do you think the work you do over 20-30 yrs to pay off a home is fair?

[a_pupil]

what do the minds of getbig think about buying houses to rent?

is it better to get into stocks or to buy a house with say a 1/3 deposit, which should clear the mortgage from the rent money in around 15 years?

[Primemuscle]

what do the minds of getbig think about buying houses to rent?

is it better to get into stocks or to buy a house with say a 1/3 deposit, which should clear the mortgage from the rent money in around 15 years?

Airbnb is the way to go if zoning laws allow for short term rentals. Many of these places start as a couple hundred dollars a night. I have a good friend who lives on Maui and has many vacation rentals that run $400 - $500 a night. Her rentals are booked year-round.

[SOMEPARTS]

what do the minds of getbig think about buying houses to rent?

is it better to get into stocks or to buy a house with say a 1/3 deposit, which should clear the mortgage from the rent money in around 15 years?

Which asset class do banks loan money on?

[Marvin Martian]

That's one way to do it if you have the means. Many won't qualify for a 15 year mortgage loan.  Banks know it limits their profit so they make it hard for many to qualify. The best part of getting a 30 year and paying it off quicker is that you have the option to suspend the monthly extra payment when you want. If Christmas is coming up you can can suspend the extra payments for a couple of months.

It’s absolutely not harder to qualify for a 15 year vs a 30... guidelines are EXACTLY the same - except that obviously with a 15 year you have a higher payment thus affecting DTI. There is plenty of money to be made on a 15 year. I am not sure where you got this idea from?
That said - a 30 year is a wise move. If you have the discipline you can pay it off just like a 15 year as all payments over the PITI go directly to principal. The added benefit with a 30 is a lower mandatory note so that if money is tight you have a lower obligation and less chance of a credit risk.

[Marvin Martian]

The mortgage industry is a sham.  Get a $165k loan for a Porsche 911 GT3 and they’ll base it in a couple % interest for 6 years. Get a mortgage for $165k and they give you a 30 year loan where you pay more than double the initial loan value.

You can do a 5 year mortgage. If you choose to go longer then it’s on you.

[Agnostic007]

I've owned a few houses. At the time they made sense. I knew I was going to be in one place awhile. In recent years I have rented. I like the freedom of moving if I choose to without worrying about taking a loss, If the A/C goes out, I call the landlord. Roof leaks, I call the landlord. No HOA, no property taxes. While most landlords want to roll all the fees into what they rent the house for it isn't always possible.  The house I'm living in now, I know would be more expensive if I took out a loan. Landlord is eating about $400 a month. My point is that not every case is the same and while buying may make perfect financial sense for many people, it's not for everyone. In my case, if eventually I find a place I truly love and want to live for at lease 5-10 years I'll certainly consider buying but for now, it doesn't make financial sense 

[Agnostic007]

The mortgage industry is a sham.  Get a $165k loan for a Porsche 911 GT3 and they’ll base it in a couple % interest for 6 years. Get a mortgage for $165k and they give you a 30 year loan where you pay more than double the initial loan value.

The theory is risk.. the Porshe likely will devalue to very little in 10 years therefore the bank wants to recover it's investment while it holds value incase you default. Homes are more secure and typically, but not always increase in value. They can afford to let you pay the interest on the loan for decades.

[Agnostic007]

That's one way to do it if you have the means. Many won't qualify for a 15 year mortgage loan.  Banks know it limits their profit so they make it hard for many to qualify. The best part of getting a 30 year and paying it off quicker is that you have the option to suspend the monthly extra payment when you want. If Christmas is coming up you can can suspend the extra payments for a couple of months.

I think this is good advice. The last 2 houses I bought I did a 15 year mortgage. If I buy again I will consider a 30 year and double up on the payments. It's something that does give you flexibility in the event of unforeseen circumstances and if you have  financial discipline it's easy to pull off

[FitnessFrenzy]

Where is XFACTOR's post that he already owns 3 houses outright? 

