Convince me to Not Buy a Home

[jon.a]

Rent a small house.
Don't buy at the top of the market because of emotion.
Perfect example of a first world problem.

 

[Get Right]

Plot twist - I'll convince you to sell a home

 

[eliquid]

My advice is a little different prob than most.

1. If you really have the money

&

2. If you really love the house and really want it

Why not just buy it?

I tend to find that if there is a violation of either of the two above, you get a conflict of what you should do. Sounds like you either really don't have the money, or really don't love it/want it.

When both of the above are true, people generally don't have an issue before hand because they have more than enough money and they really love/want it, so that cost ( if at top of market ) really isn't an issue for them.

My mother-in-law won't buy Starbucks coffee. She says it's too expensive and she doesn't like it. She would rather brew her own Folgers and save the $6 or so dollars.

Ok, cool.

I get it being expensive. She lives on social security. Maybe she doesn't like the taste, but Starbucks had to taste good to the majority of people. People don't spend $7 on horrible coffee and they do have a ton of options and diff coffees she could try.

I have more than enough money for a Venti and I really do like my Flat Whites from there. I find it no issue what-so-ever buying it even if it is $7 because I really want it and I have the money.

It bothers her. She doesn't have the money and she really doesn't want it.

I have the money and I want it. Therefor the price isn't an issue and I don't care.

I know coffee is a bit different than buying a home. However, I bought my home cash the same way with the same reasoning. I had the money and I wanted it, the market didn't make my choice for me.

Which one is the real issue for you? ( Don't answer it here ).

When you realize which one it is, you will know how to fix it.

Good luck.

.

 

[MJ DeMarco]

• How long do you see yourself in it? 2 years? Or 20?
• What is the marginal benefit? More productivity vs the apartment? Peace of mind? Stress over repairs?
  
• Do you travel a lot?
• Need mobility?

The answer depends on how you see your future.

Buying and not buying could be the right answer.

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[jon.a]

My advice is little different prob than most.

1. If you really have the money

&

2. If you really love the house and really want it

Why not just buy it?

I tend to find that if there is a violation of either of the two above, you get a conflict of what you should do. Sounds like you either really don't have the money, or really don't love it/want it.

When both of the above are true, people generally don't have an issue before hand because they have more than enough money and they really love/want it, so that cost ( if at top of market ) really isn't an issue for them.

Which one is the real issue for you? ( Don't answer it here ).

When you realize which one it is, you will know how to fix it.

Good luck.

.

There's more than one way to be right.

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[Kak]

I'm posting this as a way to FIGHT the urge to follow the herd!!!!

I don't want to follow the herd!!!

I'm tempted to buy my first house in Portsmouth, NH area because I love it there and it's beautiful. Here's the thing.....I know real estate in these hot markets has run up considerably the last few years....I feel I would probably be buying at the TOP of the market.

So it seems wise to wait until we have another crash/correction....Same thing with stock market. I think we're in another bubble waiting for a major correction.

I really want to live in a small house because I HATE hearing my neighbors through apartment/condo walls.

Should I try to find a house to rent for a while? Suck it up in another apartment in a new location while I build my business?

Any advice is appreciated!!

I can help... But I can only tell you what I would do if I we're in your shoes and why. The decision is totally up to you.

Tell us about you.

Do you have any kids? Wife? In process?

What do you currently do for a living?

How is business?

How would you be “buying” outright or loan?

How much would you have left after each of those? So much it won't even matter? Enough? Or cutting it close? I don't need specifics.

 

[biophase]

it makes me feel like I've probably lost money during that time in the form of taxes, repairs, interest on the mortgage....

although if I pay off the house eventually, that means my monthly cash flow increases because now I don't have a mortgage payment...

The argument is that I could just rent and keep investing money on the side into an index fund and do just as well as owning a house on average?

So I guess the main point to buying a home is just to enjoy the relative quiet compared to being in an apartment. I play drums too so owning a house could allow me to set up drums in the basement, etc. It's not really an investment unless I pay it off, which eliminates a major monthly bill.

