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Is it all it's made out to be?

Discussion in 'Members' Lounge' started by 99sidude, Oct 14, 2009.

  1. 99sidude

    99sidude Moderator Moderator VIP

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    Home Ownership.

    I've been thinking about it a lot lately. If I bust my ass and close I can get $8,000 free from you hardworking American's who pay for it. I really like my job, and assuming the auto industry doesn't tank more than it has, it's a stable one. Right now I'm flushing my money away in rent. I figure with a roommate, a mortage payment won't be much more than that. So from all you veterans, any words of wisdom?
     
  2. 95b16coupe

    95b16coupe New Member

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    short answer: it depends. factor in a couple percent of home value in maintence, tools, equipment, TAXES, HOA dues, appreciation values and depreciation values.

    here's what i'm doing. find a house that is for RENT, and see how much it would cost to BUY that same house. mortgage, taxes, maintenence, etc.

    the place i'm living in now cost about $800-$1000 less to rent than to buy. and with property values still dropping, you could be underwater in 6 months. if something breaks, you have to buy and replace, if you rent, it's on someone else.

    basically, spend time to compare what you can get if you rent vs. own.

    if you draw out the numbers, you aren't throwing money away on rent. if you buy, the value of the house would have to appreciate at a greater rate than your interest rate.

    if you buy a house for $200k, you would pay 6%/year in interest. well, for it to be a wash, you need to gain 6% in resale value, otherwise you are losing money. factor in ALL costs, and it really has to gain a lot of value to be worth it.

    Also, you are tied down pretty solid. can't really move out unless you sell it. plus, without stellar credit, you will need 20-30% down.

    imho, find a home on craigslist or something that you would want to buy. then see how much it would cost to rent. i'd be willing to bet you will find a rental deal. people who have unoccupied homes they are trying to flip end up renting them.

    you might find a place with a $1500 mortgage that you can rent for $1000 just because it's unoccupied, or the owner wants monthly income while waiting to flip it.

    with paying rent, you aren't throwing it away. it's a cost of living. just like food and water. now if you buy something and the value goes down, you're fucked.
     
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  3. 92stoccord

    92stoccord Big Member VIP

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    200K for a house is a nice fucking house around here, our cost of living < Africa.
     
  4. 99sidude

    99sidude Moderator Moderator VIP

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    Everything I'm looking at is in the 150-60k range. This is on a 1/3 acre lot with 2000 square feet of living space. I'm looking at an $800-900/month payment. (compares to $500/mo I pay now to share renting a 1000sqft apartment). I can cut that significantly with a roommate. With the $8000 free money I can get from Obama, it's like a 6% gain I've made already. FYI I'm looking at just under 5% interest rate.

    Great advice 95b16coupe. I did some quick searching, and to rent an equivalent house, I'm looking at north of $1000/mo.

    So money wise, this might be a good deal. That is if I plan on sticking around at my current job for awhile. Marysville is about 40min from the nearest city, Columbus, so if I ever switch careers, I'd most likely have to sell.
     
  5. eg6sir

    eg6sir Supa Mod Moderator VIP

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    i got mine at $150k at 5.5% a year and a half ago (1600 sq ft. 10k sq ft lot .. 4bd, 2 bth).. i say buy while its cheap, because eventually its gonna go back up.. i may be looking into getting a lower rate very soon
     
  6. chestercheeto48

    chestercheeto48 Senior Member VIP

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    Yes homeownership is all that it is cracked up to be at this point in time. I would say that if you are serious act now. Take advantage of the first time home buyers money, low interest rates and the fact that the market has reset to some extent. I am willing to bet your area is much like mine and the houses are pretty much at rock bottom. Talk to somebody you trust as what you figure for items like taxes and payments may not be correct if you need to add in things like closing costs and pmi.

    The wife and I purchased our house two years ago this coming March and while we missed out on the stimulus money we lucked out. Our house sat on the market for 8 months starting at 269,900 when we made our offer we got the house for 208,500. You need to know your market and what the other comps in the area are going for. I am confident that our house will only appreciate as it is a 2700sq. ft. home with unfinished basement on a .5-.75 acre lot. In my book that is money in the bank. We are planning to stay in the house a while not flip it which is important to keep in mind. Also stay within your means and don't go for something that strains you financially as it takes some time to adjust to the new mortgage, utilities, and other items that pop up.

    It will be the biggest scariest best thing you ever do. For those that say renting is a better option I ask one thing. Explain how spending 500.00-1000.00 on renting a place that you will never own is better than putting that money into something you will own and will most certianly net you a profit on your investment?
     
