Dont forget that realtor which would cost you 25k. You would also be buying into the same market you are selling into, maybe less so if you moved to a different non-oil market city, but prices everywhere are higher now than they were in 2010 (and 2006 for that matter) so there is no free lunch. After your realtor and repairs/maintenance you are up 100k, and your situation is better than 95% of people. I think that most people’s perception of gains on their home are actually losses disguised by a higher sale price.
By renting I can stay flexible, and since we are young we may move again for work. This year I left the east coast and took a position in the midwest for a 35% pay increase, which when counting standard of living is like 50%. I would have had to think twice about it if we had to sell a place, but we just walked away without a care.
I see the appeal of homeownership of course, but I just think that the old “rule” that renting is throwing money away and homeownership is always more desirable than renting is wrong, career limiting, and financially irresponsible for many buyers. Hence 2008.
just get a non-recourse loan and consider the embedded put option on the house just like CFA mentions. Banks will totally understand in the future. It’s basically fool proof.
during a bear market, buying real estate is the best move. cheap plentiful leverage when prices are cheap is key to investment success. (we aint in a beat market btw)
if after tax rates are cheap (less than 5%). always put min down and longest mortgage possible. relever if you need money or when asset prices are cheap and rates are low and you have enough equity, reinvest proceeds.
tehre are some huge changes due to 2018. prop taxes tax deduction along with state and local tax capped at 10k. home equity loans are no longer tax deductible if not improving house.
if you switch from a owner occupied to a rental, all your costs attached to it are tax deductible cuz u can biz expense. never sell a house. just rent it out. smart idea to hire prop manager to handle errythang.
lastly 5 units and its a commercial residential property. it matters cuz the amount you can boirrow basically shifts to how much income you generate from it vs the going market rate.
For the first time since 2010, it’s now easier to build wealth over an eight-year period by renting a home and investing in stocks and bonds, rather than by buying and accumulating equity, according to a national rent-versus-buy index of 23 cities produced by Florida Atlantic University and Florida International University faculty. That’s because home prices are high and rising mortgage rates are adding to the cost of homeownership.
That could be bad for sellers, especially in markets like Dallas and Denver, where renting is now so much more favorable than buying, according to Ken Johnson, a real estate economist at Florida Atlantic University, a co-creator of the Beracha, Hardin & Johnson Buy vs. Rent Index.
Reminiscent of the Bubble
Already, housing markets in strong economies are cooling, in part because incomes haven’t kept pace with rising prices and borrowing costs. Dallas and Denver have reached so far into favorable rental territory that they look like Miami right before it crashed in the last decade, Johnson said.
The difference now is that neither market is experiencing the kind of speculation and risky lending that inflated the last housing bubble, he said.
You Canadians and your ARMs. Yes, yes…the data points to ARMs being the better deal. Of course, backwards looking data is awesome during 30 years of falling rates. Wonder how the next decade or two will look?
At any rate, if you can afford it, 15 year is awesome. Made the switch from a 30 about 18 months ago and it’s nice to see most of my payments going towards principle rather than interest. Plus, I’ll have my house paid off right when my youngest graduates college. That’s going to be a big lifestyle upgrade.
My GF and I are getting ready to lock in a really good deal on a 1 BR 1 BA 900 sft apartment rental for 1100/mo…2 year lease is the best part. Can sublet if needed.
What is the opportunity cost of forcing more of your capital to be locked up in your house from a mortgage with shorter duration, compared to extending your mortgage balance and allowing you to make other investments?
Let’s say your mortgage rate is 4.0% and a third of the interest is tax deductible. There will be a quantifiable benefit from keeping a large mortgage balance - possibly enough to offset lower interest rates from a shorter mortgage.
For me it was saving about $250k in interest by switching from a 30 to 15. Yes, I could invest the difference each month, but that wasn’t happening anyway. It all went to eating out and booze. So, in my case there really was no opportunity cost.
Edit: Very similar to my (and CvM’s) stance on paying down low interest debt vs investing. I’d rather be debt free even if I have a 2% loan than invest at 4% guaranteed. I’m a person, not an excel spreadsheet.
I could, but I don’t really need to. I’m at a stage in my life where I save plenty already so extra income generally goes to frivolous stuff. Sure, if I was really disciplined I’d set that money aside to build a war chest to raze my house and build a brand new one, but that’s not really necessary. It’d just be for fun.
yea lots of people think like that. dave ramsey is one of themthey think all debt is bad. surprisingly that one lady i forget her name but hse is very popular is a fan of keeping good debt car, student, and home.
this is actually the perfect time to lock in these low rates and take out equity.
This article is not surprising. Also, current environment is maybe not risky to the point of 2006 but what is risky? Majority of people in the US could not afford a surprise $400 expense, many of those people are homeowners and that sounds pretty risky. We chose not to move forward with purchase and we were in a better place than any of our friends as far as ratios debt to income, had no other debt etc. I was sitting here with 2x after tax income in savings ready for a down payment, not many 31 year olds could do the same, many of my friends bought with FHA loans and put like 5% down. You are already looking at negative equity, and would have to bring money to the table just to get your place sold if needed, so already looking like foreclosure if one of the couple loses a job. No doubt we are headed for another crisis and this one will be tougher to re-inflate. Personally looking forward to being there to pick up the pieces.
