What $250,000 Buys You Around the Country

[pstall]

If you rent you better have no debt and are actively investing in the stock market. Otherwise you really are throwing away your money.

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[Montsta]

My house is 2250 sq. ft. In the East Bay Area in Northern California. 4 beds, 2 1/2 baths, 10,000 sq. ft. lot with a huge backyard and 4 car driveway. $800K. I just got it appraised for a home equity loan to landscape the backyard, and the appraisers I spoke with all think that if I spend $30K on premium landscaping back there, I could definitely add another $40K to the value. Also wanting to get solar because California has been in a drought and ridiculous hot and my wife can't sleep if it's too hot so she has AC on like 24/7.

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[Cat]

Renting and owning both have advantages and disadvantages. People say if you rent, you're just throwing money away. But unless your town has a great market, owning means you are pretty much agreeing to live there for year after year after year. If you live in a fun city, perfect. But imagine buying a home in like Mint Hill or Fayetteville. Christ. You want to spend a decade THERE? Wow. I was lucky I was able to sell my place when I left Charlotte. My poor pops can't sell his place in Pensacola and I remember when I was a kid and we left Mississippi their house was on the market forever. Buying is like the biggest commitment there is other than having a kid. I'd much rather "throw money away" and live someplace different than be stuck with a gamble.

 

There could be a chance that there are people in the world that want/like different things then you do. Just maybe 

[Big A]

They do not work well with High Efficiency washers....which we have.

I have tankless and HE washers and never had an issue. A quality tankless installed correctly will work with any HE washer. Originally I got the Bosch brand they carry at Lowes and it was junk. In winter I had to slow the water flow a lot just to get hot water, so I got rid of it and got a quality one for not too much more, Rinnai, Norwitz, and Takagi are all good brands.

Also, anyone considering adding tint needs to make sure they know what type of glass they have and what type of tint to use, you're not supposed to tint laminated glass, for instance. I had 6 windows crack from thermal fracture at one of my commercial properties within 2 years of having them tinted by what was supposedly a reputable company. Many of the tint companies will make you pay additional fee for warranty or sign a waiver for possible thermal fracture after tinting. As long as you use correct tint for glass it's going over, tint is great for keeping out heat and lowering AC usage

[Big A]

My house is 2250 sq. ft. In the East Bay Area in Northern California. 4 beds, 2 1/2 baths, 10,000 sq. ft. lot with a huge backyard and 4 car driveway. $800K. I just got it appraised for a home equity loan to landscape the backyard, and the appraisers I spoke with all think that if I spend $30K on premium landscaping back there, I could definitely add another $40K to the value. Also wanting to get solar because California has been in a drought and ridiculous hot and my wife can't sleep if it's too hot so she has AC on like 24/7.

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If you don't have your roof insulated, you can have foam insulation sprayed on bottom of roof inside attic for probably about $2k. I did this on one of my A frame properties where I pay electricity and saw about 34% drop in electric bills during summer. The attic temperature dropped about 25 degrees.

[Happy Panther]

Disagree.

 

 

Owning a home or two is a very good long term investment, as long as you aren't an idiot.

 

 

If you rent you better have no debt and are actively investing in the stock market. Otherwise you really are throwing away your money.

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Buying a house can be a terrible investment.

 

People are surprised when the do the math and include mortgage + taxes + insurance + maintenance that they are losing money.

 

I lost $60k last year when comparing my cash out of pocket to the equity + appreciation. 

 

I could have rented and put $30-40k in investments.

 

When you compare the two cash flows over the period of your mortgage, renting can be a way better fiscal decision.

[Big A]

Buying a house can be a terrible investment.

People are surprised when the do the math and include mortgage + taxes + insurance + maintenance that they are losing money.

I lost $60k last year when comparing my cash out of pocket to the equity + appreciation.

I could have rented and put $30-40k in investments.

When you compare the two cash flows over the period of your mortgage, renting can be a way better fiscal decision.