  7. 95b16coupe

    95b16coupe New Member

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    because it's not certain to net a profit. i posted it above. if you find something you would like to own, it's possible that it could be cheaper to rent. As it stands now, you can rent some kickass houses for cheap. someone who bought a $300k house 2 years ago expecting to flip it for $400k is probably under water right now. The house might be worth $200-$250k. nobody will buy it, and even if they did, the owner would lose a lot of money. the smart thing to do is rent it out until the value has gone up.

    chester, i doubt you will ever "own" your house. you will probably move before it's paid off. and unless the home value rises more than the interest rate, you'll be underwater. include time spent on maintenence, supplies, taxes and any other fees, it adds up quickly. The first 15 years of mortgage payments pay down very little of the principal.

    yes, for some it is a good time to buy. but the housing market is FAR from stable right now. anybody who think otherwise is foolish.
     
  8. chestercheeto48

    chestercheeto48 Senior Member VIP

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    What you are talking about is a pre-bubble bursting scenerio. I know exactly what you are talking about as my brother in law is a victim of this in CA right now. They are stuck because they were thinking short term. But do you honestly believe that there is some subdivision left in america right now that has not had the price reset button hit on it? I will give you that my house may drop a couple of grand still but over the course of 10 years or so I am willing to bet that I am turning a profit on it if we should choose to sell it. Hell with the 8,000 you can afford to take a couple of grand hit in depreciation for a couple of years. I love the fact that everyone seems to think that purchasing a house is a 2-5 year commitment, maybe that is the problem with this country.

    You are right I may never "own" my home out right but when the time comes I gaurentee you that I will walk away with a check. You simply can't do that with renting. Ok so you rent your house/apt another year what happens - you spend another 6-12,000 on rent, the interest rate goes up, houses rebound, and you are end up paying more when you go to purchase a house and you still have nothing to show. I am convinced that the time is now to be shopping for a home.
     
  9. reckedracing

    reckedracing TTIWWOP VIP

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    The housing market is at rock bottom.... until that 8k is gone, then it will drop again.
    The 8k is artifically inflating demand for buying, basically motivating people that might otherwise wait, which is exactly what its intended to do.

    So now everyone who wanted a house will have bought one, and then all the sudden demand plummets, and thus another housing slide.

    edit:
    While this is my prediction, and I believe I have a pretty good chance at being right, I am still buying now. Waiting for executed contracts and then waiting on the bank. Beat the sellers down a 1/3 of their original asking price, and going for that 8k to boot. Will my house be worth the same in 2-3 years? Probably not. Will it be worth more in 10 years? History indicates that it will in the long term.
     
    Last edited: Oct 14, 2009
  10. 95b16coupe

    95b16coupe New Member

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    chester, for personal insight on my part, what classes do you teach and at what grade level?

    you are ASSUMING that prices will rise. a lot. if they stay relatively flat, then people are going to lose money. watch cnbc, bloomberg, msnbc, any of it. you will see that a lot of analysts believe that housing hasn't bottomed. and it wont recover until more people are working and unemployment drops. if nobody has money, nobody is buying. if nobody is buying, housing values will NOT recover. it's simple supply in demand.

    and $8000 is not worth the commitment. would you buy a chrysler or gm if someone gave you $2000? probably not, because a rebate doesn't make it a better buy, it's trying to offset or stimulate a slowed/bad time.

    sidude, find yourself an online payment calculator. figure out the cost of the payments for the life of the loan. assume that you will pay the minimum until you move/sell/payoff.

    i just ran some quick numbers. $125k at 6% over 30 years totals $308,520 total paid. well, in 30 years, the market might recover and the house could be worth $308,520. Now lets be real. say you buy the house, put down $25k and live there for 10 years. The value of the house would have to be a lot higher than the cost of the house just to break even.
     
  11. 95b16coupe

    95b16coupe New Member

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    exactly, i would rather overpay on something increasing in value than mis-time the bottom and take another 10-25% cut on the value of my home.
     
  12. 95b16coupe

    95b16coupe New Member

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  13. 99sidude

    99sidude Moderator Moderator VIP

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    :confused: I'm so confused now. You bring up some great points 95b16coupe. Cash for Clunkers gave Honda one of it's best August sales months ever. This past september we were in the shitter after CFC expired. This $8k housing refund is FAR less sweeping through the housing market than CFC was for the auto market. Who knows what the housing market will do next year.

    I figure either I will spend my $$ on a house, or I will continue renting, and dump a bunch of cash into my Civic. Hard to tell which is the worse investment
     
  14. 95b16coupe

    95b16coupe New Member

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    do you have any debt at all? car loans, schooling, credit card?

    do you have 6 months expenses saved in cash?