The argument I'd make is that you also see this as an investment and not merely a reason to live in a place away from neighbors.

If it was not an investment, I would argue that you could rent the home that you would buy and get the same benefits.

So as an investment you have to decide if it is a good investment.

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[G-Man]

it makes me feel like I've probably lost money during that time in the form of taxes, repairs, interest on the mortgage....

Sounds like you have your answer.

Break out the mortgage amortization calculator template on excel. In addition to the column for interest expense, add columns for estimated taxes/ home repairs/ insurance, etc. The goal is to get your precise monthly cash out, and what portion is pure expense vs. equity. For the sake of the exercise, we're assuming the value of the property doesn't change.

On another sheet, take your down payment and walk it out month to month on a 30 year schedule at a modest rate of return.

If there's a sizable delta in monthly cash out with either renting or buying, you can add that to either schedule to get a more accurate EV.

Now - look 10 years out. Compare the amount you have in home equity to the amount you have in the cash account that represents your downpayment with 10 years of interest. Is it substantial? Is it substantial enough to justify trading a liquid asset for an illiquid one? How much does it affect quality of life? Do you value stability or flexibility? Only you can answer those questions for your life.

 

[biophase]

I'm not selling any of my 42 rental units. They all cash flow well, and even if we take a 20% hit on rents, that won't be an issue. Again, anything that I'm willing to hold for at least the next 5 years, I'm holding on to.

My properties are mostly free and clear. The ones with loans have loans under 50% LTV. And all them cashflow and have PMs and the most expensive one is $250k. So I don't feel the need to sell any either.

I'm thinking in my head if they dropped 25% would I have wished that I sold? The answer is no.

The only question in my head is, will there be better properties I can buy if the market crashes that will outpace the returns of my current properties in 10 years.

 

[biophase]

Let's say you know that REI prices will only drop 20%. Does it make sense to sell?

Assume you have $1M in REI. That will cost you 6% to sell it. Then assuming you have capital gains tax, let's just say you've done decent and made $200,000 on your current $1M REI portfolio. So now you pay $40,000 in taxes. So your $1M REI becomes $900,000 in actual cash in the bank.

If REI drops by 10% you are back to even. If REI drops 20% and your properties are worth $800k, was it even worth the trouble to sell in the first place?

One other thing I forgot about is depreciation in the tax calculations. I just did my taxes today which reminded me of it. I'm assuming a 13 year ownership period here. So a 16% REI collapse would be break even.

Same example as before, but with a lower cost basis due to depreciation:

Assume you have $1M in REI. That will cost you 6% to sell it. Then assuming you have capital gains tax, let's just say you've done decent and made $500,000 on your current $1M REI portfolio. So now you pay $100,000 in taxes. So your $1M REI becomes $840,000 in actual cash in the bank.

 

[HelpAndProsper]

I can help... But I can only tell you what I would do if I we're in your shoes and why. The decision is totally up to you.

Tell us about you.

Do you have any kids? Wife? In process?

What do you currently do for a living?

How is business?

How would you be “buying” outright or loan?

How much would you have left after each of those? So much it won't even matter? Enough? Or cutting it close? I don't need specifics.

thanks everyone!

More info:

I am single, but would like a marriage(again) and possibly kids at some point.

I have no debt.

I have a pension and investments providing a cash flow to where I am currently paying 2100.00 in rent and don't have to work. I live a debt free middle class lifestyle with an average, economical paid off car. I eat out when I want to, go to the gym etc. I don't live extravagantly.

I am willing to spend 100k as down payment if I choose to buy a place.

I hate noise inside apartment buildings and I'm sensitive to it(very good business idea I can elaborate on later....).

I work every day improving my coding/web development skills. I currently have a few clients where I do web dev/design for them.

I have several ideas to go Unscripted and one is in motion regarding helping therapists with tech support and helping them to market themselves.

I have some background in Affiliate marketing, email marketing, Google Adwords, etc. in past years.

