The Swamp

DC47 wrote:An important consideration that is typically ignored in the rent vs. buy discussion is the alternative use of funds.

Very few people would spend more on rent than on down payment plus mortgage payments plus maintenance and repairs over any period of 5 to 10 years. That means the renter has money to invest compared to the buyer.

The best investment is often likely to be one inside a tax shelter -- like an IRA, 401k or 403b. If you're not maxing out your tax-sheltered investment opportunities, this is something to consider in the buy vs. rent analysis. Historically, stocks have appreciated at a rate of several times that of houses. And inside the tax shelter you've got a tax advantage that's typically better (depending on your situation) than the mortgage deduction.

Except I can't figure out what to do with the money I'm not using for a downpayment. Right now it's making 1% and all of the stock options seem risky because I don't want to be put in a situation where tied up money prevents me from moving, buying, or taking advantage of a situation that requires quick cash (also hookers).

Tax sheltered retirement accounts certainly tie up money, to various extents. That's the price you pay for the tax deal. It's also not easy to do well in the stock market. There's strong evidence that individuals significantly under-perform market averages. The risk of doing badly is the price to be paid for the potential to do well.

Dealing with the trade-off between short-term and long-term benefits is one of those things in life where there's no single right answer and no single analysis that yields truth. But it's worth considering that perhaps 60-80% of Americans under the age of 60 don't have the assets to retire comfortably and aren't on a path to get there.

Put another way, more people "consume" too much of their assets and income in their pre-retirement years than save too much in tax sheltered accounts. Owning a house is on a net basis, for the vast majority of people in the past 100 years, a matter of consumption since the net investment return is so low compared to the stock market.

Consumption is not evil. Some people get a lot more enjoyment out of owning than renting a place to live. But tilting the balance in their financial lives heavily towards consumption at ages 20 - 50 is how the majority of Americans create their retirement crises.

Something to keep in mind is that the area BSF is talking about buying, homes are VERY cheap*. Like in some cases you can get a nice, well-maintained home in a safe neighborhood for the price of a luxury car. So owning may very well be favorable to renting.

*- I don't know specifically what town, but I do know that in any city in northern Indiana up to and including Indianapolis, home prices are very affordable.

ETA: I've thought about this before and if I had stayed in Michigan, I could have bought a 1,800 sqft house in an exceptionally nice suburb of Detroit for approximately $100,000. Which would mean a mortgage of about $500/mo. Good luck finding a decent place to rent for less than $750/mo. in those same neighborhoods and that's before you add on the tax advantages and the possible, though not guaranteed home appreciation. Much of the Great Lakes area (Indiana, Ohio, etc.) is in the same boat home price-wise. It's turned the renting vs. buying decision on its ear if you have the assets to purchase a home and are planning on staying in a home for awhile.

DC47 wrote:Tax sheltered retirement accounts certainly tie up money, to various extents. That's the price you pay for the tax deal. It's also not easy to do well in the stock market. There's strong evidence that individuals significantly under-perform market averages. The risk of doing badly is the price to be paid for the potential to do well.

Assuming that the government doesn't decide to double-tax those accounts like they have been bandying about. BSF has a lot longer to prepare for retirement than most of us.

And in order to make everyone sick in the northeast and other areas, I am getting a 3,000 sq. ft. home for 240k (with possibility we will add 20k or so in upgrades during the building process). I bet BSF will see home prices in line with that on a per square foot basis.

Hey Brian~

1) House prices still holding up in Vegas? I can't remember how long it has been since I last asked.

2) Why'd they have to mess up my favorite omelet place? And how many drugs was that driver on?

Car Crash Into Egg & I Restaurant In Las Vegas Seriously Hurts 10 People

A good RE deal is still a solid place to park money. Stocks have run up too much. Low increasing rate environment makes bonds look unattractive. Tax advantaged retirement just freezes money too long. I do think you need to consider property taxes, mortgage interest (less 25-40% presuming a full tax deduction) and maintenance costs to get to an apples-to-apples rent vs. buy analysis but my calculation says buy.

As southeastern price points 30327 Atlanta is up at least 15-20% from the bottom... I bought in Dec 2011. My neighbor last week put their house on the market for 72% higher than I paid for my foreclosed property. Granted, its not a sale but another neighbor on my street has theirs for sale for more than the immediate neighbor and is pissed that the immediate neighbor is lowballing. I bet the immediate neighbor gets 90% of what she asks. A true sale across the street went for 55% higher than mine late last year. Each of those is nicer but not that much nicer. No more than 500 sq ft bigger. I bet I could sell 60k higher right now.

