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Homeownership=Throwing $ away? - Page 6

post #101 of 117
Quote:
Originally Posted by velochic View Post
I've been reading this thread, but had to pipe up when I read this. I think being a landlord is a very RISKY investment, as well. My father is a landlord in the Midwest where the cost of living in relatively low. First of all, they have been trying to sell one of their rentals for 5 years now. Rentals are NOT liquid and if you need the money quickly, you are pretty much screwed.

Secondly, you don't get ALL that you put into it. There are so many small, hidden costs of being a landlord, it's not funny.
I second that. We were landlords for a while. We were able to sell the house for a profit and just about break even.

For us the biggest issue was all the hassles of dealing with tenants (our worst tenants had glowing references from thier previous landlord-she must have been trying to get rid of them :P) and the million little things that always needed to be done. If one is really into fixing things that can help. We did a lot of work ourselves but not plumbing and electric work and that was costly.
post #102 of 117

Buying worked for us (long and rambling)

for various reasons.

our mortgage is less than rent would be. We bought pretty much the cheapest house we could though. Well not THE cheapest, we could have got a well, dump for less money.

We actually got a great deal. We got a lot of house for the money and it didn't need work. The only negative about our house is the location. It's near the university where my husband works and half of our neighbors are students. So far (knock wood) we've never had any problems with them. They are very quiet neighbors. Seriously My theory is that they party on the next block. Compared to our previous nightmare neighbor who ran loud machines round the clock, students are great. We've been here almost 9 years and it's been fine so far.

We really like our house and we like living where we live. My husband is a block away from his office so we only need one car. We are close to campus and close to the kids school. We can walk lots of places.

Our house is not a dream house but it's quite nice. We love our yard. I could live here forever (assuming I can climb stairs).

I don't know if this will ever happen so it is a bit of a gamble but a couple houses in our neighborhood have been replaced by appartment buildings. Our lot would be PERFECT for that Even if it doesn't happen our house would make a great rental property. Since that is the most likely future we don't have to worry about things like new kitchens and bathrooms. Students don't care about those things (at least in our experience as landlords). So we don't have to improve our house to sell it.

I honestly don't think we'll ever get rich but I think we'll break even. In some ways we have a great location. Someone will always want to be here for some reason.

Now if we had overextended ourselves to buy a nicer and bigger house we might be in trouble. Some of the newer houses around here have problems and they can be hard to sell.
post #103 of 117
Quote:
Originally Posted by daekini View Post
LOL I took the LSAT and did well, went through LSDAS and all that and just before I sent out apps I found I was pg with DC#1

This is the last year that I can use it (5 years from registration), I don't think I'm going to, and I'm sure not ready to go thru all that again!
Well, if you want to talk, pm me!


As for housebuying. Does it bother anyone else that they have to pay APR on their mortgage? I know it's deductible, but that doesn't make it free. As someone who currently pays between 2% and 9% interest on $120,000 of student loans, the thought of how much interest costs me makes me seriously want to :Puke
post #104 of 117
Quote:
Originally Posted by kijip View Post
Mortgage documents are not exactly easy to understand and many brokers out and out lie to those they are hard selling the loans. Additionally it was not uncommon to be told one thing, sold on that and then arrive at closing (after you have made plans to move to the "dream" house) and be given something different. It happens. I have heard of cases where refinance people talked a mentally impaired older woman into an ARM when she was less than a year away from paying off her old mortgage on her *social security benefits*. Then bam, the payments rise above her income and she is out of her *30* year investment. Predatory lending is not entirely on the borrower. My shady sleazy brother worker as a broker in sub prime markets and you would not believe the utter garbage he used to sell those loans. Unless we shut that sort of stuff down, the lenders are culpable IMHO.
This is what happened to us. I knew I did NOT want an ARM going in to the buying process. After my divorce, my parents (with top credit) co-signed on my house, because my credit was in the toilet due to the divorce. We were told we were getting a conventional loan at a certain %, with a certain amount of PMI (we put only 10% down, but the house was worth 10% more than the sale price- the owners were in a hurry to sell.) When we got to sign our closing paperwork, we found out it was for a 5 year ARM, the % was 1% higher than we were told (on paper), and the PMI was double. If we hadn't signed the paperwork, we risked losing the house (and I had already given notice on our rental), so we signed. We have managed to drop the PMI, because our market is still rising, and we are working on a refinance (we have 3 more years). However, we definitely were victims of a bait and switch, and this was with a reputable credit union. I do think the mortgage broker was shady, though, and we are not going to refi with the same place.
post #105 of 117
We bought our home 7 years ago for $145,000. We had a big boom in the housing market 3 years ago and the value of our home is now $350,000. No matter how much we pay in interest, property taxes and upkeep....we are still way ahead.

It just depends on where, when and what you buy.
post #106 of 117
Ok, finally got through all of the posts!

