Home Ownership: the path to slavery

Quote from saxon22:

1. Well, that means that you bought a house that was too expensive since really the money you have invested in that property is needed somewhere else.

2. Sell the place and either buy a smaller house, a condo or start renting.

3. I still remember when I rented my first apartment, it was $264 a month, now it probably goes for at least a $1000.

4. You should not think of your house as an illiquid investment. Do you consider a car as an investment? A house is a place to live and grow your family, not some magic trick that will make you rich in 30years.
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1. Not really not many pay cash for a 300k house. I am way ahead of the curve have put down 30% and have a 15 year note. Plans don't always work out the way you think they will.

2. I couldn't sell in less than 1year, w/o taking a big hit. There are 2 of my same model on the street and one has been on the market for 1 year, just went bank REO. There are 2 other foreclosures. I live on nice street, yuppie by most standards. I just did the number and if I leased my place, by the time all is said and done I would only save $300-400 a month moving from a big house to a 2 bedroom. Not worth it.

4. Yes I have rented many apartments too. You generally get lower quality neighbors due to the transient nature.

5. Car to a house, comparing apples and oranges. Homes generally appreciate esp. if you hold over 10 years, cars generally depreciate once you drive off the lot.

Post edit: I didn't buy at the height of the bubble. I bought 6 years ago not 3. I paid cost, the same as the original owner 1 1/2 years later. Denver is a weird RE market. Parts, like mine, have so much land you can buy new for almost the same as used if you don't mind a further commute. It will bounce back but it may take a few years. Companies like Costco and Best Buy don't spend millions without doing target demographic research.
 
or until you just dump it.

Nothing wrong per say of being 5-10% underwater right now if you have no intentions of going anywhere...except you just can't pull anything out anymore or refi. Staying in the home for 10-15 years and able to pay OK, well fine. You just leave yourself open to that "black swan" that suddenly puts you in a major bind.

It's the massive amount of idiots who bought into the whole refi craze and rather than get a manageable loan, oh I don't know, say enough to pay off the other perhaps and now basically have a lower interest rate plus a tiny amount extra at worst? Nope, let's pull it ALL out! :)

I guess you really can profit off of stupidity...
 
Quote from MattF:

or until you just dump it.

Nothing wrong per say of being 5-10% underwater right now if you have no intentions of going anywhere...except you just can't pull anything out anymore or refi. Staying in the home for 10-15 years and able to pay OK, well fine. You just leave yourself open to that "black swan" that suddenly puts you in a major bind.

It's the massive amount of idiots who bought into the whole refi craze and rather than get a manageable loan, oh I don't know, say enough to pay off the other perhaps and now basically have a lower interest rate plus a tiny amount extra at worst? Nope, let's pull it ALL out! :)

I guess you really can profit off of stupidity...
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"Nothing wrong if you're 5 - 10% underwater." People still assume it's IMPOSSIBLE that they could be 30% underwater.
 
I'm not bullish on any asset right now but imo this is a particularly important time to be balanced between hard assets, fiat currencies and defensive stuff like metals and commodities.

If-and I don't discount the possibility-that currencies become virtually worthless as a mechanism of exchange, ala' 1970's South America-then being in mortgage debt is the way to go. There was an article in the WSJ years ago about a guy in Argentina who still owed several years worth of payments on his home. His mortgage was less than the bus fare for his commute to the bank! To those with a fair amount of money a mortgage is a tax sheltered free call on catastrophic currency collapse.

Secondly one could argue that compared to stocks and dollars, even with the downturn, real estate has been a comparative KICK ASS investment. Unless you live in Detroit, chances are your home is worth double what it was 10 years ago. Stocks sure as hell aren't worth double. And dollars are worth LESS than 10 years ago and you're paid virtually no interest to hold dollars.

That aside, yes the costs of ownership are tremendous and that's the primary reason I'm bearish housing prices. You can't squeeze blood out of a stone and with tighter lending, joblessness and higher associated costs, the pool of buyers is grossly diminished.

One factor against renting that no one has mentioned is moving costs. No prob if you're a single guy living in a suitcase but spending a few thou to move a full house of furnishings every year or two definitely adds to the rental equation. And paradoxically the cheaper the house to rent the more likely as a renter it'll be sold out from under you forcing that expensive move.
 
Once you start talking about a house as an investment or in terms of an investment you've totally missed the point of homeowership. The same thing goes for those who think of a mortgage as "good" debt.

Get your house paid for as quickly as you can. As others have already pointed out until your mortgage is paid and you're no longer a renter you're just a slave to the system.

I remember people questioning me on why I would pay cash for a house when you could borrow money so cheaply. I think rates were about 7% back then. Now I sit in my 2500 sq/ft 4br/3bth/3gar home that costs me just under $400/mo for taxes/ins and allows me to live like a king, feeding a family of 4 for less than $2500/mo total in expenses, while many of those who thought I was dumb are losing everything. Thats why you buy your house outright.
 
Quote from Mike Morrison:

Once you start talking about a house as an investment or in terms of an investment you've totally missed the point of homeowership. The same thing goes for those who think of a mortgage as "good" debt.

Get your house paid for as quickly as you can. As others have already pointed out until your mortgage is paid and you're no longer a renter you're just a slave to the system.

I remember people questioning me on why I would pay cash for a house when you could borrow money so cheaply. I think rates were about 7% back then. Now I sit in my 2500 sq/ft 4br/3bth/3gar home that costs me just under $400/mo for taxes/ins and allows me to live like a king, feeding a family of 4 for less than $2500/mo total in expenses, while many of those who thought I was dumb are losing everything. Thats why you buy your house outright.
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I totally agree with your first sentence but paying in full up front on your home or paying ASAP is merely one of personal comfort and highly dependent upon individual circumstances.

My home is simply a place to live, not an investment. I know it makes more sense to pay it off slower but I'm just too damn lazy to stop that extra principal payment every month.
 
Quote from Mike Morrison:

Now I sit in my 2500 sq/ft 4br/3bth/3gar home that costs me just under $400/mo for taxes/ins and allows me to live like a king, feeding a family of 4 for less than $2500/mo total in expenses, while many of those who thought I was dumb are losing everything. Thats why you buy your house outright.
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Wow...you pay 2500 per month in total expenses and your house is paid off? I have an $1100 per month mortgage and even with that my expenses are always under 2k per month(including food in that expense) I too have a family of 4. What are you doing...eating out at red lobster 5 days per week? :)
 
One thing to keep in the back of your mind. A fully paid for house lowers the stress considerably in this business. Yeah, there may be smarter financial moves. But frankly as we watch millions of people lose their homes today, you really gotta see the virtue of a free and clear home. Especially for those in this business who have volatile incomes.

I've had a free and clear home for decades. In fact, I have free and clear rentals. I lost a very large pile of dough in real estate paper value in the last few years. But I'm not threatened with losing anything, and the rents still come in. Sometimes security is as important as making the smartest move for a few percentage points.

Not paying rent or a mortgage payment adds up to a ton of money over the years. I still have never met a renter who had a big chunk of money saved up in the bank or invested somewhere. And I've been renting houses out for most of my adult life.

OldTrader
 
I think many people do not realize that having a house paid off frees a lot of money toward other projects. Be it another investment or better, longer vacations. Also, being able to invest in real estate (multi family dwellings) provides a nice and steady stream of cash every month. Once you get a good plumber, electrician, general construction guy, the rest is easy. Nothing beats the satisfaction of a nice chunk of $$$$ coming from a 16 apartment building.
 
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