"Renting is throwing your money away" -- total BS

[PlatinumGold]

i guess you didn't read where i wrote "APPRECIATION".

if you bought a house in a neigborhood that DOESN'T appreciate, than yes, you made a mistake.

don't blame others for your mistake.

i bought a house for $220k and 3 yrs later sold it for $360k, the fact that i didn't get much equity via my loan payments didn't phase me IN THE LEAST.

and HOW do you figure only 20% in taxes?? i guess if you don't own a small business it's not as much an impact on your taxes. me, i have a small business. for me it's closer to 40%. 15% in fica and 25% in income taxes. not a minor writeoff for me.

 

[Argo]

Don't forget that you also pay interest. On a 30 year morgage you don't really start building any equity until 10th year or so. That's one of the reasons I decided against buying a condo this year and wait until I have more saved up for a downpayment.

 

[Ameesh]

Originally posted by: flot
900 sq ft apartment = $950 a month
1100 sq ft house = $1450 a month

Welcome to S. Florida. The "$800 a month" figure I quote is the literal $500 difference plus the $300 of misc house expenses that I did not have when renting an apartment.

Edit: You said you paid $9k in interest therefore you had no federal tax liability... which would mean that you only made $9k this year.

maybe you overpaid for the house

 

[Jzero]

Originally posted by: flot
? After 10 years I would have $100,000 cash, vs my house would have to appreciate to 270,000... which is less risky??

That depends on where you live. WHere I live, that kind of appreciation over 10 years would be a conservative estimate. I'm looking at houses that costs $150 this year that were appraised at $85000 last year!

You can't just willy-nilly buy a property any more than you can just willy-nilly buy stock. It's the same as any other investment.

 

[DT4K]

Originally posted by: flot
900 sq ft apartment = $950 a month
1100 sq ft house = $1450 a month

Welcome to S. Florida. The "$800 a month" figure I quote is the literal $500 difference plus the $300 of misc house expenses that I did not have when renting an apartment.

Edit: You said you paid $9k in interest therefore you had no federal tax liability... which would mean that you only made $9k this year.

Oh, I see how you got that. You are a little confused though. The 9k in interest and the 2500 in property taxes, in addition to my other deductions (child tax credit, etc.) helped keep my income low enough that I ended up with zero tax liability. I made around 53k last year. I had about 1500 withheld, so I'm getting a 1500 refund.

 

[PlatinumGold]

Originally posted by: flot
900 sq ft apartment = $950 a month
1100 sq ft house = $1450 a month

Welcome to S. Florida. The "$800 a month" figure I quote is the literal $500 difference plus the $300 of misc house expenses that I did not have when renting an apartment.

Edit: You said you paid $9k in interest therefore you had no federal tax liability... which would mean that you only made $9k this year.

Where did you learn about income and taxes?? no wonder you can't figure out the difference between renting an apartment and paying off a loan for a house.

$9k in interest is a TAX WRITEOFF, meaning it REDUCES HIS TOTAL income by $9k. so depending on his gross income, tax deductions and exceptions and such that $9k could be the difference between PAYING OUT $3k in income taxes at the end of the year and GETTING back $2k at the end of the year.

 

[Ameesh]

Originally posted by: eakers

Originally posted by: Ameesh

Originally posted by: Liviathan
Yep..I agree with you..Owning a house to live in is WAY over rated......build equity crap...Please...takes forever to make any dent on the interest.

I manage my financial life very responsibly. I have good investments, good amount saved up in the bank..and don't own a house..what a shock!!!! And I don't plan to any time soon.

just make extra payments aside from your mortgage and your debt will go down immensely.

but you have to pay a penelty if you pay it off faster

you pay the penalty if you pay the entire mortgage if in 2 or 3 years, you dont pay a penalty if you just addd $500 to every months check .

and early payment penalty is only on some loans, not all, for instance my loan has a stipulation that i pay a fine i pay off the entire mortgage with 3 years, well there is no way i could do that so its not a big deal to me. many places dont even have this penalty

 

[flot]

Now I'm even more confused - how did you turn $11,500 of tax deductions (not credits, deductions) into a $0 tax liability on a $50k salary??

