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  1. #1
    mcdawg22's Avatar
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    H/T Miketice copyright infringement Homeownership vs Rent drunk thoughts.

    3 more weeks Der!! And none of this dumb shit. Iím revisiting the idea that renting is better than owning. If you are living somewhere in a finite amount of time renting is clearly the better option but if you move somewhere that you are going to be settled in for an undetermined amount of time buying is your best bet. Itís not an investment itís simply building equity. How hard is this math? I rent for 800 a month and never get shit from it over 10 years, or I own for 10 years paying 1100 on a mortgage after utilities are included and I spent 500 dollars on incidentals. Assuming the housing market is flat you have gained at least 12000 in equity.


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  2. #2
    Owning for 10 years or more in most markets may be a wash or win over renting if:

    You get solid appreciation.
    No major expenses, plumbing, HVAC, termites
    Rent would have followed appreciation in the market
    You had a low interest loan with low property taxes.
    You had a small down payment and were able to get away from fees for having a small down payment.

    Lot of ifs... It's not always about the monthly payment, that 20% down payment would earn 8% in the equities market and in your home it's going to usually be less than half of that.

    Remember, houses don't truly appreciate in most cases... After you factor in inflation and upkeep expenses most homes are flat to lower in value over time. It's that chunk of dirt it sits on that goes up the most.


    That said, not a bad drunk ramble, it's not a sure bet, but unless you buy a POS or in a terrible market, hard to lose on house you live in for 10 years.


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  3. #3
    Obviously, the location determines a lot. But I have owned 4 homes in different locations and profited significantly on all. The recipe is buy an older house in a nice location, apply a little sweat equity to upgrade cosmetics, bathrooms, etc., sell for increased value. I had my current house appraised approximately 1 year after moving in and had over $100k in equity. It took a little work but will pay off well.


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  4. #4
    Quote Originally Posted by JoeLee'sSocks View Post
    Owning for 10 years or more in most markets may be a wash or win over renting if:

    You get solid appreciation.
    No major expenses, plumbing, HVAC, termites
    Rent would have followed appreciation in the market
    You had a low interest loan with low property taxes.
    You had a small down payment and were able to get away from fees for having a small down payment.

    Lot of ifs... It's not always about the monthly payment, that 20% down payment would earn 8% in the equities market and in your home it's going to usually be less than half of that.

    Remember, houses don't truly appreciate in most cases... After you factor in inflation and upkeep expenses most homes are flat to lower in value over time. It's that chunk of dirt it sits on that goes up the most.


    That said, not a bad drunk ramble, it's not a sure bet, but unless you buy a POS or in a terrible market, hard to lose on house you live in for 10 years.
    Depends on what you mean by that. A lot of the last 4 or 5 decades of appreciation has been because a downpayment was the limiting facctor on what most people could afford, and downpayment requirements have continually declined until the crisis, and obviously they can't get much lower than where they are now. But even without that boost continuing, as long as people are willing to be house poor (which unfortunately most people are), houses in desirable neighborhoods can appreciate faster than wages because of people's willingness to leverage up with a 20% and often much less downpayment.


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  5. #5
    Things to avoid:

    1) Buying a house that needs a roof or AC Unit replacement within 5 years. Both will cost a shit ton, and insurance companies have tightened up considerably on how they assess depreciation and hail damage for the roof. Nothing else in your house should approach either of those two things in repair or replacement cost unless it is caused by natural disaster or appliance malfunction (in which case your insurance kicks in).
    2) Buying in a seller’s market (this varies based on location and the economy). I got my house in 2011 for $40k less than the guy I bought it from paid in 2006 right before the crash. That’s obviously an extreme example, but the key thing is don’t get new house fever just because everyone else is. Purchase based on need for you and your family (more space, better school district, shorter commute, etc.). No other reason.
    3) 30 year mortgage. You can save tens of thousands in interest payments with a 15-year even if you sell after 5 years or so. And remember that a refinance down to 15 year is gonna cost you $2-$4k if your situation improves.
    4) Put down at least 20% to avoid PMI. Rent until you can save up this amount if needed. You won’t regret it....PMI is nothing more than money down the toilet for which you get no benefit in return. It’s also a bitch to get the bank to drop it from your payment even when they are supposed to by law.

    Avoiding these 4 items and you’ll always come out ahead vs renting. Follow 3 of the 4 and you still probably will, but it will be closer to a wash. If you can only stick with 1 or 2 of these, you are probably better off renting until you can build up some savings or the market presents a better opportunity.
    Last edited by Go Budaw; 08-10-2018 at 10:29 AM.


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  6. #6
    Very good advice on all 4 points.


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  7. #7
    Bought a house in Seattle a year ago, and itís appreciated 29% over that year. Not all markets are created equal, but if youíre in a rapidly growing area, hop on that cash cow.
    Last edited by LTblows; 08-10-2018 at 10:49 AM.


