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Baddog posted:lol, but I want to probe this, so bad Based on my experience in Somerville, in all likelihood there’s still no insulation in the walls, there’s still asbestos siding, the floor is falling into the basement, and the basement walls are still collapsing. Nobody who buys there lives there. They just flip badly and cheaply and then rent rooms to college kids for like $2.5k a month.
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Sep 20, 2023 18:47
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Baddog posted:Yah, that was sort of my point back there, the 20x leverage on my initial just 5% down enables these massive returns (as long as housing prices keep going up, but our whole political system is engaged in making sure that happens). I have similar warnings about trying to time a market. Any market.
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Sep 20, 2023 18:48
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hobbez posted:What about that after you pay off your mortgage you save possibly 10-20 years of rent if you’re free and clear That is your reward for taking the risk and holding an asset instead of cashing out on it. I’m just against the blanket statement of “I bought for $140k, sold for $310k, I made $150k”. You spent significantly more than $310k to pay of your leverage, and to buy, sell, and maintain the asset. Those are real costs that exist, and people delude themselves into thinking they don’t. I’m acutely aware rent paid is a factor. But just like any investment, if you sit on an investment for 50 years you’re going to see a huge return. Especially on an asset that has actual use. Baddog posted:lol, but I want to probe this, so bad You’re comparing a $10k asset vs whatever that house’s purchase price was, which aren’t equivalent. If that home was a $100k home, try running the numbers again with $100k investment in S&P. Assuming you put down 10%, 10% of the homes value is just about exactly what the market would have returned. If you could leverage S&P 500 at the same X factor you could a home, with a required hold time of 30 years, you would absolutely make out better than a home by an giant factor. In fact, that’s basically what your 401k is only worse because you have to build it up rather than just starting at its max value. Pilfered Pallbearers fucked around with this message at 19:09 on Sep 20, 2023 |
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Sep 20, 2023 19:06
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Pilfered Pallbearers posted:You’re comparing a $10k asset vs whatever that house’s purchase price was, which aren’t equivalent. If that home was a $100k home, try running the numbers again with $100k investment in S&P. No, you generally look at your returns on cash, especially in real estate. Put up $100k on a house that costs $500k and sell it the next year for $550k, and your IRR is legitimately 50% (with the caveats being transaction fees, taxes, etc). Put another way you're looking at RoA instead of RoE, but it's the RoE an investor cares about. Leverage is fun.
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Sep 20, 2023 19:32
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I think there is a lot of talking past each other on this tangent. But *my* point is basically that at least for your residence, owning is almost always a good thing. As long as you are fairly sure you will be there for ~5 years (so that you aren't eaten up by the commissions and other fees, and risk too much short term variance), and you aren't buying in an area that people are absolutely fleeing. Probably a few more caveats in there (how responsible are you?) But in general, I think encouraging people to buy a house, without being a complete dumbass about the purchase, shouldn't be very contentious in this thread. The system is just set up to subsidize home ownership. As well as propping up the prices. (I can and have done spreadsheets running out buy vs rent / other returns, factoring in *all* the variables under various scenarios, but I'm not sure we really need to get that deep into it here? Bottom line is that I do not own multiple properties. But if I was more of a dickhole, instead of a tender hearted softy.... ) Pilfered Pallbearers posted:If you could leverage S&P 500 at the same X factor you could a home But you can't! At least most of us can't. The decision ~30 years ago was exactly "10K into the market and keep renting, or 10K into a house". Not 10K to buy a 200K house or 10K to buy 200k of SPY.
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Sep 20, 2023 19:38
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Agronox posted:No, you generally look at your returns on cash, especially in real estate. Put up $100k on a house that costs $500k and sell it the next year for $550k, and your IRR is legitimately 50% (with the caveats being transaction fees, taxes, etc). No? You just argued the same thing you quoted with different terminology.
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Sep 20, 2023 19:39
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most people make payments on a mortgage, looking at the down payment isolated is very strange.
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Sep 20, 2023 19:53
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Agronox posted:No, you generally look at your returns on cash, especially in real estate. Put up $100k on a house that costs $500k and sell it the next year for $550k, and your IRR is legitimately 50% (with the caveats being transaction fees, taxes, etc). Except on a $500k house purchase and sale, especially with a mortgage, you’re going to eat more than $50k in fees, plus the costs that build on the amount of time you own the house. Housing is not the stock market. There are enormous costs associated with obtaining, holding, and liquidating the asset. And, after holding a mortgage for 1 year w/ 20% down, you’re only getting like $10k of that $50k the asset appreciated. Baddog posted:
Yes. Buying is as a whole probably good, and you will likely at least break even. Maybe even net positive! Just don’t assume you’re going to come out ahead over renting and convince yourself to buy for that reason, because at that point you’re just asking for it. Leperflesh posted:most people make payments on a mortgage, looking at the down payment isolated is very strange. I think a lot of people are just willfully ignorant of how much money they actually spend on housing, and prefer to look through the rose tinted glasses of “I own something worth $700k, I’m well off.”