    I look at a house like a $150,000 stock. is there a guarantee it will go up? no. based on history, over a 10 year period will it? probably. but by how much. how much can it drop and how much can it recover? people didn't think the housing market would collapse. now look at the shithole we are in. being arrogant and thinking it's impossible to happen caused u.s. citizens and our government billions, if not trillions if you include the trickle down of the mortgage meltdown.

    and stop wasting money on hondas. lol. build one then get something luxury.
     
    Last edited: Oct 14, 2009
  15. phyregod

    phyregod !!YTINASNI

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    I've been a home owner for 8 years now. Loving it.

    Ups:
    You own your home.
    You can do whatever the hell you want with it
    Cheaper to own than rent if you can fix your own stuff when it breaks.
    Pride
    Good investment. My house has more than doubled in value in the last 8 years. Even in the shitty market.

    Bad:
    You are stuck like chuck. No moving on a whim.
    If something breaks or clogs, its your problem.

    Thoughts on a room mate.. Just don't. Don't even consider a room mate as part of the whole picture. Forget any rental income you might be getting from said room mate. If you happen to get one, great. Fine. But absolutely do not count on it or use it for any calculation whatsoever.

    Make absofrickinlutely certain that you can afford it all by yourself. Forever. Not wing it for 6 months.



    Must haves for a happy home buying experience:

    Have 3 to 6 months of living expenses in savings BEFORE you make your purchase.
    20% Down. 10% Bare minimum
    15 year mortgage ONLY. 30 year is a retarded rip off. Do the math.
    Monthly payment with taxes and crap MUST be 25% of your take home pay or less per month.

    If you can meet all that, jump head first into it. If not, wait a little longer. It won't kill you.
     
  16. chestercheeto48

    chestercheeto48 Senior Member VIP

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    Not that it has any bearing on our discussion but I teach HS Technology Education with an emphasis in Graphic Arts, Woodworking and Construction. Just curious why does it matter? PM if you want to.

    In the same way I am assuming that a house will appreciate you are assuming that it will stay flat or that houses will continue to reduce in value by large percentages. There are many pros and cons to either side and in my view the pros to home ownership outweigh the cons if you do it correctly. Have a downpayment in hand, have an emergency fund, have your bills under control and buy within your means.

    Personally I think the whole reason we are in this housing mess is the fact that people didn't think about what they were getting themselves into. People got caught up in the McMansion craze and signed up for mortgages where either they didn't understand or didn't care about the consequences. Payments ballooned and people couldn't keep up. Housing market flooded, and values dropped - the unemployment issue didn't help. People have gotten away from purchasing a house as a long term investment and started viewing them as a get rich quick rich scheme.

    Now I am not denying the fact that the first half of your amortization schedule is paying back interest nor am I denying fact that by the time your done you have paid significantly more than the purchase price. If buying a home was such a bad deal then why would anyone do it? You are acknowledging the cons but leaving out the pros. All I am saying is I feel that purchasing a home now is looking better than it did even two years ago when I purchased mine.
     
  17. 99sidude

    99sidude Moderator Moderator VIP

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    I have zero debt, and well over 6 moths living expenses saved up. Now plenty of that would be eaten up by the DP, but I could still scrape by for awhile if something bad happened.
     
  18. 99sidude

    99sidude Moderator Moderator VIP

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    On the roommate thing that Phyre brought up. I am going to make sure I can afford not having a roommate, but I would really like to have one at all times. My goal is to get a place where I can rent out an entire floor to someone, aka have a 1st floor master, and let someone have the 2nd floor to themselves. Where I work is filled with young, single dudes that all rent. Finding a renter is a non-issue.
     
  19. 95b16coupe

    95b16coupe New Member

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    I'm just trying to get a better understanding of your background. for example, if you are a finance teacher vs. a hippie art teacher your point of view will be different.

    I don't assume prices will drop. I anticipate the possibility and enter cautiously. weighing the pros vs. cons is dependant 100% on market timing.

    people buy it because for the last 10,000 years of human existance, it's been the
    "great dream" to be a property owner. it has a false sense of pride and accomplishment by saying that you own your house or property. when really it's overrated.

    It's looking better to you because rates are lower and prices are dropping. how would you feel if you bought a house next month, prices drop 15%, rates drop and you lose your job or start a family? Too many factors play into solidifying that commitment.

    Phyregod: owning isn't always cheaper. if you read my above post. I have lived in houses that are far cheaper than the actual mortgage. After you add in the HOA dues, taxes and maintenence, quite often it is beneficial to rent.
     
  20. 99sidude

    99sidude Moderator Moderator VIP

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    What is scares me the most is being locked in. I've always been very mobile and able move whenever I please. I love my job right now, but if I ever want a career change it almost certainly means moving.
     
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