I just can’t convince myself to buy a house.

blownstang4.6

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Yeah I know it seems like throwing money away but I just can’t convince myself to get on the hamspter wheel. Maybe if things grow with work and we can gross 25-30k a month then yeah I won’t worry too much but having 25-30% of our gross income going to one thing scares me.


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Jesus... $25-$30k a month! I own and maintain 2 properties on $8k gross a month. Both purchased in the last 3 years. Each is worth about $400k right now, but one is a 3 unit rental property. My monthly out of pocket for both mortgages, insurance, taxes is $1000.
 
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coposrv

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If you're going to live in the house for over 5 years it generally makes sense to buy. Despite what realtors say, it's almost never an "investment" after factoring in carrying costs, inflation, and transaction costs. However, you have to live somewhere. It's more of a lifestyle investment. If you want an actual investment, buy stocks.

For instance:
$365k in 2009 is about $435k in 2019 dollars.
Seller's transaction costs on a $550,000 value are $33,000.
Net $517,000 after commissions.
Taxable gain of $185,000 equals a tax payment of $37,000.
Your $517,000 net just turned into $480,000, for an inflation adjusted gain of $45,000

What were your maintenance costs over 10 years?
What were your property taxes over 10 years?
What were your interest costs on the mortgage?
What were rental costs of a similar home?

Probably a wash on your gains but you got to live somewhere you owned and you had to live somewhere anyway

Edit:
Also if you had 20% down on your initial mortgage ($85,000) you lost the use of those funds for 10 years.
If you had put that $87,000 in the SP500 in January 2009 you would have roughly $300,000 today.

This is how I’m thinking. I’m not buying for 500 or 400 my true cost is much more and ties me up.


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coposrv

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I should also add over the next few months I’m completely restructuring my business and possibly buying through owner financing a second. I’m an electrician the second company is a small Hvac firm with 6 employees.


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earico

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If you're going to live in the house for over 5 years it generally makes sense to buy. Despite what realtors say, it's almost never an "investment" after factoring in carrying costs, inflation, and transaction costs. However, you have to live somewhere. It's more of a lifestyle investment. If you want an actual investment, buy stocks.

For instance:
$365k in 2009 is about $435k in 2019 dollars.
Seller's transaction costs on a $550,000 value are $33,000.
Net $517,000 after commissions.
Taxable gain of $185,000 equals a tax payment of $37,000.
Your $517,000 net just turned into $480,000, for an inflation adjusted gain of $45,000

What were your maintenance costs over 10 years?
What were your property taxes over 10 years?
What were your interest costs on the mortgage?
What were rental costs of a similar home?

Probably a wash on your gains but you got to live somewhere you owned and you had to live somewhere anyway

Edit:
Also if you had 20% down on your initial mortgage ($85,000) you lost the use of those funds for 10 years.
If you had put that $87,000 in the SP500 in January 2009 you would have roughly $300,000 today.

I agree with all your points except the taxable gain. For primary residence this will not be the case up to the maximum cutoff. Topic No. 701 Sale of Your Home | Internal Revenue Service

OP be aware that Trump set the SALT deduction to a $10k max.
Changes to the State and Local Tax (SALT) Deduction - Explained

Even with all this I still own mainly because I want to do what I want in my own home. Picking the correct times to buy and location can minimize costs and risk. For instance my interest rate is 3.375%. NEVER think that buying a home is an automatically safe investment. Just ask all the people in the sun states that saw their property values drop by 50% or more back in 08/09.
 

CV355

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You are overthinking it, but that's what I do with everything so I can't really criticize.

If I had to sum it up to a few factors/questions:
1) Do you want to stay where you are for a long time?
2) Is the general condition of most affordable homes poor or likely to require substantial repairs?
3) Is real estate in your area in a bubble, or stable?

If I had rented from 2010-2015, I'd have saved well over $40k more than I did from fixing crap and paying less on a mortgage.

