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I was paying $1350 for a 900 sq ft two bedroom one bath apartment. I'm in the process of buying a house for just under 200K, and since I qualify for a VA loan I didn't have to have a down payment and I don't have to pay PMI. My rate ended up being 4.25%, with taxes the monthly mortgage is around $960. It doesn't take long to come out ahead given how expensive renting is here.
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Aug 8, 2013 17:51
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_areaman posted:Ignoring the money situation, the quality of life issues are enormous. As a renter you are discouraged from ever improving the unit, you may get stuck with crappy appliances, you may be forced to move after your lease, your payments can change on a yearly basis, and you never feel attached to the property in a meaningful way. Constant struggles with your landlord to fix things, repairs are half-assed, and no one really cares. As a renter you are by definition just passing through. For some people, this is the life they want to live. Personally, I enjoy owning my property and doing whatever I want with it. I have spent thousands improving it and it is the nicest home I have ever had. moana fucked around with this message at 18:39 on Aug 8, 2013 |
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Aug 8, 2013 17:58
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sbaldrick posted:The only reason we bought our house is because buying for us was cheaper then renting a place with the same features. It was only cheaper because it's a new build with a magically pay 1250 a month all in for the first 5 years deal when after that it will jump to around 1600 hundred which is what rent would be on the same place. Our first SFH purchase will likely be a next 15-20 years type of thing, and we are taking some time to do it right. gvibes fucked around with this message at 18:08 on Aug 8, 2013 |
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Aug 8, 2013 18:01
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100 HOGS AGREE posted:I like the general advice of this thread which seems to be: There are plenty of reasons to own a home, an investment is not one of them. I think the general advice of this thread should more be to question everything, don't take things at face value, don't feel pressured into doing something you're not comfortable with, look deep into every financial aspect of purchasing, and then make your decision. Owning a home as an investment is a completely valid reason to own a home if the situation is right. Will that be the situation for most people? Probably not, but for some it could be. I reserved a condo in central Austin that was just beginning construction 6 months ago by putting 5% down on it. I just moved into it and now units with the same floorplan are selling for 60k more than what I purchased my place for. The community is still under construction also so when everything is finished and with the way central Austin housing is going, I would be surprised if they aren't selling for another 50k 6 months from now - especially since almost all of the units are under contract now. There is literally no other projects in this part of the city that will be like this one anytime soon -> 4 acres of park in it, an amphitheater, community garden, 2 dog parks, etc because there is not the land for it and most developers are about squeezing in as many properties on a plot of land as possible. The downside is that it is not my dream house. It is smaller than what I would eventually like, and I also plan to move out to the west coast at some point. I bought a place I'll enjoy living at over continued renting, but it is mainly a financial decision for me. I view it as an investment. I very well might be able to double (or better) my 20% downpayment in 2 years, and I doubt I would ever get returns like that leaving my money in mutual funds instead of going towards this property. It will also be cheaper than renting a similar quality place due to the tax breaks I'll be now eligible for. It being a brand new construction with top of the line building materials used also negates a lot of risk associated with buying a house with such a short time horizon on selling it. I've rented for the last 4 years and made a huge effort to save up so I definitely don't have a problem with renting over buying. There are downsides to both. Austin is kind of a unique place. So is Boston and SF and the list goes on. A lot of people live in these places, though, so telling someone that they shouldn't view a real estate purchase as an investment under any circumstances is not the best advice. Boola fucked around with this message at 18:15 on Aug 8, 2013 |
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Aug 8, 2013 18:08
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Boola posted:Austin is kind of a unique place. So is Boston and SF and the list goes on. A lot of people live in these places, though, so telling someone that they shouldn't view a real estate purchase as an investment under any circumstances is not the best advice. I strongly disagree. There are many examples of people who did make money from investment in real estate, but owning a house solely for the purpose of real estate seems like a terrible way to put all of your money into something that is really risky. There are ways to play in the real estate market that don't involve owning a house.
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Aug 8, 2013 18:14
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ntan1 posted:I strongly disagree. There are many examples of people who did make money from investment in real estate, but owning a house solely for the purpose of real estate seems like a terrible way to put all of your money into something that is really risky. There are ways to play in the real estate market that don't involve owning a house. Well, I'm not putting all of my money into it. I'm putting about half of my liquid assets into it and not touching my retirement funds. I agree that someone going all in on a property as an investment is not the smartest move. A diversified portfolio is always a good idea. I also shouldn't compare Boston or any other place to where I live. Houses here are still very affordable so there's a lot less upfront cost, the job market is strong, and 30-40,000 people are moving here every year. There's also a big different between buying a place 1 mile from downtown in an established neighborhood and buying in the suburbs.