Unfortunately, I do own another place that im having to now rent for less than my mortgage because I cant sell yet. So generally current prices in a desirable area (but not top of the market) haven't yet caught up to 2003 purchase prices. The main builder in that old area has been finishing up all the lots he stopped work on in 2008. They've probably built 20 houses or so in the last year and no way that guy still has the pockets to front those costs. He has to be selling them.

howard wrote:Hey Brian~

1) House prices still holding up in Vegas? I can't remember how long it has been since I last asked.

2) Why'd they have to mess up my favorite omelet place? And how many drugs was that driver on?

Car Crash Into Egg & I Restaurant In Las Vegas Seriously Hurts 10 People

Yeah, I was bummed about that too. Egg & I is the bomb. Fortunately, there's three other locations around the valley. I had just eaten at the one in the accident a couple weeks ago though.

Home prices are coming back strong. About 8 to 12 percent a year for the last 18-24 months if reports are to believed. I follow my home's Zillow estimate on my Mint.com account and it has appreciated about 15 percent over the last year and a half (of course, that means I'm still $10K upside down, but looking a lot better than I was).

The economy is very much improving here. You can see a LOT of new home starts in my part of town and all over the valley. There's a new $7B resort starting on the Strip as well as a refurb of the Sahara in progress now. Downtown LV is booming. Hope it all continues, but knock on wood -- looks like the worst is over.

I think there were two locations last time I was in town. This means I'm overdue a Vegas trip.

Since we touched on the economy, let me throw something out here. And since I don't comment very often anymore. But since Xmas, I have expected the stock market to rock higher. And I still expect the same, for the next 2-3 months at least. That $85 billion a month Ben has been printing up and handing to the big banks has bought this rally, as well as a similar effect on real estate.

This won't last very long. But as long as they printing, market will go up. At least until it doesn't.

Just want to demonstrate I'm not 100% bearish 100% of the time.

(I am not putting any money into the market, though. Not in a position to gamble right now. Sticking with cash and gold.)

I get the feeling that by the time I come back to the States and am ready to retire, homes will be too fucking much for me to buy.

It sucks. I lived in the southwest for the 4 years when houses were too cheap to not buy and came away with nothing. In 8 years I'm guessing the prices will be absurd. My life is one pile of bad timing.

Johnnie wrote:I get the feeling that by the time I come back to the States and am ready to retire, homes will be too fucking much for me to buy.

Take a look at house prices in Phoenix. That'll make you feel better.

Housing prices in the Bay Area are exploding upwards right now (again), as the Facebook/Google/VC, etc. money gets spread around. Seriously, I could not afford to buy the home I live in now, if I had to do it over again - and I thought I paid way too much back then.

I'd love to retire someday to some inexpensive place in the sun, and cash in the equity, but that's a battle with the wife yet to be fought.

howard wrote:

Johnnie wrote:I get the feeling that by the time I come back to the States and am ready to retire, homes will be too fucking much for me to buy.

Take a look at house prices in Phoenix. That'll make you feel better.

Arizona is the target state for retirement outside of a Godfather offer from a Gov't contractor. If Phoenix is in the tank, Tucson should be the same.

John, don't you get sweet VA loans? I know my brother used them to buy his house.

I didn't get this mortgage deduction that you all are talking about either of the last two years.

Rush2112 wrote:John, don't you get sweet VA loans? I know my brother used them to buy his house.

Sure, but I still gotta get a good deal on the house.

From my understanding, the VA loan allows me to get a house with no money down and add the closing cost to the overall cost of the house. My friend, previous co-worker with property in Louisiana and Texas who's also a realtor, told me it's good if you have to use it, but there are better options if you deal with up front payments.

Brontoburglar wrote:I didn't get this mortgage deduction that you all are talking about either of the last two years.

If you itemize deductions on your tax return you can deduct mortgage interest and property taxes paid to add to your deductions. If you own a home, 99 percent of the time it's better to itemize than to take the standard deduction which I think was around $6,000 or so for a single filer. (I paid $8,500 in mortgage interest alone last year, that's not even including all of the other deductions you can take like state income taxes paid, etc., etc.)

