OFF TOPIC: Buying a first house

[Ligament]

I've been renting all this time.

Is it true that one should buy as expensive a house as one can qualify for?

I think in our case - physicians - since our income is most likely going to drop every year from this point forward thanks to Comrade Marxist President, I should probably buy as much as I can qualify for while my income is at possibly at a career peak. Really sad since I'm only 7 years into practice.

I don't understand any of this crap. thanks!

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[hyperalgesia]

I'm also renting 7 years since fellowship and LOVE it. I move every 1-2 years to stay light. When I move I have a rule, if something I own I did not use during the entire time I was living in a place, I give it away.

No matter how much I slice the numbers, I can't get them to work in favor of buying real estate. The American dream of "buying a house" is as contrived as a ride at Disney World. You cannot truly OWN property any more. But the concept benefits so many OTHER people. Obviously everyone involved in the sale: realtors, banks, attorneys, loan officers, etc etc. But it also benefits the federal and state govts by encumbering the populace. Once you buy a house, you are obligated to continue working, paying income taxes, etc. You are a slave.

Renting allows you to remain flexible, which is the definition of freedom. But there's no lobby out there extolling the virtues of renting. That's why everyone is brainwashed. Almost everyone...

So I say rent and be proud. But if you insist on buying, pay cash. But if you insist on borrowing because you can't resist including a bank as part of your family, borrow as little as possible. When the realtor and bank and everyone else says, "CONGRATULATIONS, YOU QUALIFY!" Don't be fooled. It's a trap!

 

[knoxdoc]

Agree that renting is fine, but if you decide to purchase, buy something that you can pay off quickly - within 3-5 years. Don't let the banks get all your hard-earned dough. Get a big down payment saved up (like 50% if you can swing it), and plan on paying off the balance ASAP. Physician pay will not improve in the future, so you don't want to get caught with a huge monthly payment that will kill you later. Your stress will drop dramatically when that puppy is paid off. I'm a big Dave Ramsey fan.

My $0.02

 

[lord_jeebus]

The greatest accomplishment of the New York Times is the Buy vs Rent Calculator: http://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html

I agree that renting is freedom. But if you have enough money, and live in the right market, buying might make sense. For me, it does not.

 

[pmrmd]

No matter how much I slice the numbers, I can't get them to work in favor of buying real estate.

Except in 20 years you have paid 3-5k a month for rent and you have nothing. You've made the property owner rich because you have helped pay off the mortgage on the house and now they have an asset they can sell for hundreds of thousands or put that money in their pocket if there is no mortgage. Hell, if you feel that way, can I please be your ongoing landlord? I would love to own something and not have to pay for it.

 

[Ligament]

Ok now I'm all confused. Renting good or not good financially?

I certainly like the freedom, however I've moved enough times in my life, and frankly I like being in the same place lately. Less stress.

I have always had the feeling that those with mortgages don't really own anything other than a landlord called "bank."

However, what about all the supposed tax benefits of "owning"?

 

[hyperalgesia]

Except in 20 years you have paid 3-5k a month for rent and you have nothing. You've made the property owner rich because you have helped pay off the mortgage on the house and now they have an asset they can sell for hundreds of thousands or put that money in their pocket if there is no mortgage. Hell, if you feel that way, can I please be your ongoing landlord? I would love to own something and not have to pay for it.

I would be delighted to pay your mortgage. Instead of anchoring my money into a fraction of YOUR BANK'S PROPERTY, I will invest it in some other, more fungible asset. In 20 years I will have a higher average return than you will. But in two years, I will walk away from your ball and chain and you will be forced to list it on craigslist, begging for a tenant who understands what your master requires.

 

[hyperalgesia]

I have always had the feeling that those with mortgages don't really own anything other than a landlord called "bank."

Bingo! It's not a feeling, it's reality. If someone can take it away from you, you don't own it.

 

[pmrmd]

I would be delighted to pay your mortgage. Instead of anchoring my money into a fraction of YOUR BANK'S PROPERTY, I will invest it in some other, more fungible asset. In 20 years I will have a higher average return than you will. But in two years, I will walk away from your ball and chain and you will be forced to list it on craigslist, begging for a tenant who understands what your master requires.

You hope you have a great return on investment. In the meantime, I will gladly put your money into my pocket for as long as you are willing. Thankfully I will be able to find more people like you who want to buy a house for me. Your ideas only make sense if we are talking over-priced property that will have trouble appreciating, which we aren't. Are you into commercial rentals too? I would love to be your landlord for your practice and have you buy me that building too.

 

[hyperalgesia]

You hope you have a great return on investment. In the meantime, I will gladly put your money into my pocket for as long as you are willing. Thankfully I will be able to find more people like you who want to buy a house for me. Your ideas only make sense if we are talking over-priced property that will have trouble appreciating, which we aren't. Are you into commercial rentals too? I would love to be your landlord for your practice and have you buy me that building too.

