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When does it really pay off to invest in a house.

F

FrustratedUser

Lifer
Considering that I really do not need my own house right now. This is just from a financial point of view.

I can easily put $1500/month away into savings.
Buying a house, let's say $200k, would cost around $1500 + tax ($170) + utilities ($200) = $1870/month.
I don't really see the house appreciate $1500/month so I guess I'd have to keep the jouse for many many years in order to make it pay off more than the $1500/month in savings.
 
if you can put away 1500/mon ON TOP of rent. well then, more power to you

tax benefits would be really only advantage to buying
 
As soon as you can! The house will appreciate. Also, paying rent is throwing away hundreds every month. Might as well put that money to use. Not to mention you can deduct mrotgage interest and property tax.
 
If you can get a better return investing it than the cost of rent + mortgage interest + LT appreciation of the house, save. If not buy.

Also, with interest rates creeping up, housing market may get a price shock depending on where you live. Oh and don't buy a condo, especially with RE market right now.
 
Originally posted by: Jumpem
As soon as you can! The house will appreciate. Also, paying rent is throwing away hundreds every month. Might as well put that money to use. Not to mention you can deduct mrotgage interest and property tax.
Click to expand...

At the moment I share a big house with 3 other friends and it is working out great. I never shared living with anyone besides parents. The reason for sharing was first to get to know the new city (relocated from Tucson in June this year) and find out whree to live. It turns out that houses are to expensive fro me right now. Nothing really nice until the $200k limit. So ATM this arrangement is really good. We've decided to have the house until June 2006 and save up money until then.
 
How much do you pay in rent no? That's important in deciding.

I know a couple who, in the last 2 years (read: crazy-booming real estate market) bought a house for $200,000. That house now, 2 years later is worth $325,000. So instantly they make $125k if they decide to sell, minus the costs of selling of course. Also, keep in mind that some (not all since early-on in a mortgage you're paying almost all interest) of the mortgage payment they made over the last 2 years went into equity in that house. Money which would have went down the tube had they been renting.

To sum up:

1) buy house for $200k
2) build some equity paying the mortgage
3) hope real estate market stays hot
4) Profit! (to the tune of ~$125-140k!)



 
Originally posted by: FrustratedUser
Considering that I really do not need my own house right now. This is just from a financial point of view.

I can easily put $1500/month away into savings.
Buying a house, let's say $200k, would cost around $1500 + tax ($170) + utilities ($200) = $1870/month.
I don't really see the house appreciate $1500/month so I guess I'd have to keep the jouse for many many years in order to make it pay off more than the $1500/month in savings.
Click to expand...
I guess you live for free, right? If so it would almost never make sense to invest in a house 🙂

Too many people, however, are too eager to get into a house. Our last apartment was $750/month. Now the house with utilities is like $500 more. That $500 with a good interest return would do pretty well. The house is appreciating, but from a purely financial standpoint you do not ever need to own a house, if you otherwise invest your money. For me, though, apartments suck very large, veiny schlongs, so I wanted to live in a house.
 
Originally posted by: jimikim
If you can get a better return investing it than the cost of rent + mortgage interest + LT appreciation of the house, save. If not buy.

Also, with interest rates creeping up, housing prices may get a price shock depending on where you live. Oh and don't buy a condo, especially with RE market right now.
Click to expand...

What's RE?

Buying a condo is not really attractive. The nice part with a house is the basement + garage + a place to BBQ.
 
Originally posted by: mikebb
How much do you pay in rent no? That's important in deciding.

I know a couple who, in the last 2 years (read: crazy-booming real estate market) bought a house for $200,000. That house now, 2 years later is worth $325,000. So instantly they make $125k if they decide to sell, minus the costs of selling of course. Also, keep in mind that some (not all since early-on in a mortgage you're paying almost all interest) of the mortgage payment they made over the last 2 years went into equity in that house. Money which would have went down the tube had they been renting.

To sum up:

1) buy house for $200k
2) build some equity paying the mortgage
3) hope real estate market stays hot
4) Profit! (to the tune of ~$125-140k!)
Click to expand...

$550 + utilities/3 ~$625
 
RE = Real estate. Historically, when interest rates go up, condo prices go down. However, historically housing prices hold.
 
Originally posted by: Skoorb
Originally posted by: FrustratedUser
Considering that I really do not need my own house right now. This is just from a financial point of view.

I can easily put $1500/month away into savings.
Buying a house, let's say $200k, would cost around $1500 + tax ($170) + utilities ($200) = $1870/month.
I don't really see the house appreciate $1500/month so I guess I'd have to keep the jouse for many many years in order to make it pay off more than the $1500/month in savings.
Click to expand...
I guess you live for free, right? If so it would almost never make sense to invest in a house 🙂

Too many people, however, are too eager to get into a house. Our last apartment was $750/month. Now the house with utilities is like $500 more. That $500 with a good interest return would do pretty well. The house is appreciating, but from a purely financial standpoint you do not ever need to own a house, if you otherwise invest your money. For me, though, apartments such very large, veiny schlongs, so I wanted to live in a house.
Click to expand...

