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Old 12-30-2013, 09:22 AM   #26
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You guessed right Cliff. Closed September 2006(wedding present to ourselves). Market CRASHED in mid 2007. So I basically bought our townhome at the top of the peak of the market of all time. And lost every penny I had been saving since I was 16($39k). That townhome was going to be a short term(2-3year) investment that we were going to bounce in and out of, and pull the projected $25k of profit out of it for the next one. Bought it pre-construction, and put every option known to man in it. Then when the bottom fell out, we had to stay in it in order to try and gain some equity back. Stayed until 2011. Fat chance, the values just died even worse. To this day our value is still less than 40% of what we owe. Renting it out now, and renting a house for us. What a mistake that was. I sold 3 motorcycles and a car to get that house. All gone.

Dont anyone fool yourself, buying a house is the single dumbest thing you can do nowadays and renting is better. You are not paying someone elses mortgage and putting money in their pocket like renting used to be. Now you are just helping your landlord from not going into foreclosure by renting from him.
In all fairness the 2007 to present situation should not be looked at as the norm for home ownership. People like you and me who bought in 2006 got FUCKED HARD, but if someone did the same today and sold 6 years from now, no way they lose like we did.

Renting has gotten VERY expensive too. You can own a house these days for the same or less monthly vs. renting.
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Old 12-30-2013, 09:25 AM   #27
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a home is not an investment, and don't let anyone tell you it is. and you shouldn't be buying one unless you can put 20% down or at least 10% down with a 10% heloc to make it up to 20. good traditional rules to live by: 25 Rules to Grow Rich By | 4 | Money Magazine

townhome/condo/home etc. seems like it will move you all around different areas with taxes to consider, association fees and upkeep of doing things yourself with the yard/deck/driveway/all that jazz. i think a lot of people go for bigger space too (i did) even though it ends up being more space for you to heat/cool and is more of a don't care if you don't have kids. my bro and i share a place and we have rented out 1-2 of the other bedrooms although it has been some time since we did that. was a nice pad to the income when we were doing it though.
A home is not an investment in the sense of buying it and then just making money by selling it down the road always necessarily... no.

But a home such as mine... that was relatively cheap that I put 20% down on, will be an investment when I am able to rent it out... which hopefully will happen towards the end of next year... I want to buy another home by the end of next year- a fixer upper that is livable... and move on in and rent mine out, and then live in it the following year and make it better and then rent that one out as well... hopefully have 2-3 rental houses by the time I am 30-31... then buy a nicer house that will be my "forever house"

fuck I'm getting old and responsible.
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Old 12-30-2013, 09:35 AM   #28
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Yup, when I first bought my house I was young and ignorant. I figured, I can afford it, so why not? Being able to afford a home on a monthly basis doesn't mean you should. Many Americans are throwing thousands of dollars out the window per month on a home just because they can. Imagine what that money will do for you 30 years from now when you're looking to retire.

I love when people think I'm an idiot for buying an R8 and wonder how I can afford such a car. A car that, by my estimation, loses less than $500 per month in depreciation over the first 5 years of ownership.

These same people spend $3000 per month on a home; most of which goes to taxes, interest and PMI.
exactly... I did everything possible to avoid PMI.

and also similar reasons why I stayed away from a property with association dues... some of the properties I was looking at- around 80-100k- the association fees were 170-200$ a month... which to me is just nuts.

170-200$ a month in a mortgage payment is up to 40k for a 30 year mortgage...

I can mow my own grass in 35 minutes with a push mower once every 10 days that uses 12$ of gas a summer, and I know plenty well how to clean out my gutters... especially for that price.
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Old 12-30-2013, 09:41 AM   #29
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I recommend you buy a home that you can take out a 10 yr or 15 yr mortgage. You can pay it off fast and save a ton on interest. Just think about what age u are at now and in 10 yrs or 15 yrs it will be paid for no mortgage.
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Old 12-30-2013, 09:45 AM   #30
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I recommend you buy a home that you can take out a 10 yr or 15 yr mortgage. You can pay it off fast and save a ton on interest. Just think about what age u are at now and in 10 yrs or 15 yrs it will be paid for no mortgage.
One thing I'd change with this advise is to take out a 30 year loan and pay it like a 15 year loan.