[Primemuscle]

It’s absolutely not harder to qualify for a 15 year vs a 30... guidelines are EXACTLY the same - except that obviously with a 15 year you have a higher payment thus affecting DTI. There is plenty of money to be made on a 15 year. I am not sure where you got this idea from?
That said - a 30 year is a wise move. If you have the discipline you can pay it off just like a 15 year as all payments over the PITI go directly to principal. The added benefit with a 30 is a lower mandatory note so that if money is tight you have a lower obligation and less chance of a credit risk.

I've always gone for the 30 year mortgage and paid it off faster. Like you mentioned, it offers more flexibility. My bank does offer a lower interest rate on a 15 or 20 year mortgage. Another way to speed the payoff is to make a payment every two weeks. For people who get paid every two weeks this makes sense.  This way you get two extra principal payments a year.

[FitnessFrenzy]

Airbnb is the way to go if zoning laws allow for short term rentals. Many of these places start as a couple hundred dollars a night. I have a good friend who lives on Maui and has many vacation rentals that run $400 - $500 a night. Her rentals are booked year-round.

Airbnb is absolutely crap right now in the corona situation. No visitors.

[Humble Narcissist]

It's interesting that people spit out the usual reasons about what a great investment owning your own house is.

The usual things are:

Tax deduction
Appreciation

These reasons have been pounded into our heads by the R/E industry.  We accept them as valid.

When you actually run the numbers you see how these things are not so hot.  For many folks owning a home has been awful and life destroying.

People who buy at market highs get killed.  Being fortunate enough to buy when the market is low is the best way but not always possible.  More luck than anything else.

Owning your own home can be a great thing from a lifestyle standpoint but as an investment it's not great.  Unless you get the land and house for nothing it's a luxury to own a home.

Even owning your home free and clear has costs.  R/E taxes, upkeep, opportunity cost of the money tied up in the house, lack of liquidity in getting the money, lack of mobility if you have to move to change jobs.

Don't forget the time value of money and the effects of inflation on your investment.

Borrow the money out of the house?  Then you owe it again and have to pay it back with interest.  

Sell the house to get the money?  Then where will you live?  Rent again?

There are many good reasons to buy your own home but investment return is far down the list.




 

This.

[FitnessFrenzy]

It's interesting that people spit out the usual reasons about what a great investment owning your own house is.

The usual things are:

Tax deduction
Appreciation

These reasons have been pounded into our heads by the R/E industry.  We accept them as valid.

When you actually run the numbers you see how these things are not so hot.  For many folks owning a home has been awful and life destroying.

People who buy at market highs get killed.  Being fortunate enough to buy when the market is low is the best way but not always possible.  More luck than anything else.

Owning your own home can be a great thing from a lifestyle standpoint but as an investment it's not great.  Unless you get the land and house for nothing it's a luxury to own a home.

Even owning your home free and clear has costs.  R/E taxes, upkeep, opportunity cost of the money tied up in the house, lack of liquidity in getting the money, lack of mobility if you have to move to change jobs.

Don't forget the time value of money and the effects of inflation on your investment.

Borrow the money out of the house?  Then you owe it again and have to pay it back with interest.  

Sell the house to get the money?  Then where will you live?  Rent again?

There are many good reasons to buy your own home but investment return is far down the list.

do you own or rent personally?
and why?

[IroNat]

do you own or rent personally?
and why?

I own my home.

Why own?  Because you can afford the luxury of owning.

There are benefits to owning your own home:

Stability for your family
Convenience
Privacy
School district
Space for your activities (home gym)
Preferred location

Some of these same benefits can be obtained by renting however.

Is it cheaper for me to own my home or rent it?

To rent a similar home in my area would be about $2000-$2500/mo.

R/E taxes on my home are $1,000/mo.  Goes up every year.

Insurance is $70/mo.  Goes up every year.

Maintenance is another $250/mo.  Does not include my time spent on upkeep.

Interest that would be paid on a mortgage to buy my home = $1,200/mo.