If you're only finding older homes in those price ranges, I'd question buying too. That's not to say that an older home isn't well built, but let's face it, people don't take care of anything they own anymore. I bought a 10 year old house that was insanely well maintained by the original owners, and everything went to hell on it last year. It happens.

The ONLY reason I don't throw in the towel and rent is that the property values are going up as Greenville expands like a bad bacterial infection.

It's a risky investment. The positives barely outweigh the negatives.
 

Pribilof

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I agree with all your points except the taxable gain. For primary residence this will not be the case up to the maximum cutoff. Topic No. 701 Sale of Your Home | Internal Revenue Service

OP be aware that Trump set the SALT deduction to a $10k max.
Changes to the State and Local Tax (SALT) Deduction - Explained

Even with all this I still own mainly because I want to do what I want in my own home. Picking the correct times to buy and location can minimize costs and risk. For instance my interest rate is 3.375%. NEVER think that buying a home is an automatically safe investment. Just ask all the people in the sun states that saw their property values drop by 50% or more back in 08/09.

Thanks, forgot about the exclusion.
 

Blk04L

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You're not truly locked in for 20-30 years.
Unless the market tanks, you can list it and move on.

IMO now isn't the best time to buy to get a decent return, at least in my area. Used prices has sort of stagnated. People are still buying, but it seems like since mid 2018 the prices have stopped increasing.

I bought in 15, sold at the end of 18. End of the day, the money in my pocket was around 72k after realtor fees. Bought the house for 253k.
Not a bad gain, and it was brand new and didn't dump 10's of thousands into it.
Did some upgrades like fence, screen, minor landscaping etc.

It's obviously a risk, so just need to make sure work is doing well and you got a good rainy day fund incase something needs to be fixed asap.

don't rush and settle.
 

Bdubbs

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I know it's all about location. I'm glad I didn't pay 300k+ on a "basic" house.

Ours cost 89k back in 2004. We just completely finished the basement, adding another bathroom, bedroom, and a living room area. That was another 50k.

I can't stomach what some are paying. Our house in a well liked location would probably fetch 400k+.

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01yellercobra

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Even with all this I still own mainly because I want to do what I want in my own home. Picking the correct times to buy and location can minimize costs and risk. For instance my interest rate is 3.375%. NEVER think that buying a home is an automatically safe investment. Just ask all the people in the sun states that saw their property values drop by 50% or more back in 08/09.

That's what helped me to be honest. We bought when things were at the lowest for prices and interest.

And it's definitely a timing thing. If we had been ready I would have sold earlier this year and moved on. Most houses in my area were on the market less than a week before selling. But we're waiting for the kids to finish school then we'll re-evaluate where we are and if we decide to sell hopefully it's on the upswing.
 

roadracer247

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Taxes and liability aside, it’s worth owning for me. For one, it gives my family stability. We don’t have to worry about moving or getting evicted. I also think it’s good for a kids self-esteem to know their family owns their home.

It’s also good for kids to stay in the same school system. Changing schools can be difficult for kids. Especially in those awkward pre-teen/teen years.

The other big reason I bought was to plan for retirement. At my current pace I’ll have my house paid off a few years before my projected retirement age. That’s a big deal.

I also like the pride in taking care of my own house. And not having to ask anyone if I want to do something to my house/property.

Homes are expensive. Things break and you have to fix them. If you can’t do it, you’ll have to pay someone else. I don’t think home ownership is for everyone. That said, if you have a steady income and a family, I think it’s absolutely worth it.

Just don’t buy more house than you can afford. Nobody enjoys being house poor. I ended up buying in a town that I hadn’t really ever considered years prior. It has turned out to be great. I love my block, neighbors, and the weather is fantastic. Good schools too. That’s a biggie for the parents out there!!
 

Machdup1

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Don’t think about buying a house.

Think about buying the right house in the right location at the right time (I.e., not top of market) that completely works for your life.

If you find that house, for a price that works for your budget, you will not regret it.
 