Edit, hey platinum, read some more. He said he had a $0k tax liability, implying that he OWED THE FEDERAL GOVERNMENT $0 in TAXES. If you have a $10,000 TAX DEDCUTION then your actual savings are $10,000 times your tax rate (say 25%) which would be a $2500 savings on your total taxes.

 

[Ameesh]

Originally posted by: ElFenix

Originally posted by: Ameesh

Originally posted by: Liviathan
Yep..I agree with you..Owning a house to live in is WAY over rated......build equity crap...Please...takes forever to make any dent on the interest.

I manage my financial life very responsibly. I have good investments, good amount saved up in the bank..and don't own a house..what a shock!!!! And I don't plan to any time soon.

just make extra payments aside from your mortgage and your debt will go down immensely.

yeah really. its sooo easy to make double principle payments early on its ridiculous. each time you double the principle you're reducing the length by a month. when your principle payment is $15 a month or whatever, the extra $15 is easy to come by.

and i'd like to see an apt as large as the house you're in for the same money. not only do they have to pay a loan and taxes and all that, they're also turning a profit.

that fact came into my decision when i was looking for a house. i purposly found a place where i wouldnt be tapped every month just because i paid the mortgage, i made my mortage about 60% of what i could afford so that i could pay off the principal quickly if everything was normal and if i lost more job or something my savings would stretch out.

 

[DT4K]

Originally posted by: PlatinumGold

Where did you learn about income and taxes?? no wonder you can't figure out the difference between renting an apartment and paying off a loan for a house.

$9k in interest is a TAX WRITEOFF, meaning it REDUCES HIS TOTAL income by $9k. so depending on his gross income, tax deductions and exceptions and such that $9k could be the difference between PAYING OUT $3k in income taxes at the end of the year and GETTING back $2k at the end of the year.

Exactly right. In 2002, I made around 50k and ended up paying a total of around 3k in federal taxes. I bought my house in December of 2002. In 2003, I made around 53k and ended up paying a total of ZERO in federal taxes. That 9k deduction from my income plus the property taxes helped lower my taxes. There was also the bush tax cuts and the child tax credits, so I don't know how much of the reduction was due to the house, but it certainly helped.

EDIT: saw your last post. The tax cuts and child tax credits helped also. Plus I didn't have as much self-employment income, so less tax on that.

 

[Vic]

Renting is always cheaper in the short-term, owning is always a better deal for the long haul.

 

[PlatinumGold]

Originally posted by: flot
Now I'm even more confused - how did you turn $11,500 of tax deductions (not credits, deductions) into a $0 tax liability on a $50k salary??

Edit, hey platinum, read some more. He said he had a $0k tax liability, implying that he OWED THE FEDERAL GOVERNMENT $0 in TAXES. If you have a $10,000 TAX DEDCUTION then your actual savings are $10,000 times your tax rate (say 25%) which would be a $2500 savings on your total taxes.

Hey FLOT, read, $0 Tax LIABILITY means NET effect.

$53k income, 3 children, Earned Income credit, $11k Deductions and whatever else he itemized COULD EASILY equal $0 TAX LIABILITY.

 

[WinkOsmosis]

Originally posted by: Jzero

Originally posted by: flot
I get SOME of that back, true - but only about 20% of what I am "throwing away"

And building equity is an interesting concept, I believe on the 1st year of my 30 year mortgage I will build about $19.32 of equity... On the other hand I could have continued renting and put $800 a month into the bank, which would give me a GUARANTEED $10,000 a year.

It's a longer-term investment. What about after 10 years?
BTW, owning the WRONG property is still a bad investment.

Centering your life around "long term investments" and mortgage payments is not a very nice way to live. Then again, to many of you, nothing is more important than money.