That's $2,520/mo in total costs for those items.

I have no mortgage so instead of interest expense to buy the home I have the opportunity cost of having my money tied up in my house instead of invested elsewhere at a higher return.

The market has swung wildly over the years but currently my house has appreciated 1.7 times in 22 years.

From a financial standpoint it's close to a wash.

I'm not telling people not to own a house.  What I'm making evident is that it's not some golden goose egg as promoted.

For some people it's a forced saving method.  They'd blow the money otherwise instead of investing it if they didn't put it into the house.  

For people like that, and there are a lot of people like that, the house becomes their biggest asset.

For me, my house is not even considered part of my investment portfolio.

[SOMEPARTS]

I own my home.

Why own?  Because you can afford the luxury of owning.

There are benefits to owning your own home:

Stability for your family
Convenience
Privacy
School district
Space for your activities (home gym)
Preferred location

Some of these same benefits can be obtained by renting however.

Is it cheaper for me to own my home or rent it?

To rent a similar home in my area would be about $2000-$2500/mo.

R/E taxes on my home are $1,000/mo.  Goes up every year.

Insurance is $70/mo.  Goes up every year.

Maintenance is another $250/mo.  Does not include my time spent on upkeep.

Interest that would be paid on a mortgage to buy my home = $1,200/mo.

That's $2,520/mo in total costs for those items.

I have no mortgage so instead of interest expense to buy the home I have the opportunity cost of having my money tied up in my house instead of invested elsewhere at a higher return.

The market has swung wildly over the years but currently my house has appreciated 1.7 times in 22 years.

From a financial standpoint it's close to a wash.

I'm not telling people not to own a house.  What I'm making evident is that it's not some golden goose egg as promoted.

For some people it's a forced saving method.  They'd blow the money otherwise instead of investing it if they didn't put it into the house.  

For people like that, and there are a lot of people like that, the house becomes their biggest asset.

For me, my house is not even considered part of my investment portfolio.

/thread

[Primemuscle]

Airbnb is absolutely crap right now in the corona situation. No visitors.

Yeah well, everything has gone to crap because of the corona situation. You can still book with Airbnb. https://www.nytimes.com/2020/04/16/realestate/coronavirus-short-term-rentals.html?auth=login-email&login=email

[JustPlaneJane]

I own my home.

Why own?  Because you can afford the luxury of owning.

There are benefits to owning your own home:

Stability for your family
Convenience
Privacy
School district
Space for your activities (home gym)
Preferred location

Some of these same benefits can be obtained by renting however.

Is it cheaper for me to own my home or rent it?

To rent a similar home in my area would be about $2000-$2500/mo.

R/E taxes on my home are $1,000/mo.  Goes up every year.

Insurance is $70/mo.  Goes up every year.

Maintenance is another $250/mo.  Does not include my time spent on upkeep.

Interest that would be paid on a mortgage to buy my home = $1,200/mo.

That's $2,520/mo in total costs for those items.

I have no mortgage so instead of interest expense to buy the home I have the opportunity cost of having my money tied up in my house instead of invested elsewhere at a higher return.

The market has swung wildly over the years but currently my house has appreciated 1.7 times in 22 years.

From a financial standpoint it's close to a wash.

I'm not telling people not to own a house.  What I'm making evident is that it's not some golden goose egg as promoted.

For some people it's a forced saving method.  They'd blow the money otherwise instead of investing it if they didn't put it into the house.  

For people like that, and there are a lot of people like that, the house becomes their biggest asset.

For me, my house is not even considered part of my investment portfolio.

You’re skewing the numbers to try to make a weak point.

Your interest on the paid off mortgage is $0. Even if it were the full boat $1,250/month ($15,000 a year) you would get 36-38% of that back in tax refund, or lowering of your AGI.

So the numbers indicate about a $200,000 home purchased 22 years ago that is worth about $340,000 now, or so.

