home. These plans are designed to move product, and they more than make up for the interest free promotion on people who gently caress up one month and get back charged 25% interest. This is a little bit more advanced than the "Bouncing around 0% interest balance transfers" credit card trick, with more risk, and little payoff.
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Jan 31, 2011 17:21
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I really want to stress to all the potential homeowners out there, there's nothing wrong with renting. You don't have to rent an apartment with upstairs neighbors, or no covered parking. There are tons of choices out there. Find something you can be happy with. There's also tons of rental houses out there. You can have 5.1 surround sound, you can paint the walls, you can have tons of freedom and perks of home-ownership but without all the bullshit. The majority of landlords don't care what you do as long as when you move out it's in a rent-able condition. (paint walls back to a neutral color) Dbhjed posted:So the big red flag about owning a place with out the 20% would be for the extra oh crap stuff (and wasting 150-200 a month on the PMI)? The 900 a month apartment might make a bit of a difference, but probably not. The underwriting on mortgages is mostly computer based. They look at your Debt To Income (DTI) ratio. If the DTI numbers are good, and the credit score is good, then it's pretty much an automated approval. There's no old scroogy guy in a bank chewing on his glasses looking over your application deciding whether or not to loan you money. For an FHA loan, you really want to shoot for a maximum DTI of 29/41. Now what does that mean? It means that your total housing payment shouldn't exceed 29% of your gross monthly income. The second number is the total amount of your debt payments shouldn't exceed 41% of your monthly income. For the sake of argument, say you gross 5K monthly. (note: Gross income. This is before all your 401k, health insurance, FSA, etc etc) That means you can afford (per guidelines) a maximum mortgage payment of 1450 a month. (This includes Principal and Interest (P&I), Mortgage Insurance (MI), Hazard(Homeowners) Insurance, HOA fees, etc.) But, you have to worry about the second number too. Your maximum monthly debt obligations can't exceed 41% of your gross income. Which means you can have 2050 a month in debt obligations. This includes things like Student Loans, Credit Card payments, Car Loans. Etc. If you do prepare to buy a house, you want these numbers as good as possible. Don't go buy 2 brand new cars before you buy a house, it'll throw your numbers out of whack. Also something to think about. Your mortgage payment encompasses quite a few things. For example here is my mortgage payment. I pay 1387.00 a month to my mortgage company. Out of that payment: 887.19 goes to Principal and Interest 75.00 goes to Hazard (Homeowners) insurance 71.62 goes to FHA Mortgage Insurance 352.19 goes into escrow to pay property taxes. Here's the fun part. I'm only 1 year into my mortgage. Out of that 887.19 P&I payment, 707 dollars goes to just interest, and I get to actually apply a whopping 179 dollars to the principal of my mortgage. Sucks doesn't it? In one year I've managed to pay off only 2,000 dollars of my 156,000 dollar mortgage. Honestly I wish I would have rented one of the houses in the neighborhood instead of buying. I could be living in the same house, for the same amount of money, but not be tied down to the place. It really feels like I have a giant weight on my shoulders.
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Jan 31, 2011 18:00
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My family is still trying to get me to buy a house. It's absolutely not happening, but I can't help but laugh at the ways they're trying to push it. I am firmly in the camp of do never buy. They started with all the typical 'throwing your money away' arguments, which don't work on me in the slightest. Then, after that, I got an e-mail saying "okay so you want numbers, well look at your area! How can you not buy with the market like this!!!" and the graph below, courtesy of Zillow:  That's the 5 year horizon; a bit inaccurate being Zillow and all, but okay it's believable. Still... that's just five years. I clicked the ten year button and mailed the picture below back to my mother along with my four-digit bank balance and my five digit student loan balance.  This brought on an angry rant about how I'm doing such a disservice to my future children by not investing in their future by buying a house now while I'm young. (I'm 28 and about to blow most of that bank balance on a wedding as it is, since neither of our families are helping pay for it.) I'm really getting the impression that some people are just completely immune to thinking rationally, and I'm a little worried that I seem to be related to so many of them.