Yes, if you do the build out, I'd be happy to get the bank off your ass for a few years

I think a lot of people overlook the down payment, and what is being lost when tying it up into equity. Which will appreciate faster historically: the equity that you purchase in your home or a more fungible asset (like an index fund)?

Keep in mind this link was at the PEAK of the real estate bubble, and still stocks easily win over the long term.
http://www.money.cnn.com/galleries/...llery.stocks_v_realestate.moneymag/index.html

I think it's completely location and time dependent, but if you think it's a slam dunk, I worry about you.
People are blind drunk when they think about real estate. It is hard wired into our DNA. I often dream about being a real estate mogul. That's why there are 10 parasites to every home buyer.

 

[lobelsteve]

Married w 2 kids. Bought house in 06 for 450. Have done 300k in upgrades including exrra garage, gym, finished basement, pool, backyard.

My house is my kingdom. It is a sanctuary. It is where my life happens and where my kids will grow up. A good neighborhood and great friends. You guys rent all you want. Im building tomorrow s leaders.

 

[NJPAIN]

Renting = freedom. I have owned a coop apartment in a "great" town, lived in it for 13 years and sold at a loss of 20%. Now in a home that I bought in 2007 at peak of market. If I could sell it I would loose 20%. Each time I bought the timing couldn't be worse. The 5 years I rented in a luxury highrise were awesome. Doorman, maintenance man, etc. Now I deal with a lawn, repairs and neighbors. It's for the birds.

 

[SSdoc33]

lots of variables. we cant answer a question like: is it financially good or bad to own a house.

in your particular situation (extrapolating from what i know), you are a tax gold-mine for the state of washington right now. no kids, business owner, high salary. even though there is no state income tax, you still could use a tax shelter. depending on your set up, you can deduct the interest on your mortgage from your personal income. this way, comrade obama will see less of your hard-earned money.

as far as the house itself as an investment? hard to say. the house could increase or decrease in value, but you will be paying down some of the principal over time, and you should be able to get out more money than you put in. if you are planning on staying for at least 3-5 years, it would probably make sense.

also, given the fact that you seem to not be the biggest fan of kids, you are in a pretty decent position. you dont need a 4 bedroom house. if you do decide to buy house, put a decent downpayment down (>25% if possible) so your monthly payment isnt all that different from what you are paying now. if you buy an expensive house with a huge mortgage, you usually cant deduct all of the mortgage interest, because you will be bumping up against the AMT (alternative minimum tax). again, that goddamn obama and his taxes.

sounds like you like WA and want to stay there. you will be "tied down" by buying a house, but it will be better for you financially. change of jobs, income, girlfriends/wife, and -- god forbid -- kids all make this more risky.

 

[Ducttape]

renting is probably less expensive, in the long run. renting is probably better if you are single, or live in a big city (NYC). houses are money sinks.
he who rents will die with the most toys (or money). but then again, well, he just dies.


if you have a family, its a completely different ball of wax.

my house is also my castle - with its own pool that i can be sure no other kid has peed or pooped in, i can go into the basement and not worry about how loud the volume is. i can put in my own wine cellar. i can take long showers without worrying about using up the whole building's water supply. i can put whatever plants i want in - i just put a few blueberry bushes in, and set up a basketball net.

financially, i do have a built in tax deduction that reduces the pain of house payments. you do build equity... selling in the LONG run may pay dividends, not within 5 years or 10 years. now it is true that if you take the money saved while renting and invest, then you would be better off financially, but most Americans are not good at doing that.


going back to the OP - if you are planning on settling down, if you have a wife and have kids coming, if you do not live in a major metropolitan area, then id seriously think about buying a house.

my advice - do not go house poor(an oxymoron of a phrase).. get a house that not only you can afford, but one that you can still play with the extra money. if your rent is like $2000 now, and you have a 20% downpayment, you can easily afford a $700,000-800,000 house with similar monthly payments.

 

[vistaril]

No matter how much I slice the numbers, I can't get them to work in favor of buying real estate.

Your numbers look a heck of a lot different than mine then.

mortgage/rent ratios in every area are likely to be different, but in many areas even after monthly taxes/insurance/repairs/mortgage payment the montly cost of ownership is cheaper than the monthly cost of rent. Here a 300k house on a standard 25 year mortgage after taxes, insurance, mortgage is going to be about 2000 per month. You could not rent that same house for 2000 month...it would be more like 2500/month.

This doesn't even go into the mortgage interest deduction(for you guys worth a ton) and the fact that you are building equity in the house if you make payments long enough.

I like the concept and freedom of renting a lot. But the idea that it isn't much more expensive for most people than home ownership(assuming equivalent houses) is crazy.

 

[deleted472101]

I love this conversation. Wife and I were just speaking about this.

Thoughts on 401k?