You should take a second look at your taxes and possibly file an amended return.

brian wrote:

Brontoburglar wrote:I didn't get this mortgage deduction that you all are talking about either of the last two years.

If you itemize deductions on your tax return you can deduct mortgage interest and property taxes paid to add to your deductions. If you own a home, 99 percent of the time it's better to itemize than to take the standard deduction which I think was around $6,000 or so for a single filer. (I paid $8,500 in mortgage interest alone last year, that's not even including all of the other deductions you can take like state income taxes paid, etc., etc.)

You should take a second look at your taxes and possibly file an amended return.

Depending on the mortgage size and the low interest rates, it might be that a single guy gets less in the mortgage deduction than the standard deductions, though. Standard is 6100 for 2012 tax year. But worth looking at. If you own a home, it's definitely worth making sure that you should do something other than the 1040 EZ.

AB_skin_test wrote:

brian wrote:

Brontoburglar wrote:I didn't get this mortgage deduction that you all are talking about either of the last two years.

If you itemize deductions on your tax return you can deduct mortgage interest and property taxes paid to add to your deductions. If you own a home, 99 percent of the time it's better to itemize than to take the standard deduction which I think was around $6,000 or so for a single filer. (I paid $8,500 in mortgage interest alone last year, that's not even including all of the other deductions you can take like state income taxes paid, etc., etc.)

You should take a second look at your taxes and possibly file an amended return.

Depending on the mortgage size and the low interest rates, it might be that a single guy gets less in the mortgage deduction than the standard deductions, though. Standard is 6100 for 2012 tax year. But worth looking at. If you own a home, it's definitely worth making sure that you should do something other than the 1040 EZ.

I considered that and I assume he may not pay much in mortgage interest, so that's why I said 99 percent (it's probably realistically closer to 95 percent).

Should be easy to see if you need to file an amended return Bronto. The two biggest things most people can deduct are property taxes and mortgage interest. Your mortgage company is supposed to provide you with a form every year that says how much you paid in mortgage interest. Add the two up and if they're over, say $6,500 or so then you should probably file an amended return. (The other major deduction that you can take that doesn't apply to me is state income taxes paid. I assume that's probably another $1,000 or so at least.)

Well shit. I have all my forms in my desk and still have the software. I will take a look tonight.

Though just doing the math on what I pay every month, I know that I didn't pay over $6K in mortgage interest

Brontoburglar wrote:Though just doing the math on what I pay every month, I know that I didn't pay over $6K in mortgage interest

Go buy a nicer house, bronts!

Brontoburglar wrote:Though just doing the math on what I pay every month, I know that I didn't pay over $6K in mortgage interest

Yeah, you may very well not. Just remember to add in property taxes and state income taxes paid as well though.

howard wrote:

Johnnie wrote:I get the feeling that by the time I come back to the States and am ready to retire, homes will be too fucking much for me to buy.

Take a look at house prices in Phoenix. That'll make you feel better.

Prices are actually starting to recover a little here. Homes under $200K are even being bid up over asking by investors. It's a good thing that this never leads to problems in the marketplace.

brian wrote:

Brontoburglar wrote:Though just doing the math on what I pay every month, I know that I didn't pay over $6K in mortgage interest

Yeah, you may very well not. Just remember to add in property taxes and state income taxes paid as well though.

PMI as well. that is usually included in the form your mortgage company sends.

Kili, you misspelled "realty" in your username.

Get home from the grocery store to find the fridge in the garage is leaking. That sucks, but it came with the house three plus years ago and operates in a pretty intense environment at times with the heat out here.

Walk into the house to find water shooting from the toilet in the half bath downstairs and water everywhere in the living room (which is mostly tile, thank Jeebus).

So not the best day I've had as a homeowner, no.

Homeowner tip: Learn where and how to turn off the water at the main near the street. Had to rent a pump and shoot water out of the crawl space for the better part of a night several years back. At least I had a crawl space.

You don't need a special tool to do this? Or city permission?

Did the shut-off valve inside the house fail?

I had my home appraised this week for a possible refi (and elimination of PMI). The price of it has gone up $100k since I bought it two years ago. Chaaaa-ching!!

I am stuck here for three years though since you have to live in your house for five years when you get an FHA loan. Hopefully this upwards trend continues.