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Sep 20, 2023 20:34
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Leperflesh posted:People with bad spending habits who can't leave a cash account alone can be forced to build savings via equity by buying a house. That happened to a big percentage of the generations from 1948, the boomers and their parents, and that's significant. A ton of people with blue collar and low-end white collar jobs moved firmly into the middle class via home equity. When that's the case, it doesn't really matter that they paid an enormous overhead on that "investment," because gradually buying and eventually owning outright an asset with enormous overhead that at least doesn't lose its value, is still better than being broke at age 65. True, but I think it would be better if houses had not become a pyramid scheme that transfers wealth from younger people to older people
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Sep 21, 2023 03:57
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Agronox posted:No, you generally look at your returns on cash, especially in real estate. Put up $100k on a house that costs $500k and sell it the next year for $550k, and your IRR is legitimately 50% (with the caveats being transaction fees, taxes, etc). Yeah I agree it's a lot easier to make money on a house purchase when your mom pays your mortgage
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Sep 21, 2023 04:03
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Nobody's going to work up a thirteen column spreadsheet for an example on the internet for you
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Sep 21, 2023 13:31
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Comedy option move somewhere with low enough prices to pay all cash and skip mortgage bullshit, don’t worry about the leaded water and raccoon infestation it’s cozy-rustic chic.
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Sep 21, 2023 15:57
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Looking for a gut check here on my calculus as I head toward selling my house and buying a new one in the next year or two. I’ll plan to hit 20%+ so I won’t have PMI. I basically am trying to model out cash flows and get a savings target. I’ve been staring at this off and on for a few months so definitely could have blind spots. Outlays at time of closing: • x% Down payment • 5% buying closing cost • 3% selling closing cost • 6mons Tax Bill, 6mons Home Ins (Pay direct or into escrow to be combine with mortgage payment) Savings @ Time of/After Closing: • 6mon Emergency Fund, increased for new monthly mortgage payment + utilities increase for larger sq. ft. Available Equity Variables: • If I fund the new purchase with a HELOC, at my CU I can get up to 90% of open equity, so I’d have ~10% of my home sale price “held up” until it actually closes. This also means I’ll have at least mortgage payments+utilities on the current house until it closes. • If I close on the same day, I’m a psycho, but would that make the 100% of equity immediately available? (I.e sign over the check in the afternoon) • Some sort of a short term bridge loan. Is there a max % here or do they cover the full sale price (or I guess difference in equity)?
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Sep 21, 2023 19:22
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Pilfered Pallbearers posted:Housing is not the stock market. There are enormous costs associated with obtaining, holding, and liquidating the asset. And, after holding a mortgage for 1 year w/ 20% down, you’re only getting like $10k of that $50k the asset appreciated. How do you get this number? 50k appreciation x .96 (realtor costs) = 47k Let’s say 7k of closing costs coming and going Leaves about 33k Legitimately just don’t understand how you got 10%
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Sep 21, 2023 19:28
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Realtor fees are a percentage of the entire sales price, not just appreciation.
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Sep 21, 2023 19:45
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hobbez posted:How do you get this number? 7k closing costs for the purchase and sale is not reality. Neither is $3k of realtor costs on a $500,000 home. Just on the sale side, 3-6% commission, taxes, etc. In some markets, you’re going to spend more than $50k in closing costs when you add both sides together. Then there is 1 year of property taxes. 1 year of Homeowners insurance. 1 year of interest paid at the max rate due to it being the first year of a mortgage and interest pays down first. There is a reason you have to stay in a mortgaged house for a minimum of 5 years to just break even on your initial cash output, and that’s assuming the home appreciated or stayed flat in value.
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Sep 21, 2023 19:46
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Crazyweasel posted:Outlays at time of closing: Are you sure about that? It's often a lot higher by the time escrow is funded. Really depends on time of year and taxes. Crazyweasel posted:• 3% selling closing cost Try 6. The seller pays both sides.