 

[flot]

You guys are quite nicely missing the entire point of my thread. (although I'm enjoying it) Despite all the side arguments, I really do understand things like appreciation and taxes, and yes I infact did buy a house very specifically based on its location and the appreciation of others in the neighborhood, and I'm sure it has appreciated 10-15% in the year I've owned it.

HOWEVER

None of this changes the fact that for the right of owning the house, I am paying $600 every-freakin-month in government mandated fees (yes even my insurance is forced on me by the govt) just to own the house. I wholeheartly consider this to be "money thrown away" and find it quite ironic that it is such a large number compared to my previous rent, and even more ironic that my neighbor can be paying so much less.

 

[PlatinumGold]

i just went thru this, i had approximately the same income in 2002 as in 2003 and yet BECAUSE i sold my house in June of 2003 I had to pay about $1400 MORE in taxes this time than i did last year.

those writeoffs help a lot.

 

[PlatinumGold]

Originally posted by: flot
You guys are quite nicely missing the entire point of my thread. Despite all the side arguments, I really do understand things like appreciation and taxes, and yes I infact did buy a house very specifically based on its location and the appreciation of others in the neighborhood, and I'm sure it has appreciated 10-15% in the year I've owned it.

HOWEVER

None of this changes the fact that for the right of owning the house, I am paying $600 every-freakin-month in government mandated fees (yes even my insurance is forced on me by the govt) just to own the house. I wholeheartly consider this to be "money thrown away" and find it quite ironic that it is such a large number compared to my previous rent, and even more ironic that my neighbor can be paying so much less.

hehehe

of course who am i to talk, ONE of the reasons i didn't buy a house IMMEDIATELY after selling my last one is, if we bought the house we REALLY REALLY wanted i'd be paying $15k per YEAR in PROPERTY tax ALONE. that's about 70% of my apartment rental right now.

so i've seen and been on both sides of this.

 

[Ameesh]

Originally posted by: flot
You guys are quite nicely missing the entire point of my thread. Despite all the side arguments, I really do understand things like appreciation and taxes, and yes I infact did buy a house very specifically based on its location and the appreciation of others in the neighborhood, and I'm sure it has appreciated 10-15% in the year I've owned it.

HOWEVER

None of this changes the fact that for the right of owning the house, I am paying $600 every-freakin-month in government mandated fees (yes even my insurance is forced on me by the govt) just to own the house. I wholeheartly consider this to be "money thrown away" and find it quite ironic that it is such a large number compared to my previous rent, and even more ironic that my neighbor can be paying so much less.

you could have bought a cheaper house, a 900 sqft apat is not the same as an 1100 sqft house even without knowing andy specifics about location etc.

you could have looked for a place that would have made your payments relativly the same.

 

[Jzero]

Originally posted by: WinkOsmosis

Originally posted by: Jzero

Originally posted by: flot
I get SOME of that back, true - but only about 20% of what I am "throwing away"

And building equity is an interesting concept, I believe on the 1st year of my 30 year mortgage I will build about $19.32 of equity... On the other hand I could have continued renting and put $800 a month into the bank, which would give me a GUARANTEED $10,000 a year.

It's a longer-term investment. What about after 10 years?
BTW, owning the WRONG property is still a bad investment.

Centering your life around "long term investments" and mortgage payments is not a very nice way to live. Then again, to many of you, nothing is more important than money.

Nobody said anything about centering their life around anything.
You have to live somewhere!
If you're not planning to go anywhere for 5-10 years, why rent and come away with $50k in cash when you can pay on a mortage and come away with $150k in cash?

There's a big difference between centering your life around long term investments and taking advantage of a good investment. This would be like me keeping all of my money in my checking account instead of putting it in savings or other vehicles. The money has to sit around somewhere. Why not sit it where it will at least grow a little?

 

[LordSnailz]

Originally posted by: PlatinumGold

Originally posted by: flot
You guys are quite nicely missing the entire point of my thread. Despite all the side arguments, I really do understand things like appreciation and taxes, and yes I infact did buy a house very specifically based on its location and the appreciation of others in the neighborhood, and I'm sure it has appreciated 10-15% in the year I've owned it.

