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reflex posted:My parents really want me to buy because a house/condo/apartment is an investment. When I'm old I can turn around and sell my house for $250,000 or whatever and bam retirement! Show your parents this. It shows housing prices in consistent terms (e.g., inflation-adjusted) and demonstrates why pouring most of your money into a single home as an investment strategy is a bad idea. There is a reason why long-term retirement investors are advised to pursue a diversified strategy. Also when you look at that chart, bear in mind that you spend something approaching 8% of the home's value just to sell it, and that as an asset, unlike (say) a mutual fund, you have to constantly spend money just to prevent it from losing value (that is, you must maintain your home to preserve it). Also you have to pay taxes on it. Also you have to insure it! Your parents probably experienced some narrow part of the good upslope periods on that chart and it has shaped their view towards housing as an investment in a skewed way. You can point out to them that in real dollars, if you bought a house in 1955 and then sold it in 1996 you actually lost money just on the principal, never mind the transaction costs, maintenance, taxes, and insurance. That's a 40-year span in which a house underperformed virtually any other kind of sensible investment, including bonds, stocks, a money market account, CDs, or even just an interest-bearing savings account at a bank. There is no reason to believe that houses in 2013 will not experience a similar performance over the following 40 years. (here is an update from may 2012, if you want a better view of the right-hand-most side of that chart: Ritholtz' interest is in whether the housing market is recovering, but for the purposes of showing why houses aren't good investments it doesn't actually matter.) Leperflesh fucked around with this message at 20:06 on Nov 12, 2012 |
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Nov 12, 2012 20:03
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Leperflesh posted:Show your parents this. It shows housing prices in consistent terms (e.g., inflation-adjusted) and demonstrates why pouring most of your money into a single home as an investment strategy is a bad idea. I prefer to think of it like: Treat buying a house like buying a new Civic. It loses 50% of its value as soon as you drive it off the lot, and you sure as hell ain't selling it 20 years later ($1-3k) for what you paid for it ($20k brand new). Along the way, it needs regular maintenance (oil changes:stocking up on oil/natural gas/wood pellets), insurance (car insurance:house insurance), poo poo needs regular replacing (tires:roof), and poo poo's gonna break and cost lots of money to fix (broken water pump:broken fridge/dryer/furnace, etc). You have to spend this money or your car/house will be worth $0 in usability dollars because it can't do its job. Now, you could pimp out your car with a kickin' rad stereo system, subwoofers in the trunk, and fuzzy dice in the mirror (or upgrade your kitchen, install all-stainless appliances, and put authentic Italian travertine tiles in the bathroom), but the end result is that your car/house is still probably not worth what you paid to upgrade it. Your car is a thing to get you from A to B. Your house is a thing to (hopefully) keep the rain off your head while you sleep. Don't ever buy a car or a house and think you'll get rich quick later. If you're lucky (mint-condition Thunderbird:housing prices stay relatively stable), you'll get back what you paid for it, and if you're really, really lucky (Delorean:you flipped the house), a little more. Now does a house sound like an investment to you? daggerdragon fucked around with this message at 20:27 on Nov 12, 2012 |
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Nov 12, 2012 20:23
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Great, now I want a house with fuzzy dice and HID headlights. It is pretty shocking that the "house is an investment!" thing has stuck around even after the real estate implosion of 2007.
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Nov 12, 2012 20:37
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Can I file bankruptcy and get my basis forgiven on my investment account if things go bad? Housing leverage can be insane if you are willing to put only 3% down. If you get to far under water stick the government with the bill. In seven years you can buy another and roll the dice again. You can only lose by paying your mortgage too long.
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Nov 12, 2012 21:19
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Elephanthead posted:Can I file bankruptcy and get my basis forgiven on my investment account if things go bad? Housing leverage can be insane if you are willing to put only 3% down. If you get to far under water stick the government with the bill. In seven years you can buy another and roll the dice again. You can only lose by paying your mortgage too long. Incurring debt with the plan to avoid paying it via bankruptcy is illegal.
