The Single-Family Home Tax Shelter Myth
- Thread starter Martin Gale
- Start date
You seem to have trouble distinguishing the difference between something being possible vs something being typical. You continually make these assertions about what "most" loans are like and then when called on it you simply state that some loans are as you describe.
Some != Most
Edit: This article from Dec 2005 WashingtonPost says "About 19 percent of home loans nationwide are subprime, up from about 5 percent a decade ago". (http://www.washingtonpost.com/wp-dyn/content/article/2005/12/06/AR2005120601743.html)
Now show me the evidence that shows that in fact >50% of mortgages are subprime as you have asserted.
There is a difference between a subprime lender and a bank that does sub-prime loans. BTW, Bank of America no longer does sub-prime loans, I have a few buddies there as well.
Look, I'm eagerly awaiting to see your rental vs ownership numbers. PM me over the weekend and I'll give you the phone number of one of the larger sub prime lenders in the Chicago suburbs that offer such a product. This shit is going to go on all night. So let's move on. PM me and you can talk to the lender yourself.
No need for a PM. Simply post ANY link to any type of nationwide lender with a clause of the type that you suggest.
The problem here is that you're making a public post with erroneous information. You either need to provide some type of evidence for your claim, or admit that you spoke incorrectly.
By the way, the most common document used in real estate closings is the FNMA documents. There can be googled and read on the internet. There is no clause of the type you suggest.
OldTrader
You can talk to the lender yourself. I'm not going to google this shit all night to post it here. I'm leaving for the evening. I'll continue this tomorrow. If it makes you happy, fine they don't exist. Let's move on. I know someone that does them and I'll offer you their number. If you don't want it, fine.
Let's move on, I hope that by tomorrow morning you can put togethor some numbers showing me the substantial benefit to home ownership vs renting.
Gotta be kidding, homeownership vs renting.... So the 60%+ out there who own the home must be thinking:
Homeowner pays what $6000 a year in property taxes, insurance and repairs. The home price appreaciates at 6.4% a year.
The average renter out there is flushing $12,000/yr down the toilet while living in a cardboard box.
Next thing ya know, some will question whether to rent an apartment or live at the YMCA.
Homeowner pays what $6000 a year in property taxes, insurance and repairs. The home price appreaciates at 6.4% a year.
The average renter out there is flushing $12,000/yr down the toilet while living in a cardboard box.
Next thing ya know, some will question whether to rent an apartment or live at the YMCA.
OK, just thought I'd update the rent vs buy numbers. Unfortunately, I'm going to speak about this more generally for reasons that I'll go into in a minute.
But before I do, let me just say that there is little reason for me to produce a rent vs buy type of situation. These are all over the internet, for your free use. Just go to google and plug in rent vs buy like I did, and you'll get 26mm hits.
Here's an example of one:
http://www.portfoliomortgage.com/wh...nyID=30003&AccessCode=guest&page=main&LoanID=
But let me see if I can sum up some of these sites: all that I checked, perhaps a dozen or so, came to the same conclusion....it is better to buy than rent. But don't take my word for it, just go check it for yourself.
The advantage of these calculators is that you can use your own assumptions....rent, purchase price, how long, etc etc. And this is beneficial since in the United States these numbers vary widely between say California and the Midwest.
Now a few comments about assumptions:
The originator of this thread used maintenance and repairs of $6000 per year. Bzzzz, wrong answer. Way too high...at least in my personal home owning experience of about 35 years. Maybe it should be $2K or even less, but lets face it, your drain gets clogged it costs $100 to get a guy out there and that's it for the year. You paint your house every 5-10 years. Your roof maybe lasts 20 years, the furnace/AC unit 20 years. Amortize the cost of a new roof over the life of the roof for example, and maybe it runs you $30 per month. Furnace/AC units together might be less than $10 per month.
Further, no one here talked about the inexorable increase in rents (other than the last couple of years). Assume for an instant that rent goes up on average with inflation, and assume inflation is 3%. That $1500 rent you pay today is $2015 just 10 years from now. 30 years from now the rent is over $3600. Your mortgage payment is over.
Next we saw some wild assumptions by Maverick that our typical renter has $500K to invest. I doubt if anyone took him seriously. In fact, the average renter has virtually no money at all. How do I know? I'm a landlord. Most renters are simply people who cannot buy, and they cannot buy because they don't have the down payment, or they don't have the credit, or both. Now in fairness, there are some who don't fit into the category, people who choose to rent because it's their preference, perhaps because they think houses are going down in value. But here while we're talking about it let's talk about the NORM, which is that rents don't have the cash.