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Jan 31, 2011 18:21
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Sundae posted:My family is still trying to get me to buy a house. It's absolutely not happening, but I can't help but laugh at the ways they're trying to push it. I am firmly in the camp of do never buy.
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Jan 31, 2011 18:29
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singe posted:I read the OP and the first couple pages. I'm pretty sure I want to buy even though according to this thread renting might be a better option.
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Jan 31, 2011 18:39
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Many people A) rationalize and validate their own past poor decisions through the mechanism of herd response... if everyone else also does what they did, then it must have been the right thing to do. If someone refuses, and their reasons are valid, it calls into question their own previous action and suggests they might have also broken from the herd, and that is a very difficult reality to face. Or B) Think they know better than you, genuinely want the best for you, but are not prepared or equipped to justify their superiority complex with rational argumentation and actual data. They've been convinced, by media, friends, or just gut feeling, and their failure to convince you tells them that you must be refusing on an emotional basis. It's ironic in the extreme, of course, but they actually think you're being irrational for rejecting their position because they mistakenly believe that their position is based on lots of evidence. These tend to be people who are not familiar with evidence-based well-developed careful arguments. Either way, there is no way to argue back. No matter what you do, they'll be relentlessly obstinate. In Category A, it's an emotional defense mechanism. In B, it's just a very long-practiced, ingrained lack of critical thinking skills, and that's not going to change easily. Of course... the maxim of "buy low, sell high" does still apply. As much as it is foolish to try to time the market, and especially with an asset as illiquid as a house, it is not entirely wrong to suspect that housing prices are either at, or within a year or two of hitting, the low they're going to hit for the next decade or so. And as every financial manager knows, it's much easier to gamble on market timing with someone else's money, than with your own. e. Here's another good chart to check out: "real" housing prices over the last century. http://seekingalpha.com/article/184511-u-s-home-prices-essentially-flat-for-over-a-century quote:Not only do prices sometimes go down, sometimes they go down and stay down for over twenty years. Love that chart. If you bought a nationally-average house between 1953 and 1957, it was worth essentially exactly the same (in inflation-adjusted dollars) in 1998. That's a forty-year "investment" with zero real return, but with enormous maintenance costs and taxes along with it. Which means a real-dollars giant catastrophic loss. Assuming a market that tracked the national average, all those people would have been financially better off renting during that entire period and saving all that interest and maintenance and tax money. That's basically a whole generation, not buying between their mid-20s and retirement age, having lost a giant pile of money to the American Dream. Leperflesh fucked around with this message at 18:50 on Jan 31, 2011 |
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Jan 31, 2011 18:41
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Leperflesh posted:Assuming a market that tracked the national average, all those people would have been financially better off renting during that entire period and saving all that interest and maintenance and tax money. That's basically a whole generation, not buying between their mid-20s and retirement age, having lost a giant pile of money to the American Dream. Please note that I'm not saying that buying a house is in any way a good investment. I'm also not saying that buying a house is a good financial decision in most cases.
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Jan 31, 2011 19:08
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Dik Hz posted:I just want to point out that renting a house will always cost more than buying the same house in the long term on average.
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Jan 31, 2011 19:22
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Dik Hz posted:I just want to point out that renting a house will always cost more than buying the same house in the long term on average. It's true that if, on average, owners failed to break even on their rented units, then no owners would bother to rent out houses. However, I think the situation is more complex than that: the rental market includes apartments, condos, etc. which may partially subsidize the house-rental market; many houses are owned outright (no mortgage left) which allows those owners to rent at a price below the cost of the average mortgaged property; and, a few rental properties lose money on purpose as a tax break. I think the owned-outright thing is the most important factor though. A mortgaged house must be rented for a price that pays the mortgage, tax, & maintenance, but an outright-owned house only needs to collect enough rent for the tax & maintenance (no interest or principle to pay). I suspect this means that if you can find a neighborhood with houses that were mostly built over 30 years ago, you've got a very good shot at paying a rent that is less than what you'd have to pay to own that house.
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Jan 31, 2011 19:26
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Dik Hz posted:Grad school is nowhere near as secure as you think it is. Don't lock yourself into a house for grad school. Yes, not only is funding liable to vary significantly, you can possibly be kicked out (even if you are used to being an excellent student in undergrad) because you can't hack it.