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Nov 12, 2012 21:47
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Shifty Pony posted:Great, now I want a house with fuzzy dice and HID headlights. People use that word all of the time, and it might be the most abused word in the english language besides "literally." Graham/Dodd define an investment as a business or operation that provides cash over its lifetime. I like this definition, because it helps to weed out even most speculative "investments" - like trading options or buying a collector's item. If it's not paying you a yield, it's NOT AN INVESTMENT - it's a baseball card. Now, you wouldn't bet the bulk of your net worth and future earnings on a baseball card - would you? But people still insist on calling everything that they want to buy an "investment." Buying nice shoes? Oh, that's an investment because if I don't look good, then I don't feel good, and I won't have confidence to get that new job. Buying a new car? Oh, that's an investment because it's the safest car you can buy, and it gets really good miles. Eating at sizzler 3 days a week? Totally an investment in the local economy. Now, let's assume for one second that buying a house isn't a huge money suck, and that you don't have to pay taxes, or insurance or make regular repairs. Even in that fictional scenario, buying a house to MAKE MONEY is NOT an investment. It's a speculation. Scheming to buy something for a low price in hopes of selling to another buyer for a higher price is not investing. It's speculating. And only idiots and gambling addicts speculate with their entire net worth.
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Nov 13, 2012 00:15
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While I agree with you sort of in principle, your definition is far too narrow. By that logic, buying most stocks isn't an investment because most stocks don't pay dividends. Value investing means investing in something you feel is underpriced, with the expectation that its price will increase. For most people, even in a financial sector, investing includes speculation. The difference between speculating on a diversified basket of blue-chip stocks, and investing in beanie babies, is mostly a matter of degree of risk (as compared to potential gains). Supposedly an efficient marketplace will price things so that the cost is appropriate for a given risk/reward proposition. One difference with houses (and comic books) has to do with the fact that these are things with utility, rather than pure investment vehicles. That is, you can read a comic book and you can live in a house, but you can't do either with 100 shares of Exxon. So, the price of housing is set by a market that is pricing based on the utility of a house (which is high: you can totally live in them) rather than only the risk (high) and potential for profit (low) which, by themselves, ought to drive prices way down to a point where it'd actually make sense to "invest" in a house. The other problem of course is that housing has huge transactional costs which are a weight on the efficiency of the market and also eat into the gains. It's sort of like if you wanted to buy shares of stock, but instead of paying a single $12 trade fee to buy a block of shares worth $10k or $50k or whatever, you had to pay 4% when you buy it, another 1+% every year, and then 8% (of the sale price!) when you sell it. Oh and it takes two to six months to buy or sell, and for the last 30 to 45 days of that period you are locked into a price. So... yeah, houses are "investments" the same way non-dividend stocks are "investments"... but they're much, much worse in terms of costs, risk, and potential upside.
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Nov 13, 2012 02:19
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Leperflesh posted:
Well, ask most folks who buy single stocks - the numbers tell us that, on aggregate, they've lost money buying non-dividend payers, and they've made money on stocks that pay dividends. On the flip side, houses rarely go to zero, whereas many stocks go to zero every day. Even in a bad housing market, you might expect a house to lose 50% of its price. I agree that my definition of "investing" is narrow. I think that's why it works. If you're only buying something because you think you can flip it, that's a speculation on pricing. You think you have some kind of inside knowledge that will let you buy low and sell high - or visa versa. A speculation is much different than an investment - though I also agree that most people blur the line so much that the two words basically have no distinct meaning. Off topic, but... If you look at speculative stocks as speculative stocks, it puts them in the right perspective. If you look at a small-cap tech stock as a long-term investment, it's easy to get confused as to why you bought it in the first place, and what your plan for it really might be. If you force yourself to carefully categorize each of your "investments" in terms of risk, in terms of your plans, in terms of how you're going to monetize them, then you tend to make good decisions.
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Nov 13, 2012 02:51
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Yeah, I agree - I think debating over the difference between investing and speculation is kinda pointless when most of the vehicles in question have (sort of) quantifiable variability and expected return. It's a continuum, after all. It's just that people don't seem to understand variability very well, and this applies triple to housing for some reason...
