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06-14-2013, 10:11 PM
I've thought a lot lately about whether it's worth owning property. On one hand, it's a hedge against inflation. If you have a fixed payment, your mortgage becomes cheaper over time as inflation creeps up. You benefit from appreciation, though that of course depends heavily when you buy into the boom-bust cycle, I know people that lost their ass in the recent bust. There are tax benefits and of course eventually owning your place outright means having no more mortgage or rent payments.
On the other hand if you rent, you have maximum lifestyle flexibility. You aren't responsible for shit that breaks or maintenance. Rent is usually lower than mortgage unless you've had the mortgage for awhile. If you invest the difference from renting in some appreciating asset in the long run you may offset the benefits you'd get from owning. You also can sleep at night knowing you don't have 30 years of debt at the signature of a pen.
I like the idea of having a property of my own, but don't like the idea of feeling anchored to it.
If any of you own or have made the decision NOT to own, I'm very curious on your thoughts.
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06-14-2013, 10:44 PM
I have owned two houses. I made out very well when I sold my house in Orange County. Now, I just rent which gives me the freedom to travel to different countries. However, moving really gets old so I could see myself buying someday in order to have a place to put my stuff.
Rico... Sauve....
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06-15-2013, 01:15 AM
Buying a home is more than just an economic decision.
There are certainly steps you can take to minimize losses and maximize gains by rolling that money you would have spent on owning a home into some kind of investment. (cause everyone has that level of fiscal discipline)
For a player? I can't imagine too many affordable Single Family Homes within walking distance of party district. There might be plenty, you'll have to do research
As for buying a Condo/Co-Op, I'd only consider that in NYC.
If your life hasn't stabilized, I'd avoid getting a house.
WIA
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06-15-2013, 09:47 AM
The days of a home being a asset is gone. It's back to being strictly shelter or something you pass down. I see value in a family home that gets passed down but not family's simply buying homes. Your seeing asset deflation still rampant in homes, it's no hedge for inflation if your asset is tanking in price just as quick. Also the boomers whom pumped up housing once they start croaking off demand will be almost non-existent to he relationship of actual supply present. It was boomers whom carried on from the fashionable homeownership to making it a necessity. Newer generations do not view it the same and don't have the capacity to take on the debts to artificially swell those assert values.
Lastly for a International player owning a home cockblocks you as you have to attend to it when leasing would void you of that hassle. It's not an investment that travels with you that you can easily get out off. People bitch about renting but if your a stable dude whom is never there landlords will lock you down for long term.
The trends point to a big drop off once the boomers go away. Already ow trends are for folks to move into the city (young and old) and they are all more open to renting vs owning. Suburbs will turn into ghettos in the near future, if your stuck 'owning' a home there you will hate yourself for it.
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06-15-2013, 10:03 AM
Take a look at this introducing the info of the apartment that you rent or some other property you're interested in, it's all about figures:
http://www.nytimes.com/interactive/busin....html?_r=0
On the other hand think... are you 101% sure you want to live in the same place for the rest of your lifetime? Are you sure you could rent it and keep it under control if you move to Europe, Asia or Latam or somewhere else in the States? Do you have a stable income that you're unlieke to lose and savings to cover you in case you lose your job or your business? Whatever you decide good luck mate.
She go crazy, is hamster!
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06-18-2013, 02:16 AM
When I sold my business I had a good chunk of cash sitting my bank and my peers were beside themselves when I told them I was not going to buy a condo. I think it was the pressure of them having such a big obligation that made them put the pressure on me.
Owning does not suit my lifestyle. My rent is cheaper. I could have put all my cash down as a 50% down payment on a $400,000 condo (one bed 600sq/ft) and for what? No thanks. I rent the same place for $1500 a month.
My parents bought a house because they had three kids. But my dad payed it off in 8 years, and it was only $100,000. In that scenario I would say home ownership makes sense. They have been mortgage free for 20 years, but my mom told me that the house costs them on average $500 a month for maintenance and bills. Plus property tax.
Its a complicated issue, but for guys like me that like to travel, live in the middle of the action and have no strings attached renting is a no brainer.
My good buddy has a $350,000 condo just down the street from me sitting empty as he is back in Alberta making money to pay for the place.