 

[nvrsumr]

Remember the mortgage interest deduction decreases(but does not disappear) over a certain income. Believe 250K for a single person. Was part of Obamacare bs. I rent in the city and own my vacation home

 

[Ligament]

lots of variables. we cant answer a question like: is it financially good or bad to own a house.

in your particular situation (extrapolating from what i know), you are a tax gold-mine for the state of washington right now. no kids, business owner, high salary. even though there is no state income tax, you still could use a tax shelter. depending on your set up, you can deduct the interest on your mortgage from your personal income. this way, comrade obama will see less of your hard-earned money.

as far as the house itself as an investment? hard to say. the house could increase or decrease in value, but you will be paying down some of the principal over time, and you should be able to get out more money than you put in. if you are planning on staying for at least 3-5 years, it would probably make sense.

also, given the fact that you seem to not be the biggest fan of kids, you are in a pretty decent position. you dont need a 4 bedroom house. if you do decide to buy house, put a decent downpayment down (>25% if possible) so your monthly payment isnt all that different from what you are paying now. if you buy an expensive house with a huge mortgage, you usually cant deduct all of the mortgage interest, because you will be bumping up against the AMT (alternative minimum tax). again, that goddamn obama and his taxes.

sounds like you like WA and want to stay there. you will be "tied down" by buying a house, but it will be better for you financially. change of jobs, income, girlfriends/wife, and -- god forbid -- kids all make this more risky.

Thanks!

 

[Ligament]

Ok, I'm seeing the risk/benefit is really dependent on a lot of personal family issues. I have no kids, no pets, minimal furniture, and my GF. Thats it.

Perhaps my best bet is to buy a multi-family dwelling like a duplex or triplex, live in one unit and rent out the others to cover the mortgage. Is that a good plan, in general?

Thanks for being so educational. I'm very, very naive on this stuff.

 

[lobelsteve]

Ok, I'm seeing the risk/benefit is really dependent on a lot of personal family issues. I have no kids, no pets, minimal furniture, and my GF. Thats it.

Perhaps my best bet is to buy a multi-family dwelling like a duplex or triplex, live in one unit and rent out the others to cover the mortgage. Is that a good plan, in general?

Thanks for being so educational. I'm very, very naive on this stuff.

You just answered your own question. But if you want to get started down this path, you are young and have an easy time replacing any damage or mistakes you could do.

Go for it.

 

[Ducttape]

its a bad plan, imo, to try to buy your first house and run it as rental also. you get the hassles of having to take care of the property without some of the benefits - doing whatever the heck you want with the property. save yourself the hassle.

live free, and let other ppl take care of fixing broken stuff by renting, or buy and do what you want with the house.

you make enough money. the small amount that is the difference between renting and owning is, imho, not worth the hassle of fretting about it.


fyi, the most important factor has been omitted:

What does your girlfriend want to do?

 

[Ligament]

its a bad plan, imo, to try to buy your first house and run it as rental also. you get the hassles of having to take care of the property without some of the benefits - doing whatever the heck you want with the property. save yourself the hassle.

live free, and let other ppl take care of fixing broken stuff by renting, or buy and do what you want with the house.

you make enough money. the small amount that is the difference between renting and owning is, imho, not worth the hassle of fretting about it.


fyi, the most important factor has been omitted:

What does your girlfriend want to do?

The GF is pretty laid back about the options.

 

[drusso]

Perhaps my best bet is to buy a multi-family dwelling like a duplex or triplex, live in one unit and rent out the others to cover the mortgage. Thanks for being so educational. I'm very, very naive on this stuff.

Multifamily is the way to go. In the not too distant future no Americans will own anything. We will become a country of renters, debtors (to the Chinese), and employees (to the hospitals, large corporations, and government).

I own a house: Hefty down-payment like Knoxdoc said, 15 year fixed mortgage, re-financed with rates were at all time historic lows...when you factor in inflation and market appreciation (I live in a tourist town) the bank is paying me...

 

[Frazier]

The greatest accomplishment of the New York Times is the Buy vs Rent Calculator: http://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html

I agree that renting is freedom. But if you have enough money, and live in the right market, buying might make sense. For me, it does not.

I was so sad when they changed the calculator a few months ago.

Here is the old version from web archive. Use the advanced settings to really get down into nitty gritty details.

https://web.archive.org/web/2014031...interactive/business/buy-rent-calculator.html

 

[hyperalgesia]

Perhaps my best bet is to buy a multi-family dwelling like a duplex or triplex, live in one unit and rent out the others to cover the mortgage. Is that a good plan, in general?

It is the worst idea I've heard all day. Please don't do this. If you continue to entertain this idea, before you buy, let's see all the numbers. If you can retain your objectivity, and the real estate mogul gene does not overtake your judgment, this idea will expose itself for what it is. Except in rare cases.

 

[hyperalgesia]

Married w 2 kids. Bought house in 06 for 450. Have done 300k in upgrades including exrra garage, gym, finished basement, pool, backyard.

My house is my kingdom. It is a sanctuary. It is where my life happens and where my kids will grow up. A good neighborhood and great friends. You guys rent all you want. Im building tomorrow s leaders.

Okay, I think it's totally reasonable to buy real estate in this kind of situation. We have a man who is basically anchored to the ground by all his limbs and has no chance of escaping this prison. In this case, it makes perfect sense to redecorate. I freely admit, it is a gorgeous prison...