That is definitely more the exception than the rule. Also, aside from appreciation, it's a valuable asset that you can borrow against in times of need or to do a business venture and helps establish a solid credit history. Although you can establish credit many other ways, people that are looking to take out a sizable loan for commercial properties are usually frowned on if they have no real assets as opposed to movables.

$60k loss seems really high. That's $5k a month so mortgage interest would have to be like around $4k a month. If you're paying. That much interest, your mortgage payment would be at least $6k a month if it's at beginning of amortization schedule. And that is still not having any offset for appreciation. Are you sure your numbers are correct?

[thefuzz]

Buying a house can be a terrible investment.

 

People are surprised when the do the math and include mortgage + taxes + insurance + maintenance that they are losing money.

 

I lost $60k last year when comparing my cash out of pocket to the equity + appreciation. 

 

I could have rented and put $30-40k in investments.

 

When you compare the two cash flows over the period of your mortgage, renting can be a way better fiscal decision.

 

I could be wrong, but your math seems really off.

[Happy Panther]

That is definitely more the exception than the rule. Also, aside from appreciation, it's a valuable asset that you can borrow against in times of need or to do a business venture and helps establish a solid credit history. Although you can establish credit many other ways, people that are looking to take out a sizable loan for commercial properties are usually frowned on if they have no real assets as opposed to movables.

$60k loss seems really high. That's $5k a month so mortgage interest would have to be like around $4k a month. If you're paying. That much interest, your mortgage payment would be at least $6k a month if it's at beginning of amortization schedule. And that is still not having any offset for appreciation. Are you sure your numbers are correct?

Yeah numbers are right because of some large repairs and extra payments we are making although I was forgetting the interest deduction

 

But look at this a different way.

 

If I take all the cash outflow related to the house from 2010 when I bought it and add them up through 2023 when the mortgage will be done I expect to have paid out around $800k for a $500k house. This includes mortgage, property tax, HOA, major repairs, minor repairs, insurance and other maintenance less any tax deductions. That is on a nominal basis. On a time value of money basis it is around $715k. On a time value of money basis, even if my house appreciates massively I expect to lose $100k on the transaction in today's dollars. If it doesn't appreciate as I hope it will be a much bigger loss

 

The renter will have an outlay less than half of that and will have invested the remainder. At the end of the mortgage the renter is way ahead even though he has $0 home equity

 

If you extend this to a 30 year mortgage he would be even further ahead.

 

Of course now you have an asset that will continue you grow. However so does the renter in his invested money. And while you lose the mortgage payment you still have taxes, insurance and maintenance.

 

In other words after 2023 I will eventually catch up to the renter but it may take a while because of ongoing costs.

[thefuzz]

Yeah numbers are right because of some large repairs and extra payments we are making although I was forgetting the interest deduction

 

But look at this a different way.

 

If I take all the cash outflow related to the house from 2010 when I bought it and add them up through 2023 when the mortgage will be done I expect to have paid out around $800k for a $500k house. This includes mortgage, property tax, HOA, major repairs, minor repairs, insurance and other maintenance less any tax deductions. That is on a nominal basis. On a time value of money basis it is around $715k. On a time value of money basis, even if my house appreciates massively I expect to lose $100k on the transaction in today's dollars. If it doesn't appreciate as I hope it will be a much bigger loss

 

The renter will have an outlay less than half of that and will have invested the remainder. At the end of the mortgage the renter is way ahead even though he has $0 home equity

 

If you extend this to a 30 year mortgage he would be even further ahead.

 

Of course now you have an asset that will continue you grow. However so does the renter in his invested money. And while you lose the mortgage payment you still have taxes, insurance and maintenance.

 

In other words after 2023 I will eventually catch up to the renter but it may take a while because of ongoing costs.

 

I somewhat agree, however, in my lifetime I have met very few lifetime renters who are astute investors.

 

 

This is the same as the social security vs. nothing debate.  There are a few of us, you and I for example where SS is a really bad investment, but the majority of Americans don't save and invest that well, they want new TV's and boats.