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06-18-2013, 09:21 AM
It will vary depending on location and what exactly you buy, however one thing to remember is the payment stays the same regardless of inflation. (Assuming fixed rate)
So, after 10 years, my house payment is less than what I would pay in rent for a comparable house in my area.
I've kicked around paying it off early, but other priorities have gotten in the way of that so far.
I should note I cannot stand apartments, so they were never an option for me.
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06-18-2013, 10:40 AM
How long do you plan on living there?
Over a long period it will probably save you money compared to renting like Hotweels said. Short term, you would be better off renting. I would just compare living expenses renting and owning over the period of time you plan on staying.
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06-18-2013, 11:24 AM
I think it depends on the your lifestyle. It can be a good decision or not. Are you the sort of person who likes a "home base," someplace to go back to after travelling, or do you work 6 months then travel 6 months? It really all depends. I have a home (actually 2) because of the situation I had back when I bought them, but I really doubt I would buy again if and when I sell these homes. If you have a kid, I think it makes sense.
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06-18-2013, 01:35 PM
So my thoughts are this:
I own my condo. I purchased at $135k. My outgoing expenses are $300/m for HOA fees, $118/m in taxes, and $300-something a month in interest on my mortgage. You can also amortize in any additional expenses such as appliance repair, chimney cleaning, etc., but those have been minimal thus far.
In one sense of the word, I'm therefore 'renting' my place for roughly $800/m. That's the amount of outgoing money that's burning up just living here. Rent in this area for a comparable place would hit $1500, but with ownership a large portion of that goes into an effective investment plan (that could rise or fall in value). Incidentally, apparently my place is worth $230k now. So, in another sense of the word, my $15k of equity built up over the course of the mortgage has sextupled in value. So there's that, but you can't count on that unless you're a real estate whiz and I'm not - I just knew that $135k in my location was undervalued at the time I bought it.
Home ownership is a simple way to build wealth in the proper economic climate. Right now it's good - interest rates are so low and property values haven't quite recovered yet to my knowledge. If I had rented my place for the last two years at $1400/m, my net worth would be a fraction of what it is right now.
HOWEVER. It does tie you down. I wanted to flee the country and move to Poland last year, and owning my place was a big thorn in my side. So there's that.
Check out my occasionally updated travel thread -
The Wroclaw Gambit II: Dzięki Bogu - as I prepare to emigrate to Poland.
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06-18-2013, 01:36 PM
Well I didn't want to flee the country, just American women
Check out my occasionally updated travel thread -
The Wroclaw Gambit II: Dzięki Bogu - as I prepare to emigrate to Poland.
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06-18-2013, 02:14 PM
You have to look at your situation and then decide how comfortable you are at "parking" money in a home.
I bought an apartment 4 years ago to get that first time homeowner's tax credit. For me, putting down 30% and getting a mortgage + HOA fees became cheaper than renting. (I pay $1350 for a 1 bedroom with parking in DC).
The way I look at it, the equity I put into owning is working for me. For example, I could rent the apartment + parking for around $2,100 a month, maybe more depending on when the season for starting the lease. That's $25,200 a year that, if I rented, would go down a black hole. Over 4 years, it's $100K.
As an owner, I get the following benefits:
-- Tax write-off on the mortgage interest
-- Tax write-off on the property taxes paid
-- Predictable fees/costs (HOA could fluctuate, but hasn't)
-- Building equity. Right now I'm adding $225 a month to the value I have in the place. (The principal)
-- I'm the landlord, stay as long as I like
The kicker is this though: You need to live in the place for 5+ years. Why? Because selling costs are ridiculous. I remember closing and the seller wrote a check for $27,000 and the agents split a part of that. I think his agent took a larger chunk for some reason.
Anyway, it all depends on your situation. It can be a good way to go.
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06-18-2013, 07:43 PM
There are a lot of variables in determining if buy is better than rent, so it's not so easy to just generalize one over the other.
It is also a lifestyle choice in that it ties you to one place for awhile, so unless if you are going to be in the same area for 5+ years, buying may not be such a good idea.
However, if you can get a really good interest rate, then buying cannot be terribly wrong since houses will track inflation in the long run.
In my example, I have 30 year fixed mortage @ 2.875% and a 5 yr fixed second mortgage @ 1.99% for a house that I bought at roughly 1995 price + intervening inflation, with overall 20% down.