Not really free but damn close to for what we get for the money. 2500 sqf + 2 car garage + huge sub basement + huge attic. I'd say close to 5000 sqf.
 
Originally posted by: jimikim
RE = Real estate. Historically, when interest rates go up, condo prices go down. However, historically housing prices hold.
Click to expand...

Oh right. I just had a brain fart.
Don't you think that house prices will level off slightly if interest go up?
 
Originally posted by: mikebb
How much do you pay in rent no? That's important in deciding.

I know a couple who, in the last 2 years (read: crazy-booming real estate market) bought a house for $200,000. That house now, 2 years later is worth $325,000. So instantly they make $125k if they decide to sell, minus the costs of selling of course. Also, keep in mind that some (not all since early-on in a mortgage you're paying almost all interest) of the mortgage payment they made over the last 2 years went into equity in that house. Money which would have went down the tube had they been renting.

To sum up:

1) buy house for $200k
2) build some equity paying the mortgage
3) hope real estate market stays hot
4) Profit! (to the tune of ~$125-140k!)
Click to expand...


Don't expect home prices to jump anymore. Interest rates have bottomed; housing works like a bond: when rates drop, price goes up; when rates go up, price goes down. Coupled with the fact that wages were increasing and housing demand was increasing, housing prices have run up in the past few years. Don't expect home prices to rise any further that rapidly. In fact, you should take into consideration that the risk now is higher for housing prices to fall.
 
Originally posted by: Skoorb
Sounds to me like you should hold tight :0 but stop putting that money into savings. Invest 😀
Click to expand...

I will further down the road. I just like to have a nice buffer in liquid funds (not alcohol 😀) and then put some away in a fund or something.
 
Originally posted by: FrustratedUser
Originally posted by: jimikim
RE = Real estate. Historically, when interest rates go up, condo prices go down. However, historically housing prices hold.
Click to expand...

Oh right. I just had a brain fart.
Don't you think that house prices will level off slightly if interest go up?
Click to expand...


Housing prices MIGHT "level off" or even fall, but your mortgage payment will remain the same because the interest rate went up.

Also, you aren't really putting money into equity during the beginning of your mortgage. You should check out an interest amortization table for a 30 year loan. However, you will get a HUGE income tax reduction by being able to deduct the mortgage interest expense.
 
Advantage if you can have you a fat house that is worth XXX and likely to appreciate more then you can invest over the period of the house.

If you rent you are paying to live in a place yes but you do not own it.

Your kids can have the house 😛

You can sell the house and get a Ferrari later 😛

Koing
 
Prices in LA are crazier. My parents bought their house for $300K and put $200K to remodel and sold for $950K in 2003. Today it's worth $1.2Mil....
 
Originally posted by: jimikim
Originally posted by: mikebb
How much do you pay in rent no? That's important in deciding.

I know a couple who, in the last 2 years (read: crazy-booming real estate market) bought a house for $200,000. That house now, 2 years later is worth $325,000. So instantly they make $125k if they decide to sell, minus the costs of selling of course. Also, keep in mind that some (not all since early-on in a mortgage you're paying almost all interest) of the mortgage payment they made over the last 2 years went into equity in that house. Money which would have went down the tube had they been renting.

To sum up:

1) buy house for $200k
2) build some equity paying the mortgage
3) hope real estate market stays hot
4) Profit! (to the tune of ~$125-140k!)
Click to expand...


Don't expect home prices to jump anymore. Interest rates have bottomed; housing works like a bond: when rates drop, price goes up; when rates go up, price goes down. Coupled with the fact that wages were increasing and housing demand was increasing, housing prices have run up in the past few years. Don't expect home prices to rise any further that rapidly. In fact, you should take into consideration that the risk now is higher for housing prices to fall.
Click to expand...

Where you live also plays a big part in the current housing market. I happen to live in South Florida, I don't see the housing market tiring here anytime soon: more and more retirees are moving here, and this will just get worse (better depending on how you look at it) in the coming years with the baby-boomer generation retiring.






 
Originally posted by: FrustratedUser
Originally posted by: Skoorb
Sounds to me like you should hold tight :0 but stop putting that money into savings. Invest 😀
Click to expand...

I will further down the road. I just like to have a nice buffer in liquid funds (not alcohol 😀) and then put some away in a fund or something.
Click to expand...
It's a good idea. Just don't sit there with like $50k in a savings account like some people do 🙂 People talk about needing 6 months worth of cash, but that's kind of silly. How often does a person need that? Plus, if you run into hardship you can lop your spending off at the knees. 6 months worth of cash sitting in an account is a good bit of interest, and in terms of emergency money credit cards are fine for that.
 
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