He is if the home is paid for and he doesn't have to pay for shelter. The removal of paying for shelter = $$ in his pocket.
That's nice. How many units and what type do you have? I've always been really interested in real estate but never had the cajones to make the move and buy something.
3 family brownstone. we live in duplex, 2floors plus basement and backyard. we rent two floor-throughs.
Yeah, obviously. Again, he could have put that interest money and down payment money into investments and accumulated useable income. Money in the pocket is worth more than future money. No right or wrong here, depends on each persons' situation. But a lot of people that assume home owning is right for them are often wrong.
Why are you selling? Too much work to manage?I've always wanted to own multifamily instead of single family. For years been looking at 15-30 unit complexes. Just never pulled trigger.
So what if he put $0 or very little down and his total note (interest included) is still no more than what he would pay in rent? I agree no right or wrong. The above is the only point I'm trying to get across.
it would take 20 years of payments to recuperate just half your principle in equity because of amortization. he would also pay more in interest because of the larger financed amount.
Huh? I think you didn't understand my question. If it costs me $1,000 a month to rent a place..... vs If it costs me $1,000 a month (FINANCING COSTS INCLUDED) for my mortgage..... Then how is that bad? Why do I care about recuperating my payments? In both scenarios I'm paying $1,000 a month for shelter. The only difference is I get to stop paying $1,000 a month 20-30 years later in the latter scenario. Why do I care if a portion of my $1,000 payment goes to interest? How is that different than a portion of my $1,000 rental payment going to the owners pocket?
Ugh, I could never see myself living in the same home for 30 years unless I am retired and just moved to my next life in a new state.
If you pay off your home in 15yrs like you should..you no longer have a huge payment every month. If you wish to move..you sell your house and suddenly you have $150,000 to pay for a new house with cash..easy solution to not wanting to live in the same house all your life. The idea is when you retire, you don't have a mortgage or rent when your income is lower. Thats why its smart to buy a house.
because the cost of a house isn't just the monthly payment. you have: 30 years of taxes that are always rising 30 years of maintenance that is always rising 30 years of landscaping and lawn care that is always rising 30 years of home insurance that is always rising so in addition to the $1000 you pay every month, you have to add the above costs. none of which are going into your pocket. we all make someone else richer. as a renter, that's my landlord. as an owner, it's the bank, home depot, allstate, plumbers, electricians, yes, after 30 years you have a house. a house that's 30 years older and probably outdated. the pipes rattle, the floors creek under the weight of a cat, the walls have cracked because of a drought. want to sell it? spend thousands more on remodeling. then you'll just have to go buy another house with additional transaction costs. ok, my rent goes up every year. but at least i know what i'm paying every month and i can move if i don't want to pay it. during the 30 years, i didn't waste money on all those things i mentioned above. i don't have a house, but i've built up enough cash reserve to either buy a brand new house (hey, maybe even from you after you remodel) or continue paying my rent from the interest i've earned from investing all of your costs. all of this is assuming it is 2 people with identical incomes. look, forget the rent vs buy argument for a second. i'm just trying to point out that housing isn't going to make one wealthy like they believe. a $150,000 house that appreciated to $450,000 after 30 years is only a 3.7% annualized return, barely beating inflation. and if you subtract the above costs, you've lost money. to be wealthy means increasing your purchasing power. you're not doing that owning a house.
This, My home should be paid for in about 15-16 years, half way there. Unless I sell it and move into a different home.
The sad fact is that most people are brain dead when it comes to financial planning. Most people have no significant savings when they retire. IIRC the max you can get from SS is about $2500 per month, before taxes. Most retirees average about half of that. Making a $1000+ rent payment out of the monthly SS check would put the squeeze on food and health expenses.
If I'm saving for retirement, and the buy price is not totally out of whack, I'd rather buy a home with a 4%-6% effective cap rate (including rent value) than load up on stocks, in the hope that the income from those stocks will allow me to pay rent since I need a place to live anyways. In the orig example here of a $150K home, with rent equivalent of $12K (is there really such a place??) my return would be $7/$150 or 4.5% (assuming costs of $5K/yr -- which seem high but may allow for some periodic bigger expenses). This is an after tax, inflation protected return, with a tax advantage on the interest and ptax. Compare this to a 10 yr bond that yields a pretax return of 2%. If I move a lot, or have to sell then the math doesn't work. The transaction costs kill it -- but long term, makes not only good financial sense -- but minimizes risk, and save me huge cash flow down the road. Ain't nothing happier then a paid off home! And to come back on topic -- most of the 1%ers own their homes. They are also more likely to own the appt buildings you financial math whizzes are renting from them. (and they also control the investment houses you're putting your home buy money into -- and the companies you're investing in.... and they're taking a cut there too).
I'm not going to say where I fall in this percentage thing (doing very well, thank you), but as for owning or not owning a home ("owning" meaning that you bought it and have a mortgage), if you do have a mortgage of 20-30 years, for heaven's sake, refinance and get a 15 year note, or even a 10. Interest rates are at or near historic lows. Jump on it, and you'll be in far better circumstances, unless you intend to move in the not too distant future. We did a refinance some years back and went from a 30 to a 15 at 5%. In 5 years or less (paying it off quicker than we have to), the house will be free and clear. We'll be retired with a home we can either keep and just pay taxes and upkeep, or that we can sell and move into Central Austin, finally, being able to buy something with either cash, or a small, short mortgage. What I like about a 10-15 year note is that you get into paying more principal than interest much more quickly. We're at the point where our interest is a very small part of our house note, and you can literally watch the principal move down significantly month by month. Besides maxing out our IRAs every year, we're sending a lump sum to the mortage company at the end of the year to bring that principal down even faster. And why not? You don't get a return from CD's and the like worth mentioning. We're invested in stocks and bonds, so we have that covered. Many folks with a 30 year they've had for a while can cut that period in half and not see much change in their note, rates being what they are.
