Convince me to Not Buy a Home

[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!!

 

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[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.

 

[Maxboost]

How does your cashflow situation change from renting to buying? If its the same I would buy, keep in mind maintenance, taxes, water bill, heat bills, etc...

 

[Guest3722A]

I think we're in another bubble waiting for a major correction.

Why?

 

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[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.

 

[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.

.

 

[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.

 

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[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.

 

[Get Right]

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

 

[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...

 

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[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?

 

[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.

 

[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.

 

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[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.

 

[HelpAndProsper]

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.

When I do the 10 year calculations like you suggested, I have about 30k more in the account getting a modest 7% return in and index fund when compared to the equity I would have in a home 10 years out....

It's not that much of a difference in the grand scheme.

Renting a house where it's quiet, with a similar monthly payment, would probably be just as good of a situation financially and lifestyle-wise....

 

[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.

 

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[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.

 

[HelpAndProsper]

THIS.

Please elaborate.....Become a realtor? That's the thing, I'm not sure the Unscripted Way really advises me to sign a 30 year mortgage.....I'm leaning towards renting for a year in this new city and practice more providing value to others , solving their problems, etc.

 

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[Thoelt53]

Being familiar with the area, I have to ask are you working in Boston? If so, do you plan on commuting to to Boston from Portsmouth?

Money aside, that commute is a major time sink. And time being the only finite resource makes that decision and easy 'no' in my book. Are you comfortable with 3-4+ hours of commuting daily?

Never mind, I just read your post indicating that you aren't working.

 

[HelpAndProsper]

Being familiar with the area, I have to ask are you working in Boston? If so, do you plan on commuting to to Boston from Portsmouth?

Money aside, that commute is a major time sink. And time being the only finite resource makes that decision and easy 'no' in my book. Are you comfortable with 3-4+ hours of commuting daily?

Never mind, I just read your post indicating that you aren't working.

Yeah, definitely would NEVER commute all the way to Boston. I work right now for myself as a freelancer web dev and learning to solve problems and provide value.

 

[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.

 

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[Antifragile]

If you have to think this hard, you probably cannot afford the house you want, or don’t want it bad enough. It’s simple, people buy on emotion and then justify their action with “logic”. You’ve started this thread with a key bias “visibility bias”, you only want to hear why not to buy and “convince” yourself that it is a good idea. Guess what, you are already there - it is in the title!

I offer you something different entirely: make a decision and stop torturing yourself with “options”. There is one thing worse than wrong decision - no decision. Threads like this tend to do that, you’ll keep waiting for some flash of brilliance while renting and truly avoiding a decision, checking in here. I recommend you commit to your decision and only revisit when your personal situation changes.

 

[Thoelt53]

If you have to think this hard, you probably cannot afford the house you want, or don’t want it bad enough. It’s simple, people buy on emotion and then justify their action with “logic”. You’ve started this thread with a key bias “visibility bias”, you only want to hear why not to buy and “convince” yourself that it is a good idea. Guess what, you are already there - it is in the title!

I offer you something different entirely: make a decision and stop torturing yourself with “options”. There is one thing worse than wrong decision - no decision. Threads like this tend to do that, you’ll keep waiting for some flash of brilliance while renting and truly avoiding a decision, checking in here. I recommend you commit to your decision and only revisit when your personal situation changes.

And who are you?

 

[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.

 

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[GoGetter24]

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

 

[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.

 

[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.

 

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[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?

 

[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.