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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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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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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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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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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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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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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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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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Sorry for making the thread get off topic. For most people, they shouldn't look at a house as an investment and should only be looking to purchase when they are looking at a 5 year or longer horizon for living in it. My point is basically what Rekinom just said - you should look at your personal situation, market, goals, and everything else that goes into making maybe the largest financial decision of your life before making it. National and historic averages do not apply to a single house in a single market for a single buyer, but they're a generally good place to start. I do not think my decision was that risky. I do agree that it is easier to say a purchase was the correct financial choice after the fact, but I still plan on keeping this place for 2-3 more years so it all isn't gloating while looking backwards. I don't mean to gloat by any means anyway; I just meant to say that I do view this as an investment as much as a quality of life / lifestyle purchase. I don't believe my situation is like Florida in 2006 (granted, I'm sure most of the people buying properties in places like Florida thought it was a sound financial decision at the time). The economy here is very strong and forecasted to be strong for the next several years, there is a large housing deficit that is only getting larger with the increasing amounts of people moving here every year, this property is in one of the most desirable parts of the city with limited new construction so that will always give it value, and I was also given a large discount over what the developers knew they would sell for later because I bought it pre construction. I also put 20% down, got a conventional 30 year loan, bought a place that will put me at a 19% debt to income ratio, and have several years of living expenses in liquid investments to support me if I lost my job/got injured/whatever. If the housing market here starts stagnating or even going the opposite direction, I'll be okay. I can afford the payments. It was said in response to me that there are few investments out there that make you get insurance on it, pay property taxes, put money in maintenance into it, etc; but there are also few investments that let me live in it for the time being, not pay rent, get tax write offs, and pay 4.25% interest on something that I believe will return me multiple times that amount while paying zero taxes on those profits when it is time to sell if it does pan out. There is risk that won't happen. I looked at my entire situation, felt comfortable with that risk, and believe I made the correct financial decision. If I turn out to be wrong, I won't be bankrupt or on the streets; I'll just have to eat some loss or stay living here for longer than I expected or look into renting it out. It won't be the end of the world. That's what I would advise anyone. Make sure going into a housing purchase that you and your family are comfortable with all the risks associated with it and are in a financial situation where you are prepared for worst case scenarios that can spring up due to home ownership. Boola fucked around with this message at 07:09 on Aug 11, 2013 |
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Aug 11, 2013 07:04
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I definitely agree with that. I bought a condo in central Austin myself last year. I think condo purchases can make a lot of sense when you're in an area where SFHs are a lot more expensive and you're in an area where there is a very high demand to live there without a lot of supply. A property of similar size/quality/location to mine would cost about $500 more a month to rent over what I'm paying to own (without including the tax breaks I'll get). I know my property taxes are going to go up and HOA dues will most likely go up with time, but at least my P&I is fixed while rent in this city is going up dramatically every year. There is the opportunity cost for my downpayment which could have been invested instead of put into something non liquid (my condo), but I am getting any appreciation on my property instead. I live just a little over a mile from central downtown in an area with hardly any land available to built on so it is a better bet that property values will keep increasing here (or at least not start decreasing anytime soon) over places out in the outskirts of the city / suburbs. I could have gone with a SFH, but it would have been a lot more expensive and the condo lifestyle suits me more at this point in my life anyway. If I was going to live somewhere around here besides central Austin, I would definitely go with a SFH.
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May 4, 2014 22:39
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Trabant posted:I'd really appreciate any advice you can offer based on your experience. We've only dipped our feet so far but it's clear we're going to be dealing with complete madness. I bought my place in a complex that was pre construction and had plenty of units available to reserve at the time so I only saw a little of the madness of the housing market here before reserving my unit. The Denizen is the name of the development I'm at if you're interested in looking it up. They have only a few units left (that won't be move in ready for awhile) and the prices have gone up a lot from when I reserved my place; but it is a very nice development. From what I saw, you'll need everything financially in order and have your pre-approval on hand so you can move quick on any properties coming on the market that fit your needs. Have a realtor that knows the area you're looking in well, has connections, and is up for looking at a place with you on short notice whenever it hits the market. From what I saw, desirable properties don't often make it to a zillow or redfin before being under contract already because they're getting offers within a couple days of being on MLS. I liked my realtor a lot and can give you his information if you're looking for one.
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May 5, 2014 16:20
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I was wrong on redfin, then. Good to know - I should have used you guys. My realtor was just forwarding me everything in the area I was looking in as soon as it hit MLS, but it would have been good to have that myself. Zillow was horrible. Me: "I'm interested in this property that just showed up, says it was listed today, and is available" Agent: "Under contract as of 2 days ago"
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May 5, 2014 16:44
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It seems like once every few months this thread goes through a phase where there's a chain of posts saying why they would never buy a condo and then from there onto why no one else should ever buy one. Blanket advice like that is usually shortsighted as not everyone lives in the same area/market or is in the same situation or has the same wants/needs. Research your situation very carefully when you're making the largest purchase of your life and then make a well thought out decision from there. There are different potential pitfalls and risks in a condo opposed to a SFH - very true - and warning people of those risks is a good thing. The condo I purchased was an perfect fit for me and my situation and also made a lot of sense financially, but the same won't be true for everyone else.
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Jul 1, 2014 21:09
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