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Sep 21, 2023 19:48
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Crazyweasel posted:Looking for a gut check here on my calculus as I head toward selling my house and buying a new one in the next year or two. I’ll plan to hit 20%+ so I won’t have PMI. I basically am trying to model out cash flows and get a savings target. IMO if things are this tight where you’re not sure you can hit a 20% down payment and you need to be this extreme spreadsheeting when you already own a place I’m going to assume one of.. - You don’t have enough equity in your current place - you’re trying to buy more house than your current salary and savings can afford.
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Sep 21, 2023 19:57
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Pilfered Pallbearers posted:7k closing costs for the purchase and sale is not reality. Neither is $3k of realtor costs on a $500,000 home. Just on the sale side, 3-6% commission, taxes, etc. In some markets, you’re going to spend more than $50k in closing costs when you add both sides together. I don’t know what I’m missing here but my closing costs were 6k on my purchase
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Sep 21, 2023 20:04
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hobbez posted:I don’t know what I’m missing here but my closing costs were 6k on my purchase Because you rolled the rest into your loan, most likely. If you want an actual explanation stop going by memory, go dig up your closing disclosure and start posting actual numbers.
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Sep 21, 2023 20:06
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hobbez posted:I don’t know what I’m missing here but my closing costs were 6k on my purchase Closing costs for buyers are low because sellers cover most closing costs. Seller's closing costs need to be accounted for when planning to buy a house as an investment (or when planning on selling your current house to buy a new one).
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Sep 21, 2023 20:07
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Motronic posted:Are you sure about that? It's often a lot higher by the time escrow is funded. Really depends on time of year and taxes. Good callout, I’m not sure why I thought 3%, maybe I thought of a split. Pilfered Pallbearers posted:IMO if things are this tight where you’re not sure you can hit a 20% down payment and you need to be this extreme spreadsheeting when you already own a place I’m going to assume one of.. This is somewhat true today, but a year ago I got a new job with 3x the compensation at a company that is growing fast, so my available cash is rapidly growing. At a minimum, I’m trying to hit a significant down payment, so my mortgage is 28% of the gross income I’d expect if this job goes poof and I’m back to a “normal” job and wages (I.e. no more stock). So I’m just planning for the soonest I could reasonably have the cash to do this because I guarantee you that timeline is going to closely intersect with the Spring home listing surge. If I miss the boat I’m not gonna stretch to something unreasonable, but I want to be prepared.
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Sep 21, 2023 20:21
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I didn't see a big pile of money to take care of a bunch of bullshit in the new house. I am not a homeowner but I understand this is important.
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Sep 21, 2023 20:23
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LLSix posted:Closing costs for buyers are low because sellers cover most closing costs. Seller's closing costs need to be accounted for when planning to buy a house as an investment (or when planning on selling your current house to buy a new one). Motronic posted:Try 6. The seller pays both sides. gently caress lol
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Sep 21, 2023 20:28
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Buyer’s closing costs on my current place were about $12k + 2.3%; thank you, New York, for the brutal buyer-paid taxes. You shouldn’t count prepaid property tax and insurance when you’re doing these calculations, though.
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Sep 21, 2023 20:37
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hobbez posted:I don’t know what I’m missing here but my closing costs were 6k on my purchase And my closing costs as a buyer were like $27,000 (between 3-6% as expected). Motronic hit the nail on the head. And sellers costs are generally 6-10%, market dependent. So on your $550k house, closing costs (including realtor costs) for a sale and a purchase would be estimated to be between $49,000 and $88,000. And this is still conveniently forgetting the costs you ignored in my last post. And I didn’t even factor in the likely emergency maintenance or repairs that are likely on year 1 of owning a home. So I was in fact extremely generous on saying you would make $10k. In reality, you’d probably lose $100k. rjmccall posted:Buyer’s closing costs on my current place were about $12k + 2.3%; thank you, New York, for the brutal buyer-paid taxes. And why not? These are costs that will be paid out of the profit one way or another.
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Sep 21, 2023 20:40
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rjmccall posted:You shouldn’t count prepaid property tax and insurance when you’re doing these calculations, though. Which calculations? Profit and loss? No, if you've accounted for them otherwise. Can I afford to buy this house now? Absolutely yes. We have two different types of conversations going on here.
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Sep 21, 2023 20:44
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Pilfered Pallbearers posted:And why not? These are costs that will be paid out of the profit one way or another. Because you should be accounting for them already in your month-by-month costs. It matters for cash flow at purchase time, but if you include them in closing costs, you’ll end up double-counting them.