I want to keep improving tech skills and business education so I can test out business ideas with websites/apps, etc.

 

[biophase]

So if we make one assumption... that the value of your house will not go up or down in 15 years...

If you pay $300k today knowing that it will be worth $300k in 2033, how does this make you feel about buying this house?

 

[Late Bloomer]

GREAT thread with a lot of terrific posts on both sides of the purchase debate!

I'm leaning towards renting for a year in this new city

I recommend that as your wise approach for now.

You might find you don't like the city long term.

You might find a particular neighborhood is wonderful.

You might find a band that splits the cost of rehearsal space where you can leave your drums set up. For a while my neighbor who plays drums asked if he could leave them set up in my spare room, where I had my keyboards, between our jam sessions, when I had a little more room for that than he did.

You might find the love of your life, and have a good reason to relocate to a place that's better for her, while you continue an online business from anywhere.

You might make great friends who'd like to rent the other half of a two-family home from you.

If becoming a homeowner is a great deal for you now, it would probably still be a great deal a year from now... with only the loss of one year's rent, but with a lot more certainty.

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[GoGetter24]

Just remember, if you buy a house, you're allowed to drill holes in it without permission.

 

[MJ DeMarco]

This has turned into an interesting economic discussion...

But I'm also leaning toward a significant event downward. My prediction is it begins at the end of August with October being absolutely brutal.

As such, I've reduced my option sales and short exposure, assuming my dates are off.

Among other things mentioned by @JScott, I come to this conclusion based on that 1) the market has been unable to recover the February correction and 2) Large up days in the S&P is accompanied by below average volume (no conviction) and 3) Netflix is a 350 stock with a 250 PE.

 

[HelpAndProsper]

So if we make one assumption... that the value of your house will not go up or down in 15 years...

If you pay $300k today knowing that it will be worth $300k in 2033, how does this make you feel about buying this house?

it makes me feel like I've probably lost money during that time in the form of taxes, repairs, interest on the mortgage....

although if I pay off the house eventually, that means my monthly cash flow increases because now I don't have a mortgage payment...

The argument is that I could just rent and keep investing money on the side into an index fund and do just as well as owning a house on average?

So I guess the main point to buying a home is just to enjoy the relative quiet compared to being in an apartment. I play drums too so owning a house could allow me to set up drums in the basement, etc. It's not really an investment unless I pay it off, which eliminates a major monthly bill.

 

[Kak]

Good posts @G-Man and @biophase y'all covered it.

Home buying isn't some crazy endeavor. It's just buying a home. I got a great deal on my home. It is worth way more today than I bought it for, but I haven't realized the appreciation. Meanwhile, I have to fix things that go wrong and keep up with property taxes and HOA crap... Meh. I'll be here for a while so it's fine. 6 to one half dozen to another.

 

[Mckenzie]

Plot twist - I'll convince you to sell a home

THIS.

 

[biophase]

I know a lot of people disagree with me on this, and I'm the first to say I don't have a crystal ball, but I'm confident enough in my assessment that I have completely reorganized my real estate business based on the current economic conditions and my perceived implications of them.

I'm curious, based on your opinion of where we are at, are you selling your real estate holdings?

Let's say you know that REI prices will only drop 20%. Does it make sense to sell?

Assume you have $1M in REI. That will cost you 6% to sell it. Then assuming you have capital gains tax, let's just say you've done decent and made $200,000 on your current $1M REI portfolio. So now you pay $40,000 in taxes. So your $1M REI becomes $900,000 in actual cash in the bank.

If REI drops by 10% you are back to even. If REI drops 20% and your properties are worth $800k, was it even worth the trouble to sell in the first place?

 

[SteveO]

I can see plenty of reasons to sell property right now, but most of them will be situation dependent. Also, changing market conditions provide opportunity -- if you're well positioned to take advantage of those opportunities, selling now can provide additional cash to position yourself even better.