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Nov 13, 2012 04:22
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Anyone have any information on Vacant/Agriculture type loans? I'm looking for lender specific terms conditions. Where do I find specific vacant land lenders? I put an offer in on 10 acres this past Saturday(Zoned A-2). The Seller agent came back with, "we want to see you are pre-approved before we counter-offer".  He's just buying time to see if more offers are going to come in.In the offer, I had that I would be putting 30% down and financing the rest at 15year term. I called a few banks today(Not a great day for this, being the Veteran's Day holiday). The banks I did talk to either don't deal with Vacant land loans, or I would have to purchase a construction loan within 1year(Im looking at 18 months out till I build). The acreage has a an old farm house from 1901(inhabitable) that would have to be demolished, so I can't take out a regular mortgage. The listing price is based on acreage(barn, external garage) alone. The old farm house is not part of the listing price. Are all the banks/lenders going to want a assessment of the farm house? Whats the best way to just a get a piece of paper over the seller agent, that lists I would be approved? I have been waiting/saving for 3 years for a property to pop-up in this area at this value.
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Nov 13, 2012 04:52
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Leperflesh posted:Incurring debt with the plan to avoid paying it via bankruptcy is illegal. And this situation is not that. I plan on retiring on the house's profits, but I take no risk on a valuation decline.
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Nov 13, 2012 12:43
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Elephanthead posted:And this situation is not that. I plan on retiring on the house's profits, but I take no risk on a valuation decline. I am not a lawyer, etc., but I've heard that documenting your intent to use bankruptcy to avoid the downside of a speculative investment can be all that the government needs to pursue you for charges. You are not supposed to take on debt you know you can't afford to pay out in full. By which I mean, if you are talking about purchasing a house where you could afford the payments, the bankruptcy court is not going to give a poo poo that you're horribly underwater, you're going to have to pay your payments. On the other hand if you purchase a house where you can't afford the payments, with the express intention of either winning the speculation lottery with a significant value increase before you run out of cash, or, filing for bankruptcy if you don't win that lottery, that's intent to defraud the government and it's not kosher. I will just say that if I've accurately described your intent, you should consult a lawyer before enacting your clever plan.
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Nov 13, 2012 19:59
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Leperflesh posted:I am not a lawyer, etc., but I've heard that documenting your intent to use bankruptcy to avoid the downside of a speculative investment can be all that the government needs to pursue you for charges. You are not supposed to take on debt you know you can't afford to pay out in full. The exception being if you are noted superinvestor Casey Serin, in which case you can spend several years live blogging your mortgage fraud, hit the talk show circuit, live blog your corporate fraud, spend another year live blogging your bankruptcy fraud, and then move to Hawaii none the worse for wear. (not mentioned, fleeing to Australia, living in a van, panning for gold in a dry stream, dressing up like a pirate, accidentally posing for a twink porn photographer, trying to sell Circus Circus, attempting to create a despotic island nation, leaving parents homeless).
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Nov 13, 2012 20:18
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So my painter was doing baseboard in my guest bedroom and revealed a carpenter ant colony. Luckily my girlfriend had some heavy-duty pest poison on hand (a big handled jug with a little hose attached to a shower head-like gun) which killed them all instantly. About 300 in total erupted into the room once that old baseboard came up. We killed the queen, several, I forget what they're called ... the ones that go off and build new colonies, and a few hundred other assorted little bastards. Some had wings and some were like a half an inch or more long. No more came out after we poisoned the lot and vacuumed them all up and the new molding is covering it back up. Didn't look like they had really eaten much, and until that point we hadn't spotted an ant in the entire place in nearly over a month now. I'm wondering if they came from the trees in my backyard or maybe even the decking outside, or if the cold has something to do with it. I hope they came in through that crack I posted earlier in the thread about sealing up as opposed to finding some permeable entryway through my siding/wood. The exterminator came out and quoted me $187.50 to spray 30-45 day effect poison along all my walls and in my back yard around my decks and some trees. He said that should do the trick and I might have to have them come out every two or three years to do that. My girlfriend and I are looking into a more permanent solution so they don't do any (more?) damage to the house. On the bright side my entire first floor was painted (sans bathroom) for $1,000, and the guy installed four light fixtures, a TV mount and did several instances of plaster patching/touch ups, not to mention hanging three sets of curtains and three sets of blinds, and he painted my outlet covers and vents. Also took those old light fixtures and two old chairs away.
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Nov 14, 2012 01:02
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ANGRY TEEN posted:
We have a similar issue in our house. Carpenter ants are eating one of the walls - though they've disappeared with the cold weather. Our contractor recommended gutting and replacing all wood that's even remotely rotted/soft or water damaged in the area of infestation, and spraying at least once a year around the perimeter of the house. He also recommended getting rid of all plants, trees and bushes that are within 3 feet of the house, since they'll prevent the house from drying sufficiently after rains - and can be a great cover for bugs to find weaknesses.