Since inflation is 3% on average, the bank is pretty much handing me free money at those rates, so it can't be a terribly wrong decision to buy.
Plus I have tax write off, a roommate who pays rent, etc.
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06-19-2013, 07:53 PM
Come to Texas and let me sell you a house. Prick.
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06-19-2013, 09:12 PM
Quote: (06-19-2013 07:19 PM)bacon Wrote:
Quote:Quote:
What if we came up with the worst possible investment we can construct? What might that look like?”
Well, let’s see now (pulling out our lined yellow pad), let’s make a list. To be really terrible:
It should be not just an initial, but if we do it right, a relentlessly ongoing drain on the cash reserves of the owner.
It should be illiquid. We’ll make it something that takes weeks, no – wait – even better, months of time and effort to buy or sell.
It should be expensive to buy and sell. We’ll add very high transaction costs. Let’s say 5% commissions on the deal, coming and going.
It should be complex to buy or sell. That way we can ladle on lots of extra fees and reports and documents we can charge for.
It should generate low returns. Certainly no more than the inflation rate. Maybe a bit less.
It should be leveraged! Oh, oh this one is great! This is how we’ll get people to swallow those low returns! If the price goes up a little bit, leverage will magnify this and people will convince themselves it’s actually a good investment! Nah, don’t worry about it. Most will never even consider that leverage is also very high risk and could just as easily wipe them out.
It should be mortgaged! Another beauty of leverage. We can charge interest on the loans. Yep, and with just a little more effort we should easily be able to persuade people who buy this thing to borrow money against it more than once.
It should be unproductive. While we’re talking about interest, let’s be sure this investment we are creating never pays any. No dividends either, of course.
It should be immobile. If we can fix it to one geographical spot we can be sure at any given time only a tiny group of potential buyers for it will exist. Sometimes and in some places, none at all!
It should be subject to the fortunes of one country, one state, one city, one town…No! One neighborhood! Imagine if our investment could somehow tie its owner to the fate of one narrow location. The risk could be enormous! A plant closes. A street gang moves in. A government goes crazy with taxes. An environmental disaster happens nearby. We could have an investment that not only crushes it’s owner’s net worth, but does so even as they are losing their job and income!
It should be something that locks its owner in one geographical area. That’ll limit their options and keep ‘em docile for their employers!
It should be expensive. Ideally we’ll make it so expensive that it will represent a disproportionate percentage of a person’s net worth. Nothing like squeezing out diversification to increase risk!
It should be expensive to own, too! Let’s make sure this investment requires an endless parade of repairs and maintenance without which it will crumble into dust.
It should be fragile and easily damaged by weather, fire, vandalism and the like! Now we can add-on expensive insurance to cover these risks. Making sure, of course, that the bad things that are most likely to happen aren’t actually covered. Don’t worry, we’ll bury that in the fine print or maybe just charge extra for it.
It should be heavily taxed, too! Let’s get the Feds in on this. If it should go up in value, we’ll go ahead and tax that gain. If it goes down in value should we offer a balancing tax deduction on the loss like with other investments? Nah.
It should be taxed even more! Let’s not forget our state and local governments. Why wait till this investment is sold? Unlike other investments, let’s tax it each and every year. Oh, and let’s raise those taxes anytime it goes up in value. Lower them when it goes down? Don’t be silly.
It should be something you can never really own. Since we are going to give the government the power to tax this investment every year, “owning” it will be just like sharecropping. We’ll let them work it, maintain it, pay all the cost associated with it and, as long as they pay their annual rent (oops, I mean taxes) we’ll let ‘em stay in it. Unless we decide we want it.
For that, we’ll make it subject to eminent domain. You know, in case we decide that instead of getting our rent (damn! I mean taxes) we’d rather just take it away from them.
http://jlcollinsnh.com/2013/05/29/why-yo...nvestment/
All of this is a strong argument against home-ownership, but you can't live inside of your bonds, precious metals, and securities investments.
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06-20-2013, 04:05 AM
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Oops, Altucher posts already posted here. My bad.
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Pay taxes on something I "own"?
Be location dependent for 30 years?
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My dream is to spend each year in 2-4 different spots and AirBNB it in luxury flats.
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06-20-2013, 07:48 AM
Location, location, location. Buy a single room apartment in downtown Helsinki and i guarantee the price will not go down.