HOWEVER

None of this changes the fact that for the right of owning the house, I am paying $600 every-freakin-month in government mandated fees (yes even my insurance is forced on me by the govt) just to own the house. I wholeheartly consider this to be "money thrown away" and find it quite ironic that it is such a large number compared to my previous rent, and even more ironic that my neighbor can be paying so much less.

hehehe

of course who am i to talk, ONE of the reasons i didn't buy a house IMMEDIATELY after selling my last one is, if we bought the house we REALLY REALLY wanted i'd be paying $15k per YEAR in PROPERTY tax ALONE. that's about 70% of my apartment rental right now.

so i've seen and been on both sides of this.

How do you figure out what your property tax will be if you ended buying the house?

 

[flot]

Ameesh, if I looked for a place that made my payments relatively the same (say a $100k condo), then there would be effecitvely no benefit to owning vs renting, as I wouldn't get any tax break at all, I wouldn't be building any significant amount of equity for years, and any random expenses (say a new air conditioner) I would incur would immediately throw me way negative for the year...

 

[DT4K]

Just to clarify.
Having the house helped reduce my taxes.
It was not entirely responsible for going from 3k to zero tax liability.

I have the following pretax deductions from my paycheck each month:
$200 - Health Care Reimbursement Account.
$200 - 401K
$180 - Medical and Dental insurance

Plus I get credits because:
I have 3 kids.
My wife attended college.

 

[PlatinumGold]

Originally posted by: LordSnailz

Originally posted by: PlatinumGold

Originally posted by: flot
You guys are quite nicely missing the entire point of my thread. Despite all the side arguments, I really do understand things like appreciation and taxes, and yes I infact did buy a house very specifically based on its location and the appreciation of others in the neighborhood, and I'm sure it has appreciated 10-15% in the year I've owned it.

HOWEVER

None of this changes the fact that for the right of owning the house, I am paying $600 every-freakin-month in government mandated fees (yes even my insurance is forced on me by the govt) just to own the house. I wholeheartly consider this to be "money thrown away" and find it quite ironic that it is such a large number compared to my previous rent, and even more ironic that my neighbor can be paying so much less.

hehehe

of course who am i to talk, ONE of the reasons i didn't buy a house IMMEDIATELY after selling my last one is, if we bought the house we REALLY REALLY wanted i'd be paying $15k per YEAR in PROPERTY tax ALONE. that's about 70% of my apartment rental right now.

so i've seen and been on both sides of this.

How do you figure out what your property tax will be if you ended buying the house?

well, i DIDN'T end up buying the house, but i figured it out because on the summary sheet you get from the real estate agent it tells you what property taxes are in that neighborhood for houses of that value, it might not be exact but it's close enough.

 

[Jzero]

Originally posted by: flot
Ameesh, if I looked for a place that made my payments relatively the same (say a $100k condo), then there would be effecitvely no benefit to owning vs renting, as I wouldn't get any tax break at all, I wouldn't be building any significant amount of equity for years, and any random expenses (say a new air conditioner) I would incur would immediately throw me way negative for the year...

Why wouldn't you? If you are paying $1000/month rent and you move to a $1000/month mortgage payment, already a portion of that $1000 will come back to you when you get your refund.

 

[flot]

I'm still a little baffled - although I make more than Shanti my rough calculations still say he should have been paying about $10k in federal taxes before any credits/deductions. And even with $11k of house stuff, that leaves $7k - or do I just need to seriously start having kids?? hahaha

 

[PlatinumGold]

Originally posted by: Shanti
Just to clarify.
Having the house helped reduce my taxes.
It was not entirely responsible for going from 3k to zero tax liability.

I have the following pretax deductions from my paycheck each month:
$200 - Health Care Reimbursement Account.
$200 - 401K
$180 - Medical and Dental insurance

Plus I get credits because:
I have 3 kids.
My wife attended college.

but you had the Healthcare, 401k and medical dental expenses the previous year also right?

no, the house was the biggest part of the reason without a doubt.