There are two main reasons I don't want to rent have minimal to do with finances:
1- I hate paying someone else's mortgage. Between selling house 1 and buying house 2, I had to rent a year, while XH and I fought about the proceeds from house 1. We rented from my BIL and paid his mortgage plus a couple hundred dollars a month (just about what I pay in my mortgage now). In that time, HIS house appreciated about 50K, which he made when he sold after we moved out. That killed me.
2- I am a private person, and I don't like people being able to enter my home for anything less than an emergency. My home is my fortress! I don't want landlords in, even to make repairs. My parents co-own my house, but they are my parents, and are welcome whenever.

That said, our area has grown tremendously and continues to grow. We have more people who want to live here than space. I don't see the trend stopping for a while now. Our first house, we put 10% down, and then paid off another 10% when XH got a slight inheritance. 3 1/2 years after buying it, we sold it for 50K more than we the original sale price. We would have been able to sell it for about another 20K, but I had to sell, as XH left me pretty destitute. Had I not had the house, there is no way, we would have had any significant investments by the time of the divorce. XH is a spender.

A year after selling, I bought my house (also putting 10% down) for a little bit less than I paid for the last house (smaller and older house, not quite as hot of a neighborhood, but still nice.) The house is now worth almost 100K more than I purchased it for- 2 1/2 years ago. I put extra money towards the principle every time I pay the mortgage, so I most likely would clear 100K if I had to sell it tomorrow. My mortgage is what I would pay in rent for this area, plus I am sitting on equity. I'd be doing even better if I still had the house I bought in 2000. That one is now worth about 200k more than we paid for it.

My XH keeps waiting for the bubble to burst before he buys another house. In the meantime, he has blown through all of the proceeds from selling house 1 and moved twice. They had to move out of their last (rental) house with a month's notice, because the owner decided he wanted to live there after he got married.
post #107 of 117
: I finally made it to the end of the thread!

We're in one of those high-priced over-inflated areas. We have a small, 1968 built 3 bedroom, 1 bath rambler that needs a lot of work - when we bought it, it seemed to mostly just need some cosmetic stuff and updating in the "future". We closed two weeks after Sept. 11, 2001. Two days after we moved in the fridge died and we had to replace it (we bought used). Then DH lost his job 2 weeks later. He was unemployed for 6-1/2 months. We still haven't truly recovered.

We did have a 3% down loan with PMI through a 30 yr. fixed gov't loan. Then we refi'd and got am 80%/20% loan with two mortgages. Last year we refi'd again and used the equity to pay off the 20% loan which was a 10 year loan with a balloon pymt. The other had been a 30 yr fixed.

We have some equity to "spare" and still have a 30 yr fixed mortgage. However, our property taxes have gone up each year quite a lot - right now they're around $3800-4000 per year. Our house appraised for 100K more than our current loan so that's good. But we need to do a lot of work on this place. And right now, we just don't have the money.

DH's current job has been a bit rocky lately. When we first bought the house, we had $0 debt. Now we have added debt besides the mortgage. At this time, we are trying to decide if we should try to stick it out here or try to find more affordable housing. Or if DH will have to find a new job that makes more $$. (He really likes where he is at and that means a lot too and the whole job issue is very complicated. He is paid pretty well and I currently SAH.)

I could go back to work. but I'd have to go to back to school to make a decent wage. And we don't find it feasible or reasonable to pay someone else to care for DD while I work a job I don't care much about and end up making less than $2.50 an hour after day care and expenses. Plus we want to homeschool.

We have one car which will be paid off in about a year. DH works from home 2/week and then takes the bus into the city the other days. The commute sucks.

We've been considering selling off and on for a couple years now because we just don't have the money, the time, energy or know-how to be DIY'ers. It often times feels like just too much. I'm anticipating possible roof/siding issues coming up. We need to paint the outside - but how do I know if it's OK to paint, or if I should just get the siding replaced? (Not in the budget right now anyway.) There are so many things to do we don't know where to start. And we've had to hire out to fix both gas-line problems and plumbing leaks in the past 3 years.

Right now, our neighborhood is kind of up and coming - people have been coming in and "flipping" houses all around us. I'm wondering at this point if it may be in our best interest to sell to an investor or to someone who likes to buy fixers and live in them while they improve them.

If we do that, we're faced with the options of renting for awhile and possibly staying on this side of town. Or possibly downsizing to a condo - 2 bd tops if we stay in this general area. Or maybe venturing out to more affordable areas in the general region that would have a comparable commute??

We could get nicer houses farther away from here (not in the boonies either) for less money - esp if we can recoup a decent amt on the equity. But then we have to decide - condo or house? Either way, it would have to be something already in good condition that would only need general scheduled maintenance for some time and we'd need to have an extra $ put away for emergency stuff. And probably only a small yard without so much maintenance involved. For us at this time anyway, owning this house has been rather overwhelming.

And we've lived in this general area for 8+ years now (some renting before this house). We have some acquaintances in our neighborhood but no close ties. However, there are now many families with young children living here so there is definite potential if we decide to stay. At this point, we just have a lot of thinking to do. We're also trying to re-evaluate what is important to us in our lives - what brings us joy - because lately we haven't been able to do many of those things.

Plus, I have no retirement savings at all. DH has a 401K but could use more and we want to save some money for DD for college.