03cobra#694

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Paid $103k 23 years ago on a foreclosure. Dumped a ton into it getting it how we wanted over the years. I couldn’t imagine paying rent, as this is now paid for and worth just shy of $400k the way it sits. They get $2,200 a month for rentals in my area. My mortgage was like $900 and change at the time, but that was after a refinance where we got 2.75% a bunch of years back.
 

Mpoitrast87

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Taxes and liability aside, it’s worth owning for me. For one, it gives my family stability. We don’t have to worry about moving or getting evicted. I also think it’s good for a kids self-esteem to know their family owns their home.

It’s also good for kids to stay in the same school system. Changing schools can be difficult for kids. Especially in those awkward pre-teen/teen years.

The other big reason I bought was to plan for retirement. At my current pace I’ll have my house paid off a few years before my projected retirement age. That’s a big deal.

I also like the pride in taking care of my own house. And not having to ask anyone if I want to do something to my house/property.

Homes are expensive. Things break and you have to fix them. If you can’t do it, you’ll have to pay someone else. I don’t think home ownership is for everyone. That said, if you have a steady income and a family, I think it’s absolutely worth it.

Just don’t buy more house than you can afford. Nobody enjoys being house poor. I ended up buying in a town that I hadn’t really ever considered years prior. It has turned out to be great. I love my block, neighbors, and the weather is fantastic. Good schools too. That’s a biggie for the parents out there!!
I agree with everything you said
 

jpro

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@slo984now and @Machdup1 are right...it is all about timing. We have owned two homes in two different states. We sold one for a loss and one for a pretty good gain and it was all about timing.

We currently rent in a great area in Henderson outside of Vegas. Good schools, safe & family friendly neighborhood. Prices here are high but have leveled off over the past 6-12 months. I won't buy until the time is right, but I plan to buy again.

And to all of you who said it isn't necessarily a financial investment, you're right. For example, if you bought a house right now for $450k at 4.01% for 30 years, your total price (principal & interest with 20% down) is $710k. I don't know about you, but paying $710k for something that is worth $450k isn't an attractive thought. Plus you would still have to pay property taxes, homeowners insurance, and maintenance. Ballpark the taxes (in NV they are low) and insurance at about $120k and your payments over 30 years will equal almost double the original purchase price. Crazy!!! Then again, renting and throwing away 100% of your money doesn't sound so good either. LOL
 

Kevins89notch

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Well OP, I'm on your side. I could have bought a couple years ago and I keep putting it off. My current rent is very cheap and allows me to save close to 50% of my income. Now however, I'm starting to think about buying. The amount of money wasted on a 30 year lease seems beyond stupid in my opinion, but I expect to pay off whatever I put within 5 years. Then I'll be back to "cheap" as I'll just be paying the utilities and taxes.
 

Kevins89notch

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And to all of you who said it isn't necessarily a financial investment, you're right. For example, if you bought a house right now for $450k at 4.01% for 30 years, your total price (principal & interest with 20% down) is $710k. I don't know about you, but paying $710k for something that is worth $450k isn't an attractive thought. Plus you would still have to pay property taxes, homeowners insurance, and maintenance. Ballpark the taxes (in NV they are low) and insurance at about $120k and your payments over 30 years will equal almost double the original purchase price. Crazy!!! Then again, renting and throwing away 100% of your money doesn't sound so good either. LOL

Exactly. Putting 5% down and barely getting by monthly just to say you own a house, in my mind...hell no! I'll be putting like 30%+ down while I still have another 30% in the bank, and then paying it off with several years. I hate interest.
 

PhoenixM3

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I think it’s a huge 20-30 year liability for a terrible return and I can’t stomach the thought of it. Am I over thinking it?

The average decent single family home that isn’t 150 years old and on top of the neighbors house where we are is 500k and another 8-10k in taxes a year. We can pay the mortgage but I don’t want to. My wife and friends think I’m crazy.


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Move to some place with reasonable taxes....
 

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