In 22 years of owning the home you’ve saved $100,000 in federal tax using your numbers.
You have $340,000 in equity
You have saved paying about $564,000 in rent.
You paid about $350,000 on the mortgage over 22 years.

So your house returned about 8% per year as an investment.

A rental would have cost you the $564,000 in rent + the $340,000 in lost equity.

[Hypertrophy]

I own my home.


R/E taxes on my home are $1,000/mo.  Goes up every year.

Where the hell do you live? $12K a year for property taxes?? I used to live in upstate NY and paid that on a house that was only valued at $250K - so I moved south and now they are $4K on a home 3X in value. You read that right.

You might want to rethink your location if you are at all concerned with investments. The 1.7X appreciation in 22 years indicates you are living in a dead state or at the very least, a crappy location.

[JustPlaneJane]

Where the hell do you live? $12K a year for property taxes?? I used to live in upstate NY and paid that on a house that was only valued at $250K - so I moved south and now they are $4K on a home 3X in value. You read that right.

You might want to rethink your location if you are at all concerned with investments. The 1.7X appreciation in 22 years indicates you are living in a dead state or at the very least, a crappy location.

R/E taxes in Illinois (Chicagoland area) can be 3.4 - 4.0 percent of the assessed value of the home for the year.

[FitnessFrenzy]

So money is essentially a reflection of the value of your labor right? Do you really think the work you do for the 30 odd years it takes to fully pay off a house accurately reflects the work out into making that house? Or is the value of land and homes currently way too overvalued?The land was once owned by nobody until somebody turned up and claimed it, then you are just looking at the materials and labor needed to put it up.

some people make millions in a single stock trade. Sports stars make millions for work that is less physically demanding than many normal jobs. The world is not fair in that sense, it all comes down to supply and demand in terms of who makes a lot of money.

And then skill and luck.

[IroNat]

Where the hell do you live? $12K a year for property taxes?? I used to live in upstate NY and paid that on a house that was only valued at $250K - so I moved south and now they are $4K on a home 3X in value. You read that right.

You might want to rethink your location if you are at all concerned with investments. The 1.7X appreciation in 22 years indicates you are living in a dead state or at the very least, a crappy location.

If you have to ask you can't afford it.

[Hypertrophy]

If you have to ask you can't afford it.

Translation-  You are stuck there because of a wife, lol.

[Hypertrophy]

R/E taxes in Illinois (Chicagoland area) can be 3.4 - 4.0 percent of the assessed value of the home for the year.

Just like NY. Somebody has got to pay all the union payrolls and pensions. I sold a tech company and was all set to build my dream home there when I inquired about the potential tax bill in Skaneateles, NY (a  beautiful village in the Finger Lakes region). On a $750 K house they would have been... $35K a year!

Umm - no. So I moved south and bought a much bigger place for less money. With a property tax bill that is currently 0.5% of the assessed value. BTW - a lot of the people in my community are ex Chicagoans, haha.

[Primemuscle]

Where the hell do you live? $12K a year for property taxes?? I used to live in upstate NY and paid that on a house that was only valued at $250K - so I moved south and now they are $4K on a home 3X in value. You read that right.

You might want to rethink your location if you are at all concerned with investments. The 1.7X appreciation in 22 years indicates you are living in a dead state or at the very least, a crappy location.

Probably New Jersey, which has the highest property tax rates in the country at 2.47 % or $8,104 on a $327,900 median price home.

The county with the highest property tax in the country is Westchester, New York: $17,392.

At $7,860 Los Angeles has the highest property tax burden for a median priced home, which is just under $700,000 of any city in the U.S.

[Hypertrophy]

Probably New Jersey, which has the highest property tax rates in the country at 2.47 % or $8,104 on a $327,900 median price home.

The county with the highest property tax in the country is Westchester, New York: $17,392.

At $7,860 Los Angeles has the highest property tax burden for a median priced home, which is just under $700,000 of any city in the U.S.

$8104 on a $327.9 K house is a bargain. My $225,000 "starter home" in upstate NY had a $9K tax bill when I sold it.