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Aug 8, 2013 18:21
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moana posted:You sounds really condescending towards renters, and I think it's a pretty lovely attitude to have, financial issues aside. Don't you miss being 24 and knowing everything?
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Aug 8, 2013 18:25
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ntan1 posted:I strongly disagree. There are many examples of people who did make money from investment in real estate, but owning a house solely for the purpose of real estate seems like a terrible way to put all of your money into something that is really risky. There are ways to play in the real estate market that don't involve owning a house.
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Aug 8, 2013 18:28
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Renting a home can suck, buying an apartment (condo, whatever) can suck. Buying homes can be pretty good, renting an apartment/condo can be pretty good.
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Aug 8, 2013 18:39
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tiananman posted:You're forgetting taxes ($5k) and heating costs ($3k+) - which were covered when we rented, as well as another dozen regular repairs I can't remember off the top of my head. Awesome view btw, congrats. 
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Aug 8, 2013 18:54
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Boola posted:Austin is kind of a unique place. So is Boston and SF and the list goes on. A lot of people live in these places, though, so telling someone that they shouldn't view a real estate purchase as an investment under any circumstances is not the best advice. What's an investment? Seriously, I'd love to hear your definition. Every 5th page in this thread someone has said something similar to "buying a house isn't always a bad investment" - in spite of the preponderance of evidence to the contrary. But no one is talking about being a real estate investor - they're talking about buying a house with a mortgage to live in for an extended period of time - and somehow "coming out ahead" on the deal. The successful real estate investors I know don't use any debt or leverage. They buy real estate when it's cheap with cash, hire a contractor to make necessary repairs and then sell or rent for either a short term capital gain or long term cash flow. But then there are people in this thread who seem to be hinting at some other, 3rd type of investment - the one where you go into HUGE amounts of debt, pay interest for 10, 20 or 30 years, pay taxes, pay insurance, make ongoing repairs and improvements, and somehow come out of the deal richer for it. One of the major purposes of this thread is to dispel this myth - but it won't die!
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Aug 8, 2013 18:59
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NJ Deac posted:Our appraisal came back today for our closing in two weeks. $11k short of our purchase price! While it's not a huge percentage of the purchase price and we should be able to cover a discrepancy if the appraiser didn't gently caress up (it's likely that he did), it's going to be annoying dealing with this at the very least. Moral of the story? DO NEVER BUY. If he didn't, do you have a clause that allows you to renegotiate if it comes in under? I wouldn't typically advocate for buying a house at above what an appraiser would value it at...
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Aug 8, 2013 19:19
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Robo-Pope posted:If he didn't, do you have a clause that allows you to renegotiate if it comes in under? I wouldn't typically advocate for buying a house at above what an appraiser would value it at... Many (all?) lenders won't let you buy for more than the appraisal. It's great leverage for the buyer when the appraisal comes in low.
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Aug 8, 2013 19:28
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tiananman posted:What's an investment? Seriously, I'd love to hear your definition. Putting money into something with the hope of it increasing in value. That's the definition of an investment. I'm only looking to keep it for a little over 2 years. Why 2 years? That's the time horizon I'm looking at for moving to a different part of the country and it also lets me not pay capital gains taxes on any profit. It is not a guarantee that it'll make money or break even after all costs are considered, but that's pretty normal for an investment. There'll be risk. I considered all of the options and think that the risk of not making money on selling it in 2-3 years in my market are pretty low, but there is a possibility that will happen. It has the added benefit of being in a nicer and bigger place to live in the meantime over renting here. It can be both a place to live and an investment. I'm not saying people should view it this way a majority of the time. I'm saying I'm viewing it that way and there is no myth to be dispelled in my case.
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Aug 8, 2013 19:48
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I don't like to think of an owner-occupied property as an "investment", more of a "piggy bank that you can live inside." You spend some amount of money on shelter and housing each month, either renting or owning. When you own a house, some portion of what you spend each month goes into paying down principal or building equity, which feeds the piggy bank. When it comes time to sell the house and smash your piggy, you might find a pile of cash or you might find a bunch of I.O.U.s inside. Another way to think of it is building equity is like getting a rebate on your housing costs each month. But you don't know for sure how much that rebate is worth. And it's possible that it could be pennies. Then everyone disagrees about how much that "rebate" is worth, and swap anecdotes. I see owning is not as much a "wealth generating" vehicle, more of a "wealth preservation" instrument. And even then, it isn't without risk and doesn't always work.