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Nov 14, 2012 03:11
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tiananman posted:We have a similar issue in our house. Carpenter ants are eating one of the walls - though they've disappeared with the cold weather. Our contractor recommended gutting and replacing all wood that's even remotely rotted/soft or water damaged in the area of infestation, and spraying at least once a year around the perimeter of the house. This is sage advice. They thrive off wet wood, and will most likely come back if its not removed. Also walk around the exterior and make sure you have adequate clearance between bottom of sheathing and any dirt (or concrete/pavers, for other reasons). Also why was your painter removing baseboard to paint?
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Nov 14, 2012 06:24
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We happened to be in the same building as our Realtor's office last night and noticed she was in, so we stopped by to say hello. The next thing we knew, we were initialing a crap-ton of paperwork and submitting an offer on a house we looked at last week. I just got word they accepted our offer. OH CRAP OH CRAP OH CRAP HOW DO YOU PEOPLE DO THIS?! $10k less than current asking, $43k less than initial asking, $71k less than appraised. And mortgages set a new low today. Please, God, let us have bought at the bottom.
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Nov 15, 2012 01:10
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Advent Horizon posted:We happened to be in the same building as our Realtor's office last night and noticed she was in, so we stopped by to say hello. Congrats! Welcome to our neurotic club. Now...try not to worry about the market. It only matters when you sell or re-fi or if it tanks so much the bank decides to foreclose on you. I hope your new appraisal comes in where you think it will because if so, that's equity! Time for paperwork. I hope you like signing your full name including spelling out your middle name 1,000 times. Edit: Oh yeah and now that you've bought - DO NEVER SELL!
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Nov 15, 2012 01:33
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Spamtron7000 posted:Congrats! Welcome to our neurotic club.
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Nov 15, 2012 01:51
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My parents bought a 2 year old house at the bottom of the last crash (1987) for slightly over half what it sold for new. They paid it off and still live there, but also now have a condo in the Carribean. I'm modeling my real estate plans on that. It seems to work well.
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Nov 15, 2012 01:53
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Spamtron7000 posted:Time for paperwork. I hope you like signing your full name including spelling out your middle name 1,000 times. When I closed, I kept a scrap paper and tallied up everything I signed just for shits and giggles. Paper stack: ~1.5 inches Initials: 23 Legal signatures: 83 Full name signatures: 18 (NY is retarded and requires some signatures to match 100% what's on your birth certificate) Took me almost two hours to read through that pile, and I'll admit, by the end I was starting to skim instead of read+comprehend every single word. Good thing I brought my wrist brace for going to work afterward.
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Nov 15, 2012 17:12
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JimTheSarcastic posted:What? First of all, how would the bank foreclose if you're making payments? Second, why would the bank foreclose if you're making payments, and the house is worth way less? Did I misunderstand you? I researched it and you're right. My father told me he had a business property that was foreclosed on in the early 90's even though he was current on payments. Had to do with the value of the property going too far below the loan principal. Either laws have changed, there are different rules for homes vs. business or he's full of poo poo. My money is on #3.
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Nov 15, 2012 18:17
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Elephanthead posted:Can I file bankruptcy and get my basis forgiven on my investment account if things go bad? Housing leverage can be insane if you are willing to put only 3% down. If you get to far under water stick the government with the bill. In seven years you can buy another and roll the dice again. You can only lose by paying your mortgage too long. "So bankruptcy court is going to discharge your debts for you when you're still solvent. There are no downsides to having no access to credit for X amount of years after filing bankruptcy." You actually believe these statements? Or is this some kind of armchair financial advice that you heard about from some random dude talking about on the radio? Admiral101 fucked around with this message at 18:53 on Nov 15, 2012 |
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Nov 15, 2012 18:48
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Advent Horizon posted:We happened to be in the same building as our Realtor's office last night and noticed she was in, so we stopped by to say hello. Congratulations, I'm about to get my pre qual soon. With the way Juneau is, anything livable is insanely expensive. I'm starting bottom of the barrel with a $170k condo in Douglas and praying I can get something good, cheap, and with low HOA dues. Any advice for my poor delusional soul? You mentioned the banks could give you $700k, my previous meeting the bank wanted to give us $280k or more and I thought holy hell how do they expect me to pay that off? $280k is enough money to dig my own grave.