But if we assume that a renter had a downpayment, let's say $10K, and that he chose to not buy a house with it, but to invest it, then we could figure out a return on the $10K. Let's say for example that he did a pretty good job, and that over 30 years he built his money up to $100K. The point is that he's not anywhere even close to where his money equity would have become in a house AFTER all expenses. According to the OP this number was $500K, even with maintenance numbers that I believe are incorrect.
What I think is generally true about young people, is what someone has already said here....buying a house and sitting in it for 30 years is decidedly not glamorous, but it's a good investment vs rent for most people...a good conservative investment.
Personally, I never looked at it that way. I paid my house off when I had the opportunity to lower my overhead. Best thing I ever did. I couldn't tell you what the return on my money has been...I just know that on the first of the month I DON'T write a check.
I don't know how many of you guys are in the trading business for real. But if you are, a low overhead is a stress reducer. It helps to give you the equanimity to be a volatile enviroment with a little less stress. And that's worth almost any price to me personally.
OldTrader
But before I do, let me just say that there is little reason for me to produce a rent vs buy type of situation. These are all over the internet, for your free use. Just go to google and plug in rent vs buy like I did, and you'll get 26mm hits.
Here's an example of one:
http://www.portfoliomortgage.com/wh...nyID=30003&AccessCode=guest&page=main&LoanID=
But let me see if I can sum up some of these sites: all that I checked, perhaps a dozen or so, came to the same conclusion....it is better to buy than rent. But don't take my word for it, just go check it for yourself.
The advantage of these calculators is that you can use your own assumptions....rent, purchase price, how long, etc etc. And this is beneficial since in the United States these numbers vary widely between say California and the Midwest.
Now a few comments about assumptions:
The originator of this thread used maintenance and repairs of $6000 per year. Bzzzz, wrong answer. Way too high...at least in my personal home owning experience of about 35 years. Maybe it should be $2K or even less, but lets face it, your drain gets clogged it costs $100 to get a guy out there and that's it for the year. You paint your house every 5-10 years. Your roof maybe lasts 20 years, the furnace/AC unit 20 years. Amortize the cost of a new roof over the life of the roof for example, and maybe it runs you $30 per month. Furnace/AC units together might be less than $10 per month.
Further, no one here talked about the inexorable increase in rents (other than the last couple of years). Assume for an instant that rent goes up on average with inflation, and assume inflation is 3%. That $1500 rent you pay today is $2015 just 10 years from now. 30 years from now the rent is over $3600. Your mortgage payment is over.
Next we saw some wild assumptions by Maverick that our typical renter has $500K to invest. I doubt if anyone took him seriously. In fact, the average renter has virtually no money at all. How do I know? I'm a landlord. Most renters are simply people who cannot buy, and they cannot buy because they don't have the down payment, or they don't have the credit, or both. Now in fairness, there are some who don't fit into the category, people who choose to rent because it's their preference, perhaps because they think houses are going down in value. But here while we're talking about it let's talk about the NORM, which is that rents don't have the cash.
But if we assume that a renter had a downpayment, let's say $10K, and that he chose to not buy a house with it, but to invest it, then we could figure out a return on the $10K. Let's say for example that he did a pretty good job, and that over 30 years he built his money up to $100K. The point is that he's not anywhere even close to where his money equity would have become in a house AFTER all expenses. According to the OP this number was $500K, even with maintenance numbers that I believe are incorrect.
What I think is generally true about young people, is what someone has already said here....buying a house and sitting in it for 30 years is decidedly not glamorous, but it's a good investment vs rent for most people...a good conservative investment.
Personally, I never looked at it that way. I paid my house off when I had the opportunity to lower my overhead. Best thing I ever did. I couldn't tell you what the return on my money has been...I just know that on the first of the month I DON'T write a check.
I don't know how many of you guys are in the trading business for real. But if you are, a low overhead is a stress reducer. It helps to give you the equanimity to be a volatile enviroment with a little less stress. And that's worth almost any price to me personally.
OldTrader
This doesn't happen often but I agree with Maverick.
There are lots of areas in the country today where renting is a better deal than home ownership, no matter what time frame you look at. Even 30 years.
It's a fallacy that capital gains or rent increases act against renters in the long term. If you take the long view, housing prices have barely beat inflation. And rent makes up 40% of the CPI so it is virtually stationary in real terms -- almost by definition.
Whereas anyone who fancies themselves an "Elite Trader" can do a hell of a lot better trading their capital instead of tying it up in a house.
Martin
There are lots of areas in the country today where renting is a better deal than home ownership, no matter what time frame you look at. Even 30 years.
It's a fallacy that capital gains or rent increases act against renters in the long term. If you take the long view, housing prices have barely beat inflation. And rent makes up 40% of the CPI so it is virtually stationary in real terms -- almost by definition.
Whereas anyone who fancies themselves an "Elite Trader" can do a hell of a lot better trading their capital instead of tying it up in a house.
Martin