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Aug 8, 2013 19:49
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Boola posted:I'm only looking to keep it for a little over 2 years. Why 2 years? That's the time horizon I'm looking at for moving to a different part of the country and it also lets me not pay capital gains taxes on any profit.
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Aug 8, 2013 19:53
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gvibes posted:You need insane appreciation to make money over a two year period. You may get lucky, but 98% of people who flip in a two year span will lose money versus renting. I locked in a price of 300k and condo units with the same floorplans here (and without the views of downtown mine has) are now selling for 360k. If it doesn't appreciate at all over the next 2 years, I should still come out slightly ahead when I sell it. This area is going up 8-10% a year, and I could see this property outperforming that appreciation rate. There is a possibility that the housing market here crashes, but I believe that risk to be low. Even during the recession, prices just kind of stayed the same for a year or two here. I like the piggy bank analogy canyoneer just made. I might find a bunch of IOUs in 2-3 years when I want to sell it, but I made this decision with the best knowledge/research I could get and feel as comfortable as I can going into something like this. My whole point is that there is no hard and fast rule for real estate that applies to everyone across the entire country. I'd rather take my 60k downpayment and put it into this property than leave it in mutual funds for the next several years when I'd then be able to buy a place I plan on staying in long term.
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Aug 8, 2013 20:03
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Boola posted:Putting money into something with the hope of it increasing in value. That's the definition of an investment. You're exactly right: that is the popular and utterly useless definition of an investment that most people use. But in the world of finance, an investment has a very specific definition. It's not just any old asset that you "hope" will increase in value. In fact, it's funny that you mention value, because value investors understand the fundamental difference between value and price. The value of a business or a venture is relatively static. They come up with different rules or metrics to decide what a fair price is to pay for that value - understanding that it's foolish to expect a HUGE increase in that value over a given time frame. They assume, in order to give themselves a margin of safety - that the investment's value will not change much - and then they come up with a price they'd pay for that value. But in the case of a house - you MUST realize that its value depreciates instantly and constantly. It costs money to keep the value at par. That makes it an especially speculative investment asset. You'd have to believe that either the price you initially pay is especially low, or that for some other reason the price will significantly rise over the period of ownership - or both. Compare and contrast your housing investment with other investments - like owning blue chip stocks, AAA rated bonds - and you begin to see that buying a house is a terrible investment. What other investment COSTS money to maintain? What other investment do you have to pay taxes on while you own it? What other investment requires you to buy insurance on? What other investment do you go into huge amounts of debt to buy? People look at how much housing prices go up - but the real estate market can't hold a candle to real investments. Average home prices went from about $25k in 1968 to $225k in 2006. That's a 9-fold gain in 40 years. Compare that to the Dow - when stocks went from 800 to 14,000 - a 17-fold gain - and that's not even looking at taxes, interest payments, repairs and other costs associated with owning a home - which again, I'll repeat - will at least keep pace with price appreciation in most cases. It's not even close. Own a home for any other reason in the world - but STOP calling it an investment.
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Aug 8, 2013 20:33
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I think it's easy for most people to not make the investment connection because "it goes up in value and I need to pay rent anyways, right"? It's difficult for most to really figure out the true cost because that obfuscates it a lot. To me owning is about doing what I want to do with the space I live in, without having to seek permission from my landlord. Anything else is a bonus.
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Aug 8, 2013 20:37
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tiananman posted:Own a home for any other reason in the world - but STOP calling it an investment. No thanks. You didn't read my post or don't understand my situation. Buying for the vast majority of people should not be viewed as an investment. For me, it is.
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Aug 8, 2013 20:52
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Boola posted:No thanks. You didn't read my post or don't understand my situation. Buying for the vast majority of people should not be viewed as an investment. For me, it is. You're kidding yourself. Even a realtor wouldn't tell you that a two year holding period is a good financial move - but you've guzzled the kool aid.
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Aug 8, 2013 20:56
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tiananman posted:You're kidding yourself. Even a realtor wouldn't tell you that a two year holding period is a good financial move - but you've guzzled the kool aid. If I sold it today, I'd make 25k in profit after the initial closing costs and selling fees are taken into account. That's a 41% return on my down payment in 6 months. I think I'll be alright.