This is the game that I want to stick with. Distressed sales are few and far between right now. The 20% swing is much greater if you dig deep. Could be more like a 50-80% swing.

 

[HelpAndProsper]

I'm posting this as a way to FIGHT the urge to follow the herd!!!!

I don't want to follow the herd!!!

I'm tempted to buy my first house in Portsmouth, NH area because I love it there and it's beautiful. Here's the thing.....I know real estate in these hot markets has run up considerably the last few years....I feel I would probably be buying at the TOP of the market.

So it seems wise to wait until we have another crash/correction....Same thing with stock market. I think we're in another bubble waiting for a major correction.

I really want to live in a small house because I HATE hearing my neighbors through apartment/condo walls.

Should I try to find a house to rent for a while? Suck it up in another apartment in a new location while I build my business?

Any advice is appreciated!!

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[DavidK]

Buy a home where you can rent out part of it, for example you can live in the basement while you're single and rent to a family upstairs. Then when you get married and have kids stop renting it out, best of both worlds...

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[HelpAndProsper]

It seems the only way you really come out ahead with home ownership compared to investing in an index fund is if you pay the home off within 10 years or if you just buy a property of course in cash with no mortgage.

Otherwise, I would argue you'd make more money just throwing your money into an index fund every month.

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[RahKnee]

My 2 cents:

You can invest the money you would put into the house and likely make a bigger return in the long run. A house that you live in is a liability, not an asset.

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[Seeker]

Does the noise bother you all the time? If it's just while you are improving your coding skills, I'll suggest to get a set of good in-ear headphones or on-ear with noise cancelling. That way you could escape the noise for a limited time, listen to your favorite music or just relaxing tones (if music destracts you too much).

Of course that won't work if it keeps you up at night.

 

[Envision]

Real estate indicators don't make it seem we're necessarily at a top, but in most recessions, real estate doesn't lead the downturn -- it's a lagging indicator. 2008 was an exception, and because of it, many new investors incorrectly believe that real estate is typically the *cause* of the recession, and generates leading indications of an economic downturn.

But, that's not generally the case (hardly ever, in fact)... Typically, it's the business cycle that gives way first, leading to increased unemployment and wage depression, which ultimately leads to a turn in the real estate industry. Real estate starts to turn a few months after the rest of the economy.

With that said, how is the rest of the economy doing? All indications are that the business cycle we're currently in may be coming to an end. Some of the most reliable indicators:

- Full employment
- Flattening yield curve
- Rising interest rates
- Consumer credit at a peak
- Reduction in GDP (especially immediately after a tax break)
- Wage and real inflation increasing

(Note that the first two -- full employment and an inverting yield curve -- are almost perfect indicators for recession in the United States.)

And if you just look at the statistics, we're currently in the second longest business cycle in recent history, so just based on timing, we should be expecting a turn in the near future.

I know a lot of people disagree with me on this, and I'm the first to say I don't have a crystal ball, but I'm confident enough in my assessment that I have completely reorganized my real estate business based on the current economic conditions and my perceived implications of them.

This is a good POV but you gotta take into consideration the devastation of the recession and the recovery that we need to make, so it's not outrageous to be in the second longest business cycle.

No doubt, the economy will turn at some point in the future but I'd bet it won't be nationwide, various indicators in my city for example show that people keep coming here, we're in a housing deficit, and house prices are skyrocketing. This would be different compared to California, or the midwest. What's your thoughts on that?

Also, for the op...

Your house isn't an investment. I'd recommend seeking a househacking opportunity like many on the forum have done but you'd need 2 years of w2 income for the fha loan. That would turn your house into an asset.

Can you use the money you have to make more money at a better rate than an investment home would?

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[Rickh]

After years of renting I got really bored and irritated of:

a) paying off someone else mortgage whilst they also benefited from the increase in house prices
b) being 3 months away from not having a home [3 months notice in tenancy agreements]
c) not being able to make changes to my homes layout/aesthetics to my taste because it belonged to someone else.

I felt like some elses b**ch working to pay off their loan.