Keg wrote:I had my home appraised this week for a possible refi (and elimination of PMI). The price of it has gone up $100k since I bought it two years ago. Chaaaa-ching!!

I am stuck here for three years though since you have to live in your house for five years when you get an FHA loan. Hopefully this upwards trend continues.

A friend of mine who lives in El Cerrito, CA was underwater big time on his home loan (ARM loans for the loss!), and was about to say to hell with it and default on the mortgage. He decided on a whim to see if he could refinance, and found if his house had gained any equity in the last four years, he'd be able to refinance. He was shocked to find his house had gone up about $45k during that time, so he's now able to keep his house.

I've never heard of a five-year residency requirement for an FHA loan. We got an FHA loan when Mrs. Sabo and I bought our condo in Dayton, and we lived there less than two years before selling. Perhaps that's a new requirement?

Sabo wrote:

Keg wrote:I had my home appraised this week for a possible refi (and elimination of PMI). The price of it has gone up $100k since I bought it two years ago. Chaaaa-ching!!

I am stuck here for three years though since you have to live in your house for five years when you get an FHA loan. Hopefully this upwards trend continues.

A friend of mine who lives in El Cerrito, CA was underwater big time on his home loan (ARM loans for the loss!), and was about to say to hell with it and default on the mortgage. He decided on a whim to see if he could refinance, and found if his house had gained any equity in the last four years, he'd be able to refinance. He was shocked to find his house had gone up about $45k during that time, so he's now able to keep his house.

I've never heard of a five-year residency requirement for an FHA loan. We got an FHA loan when Mrs. Sabo and I bought our condo in Dayton, and we lived there less than two years before selling. Perhaps that's a new requirement?

There was a new rule on FHA loans that you had to stay a certain time period to get some perks that were being offered. It was specifically so that people wouldn't take the perks and flip their houses immediately.

AB_skin_test wrote:

Sabo wrote:

Keg wrote:I had my home appraised this week for a possible refi (and elimination of PMI). The price of it has gone up $100k since I bought it two years ago. Chaaaa-ching!!

I am stuck here for three years though since you have to live in your house for five years when you get an FHA loan. Hopefully this upwards trend continues.

A friend of mine who lives in El Cerrito, CA was underwater big time on his home loan (ARM loans for the loss!), and was about to say to hell with it and default on the mortgage. He decided on a whim to see if he could refinance, and found if his house had gained any equity in the last four years, he'd be able to refinance. He was shocked to find his house had gone up about $45k during that time, so he's now able to keep his house.

I've never heard of a five-year residency requirement for an FHA loan. We got an FHA loan when Mrs. Sabo and I bought our condo in Dayton, and we lived there less than two years before selling. Perhaps that's a new requirement?

There was a new rule on FHA loans that you had to stay a certain time period to get some perks that were being offered. It was specifically so that people wouldn't take the perks and flip their houses immediately.

I believe it is called the Sabo rule.

More specifically, the "Sabo's moving to take a better job" rule.

The "now Sabo's in Cleveland" rule?

How about the "Sabo's moving to take a better job but has to live in Stockbridge, Michigan, then Ann Arbor, Michigan while his wife moves back to Cleveland to live with her parents, and then he moves to Cleveland to join her" rule.

That would be the most accurate description of said rule.

Sabo wrote:How about the "Sabo's moving to take a better job but has to live in Stockbridge, Michigan, then Ann Arbor, Michigan while his wife moves back to Cleveland to live with her parents, and then he moves to Cleveland to join her" rule.

That would be the most accurate description of said rule.

But everyone is happy now! Except for the Cleveland part...

I'm very happy here in Cleveland.

Sabo wrote:I'm very happy here in Cleveland.

You should check with Cleveland before giving such a definitive response.

Sabo wrote:I'm very happy here in Cleveland.

I don't think that phrase has ever been said until now

AB_skin_test wrote:There was a new rule on FHA loans that you had to stay a certain time period to get some perks that were being offered. It was specifically so that people wouldn't take the perks and flip their houses immediately.

But how is that enforced? The FHA can't stop someone from selling. They might be able to make you repay the perks, but if you are really in a position to sell, it might be worth it.

Still, unless you are going to leave the area or downsize to a rental, does rising home equity really do much for you? It seems to me that if you move out of your place, you would just have to buy another house, and the price of that one has probably gone up just as much.