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Sep 21, 2023 20:45
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rjmccall posted:Because you should be accounting for them already in your month-by-month costs. It matters for cash flow at purchase time, but if you include them in closing costs, you’ll end up double-counting them. You weren’t here before. This convo with hobbez is in relation to a different situation regarding buying a house, holding it for a year, and selling it.
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Sep 21, 2023 21:02
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Motronic posted:Because you rolled the rest into your loan, most likely. If you want an actual explanation stop going by memory, go dig up your closing disclosure and start posting actual numbers. Ok I looked it up and it was 10k total, including funding escrow. I did receive a 3k rebate from the lender. So on a 445k home, 2.2%. Not saying that’s the norm, I guess I just got a good deal. I’m a little vague on what we’re including when we’re talking sellers closing costs. The 5-6% realtor commission is obviously the biggest expense, how much additional % can one expect to add on to that?
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Sep 21, 2023 21:20
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hobbez posted:Ok I looked it up and it was 10k total, including funding escrow. I did receive a 3k rebate from the lender. So on a 445k home, 2.2%. Not saying that’s the norm, I guess I just got a good deal. Under 3% is not at all the norm, certainly not in my area. Also, don't forget that in the context of housing affordability - and really even in the context of profit/loss you spent more than what you paid at closing to finish the deal. You likely paid for some or all of the following: inspections, rekeying, moving expenses, repairs, cosmetic things like painting........deposits on utilities and services if you're accounting for cashflow as well. hobbez posted:I’m a little vague on what we’re including when we’re talking sellers closing costs. The 5-6% realtor commission is obviously the biggest expense, how much additional % can one expect to add on to that? Anything past that is going to be very location dependent. You may need to pay for inspections/certifications (i've head of places that require a recent certificate of occupancy/inspection), you may have local taxes. You definitely have federal taxes but that's going to be too complicated to track because it will be different for everyone and may even be deferred in a 1031 exchange.
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Sep 21, 2023 21:27
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When I sold my previous house, in California, the closing costs were the commissions (6%), transfer tax (~.8%), about $1k in other taxes, fees, and inspections, and about $4k for staging (which obviously is an optional expense). Plus about 40 days of prorated property taxes because those were due trailing. But all of this is very location-specific.
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Sep 21, 2023 21:42
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I paid $10.8k on a $625k purchase last month in WA. Including funding escrow for insurance and property taxes etc. Not sure where another $10-15k would come from? The sellers look to have paid $13k, primarily in state and local transfer taxes, but also in half the title-owner policy. This doesn’t have realtors fees on it, it looks like which I know was 3% for my agent at least.
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Sep 21, 2023 21:47
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TheBacon posted:Not sure where another $10-15k would come from? Here's a loan estimate for one of my properties in PA:  Services, taxes and fees can add up quite fast. If these aren't a think in washington state, good for you.
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Sep 21, 2023 22:06
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For NYC a few months ago, my buyer closing costs were 4.25%, and the seller closing costs were 7%. Probably higher than most other places.
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Sep 21, 2023 22:22
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Sounds like WA is a state where title insurance is split? That varies a lot — it was paid by the buyer in every transaction I’ve been in, but sometimes local custom is different.
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Sep 21, 2023 22:26
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Goddamn, almost 8K in "transfer taxes"? Colorado is a "documentary fee" but it is about the same magnitude as your recording fee.
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Sep 21, 2023 22:34
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Good lord it’s not even that bad in Boston.quote:In Massachusetts, the average cost of the transfer tax is $4.56 per $1000 of the sales price. As an example, if you’re selling your home for $650,000, the transfer taxes would total out to be $2,964. Remind me not to buy in PA 
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Sep 21, 2023 22:38
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Baddog posted:Goddamn, almost 8K in "transfer taxes"? The county does love to take its bite. They kinda screwed themselves years ago. There has not been a property reassessment since 1972. You pay "current" value on additions from when they were built or new homes from when they were built post 1972, but that's it. My house was built in the late 60s and I pay less property tax than a new condo 1/4 the size and 1/3 the cost. E: just for extra Motronic fucked around with this message at 22:44 on Sep 21, 2023 |
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Sep 21, 2023 22:39
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Motronic posted:The county does love to take its bite. Hmm, its so hard to compare relative tax burdens between states because of stuff like this. Colorado nominally has one of the lowest property taxes in the country, but they are *on the spot* with re-assessing, and it is very very close to real value. Does tend to screw older fixed income people considerably though, they are hurting after this last re-assessment. This big bump is probably going to get the law rewritten to cap increases somehow.
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Sep 21, 2023 22:59
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