 

 

When you bring in inflation, the ability to pre pay off mortgages, interest deductions, and quality of life, I still think that owning at least 1 home is sound financial advice.  And if you have the patience, 3 or 4 is ideal.

[Happy Panther]

I somewhat agree, however, in my lifetime I have met very few lifetime renters who are astute investors.

 

 

This is the same as the social security vs. nothing debate.  There are a few of us, you and I for example where SS is a really bad investment, but the majority of Americans don't save and invest that well, they want new TV's and boats.

 

 

When you bring in inflation, the ability to pre pay off mortgages, interest deductions, and quality of life, I still think that owning at least 1 home is sound financial advice.  And if you have the patience, 3 or 4 is ideal.

Interestingly in my simple spreadsheet I assumed a 2% interest rate which hopefully any dummy can obtain with T-Bills or something. If you start saying the renter can get an 8% return the numbers change dramatically.

 

Inflation and interest deductions are in there. Luckily we are on track to finish up what was a 30 year mortgage in like 14. But if you run the spreadsheet with your typical 30 year fixed mortgage you end up way way behind after 30 years. Like having paid more than double the home price and that is at extremely low interest rates. Depending on appreciation and what the renter does with investments you may not break even with the renter in your lifetime. 

 

I'm still a buyer because I don't look at a house as an investment but rather a place to live. While the rental market is cheaper it is limited and restrictive in other ways.

[thefuzz]

Interestingly in my simple spreadsheet I assumed a 2% interest rate which hopefully any dummy can obtain with T-Bills or something. If you start saying the renter can get an 8% return the numbers change dramatically.

 

Inflation and interest deductions are in there. Luckily we are on track to finish up what was a 30 year mortgage in like 14. But if you run the spreadsheet with your typical 30 year fixed mortgage you end up way way behind after 30 years. Like having paid more than double the home price and that is at extremely low interest rates. Depending on appreciation and what the renter does with investments you may not break even with the renter in your lifetime. 

 

I'm still a buyer because I don't look at a house as an investment but rather a place to live. While the rental market is cheaper it is limited and restrictive in other ways.

 

All true.

 

However, my mortgage, insurance, and taxes are less than what I would pay in rent in Wilmington, and that's a fixed cost, how much will rent rise over the next 50 years?

 

If I never sold my house, paid it off, and lived in it for the next 35 years with nothing but maintenance, taxes, and insurance, would they really be that far ahead of me?

 

I have not broken this down completely, but it just seems that after 15 years and I have no mortgage/rent, and I put every bit of that money into investments that I would blow past them, but maybe not.

[MadHatter]

Interestingly in my simple spreadsheet I assumed a 2% interest rate which hopefully any dummy can obtain with T-Bills or something. If you start saying the renter can get an 8% return the numbers change dramatically.

 

Inflation and interest deductions are in there. Luckily we are on track to finish up what was a 30 year mortgage in like 14. But if you run the spreadsheet with your typical 30 year fixed mortgage you end up way way behind after 30 years. Like having paid more than double the home price and that is at extremely low interest rates. Depending on appreciation and what the renter does with investments you may not break even with the renter in your lifetime. 

 

I'm still a buyer because I don't look at a house as an investment but rather a place to live. While the rental market is cheaper it is limited and restrictive in other ways.

If you only get 2% average annual return on your money, then you completely failed at even a basic investment strategy.

 

Put the money in mutual funds (large cap, small cap, S&P, etc) and the statistics show you that your rate of return over a 20 year period is 10%. 

 

To assume a 2% growth as a justification for why renting is better than investing is crazy.

[Zaximus]

What about the tax breaks from paying a mortgage (at least initially through heavy interest) and even breaks for PMI now?   If you're paying more rent than all of your house stuff, plus tax break, etc.  Home repairs are definitely an issue though.

 

I've thought about selling and just renting, for simplicity and also because I work uptown now and would love to be able to walk to work or take a quick bus or trolley instead of spending 2 hours in the car a day.