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Aug 8, 2013 21:03
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Boola posted:If I sold it today, I'd make 25k in profit after the initial closing costs and selling fees are taken into account. That's a 41% return on my down payment in 6 months. I think I'll be alright. Another way to look at it: it would only take a ~15% hiccup in your housing market to wipe out all of your equity.
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Aug 8, 2013 21:08
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Boola posted:If I sold it today, I'd make 25k in profit after the initial closing costs and selling fees are taken into account. That's a 41% return on my down payment in 6 months. I think I'll be alright.
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Aug 8, 2013 21:11
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tiananman posted:Another way to look at it: it would only take a ~15% hiccup in your housing market to wipe out all of your equity. Very true. I agree with you there. There is risk. I went into the buying process knowing that it existed. I believe the risk is very low in the short term, but it is still there. My 60k downpayment could also loose value if it was still in mutual funds, but I then wouldn't be on the hook for a 240k mortgage. On the other side, leaving it in mutual funds was very unlikely to yield me the turns I hope to get on this property.
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Aug 8, 2013 21:12
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Boola posted:leaving it in mutual funds was very unlikely to yield me the turns I hope to get on this property. Over the long term, that's completely wrong. The stock market vastly outperforms real estate on average.
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Aug 8, 2013 21:15
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gvibes posted:Taxes? Maintenance? Mortgage interest? Lost income on the 60k dollars (which, if we are playing the what-if game, would have grown 19% on the year if invested in the S&P 500 index)? Well, I only put 5% down to reserve the unit until just recently when I forked over the full 20%. So it would have been 19% returns on 15k; but yes, I lost out on that profit. I'll also miss out on future gains or losses in the stock market on that amount. My taxes right now are minimal since the tax assessor only has the property valued at 20k right now (they do assessments in January). Next year they'll be significant, though. That and the mortgage interest I'll get 28% back on at the end of the year on my tax return, and I would have paid those amounts in rent indirectly. Maintenance should be minimal, but there is risk there too - even with a new place. tiananman posted:Over the long term, that's completely wrong. The stock market vastly outperforms real estate on average. Again, I'm only planning on holding for 2-3 years. I agree that over the long term the stock market usually gets better returns.
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Aug 8, 2013 21:17
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tiananman posted:Compare and contrast your housing investment with other investments - like owning blue chip stocks, AAA rated bonds - and you begin to see that buying a house is a terrible investment. What other investment COSTS money to maintain? What other investment do you have to pay taxes on while you own it? What other investment requires you to buy insurance on? What other investment do you go into huge amounts of debt to buy? Like I was trying to explain several posts ago all the things you're calling "losses" just end up being what you paid to live in the house for the time you were there (your "rent"), IF you sell for no profit or loss. Your mortgage interest, repairs and taxes probably don't come anywhere close to what you would pay to rent a similar place over the long term (provided you live there long enough to take a bite of the principal), so there will probably be a buffer where you do come out ahead compared to renting even if you sell at a bit of a loss. I invested $39k of an inheritance in an S&P 500 fund in 2004 or 2005. In 2009 it was worth $26k or something, when I sold it a month ago to make my down payment it was worth $42k. The houses in the area I'm buying are similarly just now eclipsing their pre-2008 values much like my index fund. I wasn't in a position to own a house 9 years ago, but if I had been and I had bought the same house, it wouldn't have hurt my finances any more than my index fund did over the last 9 years. I dont know what the interest rate was in 2005 but it's entirely conceivable that I've paid more in rent in the last 9 years than I would have paid in interest, repairs and property taxes on that house, and I wouldn't have to pay any capital gains if I sold the house for profit last month like I will on my index fund. I also could have deducted all the mortgage interest on my income taxes over that time.
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Aug 8, 2013 21:23
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tiananman posted:You're kidding yourself. Even a realtor wouldn't tell you that a two year holding period is a good financial move - but you've guzzled the kool aid. Austin is really loving bonkers right now, housing flippers are making a killing. There are some anomalous markets that are going crazy right now, and its the equivalent of riding up a stock in a short squeeze or something similar. When it breaks, there are going to be a lot of people left holding the bag. There are people building in a new development my parents have bought in who are selling a house 3 months after they moved into it for $70k over what they paid for it. This is waaay more like gambling on penny stocks or even in a casino than investing though.