That's just me, I'm 4 years into my mortgage and I don't feel 'restricted' or at the mercy of a large financial institution earning money on the interest I pay. Hell if I sell up now I'd be 100k better off than I would if I was paying rent over the past 4 years.

Yeah the market could crash and I could have negative equity for a while, but I've got a wife and kids and happy with the area we live in, again I feel totally free to progress my business ventures whilst my family has permanent residence in a great area, which is important for schools, near family etc.

Also I was in a financial position to take out a mortgage loan at a competitive rate, not everyone can summon up a decent deposit.

I would say the only bad advice I got was to 'stretch' your mortgage payments as much as you can in order to buy a more valuable property [I didn't do that as it didn't feel right]. For me that's got your a$$ over a barrel with your bank keeping you stuck with a job that pays your high debts and likely removes any meaningful 'side hustle' time from your life.

There are many factors involved in making the right choice, it's down to you and your circumstances.

 

[DustinH]

Don't buy a house unless you are committed to living in it for 10 years. Buy something in a price range that sells (don't get anything over $600,000) and in a quiet suburban area that is desirable with good school systems (stability). Don't put all your cash into the down payment if you don't have to. Only put 20% down to avoid the PMI. Put the rest of your cash to work somewhere else. Don't try to search for a great "deal." Pay for a good house that will be desirable 10 years from now (unless you have plans to update it). Don't try to get a discount on the sales price. Get the sellers to pay for all the closing expenses/fees, and ask your realtor to pay for the inspections. The fees involved in the transaction is cash you will never get back. The cash put as a down payment will appreciate. Here is a list of closing costs and fees you should get someone else to pay for (the seller, your realtor, or even your mortgage broker): inspection fees, repairs, title insurance, loan origination fee, closing attorney fee, homeowners association transfer fees, typical closing costs such as the state mortgage tax and state deed transfer tax. Your mortgage broker should be able to give you a detailed list of every line item you have to pay, except for the inspection costs and closing attorney fee. Your realtor should be able to negotiate these on your behalf.

If you don't want to commit to one place for 10 years then don't buy it. Buy 2 or 3 rentals instead. Don't ever just buy one rental. If you go that route then go into it thinking you will buy 3 rentals. One door is never a good investment.

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[LaraJF]

I'm happy I bought my house for similar reasons (noise).

But you wanted the negatives. You're responsible for paying for everything. Leaky pipe in the wall? the plumber charges you to open a hole, repair it, and then you need to find someone else to repair the dry wall and paint.

You pay property taxes usually (check NH...it may be different then California aka Tax You To Death State). I also have homeowner's insurance and earthquake insurance. It adds up.

Appliance dies? Yup, have to buy a new one.

Rat dies squeezing out between the house & the chimney? Guess who gets to remove it or pay $175?

Owning a home feels like "if it's not one thing, it's another." (yet I'm glad I bought when I did even though the interest rates were around 11% in 1995 if I recall correctly)

So, time to make a pro's & con's sheet.

I'm posting this as a way to FIGHT the urge to follow the herd!!!!

I don't want to follow the herd!!!

I'm tempted to buy my first house in Portsmouth, NH area because I love it there and it's beautiful. Here's the thing.....I know real estate in these hot markets has run up considerably the last few years....I feel I would probably be buying at the TOP of the market.

I really want to live in a small house because I HATE hearing my neighbors through apartment/condo walls.

Should I try to find a house to rent for a while? Suck it up in another apartment in a new location while I build my business?

Any advice is appreciated!!

 

[LaraJF]

I could tell you about potholes, about the incredible closed-minded people (agree with me or else), the actual costs of sanctuary cities and "undocumented workers." The people who vote for Bond Issues thinking they're making things wonderful when they're raising taxes. Then they move because it's too expensive to live here and leave us holding the tax burden.

But, this thread isn't about that. So I won't. I could write a book about the reality of this "paradise." I've lived in Silicon Valley since 1976. I've seen the changes, good and bad.

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.