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Jan 31, 2011 19:31
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Dik Hz posted:I just want to point out that renting a house will always cost more than buying the same house in the long term on average. This really really really depends on the market, and the length of time staying in the house. My grandparents still live in the house they bought in 1965 for less than $10,000. It's worth $250K now and has been paid off for over 20 years. While their mortgage payments never rose, their rent surely would have. Of course this is an extreme example, but I don't think you have to go beyond 10 years or so break even or make money. Or in my case, where the house next to me is renting for $1,200/mo, and my mortgage is $700.
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Jan 31, 2011 19:39
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Leperflesh posted:It's true that if, on average, owners failed to break even on their rented units, then no owners would bother to rent out houses. However, I think the situation is more complex than that: the rental market includes apartments, condos, etc. which may partially subsidize the house-rental market; many houses are owned outright (no mortgage left) which allows those owners to rent at a price below the cost of the average mortgaged property; and, a few rental properties lose money on purpose as a tax break. Obviously there will be exceptions.
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Jan 31, 2011 19:44
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Chin Strap posted:Yes, not only is funding liable to vary significantly, you can possibly be kicked out (even if you are used to being an excellent student in undergrad) because you can't hack it. Dik Hz fucked around with this message at 19:48 on Jan 31, 2011 |
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Jan 31, 2011 19:46
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Dik Hz posted:Or, in this era of decreasing grant funding, a professor might move his entire lab to a new university for a new bundle of startup money. Honestly, this is probably the third biggest risk you run into as a graduate student. You (general you) seriously need to evaluate the likelihood that your professor hangs around for grad school. My opinion on likely causes of grad school instability: #1 - You can't actually cut it and burn out or get kicked out. It happens more than you think. It's a shame you bought that house, because you're not a student anymore. #2 - You discover, a few years in, that your interests aren't actually where you thought they were. It'd be great to go over to that other lab that is researching EXACTLY what you want, but you've got that damned house... #3 - Your professor loses funding or gets more funding elsewhere, or is offered a more prestigious position at another school. He heads off, and gives a nudge nudge wink wink to his grad students that he'll take them on if they come over with him. Great, right? STUPID loving HOUSE. #4 (BONUS!) - Your department's budget got cut, and they have had to reduce your stipend by 20% this year and next year. Your mortgage was being paid by that stipend. (Admittedly this can happen in the professional world too, but at least then you can quit and go to a new job without risking losing absolutely all progress you've made for the last several years.) Don't buy as a grad student. Seriously.
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Jan 31, 2011 19:56
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Leperflesh posted:Assuming a market that tracked the national average, all those people would have been financially better off renting during that entire period and saving all that interest and maintenance and tax money. That's basically a whole generation, not buying between their mid-20s and retirement age, having lost a giant pile of money to the American Dream. I do agree with you here, but investing and renting is not a surefire path to riches either. Couldn't the same concept apply to the stock market during the 2000s? All those people who thought they were getting a head start on retirement lost a decade. Maybe they didn't lose money, but it certainly wasn't the magical 8% a year that's always thrown around.