When you lock into a 30 year loan, you can pay it as if it's 15 years and pay less if shit hits the fan.

When you lock into a 15 year loan, you have to pay it as a 15 year and can't pay less under any circumstance.
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Old 12-30-2013, 09:46 AM   #31
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One thing I'd change with this advise is to take out a 30 year loan and pay it like a 15 year loan.

When you lock into a 30 year loan, you can pay it as if it's 15 years and pay less if shit hits the fan.

When you lock into a 15 year loan, you have to pay it as a 15 year and can't pay less under any circumstance.
I was just coming to say that
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Old 12-30-2013, 09:51 AM   #32
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each transaction is individual, you can come out great buying at any time and it just matters on the price and the real market value of your house. i bought high in bubble (2/2005) but got incredibly lucky as my place cost a little more than what it was sold for prior in 2002. baxter actually owned it and just wanted it off their books, since they ain't in the house holding business. i'd like to think it's gone up a smidge today, my bro thinks the same or less, either way i have not had the ride on the pain train that several friends have with slashed values where they are still staying today or have sold short to escape.

i'll again point out a house is not an investment, outside the case where you are cash flow positive. take the money your house made you over the past 3 years, subtract the money your house cost you over the past 3 years, is this greater than zero? if not, it ain't an investment. you need to be renting it and renting it for more than it is costing to become one.

house values now actually should be even lower than where they are at today. asset bubbles revert to their means. the government has been fighting this, in plenty of arguably quite dumb ways. one of the net effects though is they are basically trying to let the bubble deflate slowly or even reflate it. super low interest rates are a contributor to keeping money available to support high/higher prices, as is a secondary market where basically the government is the only willing party to buy and hold onto mortgages. so we are absolutely not in a healthy normal organic market situation right now, but a heavily intervened one which has distorted house prices and caused them to stay/float where they are or even up.

when doing some recent chicago condo shopping one of the things i consistently did was inflation adjust pre-bubble home sales to present day dollars to see how they came in line with asking prices, as this is basically the mean value they would revert to.
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Old 12-30-2013, 09:52 AM   #33
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One thing I'd change with this advise is to take out a 30 year loan and pay it like a 15 year loan.

When you lock into a 30 year loan, you can pay it as if it's 15 years and pay less if shit hits the fan.

When you lock into a 15 year loan, you have to pay it as a 15 year and can't pay less under any circumstance.
But how often do people actually pay off there mortgage in 10-15 yrs when they have a 30 yr loan. Not many
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Old 12-30-2013, 09:52 AM   #34
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One thing I'd change with this advise is to take out a 30 year loan and pay it like a 15 year loan.

When you lock into a 30 year loan, you can pay it as if it's 15 years and pay less if shit hits the fan.

When you lock into a 15 year loan, you have to pay it as a 15 year and can't pay less under any circumstance.
This is exactly what I am doing except I plan to be paid off much sooner then 15 years also.
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Old 12-30-2013, 09:53 AM   #35
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i'll again point out a house is not an investment, outside the case where you are cash flow positive. take the money your house made you over the past 3 years, subtract the money your house cost you over the past 3 years, is this greater than zero? if not, it ain't an investment. you need to be renting it and renting it for more than it is costing to become one.
I don't think anybody here is saying that it is.... But you have to live somewhere right?
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Old 12-30-2013, 09:54 AM   #36
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But how often do people actually pay off there mortgage in 10-15 yrs when they have a 30 yr loan. Not many
Probably about the same amount of people that take out a 10 to 15 year loan.