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  8. #8
    Even here in NEMS houses are selling fast. Had a few in my neighborhood go up this summer for higher than I thought they were worth, and sold in anywhere from 2-3 days to 2-3 weeks. None have stayed on the market for over a month.

    After seeing that, I'd love to list mine but then I'd have to find somewhere else to live and I hate moving...


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  9. #9
    Iíll come help you move.


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  10. #10
    Quote Originally Posted by JoeLee'sSocks View Post
    Owning for 10 years or more in most markets may be a wash or win over renting if:

    You get solid appreciation.
    No major expenses, plumbing, HVAC, termites
    Rent would have followed appreciation in the market
    You had a low interest loan with low property taxes.
    You had a small down payment and were able to get away from fees for having a small down payment.

    Lot of ifs... It's not always about the monthly payment, that 20% down payment would earn 8% in the equities market and in your home it's going to usually be less than half of that.

    Remember, houses don't truly appreciate in most cases... After you factor in inflation and upkeep expenses most homes are flat to lower in value over time. It's that chunk of dirt it sits on that goes up the most.


    That said, not a bad drunk ramble, it's not a sure bet, but unless you buy a POS or in a terrible market, hard to lose on house you live in for 10 years.

    Joe Lee is right that in most cases, home ownership is a break even at best....the biggest killer is the growing tax burden that will fall on homeowners. In states like Texas, where the tax bills are increasing at nearly 10% a year, taxes are becoming the single biggest expense to own a home. And while taxes are just passed through to the renter, you have the ability to move at the end of your lease.

    It depends on what is important to you ...if you want worry free flexibility then renting is your best choice.


    17n Piece of Shit | Rob Skelton Yes | No

  11. #11
    Quote Originally Posted by Go Budaw View Post
    Things to avoid:

    1) Buying a house that needs a roof or AC Unit replacement within 5 years. Both will cost a shit ton, and insurance companies have tightened up considerably on how they assess depreciation and hail damage for the roof. Nothing else in your house should approach either of those two things in repair or replacement cost unless it is caused by natural disaster or appliance malfunction (in which case your insurance kicks in)...
    I would add a few things to this...
    Foundations, sewage backups, termites, mold remediation, windows, pools... These are all big expenses usually not covered by insurance if you have issues.

    Insurance covers sudden/accidental stuff. Most issues with a home are wear and tear or poor maintenance issues.

    Windows is the one I started paying attention to recently on some remodels we worked on.. It's hard to sell a house with foggy windows from broken seals. Window replacement from companies that specializes in it is silly, I have seen $1000+ per window quotes given to home owners. We use glass replacement where they use the frame and put new double pane gas sealed glass in the existing frame for $100-$200 per window.


    You could easily rack up $15,000 or more per instance on roofs, HVAC, sewage backups, window replacement, and foundation repairs if you are an average homeowner paying retail.


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  12. #12
    The ROI on a house is largely proportional to your ability to afford the house in the first place.


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  13. #13
    Quote Originally Posted by tatedog View Post
    The ROI on a house is largely proportional to your ability to afford the house in the first place.
    Nugget of truth here.


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  14. #14
    mcdawg22's Avatar
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    Quote Originally Posted by Go Budaw View Post
    4) Put down at least 20% to avoid PMI. Rent until you can save up this amount if needed. You wonít regret it....PMI is nothing more than money down the toilet for which you get no benefit in return. Itís also a bitch to get the bank to drop it from your payment even when they are supposed to by law.
    Here is the crux. I falsely assumed that other people arenít in a profession where their savings or Severance could cover big financial losses. And in those situations if you live paycheck to paycheck and losing your job would be catastrophic sure. But paying PMI, as the big baddie seems silly when compared to renting. The argument is you will never see your money back with PMI, well, you will never see your money back with rent.


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  15. #15
    Quote Originally Posted by LTblows View Post
    Bought a house in Seattle a year ago, and itís appreciated 29% over that year. Not all markets are created equal, but if youíre in a rapidly growing area, hop on that cash cow.
    I was listening to CNBC a few weeks ago... hop fast in Seattle. Apparently the Seattle housing market prices were being driven so fast not just because of the new residents moving into the city, but by Chinese investors, many of which are establishing residency to send their kids to US colleges. So all the people moving in drove up demand, but many were having to outbid the Chinese. Now that the Yuan has fallen in value, the bubble is popping in Seattle a bit. Demand should still be there, but the pricing will correct.

    That's been happening in Dallas, but mainly in the rental and commercial market and to a much smaller scale. It's interesting that not a lot has been made about how much RE Chinese investors have bought over the last decade.. if they are cashing out it will cause some disruption in a handful of cities.


    17n Piece of Shit | Rob Skelton Yes | No

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