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Jan 31, 2011 20:25
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There is obviously no surefire path to riches. There are only investments that carry risks and potential rewards; risks and rewards are balanced to the degree that the market is efficient, which can be high or low; and there is always some level of risk even when there is no reward, because risk is inherently unpredictable. The point I'm making here is that a ton of people - perhaps even still the majority of folks - seem to believe that real estate is a great "investment". Actually that chart shows that over many long periods, it performed worse than even the safest government bonds, but at far higher risk. Don't "invest" in a house. Buy a house for other reasons than investment. Invest in something else. Dik Hz posted:I apologize for getting all "efficient market" on you, but look at the flipside of the argument. If someone could make more money on average by selling a rental property and investing it with returns at the average rate of inflation, they'd be pretty stupid not to do it. And relying on landlords to work against their self interest isn't really a viable long-term strategy for most people. The exceptions lie, to a large degree, with people who have decades of experience in real estate and enjoy getting an investment income from their properties, but lack the expertise or interest in moving into better investment vehicles. There's a ton of retirees out there who own more than one house, or own one house but move into assisted care, or to a condo in florida, or whatever; they want to rent out their house and use the income to supplement their retirement funds, but they also want to leave the house to their grandkids and would never dream of selling the place they lived in for forty years, etc. A quick google tells me that roughly 70% of residential homes in the US have a mortgage, so we're only talking about some fraction of those 30% outright-owned houses anyway. But that's enough that it can't be said for certain that, overall or in any given market, average rents must be at or above the average PIMA costs of all of those houses at their current market value. This is borne out by the observation that in many, many markets, rents are demonstratively lower than PIMA cost of buying a comparable property. Leperflesh fucked around with this message at 20:36 on Jan 31, 2011 |
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Jan 31, 2011 20:34
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Leperflesh posted:This is borne out by the observation that in many, many markets, rents are demonstratively lower than PIMA cost of buying a comparable property.
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Jan 31, 2011 20:53
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Dik Hz posted:You can't really look at it as a snapshot. There have obviously been serious upheavals in real estate in the last couple years. In the long term, rent prices generally trend towards mortgage costs. I would say that in the long term, rents tend towards the total-cost-of-ownership, rather than the current market price, of that real estate which is offered for rent; which must take into account historical appreciation/depreciation. E.g., the average total original paid price in a neighborhood may be substantially below or above their current market value, and that rents are tending towards that original-average rather than current-average. But I believe rents are more directly driven by supply and demand; vacancy rates determine what can be charged for rent. If rents are lower than the current average mortgage cost, then this will push recent-buyers out of the rental market, favoring buyers with lower mortgage costs and reducing rents (but with the feedback loop of reducing supply). But supply and demand are predicated on things like the current employment market, zoning, credit availability to homebuilders, and myriad other factors, I think the situation is too complex to boil down to an efficient market finding a rental price at the (current) mortgage price. Additionally, in any market, it may be that only those houses that were bought below the average mortgage price are for rent, and those bought above the average are not (or vice-versa); this implies again that rents could be below (or above) the total-market average mortgage price, and persist that way long term. For a person considering buying vs. renting, if all the cheap houses for sale are bought with cash by investors looking to rent for income, they may have no choice but to only consider more expensive houses that are not economical to rent; and therefore, buying may be more expensive than renting, permanently. The real world is not an efficient market, and this is especially so of real estate and rental prices. It's a mistake to make broad statements about how rents must compare to mortgage prices.
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Jan 31, 2011 21:14
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I stayed up late last night running a crapload of numbers on paper, calculations, and using the mortgage calculator. The number was staggering between the two. I'll probably post it later tonight or tomorrow. It basically brings "DO NEVER BUY" straight to home. The sad part is, it doesn't even touch cost of maintaining the home. This thread has possibly saved me from making the biggest mistake of my life.
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Jan 31, 2011 21:16
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Leperflesh posted:I would say that in the long term, rents tend towards the total-cost-of-ownership, rather than the current market price, of that real estate which is offered for rent; which must take into account historical appreciation/depreciation. E.g., the average total original paid price in a neighborhood may be substantially below or above their current market value, and that rents are tending towards that original-average rather than current-average. Also, please show me the landlord that loses money by renting his properties. I mean, there are a couple speculators out there that are willing to rent at a loss, and some people have unique circumstances that require them to rent at a loss. But when you make a claim like: leperflesh posted:If you bought a nationally-average house between 1953 and 1957, it was worth essentially exactly the same (in inflation-adjusted dollars) in 1998. That's a forty-year "investment" with zero real return, but with enormous maintenance costs and taxes along with it. Which means a real-dollars giant catastrophic loss. Assuming a market that tracked the national average, all those people would have been financially better off renting during that entire period and saving all that interest and maintenance and tax money. That's basically a whole generation, not buying between their mid-20s and retirement age, having lost a giant pile of money to the American Dream.