It's not that hard to do nowadays, just have your automatic payment take out extra principal each month.
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Old 12-30-2013, 09:55 AM   #37
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Old 12-30-2013, 09:57 AM   #38
 
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This is Turks spin on real estate and home ownership.

First, put down as much money as you can on the home. What you pay for your mortgage isn't actually what you are paying to live in the home.

WTF am I talking about?

Let's take my example. When I first moved in, I was paying $400 per month in taxes, $180 in association, $150 in PMI and $1600 in mortgage. That adds up to a whopping 2330 per month!

But that isn't the whole story. Why should we calculate the portion of payment going to principal as a cost to live in a home? It's like money going into a savings account, eventually you will get that prinicipal back. So if we redo the original math, the $1600 in mortgage was about $1300 per month in interest in 2008... OUCH!!! So that's still $2030 per month to live in my home that I will never see again, that's a ton of money. I realized this in 2008 and started dumping money into the mortgage to lower my interest payments.

Fast forward to now where I've put more money into the mortgage, and refinanced at a lowe rate.

New numbers are: $400 in taxes, $180 in association, $0 PMI and $1200 mortgage. Out of the $1200 in my mortgage, $1000 is now going to principal and only $200 is interest, so my total cost to live at the house now is $400 + $180 + $200 = $780.

$780 per month to live in my home is a steal IMO, not to mention I get to write off that $780 per month at the end of the year and get some of it back. If you calculate an increase of only 3% per year in the value of the home it only costs $180 per month to live at my house or virtually free.

Putting more money into my mortgage instead of a savings account allowed me to save $1000+ in interest and PMI per month and this is what allowed me to get my R8.
Ricky, one thing too is that depending on your mortgage rate, it might be BETTER to not pay extra into your loan. If you can make more money (ie returns) in let’s say the stock market, it would be wiser to put the money in there. This is called opportunity costs….I did pay attention in econ
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Old 12-30-2013, 09:58 AM   #39
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Ricky, one thing too is that depending on your mortgage rate, it might be BETTER to not pay extra into your loan. If you can make more money (ie returns) in let’s say the stock market, it would be wiser to put the money in there. This is called opportunity costs….I did pay attention in econ
Can you guarantee me a 5% return on my money?
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Old 12-30-2013, 09:59 AM   #40
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i'll again point out a house is not an investment, outside the case where you are cash flow positive. take the money your house made you over the past 3 years, subtract the money your house cost you over the past 3 years, is this greater than zero? if not, it ain't an investment. you need to be renting it and renting it for more than it is costing to become one.

It will be actually pretty easy to be cash flow positive in this case... by your definition mine may be an investment then.
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Old 12-30-2013, 10:00 AM   #41
 
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One thing I'd change with this advise is to take out a 30 year loan and pay it like a 15 year loan.

When you lock into a 30 year loan, you can pay it as if it's 15 years and pay less if shit hits the fan.

When you lock into a 15 year loan, you have to pay it as a 15 year and can't pay less under any circumstance.
My mortgage guy recommended paying one extra mortgage payment each year. That alone drops it from 30 to roughly 22 years.
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Old 12-30-2013, 10:00 AM   #42
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Good luck to you goldkitty. Like I said if you can afford it do a shorter term.
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Old 12-30-2013, 10:03 AM   #43
 
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Can you guarantee me a 5% return on my money?
Over 15 years, you should be able to do that. If you have enough cash, it's very easy to make a 5% return.
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Old 12-30-2013, 10:04 AM   #44
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Over 15 years, you should be able to do that. If you have enough cash, it's very easy to make a 5% return.
Historically you can easily get 8%, not a guarantee though.
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Old 12-30-2013, 10:04 AM   #45
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My mortgage guy recommended paying one extra mortgage payment each year. That alone drops it from 30 to roughly 22 years.