So point of all this rambling? I guess just that we're kind of in the middle of the whole rent vs. buy - what the heck should we do thing ourselves. We'll see how it plays out. It's been great to read everyone's thoughts, experiences and opinions on this thread. Thanks!
post #108 of 117
Quote:
Originally Posted by monkey's mom View Post
Right. But she's not selling right now, is she? That would be suicide! She won't be breaking even forever--once that mortgage is paid down or off and rents are raised, the profits are going to go up considerably.
Many people in California went out of their way to buy houses in 2005 and 2006 hoping to just rent them out and making the big buck. As a result too many houses and condos were build and no one is moving in. Not everyone can afford to have empty houses for even 1-2 months.
post #109 of 117
After the %$& we went through last year with out landlord I'd buy even if a loss was guaranteed. Just that we can't afford a house right now, HERE at least.
post #110 of 117
After the %$& we went through last year with out landlord I'd buy even if a loss was guaranteed. Just that we can't afford a house right now, HERE at least.
post #111 of 117
Quote:
Originally Posted by huggerwocky View Post
Many people in California went out of their way to buy houses in 2005 and 2006 hoping to just rent them out and making the big buck. As a result too many houses and condos were build and no one is moving in. Not everyone can afford to have empty houses for even 1-2 months.
I'll go out on a limb and say that if you're buying rental property when the market is at, or close to, its zenith and you can't afford to cover 1 or 2 months, you might be in the wrong game. :
post #112 of 117
Quote:
Originally Posted by cjr View Post
We bought our home 7 years ago for $145,000. We had a big boom in the housing market 3 years ago and the value of our home is now $350,000. No matter how much we pay in interest, property taxes and upkeep....we are still way ahead.

It just depends on where, when and what you buy.
I would REALY emphasize the 'when' here. You just got really, really lucky. The increase in prices in the last 7 years (well, really the first 5 or 6 of those years) was extremely unusual. You certainly won't keep going up at the rate you have been. In many, many markets prices are leveling off or falling, as I am sure you all know.

Your $350K may be what it seems to be worth on paper, but are comparable houses right now actually selling for that much? If you put it on the market today, could you actually sell it for $350K? It is risky to base the value of your investment simply on the apparent market rate--you don't *actually* have $350K in the bank. It is a number that can go up or down based on the market.

We are in a very interesting time right now in real estate, and what people expect from selling can be very different from what they are actually able to get. (I am in Boston, and I have watched many people put things on the market recently and then have to reduce prices SEVERAL times, some quite substantially--it really is a buyer's market right now. What you could get for your house 1-2 years ago is just not realistic anymore in many places.)
post #113 of 117
HI,
I'm interested in reading the article but it is not available (anymore I guess). Does anyone know where I can find the original article online?
Thank you in advance.
post #114 of 117
I know WAY too many young couples who have bought condos when they really weren't financially ready to do so. Minimal downpayments, mortgage payments were something of a stretch already, and then there is no extra money - for even those little things you like to do in a new home - curtains, area rugs, etc. I knew a group of friends who bought condos in an "up and coming" neighborhood, but it was still pretty dangerous - one woman saw a shooting out her window in the late stages of being pregnant and would not go back to her condo. They then had trouble selling.

I couldn't buy a 1-BR condo right now if I wanted to. I live in Chicago - a small 1 BR in a gut-rehabbed old apartment building WITH a parking spot (I've done enough street parking to be danged if I do it after buying!) is $225K MINIMUM. I make $40K a year (single, no kids). I rent for $650/month, all utilities included (even central A/C), great location. Building is a bit old and could use some work, but hey, it's cheap!
post #115 of 117
Quote:
Originally Posted by fuller2 View Post
Your $350K may be what it seems to be worth on paper, but are comparable houses right now actually selling for that much? If you put it on the market today, could you actually sell it for $350K? It is risky to base the value of your investment simply on the apparent market rate--you don't *actually* have $350K in the bank. It is a number that can go up or down based on the market.
That is true of any investment, stocks, bonds, real estate, it is all variable. That is the risk you take and if you are in it for the long haul, you almost always do very well. Now is the time to buy into the housing market. Interest rates are still quite low (stay away from adjustable rates) and there are some desparate sellers out there. Of course, you still need to buy within your means. Avoid interest only loans and put some money down.

Money in the bank is just money in the bank, we all need some liquid money but whatever isn't invested is losing value to inflation.
post #116 of 117
I finally now see homeownership as not always the best. Our last house we had to sell because my DH took a job in another state (for a nice raise). We had to carry that house for 6 months and pay out 10,000 to be rid of it in the end. It was a very nice house, but housing just dumped off. Had we been renting, we would have been able to walk away free and clear after our lease was up. We are renting now and will continue to do so for some time.... at least long enough to make sure that when we buy again, we will never, ever, ever need to sell it. I am 26 and have owned 3 houses and it no longer holds the same value to me that it once did.
post #117 of 117
When you rent you are still paying a mortgage.

You are paying someone else's - instead of your own.
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