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Jan 31, 2011 21:46
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Dik Hz posted:I just want to note that I wrote "trends towards" and not "equals" Tax laws change over time, but I recall reading that there were tax shelter properties that lost money (e.g., cost money to service that was more than what they earned in rents) as a way of lowering tax liability by a greater degree than they cost to maintain. But that's a small number in any case so we can discount that if you like. quote:But when you make a claim like: Lose money after adjusting for inflation. Which is not at all ridiculous. And that statement is about people who bought during that four year period merely breaking even at another moment 40 years later. The market is composed of many owners who bought at many different periods, and it is possible for my statement to be true even while the average rental property owner made money on their investments via rent. Because that chart tracks prices, not volumes, and that should be kept in mind. You could have a small number buy in a certain year where they lose money over time, and a large number buy in a different year where they made money over time. You are also still ignoring the cash investor, who does not have to pay interest or mortgage insurance and can afford to rent at a rate that recovers his cash investment over any period he chooses, as long as he can cover his tax liability and maintenance cost each year. Leperflesh fucked around with this message at 22:22 on Jan 31, 2011 |
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Jan 31, 2011 22:14
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Leperflesh posted:Tax laws change over time, but I recall reading that there were tax shelter properties that lost money (e.g., cost money to service that was more than what they earned in rents) as a way of lowering tax liability by a greater degree than they cost to maintain. But that's a small number in any case so we can discount that if you like. I'll make it as simple as possible and then be done with this derail. In order for renting to be cheaper for the same property in the long run over owning, the money has to come from somewhere. That somewhere is the landlord. The money may be cash or opportunity cost. Occasionally, for personal or other reasons, a landlord may act against their best financial interest. On average, though, landlords do act in their best financial interests. I mean, you're essentially arguing that involving a middle man lowers the price of a good.
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Jan 31, 2011 22:44
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Ok, I'll limit myself to a single response as well. You seem to be arguing about "a single property" whereas I am discussing the market (or markets) on the whole, and talking about averages. You are absolutely correct and I completely agree about a single property. Where I disagree is that because a single property must behave in this way, over time all rental properties in a market will produce rents which average the same or higher than the average monthly costs of buying a similar property at current market prices. Because remember, the origin of this discussion is the assertion that it is necessarily, on average, always going to be the same or cheaper to buy than to rent, and I disagree with that. I have tried to show that because each year different numbers and types of properties are bought (most through mortgage but some with cash), and that each year the market sets a rental price that must be loosely related not to the current year's property prices but to the average ongoing ownership costs of only those properties offered for rent, rents may not track current house prices even over long periods of time.
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Jan 31, 2011 22:50
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It's a pretty consistent statistic that roughly half of high net-worth individuals utilize investment real estate. I guess they are all idiots who should be putting their money elsewhere? How you can convince yourself that renting from the buyer (who is renting to you to make money above and beyond his investment in the property) instead of buying it yourself nets you more money (on average, over time) is beyond me, but that said, of course there are all kinds of historical anomalies that make the "conventional wisdom" not apply for a while and we are right in the middle of one of those times so do whatever you want. Some areas are obviously way worse than others. I have bought two properties over the past 2 years in my area and am living in one for cheaper than I was renting a lesser house after *all* expenses and am cash flow positive renting out the other one with it 50% financed. Renting is definitely not better in my area- and we have relatively high property taxes. Your argument about landlords renting for whatever they want once they have the property paid for is just retarded- landlords rent for as much as the market will bear, period. Landlords are in it to make money, not do favors for the 20 year old who has done some back of the envelope calculations and deduced that he can rent for his entire life cheaper than buying. (USER WAS PUT ON PROBATION FOR THIS POST)
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Jan 31, 2011 22:55