I had a math teacher in highschool that stressed real life math applications... we went over mortgages for an entire month and I am better off because of it.
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Old 12-30-2013, 10:07 AM   #46
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, but if someone did the same today and sold 6 years from now, no way they lose like we did.
as a percentage, it would be unlikely. could they lose? absolutely. there is nothing stating houses always go up, and as i noted before, we aren't even in a normal market. we are in a heavily intervened with one. look here is one result:



this was a big bubble indicator - that people can't afford homes anymore at fantasy valuations. the chart above misses history, found here:



you could even make the argument that we are now in a second bubble. i do not think this is actually the case because a single chart or metrics is rarely (never?) enough to indicate a real bubble.

i think the chart above is somewhat of an anomaly due to the number of unemployed, and aside from that, the sales volume now is nowhere near as much as it was during the housing bubble. might this indicate homes are overvalued/could still fall some more? i think plenty of things state that can happen, although i don't think we are truly in some sort of second nationwide bubble.

someone still could certainly buy a house today and sell it in 6 years for a loss though.

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A home is not an investment in the sense of buying it and then just making money by selling it down the road always necessarily... no.
this is capital appreciation, and the first thing any research into real estate investment to show is to NEVER invest expecting to simply make money on this. and plenty of data shows that an individual home only ever keeps up with inflation. capital appreciation can occur, for various reasons, but it should never be relied on.

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But a home such as mine... that was relatively cheap that I put 20% down on, will be an investment when I am able to rent it out... which hopefully will happen towards the end of next year... I want to buy another home by the end of next year- a fixer upper that is livable... and move on in and rent mine out, and then live in it the following year and make it better and then rent that one out as well... hopefully have 2-3 rental houses by the time I am 30-31... then buy a nicer house that will be my "forever house"

fuck I'm getting old and responsible.
and that's great - as long as your rent is more than the thing costs you're set. you just have to deal with keeping people in and them not destroying the place. hope it all goes well, ultimately i don't think i'd like dealing with people to do that on more than one property, although it can certainly work out great if you get a nice cash flow from it.

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Can you guarantee me a 5% return on my money?
of course not, the stock market is heavily intervened with too, with all the quantitative easing programs. who knows where the DOW would really be without all this crazy shit?

welcome to the new american economy: you can't really tell the value of anything because the government is so heavily intervening with every market. who the fuck knows what is real growth vs. manipulations that appear like growth?

basically anything you invest in now you just hope doesn't fall completely fucking apart later because it happened to be built on a pile of bullshit.
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Old 12-30-2013, 10:09 AM   #47
 
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Historically you can easily get 8%, not a guarantee though.
Yeah there is risk in paying more money into real estate too.....could be paying money into something where the valuation takes a dump. My parents place in Florida would sell for about 60% of what they paid for it in 2004. Either way you go, sounds good to me as it's being financially sensible.
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Old 12-30-2013, 10:11 AM   #48
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and that's great - as long as your rent is more than the thing costs you're set. you just have to deal with keeping people in and them not destroying the place. hope it all goes well, ultimately i don't think i'd like dealing with people to do that on more than one property, although it can certainly work out great if you get a nice cash flow from it.



I know this is definitely part of the risk... but at the same time, if I can have my "forever home" mortgage & taxes... and then some... paid for by these 2-3 properties- the annoyance of dealing with renters will be worth it.

i have a few friends that do/have done this and it is moreover what has led me to wanting to.
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Old 12-30-2013, 10:11 AM   #49
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Yeah there is risk in paying more money into real estate too.....could be paying money into something where the valuation takes a dump. My parents place in Florida would sell for about 60% of what they paid for it in 2004. Either way you go, sounds good to me as it's being financially sensible.
The loan has nothing to do with the changing value of the home.... What is your point. If your parents paid off the loan early they'd pay less in interest regardless the value...
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Old 12-30-2013, 10:12 AM   #50
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Yeah there is risk in paying more money into real estate too.....could be paying money into something where the valuation takes a dump. My parents place in Florida would sell for about 60% of what they paid for it in 2004. Either way you go, sounds good to me as it's being financially sensible.
you're guaranteed to still own the debt, you're not guaranteed any market return.
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