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Nov 16, 2012 04:20
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Holy Hell, I didn't expect somebody local in this thread. We started at AlaskaUSA, they gave us that stupid huge number. We have since learned that they are having major issues and not to trust a drat thing their mortgage department says. We're probably going to go with Residential Mortgage, if only because they seem to have a few more tricks up their sleeve to get our payments down and otherwise charge similar fees (we also learned AlaskaUSA title company charges $100 more than anybody else for the exact same service). We honestly haven't even looked at the condos in Douglas so I can't help you there. But if you can afford a 1 bedroom apartment in this town you can afford a $300k house. A $300k house would actually have a slightly lower P&I payment than our shithole's rent. I'd really, really try to get into something where you own all four wallsand the roof. If you haven't already, take the AHFC class. It's free, just do it. I don't know if you've talked to any Realtors yet, but I'd be willing to give my opinions of a few over PM. At least of the companies in town. Related scary story: a woman in my office owns half of a duplex in the valley. There were corners cut in construction and the other side has issues with water pooling in the garage against the shared wall. Now it's molding, and the mold is coming through to her side. The damages are clearly the responsibility of the owner of the other half, but she obviously doesn't want to pay. Now they lady in my office has no choice but to sue the owner of the other half of her house. This is why I want no part of anything with shared bits.
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Nov 16, 2012 04:51
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Second-time homeowners, closed in early October. Took a couple weeks to paint before moving in, so we've lived here just under three weeks. Just found that all the ducts under half the house are in terrible shape, way too-long runs with tons of twists and turns, leaky joints, and a few runs that weren't even connected properly - a fact missed by the inspector. $7000 of repairs not even one month in. Do never buy.
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Nov 16, 2012 15:31
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Reggie Died posted:This is sage advice. They thrive off wet wood, and will most likely come back if its not removed. My painter does all kinds of poo poo. He's more of a general handyman, but painting is his specialty. So should I remove the aluminum siding near that wall and have a look underneath it from the outside, or have a look down the wall from the attic? alucinor posted:$7000 of repairs not even one month in. Do never buy. Wow, lovely inspectors are apparently a pervasive problem. Get more quotes.
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Nov 16, 2012 18:31
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Are there inspectors that aren't lovely? Every single repair I've made since I moved in three years ago plus a bunch of stuff that could really use some work is related to something the inspector should have noticed. Instead he spent all his effort finding completely trivial stuff. 'This faucet rotates too far!! No I don't see that major roof leak, what do you mean. And you shouldn't worry about the fact that your new 2" PVC kitchen sink drain runs uphill and empties into a rusting 1.25" drain from 1945.'
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Nov 16, 2012 18:52
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Eh, they aren't all terrible. My inspector was a working contractor, the inspection took 2 hours for a 1600sqf space and then he spent a solid half hour going over the report with me and answering questions. He found no major problems, only a small amount of minor ones. In 2 and half years now, we have had no major problems. I felt he was thorough and did a good job explaining the limitations of his report and basically everything in it has been accurate. So, they aren't all bad.
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Nov 16, 2012 19:55
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emocrat posted:Eh, they aren't all terrible. My inspector was a working contractor, the inspection took 2 hours for a 1600sqf space and then he spent a solid half hour going over the report with me and answering questions. He found no major problems, only a small amount of minor ones. In 2 and half years now, we have had no major problems. I felt he was thorough and did a good job explaining the limitations of his report and basically everything in it has been accurate. If he found no major problems I don't think he deserves very much credit if that was because the house didn't actually have any. Stories of inspectors saying "oh god run" seem to be thin on the ground.
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Nov 17, 2012 16:02
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sanchez posted:If he found no major problems I don't think he deserves very much credit if that was because the house didn't actually have any. The problem is, inspectors really can't do too much digging during a general inspection. Our guy explained that he wasn't allowed to put any holes in walls, or do anything that would be permanent to the house. Unfortunately, that's probably a constraint that handicaps even the best of inspectors - especially if you get an unscrupulous homeowner that can literally sweep problems under the carpet over the short term. The house we bought was built in 1990, so it basically wasn't possible for there to be too many problems. He basically looked at the biggest ticket items (roof, foundation, heating, plumbing, wiring) and made sure as best he could that they were in working order. He found several big problems that I wouldn't have noticed until like, a wall caved in, so I think it was worth the $500 in our case. He came recommended from our realtor and a friend who just bought a house a few months before us. A good realtor should know good inspectors.