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Ugh. That's really not what I'm saying. What I'm saying is that the presence of a lot of landlords, all of whom bought at prices well below the current market value, can be a factor in creating a situation where rents can be sustainably lower than the current price of buying a house. The landlords naturally will rent for whatever the market can bear, which as I said is not entirely controlled by prices (although that can and should set a floor). We all should be well aware that supply and demand are what set prices. If there is low supply, rents will be high regardless and the entire discussion is moot. Obviously when rents are high, landlords are making money, and if you were a smart investor and wanted to earn money from investing in real estate, you'd look for a place where rents are high, vacancy is low, and prices of houses are rising too. You'll make money on the property's appreciation and on the rent, and you're doing great. But there are also many markets where vacancy is high, driving down rents, and if you are a landlord who bought your house for half of what they currently cost, you can afford to undercut your competetors to keep your place filled instead of empty, even if the rent you accept is lower than what you'd get if you sold your house. Because of course real estate is really illiquid. It costs a fuckload of money to sell a property - minimum 6% up front, plus probably a lot extra to resolve inspection issues and perhaps taxes too. And, you may need to turn around and re-buy to avoid capital gains taxes as well. Suppose you bought a house in 1985 for $100,000. You could sell it today for $200,000, or you could rent it for income. If rents today are going at approximately the same as the cost of ownership for a house at $190,000, you are doing great - nicely profitable. New investors are priced out, they won't make enough to make it worth buying a house at $200k and renting it. But this rental rate is what the market will bear right now, because of supply and demand. From your perspective you're fine; yes, you could sell, but you'll pay $12,000 in comissions plus some tax and maybe you would also have to replace the roof and re-finish the floors to make it an attractive sale. So you rent. From the renter's perspective, however, rents are cheaper than buying. This situation can persist indefinitely, as long as several or a few of the following factors are in play: -some fraction of rental properties are owned outright -the properties available to rent are below the average property value, e.g., more expensive properties aren't rented, just the cheap ones -the cost of selling is enough to make a break-positive situation break-negative instead -owners want to keep their properties, perhaps to move back in later, or give to their children, even though strictly speaking they'd make more money selling than continuing to rent it out Rich people make money in real estate at the same time that it can cost more to buy than to rent for the average incomed individual. This situation is not inconsistent because it is not an apples-to-apples comparison.
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Jan 31, 2011 23:11
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skipdogg posted:I really want to stress to all the potential homeowners out there, there's nothing wrong with renting. You don't have to rent an apartment with upstairs neighbors, or no covered parking. There are tons of choices out there. Find something you can be happy with. I just want to go back to this because it seems like the majority of people in this thread think renting = living in an apartment complex. Most areas have tons of really nice rental houses that are in the same price range as apartments with the same number of bedrooms. I share a 2-bedroom house with a roommate and we have a larger space than every one of our friends who live in an apartment, and we actually pay less rent. Our landlord lets us hammer holes into the walls and replace curtains and do whatever we want. We have a nice big yard that the landlord takes care of, a private gravel parking area for three cars, and a storage shed. I hate, hate, hate having people around me and up in my space. I'm such a private person (hence wanting to live in that house way out in the middle of nowhere that I posted about earlier). But for now the next best thing for me is to rent a house, it is in a quiet neighborhood but we still can have parties that spill outside and our neighbors are cool with that. No people stomping around above me or blaring music on either side. I can sit out on my back porch and drink my coffee in peace, or fire up my charcoal grill whenever I want. I have two loud-rear end parrots that would not be possible to keep in an apartment. I think renting a house would be a good compromise for those of you wanting the freedom of living in a house but aren't quite ready for the financials of it. Plus sometimes the landlords will give you discounted rent for working on the house. Then you can see how awesome it is to have to rip the garbage disposal apart when rotting food water starts uncontrollably flooding out of the dishwasher or to wake up in the morning and the water pressure is so low that you can't even take a shower so you have to dismantle the plumbing at 6:30 am.