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Aug 8, 2013 21:32
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tiananman posted:Many (all?) lenders won't let you buy for more than the appraisal. It's great leverage for the buyer when the appraisal comes in low. AFAIK, they don't give a poo poo if you buy for more than the appraisal; they just aren't going to lend you more than 80% of the appraised value.
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Aug 8, 2013 21:38
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I can't really rationalize my house as an 'investment.' I have a lot of investments that earn me tangible returns, and I can't put the place where I sleep and poo poo in the same pigeonhole. As far as I'm concerned, there are two major long-term financial edges to owning, and that's why I own:
Really, the ability to deduct mortgage interest is icing on the cake. CatsOnTheInternet fucked around with this message at 22:04 on Aug 8, 2013 |
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Aug 8, 2013 21:51
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tiananman posted:Over the long term, that's completely wrong. The stock market vastly outperforms real estate on average. This I will call into question. Real Estate, when for the purposes of investing only (to make this simple, let's exclude all cases where you are expecting to live in the house your purchase) actually may have similar returns to the stock market, but carries similar risks. There is some historical evidence that the current rate of stock market increases over the long term may be unsustainable, and that a real average rate should be 5% post inflation also. However, the Real Estate market behaves differently from the stock market. That being said, buying a house that you do not want to live in is again not the right way to invest in real estate. Boola posted:My 60k downpayment could also loose value if it was still in mutual funds, but I then wouldn't be on the hook for a 240k mortgage. On the other side, leaving it in mutual funds was very unlikely to yield me the turns I hope to get on this property. Over the long term, invested in the right set of index mutual funds, there is a strong expectation that you will not lose money, with acceptable variance (standard deviation). There is no expectation of this for a single house. This is the main point that tiananman keeps trying to tell you. We call what you are doing gambling. ntan1 fucked around with this message at 22:17 on Aug 8, 2013 |
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Aug 8, 2013 22:06
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Zhentar posted:AFAIK, they don't give a poo poo if you buy for more than the appraisal; they just aren't going to lend you more than 80% of the appraised value. I assumed that as well, but my lender was clear that they wouldn't lend me any money at all to pay more than the house appraised for. I was told the only option for me to buy the house if the appraisal came in lower than my offer was to have the seller lower the sale price. Which actually would have been pretty easy to do with the weird new Due Diligence rules in NC. I got the appraisal done right after I was happy with the house inspection, while I could still have walked away "for any or no reason at all." Making the seller lower the sale price to the appraisal would have been easy, I'm pretty sure the next potential buyer would get to see the appraisal if I released it to the seller.
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Aug 8, 2013 23:41
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tiananman posted:Over the long term, that's completely wrong. The stock market vastly outperforms real estate on average.
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Aug 9, 2013 00:12
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wixard posted:I assumed that as well, but my lender was clear that they wouldn't lend me any money at all to pay more than the house appraised for. I was told the only option for me to buy the house if the appraisal came in lower than my offer was to have the seller lower the sale price. That's weird that they would refuse to lend at all if the purchase price was more than the appraisal, since allowed loan amount is based on the lesser of those 2 figures. We just require that the borrower sign a letter acknowledging that they are purchasing for above the appraised value.
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Aug 9, 2013 00:14
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tiananman posted:I'd argue the opposite: it is rare and thus a little bit insane to expect to "come out ahead." Renters trade cash for flexibility.
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Aug 9, 2013 00:16
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Dik Hz posted:You're wrong. For renting to come out ahead long term (ignoring transacational costs) of buying a house, there would have to be someone out there willing to buy the house and rent it to you at a cheaper price than the total cost of ownership. Renting assumes that you'll take that cash and put into the long term retirement instead.
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Aug 9, 2013 01:45
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tiananman posted:Over the long term, that's completely wrong. The stock market vastly outperforms real estate on average. The average doesn't matter much when his sample size is 1 specific house that seems to be in a really good financial setup. You're misusing statistics terribly.
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Aug 9, 2013 09:25
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Rekinom posted:The average doesn't matter much when his sample size is 1 specific house that seems to be in a really good financial setup. You're misusing statistics terribly. He's not. You assumed that the specific house was in really good financial setup. However, markets and history tell us that's not always the case.
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Aug 9, 2013 09:57
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ntan1 posted:Renting assumes that you'll take that cash and put into the long term retirement instead.
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Aug 9, 2013 12:27
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