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Nov 17, 2012 19:34
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slap me silly posted:Are there inspectors that aren't lovely? Every single repair I've made since I moved in three years ago plus a bunch of stuff that could really use some work is related to something the inspector should have noticed. Instead he spent all his effort finding completely trivial stuff. 'This faucet rotates too far!! No I don't see that major roof leak, what do you mean. And you shouldn't worry about the fact that your new 2" PVC kitchen sink drain runs uphill and empties into a rusting 1.25" drain from 1945.' I think the trick is to use your own inspector. The things we learn the hard way (I have a spigot in the back that floods my basement, thanks for testing that buddy!).
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Nov 18, 2012 01:10
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Question: I'm frantically saving so I can put a down payment on a place, and I've got 14K in a 401K that I'd like to use towards my first home purchase. Normally, I wouldn't touch the 401K, but since it's not got THAT much money in it, and I need to move sooner than I thought, and since I can replenish it within 3 months, would it be okay to borrow against? Is there a limit as to how much I can withdraw?
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Nov 18, 2012 21:05
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The issue isn't so much the 401k as it is the fact that you will be wiping out your savings for the down payment, plus you are buying under time pressure. Both of those are very bad ideas, look at the posts above this one for examples of unexpected costs that come up right after you buy. If you have to move 'right away' you absolutely shouldn't buy, the best position to be in is the one where you are mentally and financially prepared to walk away on closing day, because issues can and do crop up at the last minute. Rent a place out for a year, build up more savings, and do a long-term search for a house you are willing to spend at least a decade in.
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Nov 18, 2012 21:52
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Mandals posted:Question: I'm frantically saving so I can put a down payment on a place, and I've got 14K in a 401K that I'd like to use towards my first home purchase. You have to realize that your retirement savings and your "other expense" savings have to have a very serious firewall between them. I don't think anyone could blame you for tapping your 401k if you had a serious emergency expense that you couldn't afford any other way - but if you can't make the effort to save for retirement now - then when will you? The fact that your retirement savings is admittedly meager should not be a solace for you to dip into it. It should be a reason to bulk it up.
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Nov 18, 2012 22:25
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Mandals posted:Question: I'm frantically saving so I can put a down payment on a place, and I've got 14K in a 401K that I'd like to use towards my first home purchase. I thought of doing this too, but my financial guy dashed my hopes by reminding me that if I want to take any money out, it'd be subject to a 10% fee as well as taxes. So I decided to look elsewhere for down payment money.
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Nov 18, 2012 22:29
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Rats. Well, I've got until March 31 to have closed on a place, and I can extend my current lease for a month or two after. So looks like I'll just have to do this the old fashioned way and save up the 30K down payment.
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Nov 18, 2012 22:36
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Mandals posted:Rats. Well, I've got until March 31 to have closed on a place, and I can extend my current lease for a month or two after. So looks like I'll just have to do this the old fashioned way and save up the 30K down payment. It would be a little different if you had like 100k in your 401k. And you said, "hey, i'm really close to having a 20% down payment. Does it make sense to take out 10 grand to make that happen?" then you might have a dilemma.
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Nov 18, 2012 22:40
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Mandals posted:Rats. Well, I've got until March 31 to have closed on a place, and I can extend my current lease for a month or two after. So looks like I'll just have to do this the old fashioned way and save up the 30K down payment. Why can't you get an FHA loan? Paying for Mortgage insurance isn't ideal but neither is raiding your 401k.
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Nov 18, 2012 23:52
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I'm going to get torn a new one for this, but I agree that you might look into the mortgage insurance/FHA route. Running our numbers, with current interest rates, it makes more sense for us to put down as little as possible (but pre-paying the mortgage insurance) and invest the rest of our down payment funds than to dump it all in at once. BUT, this is all based on the idea that we plan to stay in one place until it's paid off. If you can't say that, DO NOT BUY. If you're under a deadline to move it sounds like your life isn't exactly settled down yet. If that's the case you shouldn't even be thinking about buying.
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Nov 19, 2012 01:08
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