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Feb 1, 2011 00:08
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Who wants to prevent my friends from making a retarded financial decision? The three of us are all sick of living at home and we want to move out, the problem is that our friend Jon wants to buy a house. For some background me and the other guy Alex both work retail. Alex might be working regular hours but he still only earns roughly 20K a year Canadian. I on the other hand at best earn slightly less. Jon works as a janitor and makes equivalent to our combined income, so together pooling our resources we'd have something close to 70K. Originally we were looking at renting and we would definitely have enough for that, but Jon's cousin Jesse has been convincing him that buying is the best idea to do. His main point is that: it's better to own than rent because rent is just paying off someone's mortgage which YOU could be doing, so you're a sucker for renting. I figured this was a poor reason to buy, especially when I'm pretty sure that none of us are going to be living there for the rest of our lives. I mean what happens when we sell? Jesse's logic was that we could just sell the house (I guess with the mortgage?) and we'd be making back the money on the house. So right now the proposed arrangement is that Jon puts the down payment on the house, and me and Alex help pay off the mortgage in rent. It just sounds like a stupid idea. Like I said our incomes are pretty lovely, we probably aren't going to stay there for that long (I know I'm not). Jon is going to be tied down to a place, and I'm pretty sure that it's not as easy to pick up and sell as Jesse makes it seem to be. Besides, we live in Toronto and the average house is going for something like 400K and using that 2.5x your income rule of thumb we can just afford buying a condo that wouldn't fit all of us. Moreover the biggest down payment that Jon can put down is 20K - me and Alex have nothing in savings. My problem is that I don't have any concrete numbers to throw out there and it's hard to argue when Jesse works at a bank and can chuck numbers and figures out there. It just feels like there's a lot missing to the equation and as a Canadian, I don't know how much of the OP applies. I don't want to trap myself or have my friends trap themselves in a lovely situation.
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Feb 1, 2011 01:27
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razz posted:I just want to go back to this because it seems like the majority of people in this thread think renting = living in an apartment complex.
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Feb 1, 2011 01:29
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Testikles posted:Who wants to prevent my friends from making a retarded financial decision? You don't have to. This isn't 2005. There is 0% chance of your friend getting a $400,000 loan with $20K in the bank and $40K in income. If you actually want to save him time
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Feb 1, 2011 01:49
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Don't worry. Your friend won't qualify. My wife and I make 80-90k combined and we were pre-approved for 370k with 20k down. If that doesn't help, don't worry. I'll have my numbers up. And realtors fee is anywhere between 5-8% of the sold price. Sometimes higher.
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Feb 1, 2011 02:27
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Well I just ran it all by him and he didn't sound very impressed but by the end of the conversation it made more sense and if anything we realized how little we know about buying a house. He's going to call the bank tomorrow and have a talk with them to get more information and some clarification because like you said, they're not going to let him make a loan he can't pay.
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Feb 1, 2011 02:54
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Testikles posted:they're not going to let him make a loan he can't pay. I hope so, because it wasn't that way for about seven or eight years there.
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Feb 1, 2011 03:15
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Arzakon posted:I hope so, because it wasn't that way for about seven or eight years there. If he does get a loan and does buy a house, I'm just going to either a. not move out with him or b. make sure not to put my name on any of the documents.
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Feb 1, 2011 08:04
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Testikles posted:If he does get a loan and does buy a house, I'm just going to either a. not move out with him or b. make sure not to put my name on any of the documents. Seriously. It would be good to help your friend out, but if he is insistent on hanging himself then there is only so much you can do. Also if he bought a house by himself there's nothing saying you couldn't rent from him as a roommate. He shouldn't get approved for that amount though, I hope.
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Feb 1, 2011 18:53
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My math's probably off in some aspect, let me know if I did anything wrong. Click here for the full 1053x1208 image.  Click here for the full 795x1028 image. Page 1 was considering the difference in cost with renting and buying a property to "pay yourself" and earn equity. The property in question is $314,900 with $15,000 down (<5% by like $600-800). Mortgage insurance of 3.19%, iirc. I know it was at least $8,000 anyway. Page 2 is how much I would be saving every month with extra cash. I normally save about $1,000 a month after investments, paying minimum on student loans, and all normal expenses. I have to note, I didn't add cost of water or cost of repairs/replacement for appliances.
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Feb 1, 2011 20:03
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greasyhands posted:It's a pretty consistent statistic that roughly half of high net-worth individuals utilize investment real estate. I guess they are all idiots who should be putting their money elsewhere? No, they're smart people who leverage their money to make more money. Low net worth people have to borrow, which radically changes the return on investment. The context of the thread is not centered around high net worth individuals.
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Feb 1, 2011 20:52
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