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Old 02-27-2007, 06:33 PM
 
458 posts, read 453,617 times
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need_affordable_home....the math can be as complicated as people want to make it. But the figure of $12500 in purchase price for every $100 in monthly rent has been tested by numerous real estate investors. These are people that make their living buying rental houses. That is the figure they use.

Now if you add to that the fact the Florida property taxes and insurance are high, it makes it an even better deal to rent than in a cheaper state.

These professional landlords have used the $12500/100 rule of thumb forever.

In this market a house that you can negotiate the rent down to $1500-$1800 is listing for sale at $300000, and in many cases much more.

15 X $12500 = $187500. 18 X $12500 = $225000. Historically these landlords would buy a house for $187,500 to $225,000 and rent them out for $1500-1800/month.

So when these houses are now priced at $300000 to 500000, that shows you how out of whack things are in many parts of Florida.

Prices will fall 50% in many parts of Florida. But this may take 5 years, who knows. But the long term trend will be down, down, down.

If someone buys now at $350,000, with a $70,000 downpayment and that house loses just 10% in value, they are under water. But if they take that $70,000 and put it in a 6% CD for 2 years and wait....and get that same type house for $300,000 in 2 years, they are in great shape.

The buy vs rent decision people make in 2007 will either make or break thousands and thousands of people for the rest of their lives.
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Old 02-27-2007, 06:40 PM
 
458 posts, read 453,617 times
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red-wings...thats the old mindset that renting is "throwing money away". It is not in this market, in fact just the opposite.

Prices have to come down BELOW 2001 prices. Why? Easy math.

1. Wages have been flat when adjusted for inflation for decades.

2. Utilities, insurance, property taxes...all the other parts of housing costs not including principle and interest are all up.

3. Most US consumers have much larger debt service on credit cards and car loans than they did in 2001.

3. 1 plus 2 plus 3 equals people have LESS money to spend on housing (principle and interest) than they did in 2001.

No matter how they spin it, the numbers do not add up. People have less money to spend on housing than in 2001.

It may take 2 years...3 years...who knows. But mark these words, prices in bubble parts of Florida such as Sarasota, Bradenton, Tampa, Jupiter, Tequesta, Port Saint Lucie, parts of West Palm, parts of Boca Raton....will come down to 2001 prices when adjusted for inflation ...or even below.
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Old 02-27-2007, 06:55 PM
 
1,775 posts, read 7,334,663 times
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well i guess the main decision on whether to rent or buy all comes down to your credit score. We all know bad credit will kill you on any type of mortgage if you can get one at all. in that case, your stuck paying rent and also don't forget you should always have renters insurance on top of your rent.
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Old 02-27-2007, 06:56 PM
 
Location: WPB, FL. Dreaming of Oil city, PA
2,909 posts, read 12,974,224 times
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Quote:
Originally Posted by RedWingsFan View Post
Your not realistic if you really think prices will decline to 2001 levels. Nope. Not going to happen. Even if they dip slightly they won't go down that much. And all you'll be doing with renting is throwing your money away.

Buy! Just wait until you find a good deal (like I did).

You must also realize that many people (such as myself) don't find the homes in Florida to be overpriced to begin with. That's because we moved here from somewhere that had much higher prices. So these look pretty darn reasonable to me and many like me. The house I'm buying here I'm paying around $100k less than I would have paid in the last place I was living.

Well some people need a house soon or now. Once I make enough money, I want my own home. Rent in FL is too expensive, buying is also too expensive. $1500 a month on rent is $18000 a year! I would save so much more if I got a mobile home or better yet relocated which I am. The mortgage, insurance, property taxes is a fraction of the cost of rent in FL!

I guess people comming from CA, NJ and NYC may have lots of equity to afford the FL prices. But im comming from FL and im a first time buyer so its a different ballpark for me.


Quote:
Originally Posted by TriMT7 View Post
I won't stoop my expected living standards in order to buy a crappy house for less money. I'd rather rent and get what I couldn't afford. I also lease my cars and will continue to do so as long as practicable with commuting, etc. But that's me, and I have expectations beyond "cheap" to help me decide what to buy, where, and how.

This is why I also want a nice house. I dont care much for location as long as its low crime, low pollution, no extreme cold/heat and has your basic shopping and very reasonable prices. Jobs, big malls, concerts, theatres, beaches dont matter to me, well big malls matter a little but everything is too expensive and I just shop at walmart instead. Rent in a cheap area costs more than buying and rent in an expensive area is not affordable. If you want to pay $1500 a month just to enjoy an overpriced location, go ahead. Ill be paying $1500 a year in property taxes to enjoy a house just as nice as yours in a location I am happy with.


Quote:
Originally Posted by daniellefort View Post
Well this is what most people did a few years ago when they could cash in on their homes before the slump but now we can't sell the homes at all so some of us are stuck here for a while. It's easy to say just move but it's not easy to just get up and go like that either.

They can still sell if they would only price them reasonably. In fact its best to sell now as prices will keep falling for at least another 2 years then stay flat till inflation catches up. If they rent the houses out, they will lose money unless the rent is more than property taxes, insurance, HOA(if theres any) and the mortgage's interest. Those who bought their house years ago can still make some profit or at least break even.


JimKing, its not as simple as the 1:125 rule. Maybe that rule works out if you are a landlord in order to make rent profitable, but for a tenent its different. I know people who rented in the past and are now priced out of home ownership while their rent goes up. They lost many thousands in rent, would have made many thousands in home ownership.

I would not buy nor rent in Florida. Why pay $1500 a month to rent in FL when you can buy a house elsewhere with a mortgage much less than that while making more money with the same job than FL? You can always move back to FL after house prices bottom out and sell the house you bought elsewhere for a profit. I know this logic only works if you are willing to leave FL for a few years before comming back. Maybe youll actually like it elsewhere and stay forever

I am not waiting 5 years to buy a house and I am not paying those high rents either. Do the math on $1500 a month rent in FL or the mortgage on a $100k house elsewhere
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Old 02-27-2007, 06:57 PM
 
458 posts, read 453,617 times
Reputation: 136
By the way, just a sample from CNN/Money Magazine of the overvalued markets.

And I think these numbers are being kind. The actual drop will be more due to the high costs of utilities, insurance, property taxes.

Metro areas with housing prices the most overvalued in terms of income, employment and other factors:

Naples, FL +84% overvalued
Port St. Lucie, FL +72% overvalued
West Palm Beach, FL +60% overvalued
Sarasota, FL +56% overvalued
Miami, FL +55% overvalued
Vero Beach, FL +54% overvalued
Fort Lauderdale, FL +53% overvalued
Cape Coral, FL +51% overvalued
Panama City, FL +46% overvalued
Fort Walton Beach, FL +43% overvalued
Ocala, FL +35% overvalued
Tampa, FL +34% overvalued
Pensacola, FL +33% overvalued
Orlando, FL +33% overvalued
Jacksonville, FL +31% overvalued
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Old 02-27-2007, 07:05 PM
 
Location: WPB, FL. Dreaming of Oil city, PA
2,909 posts, read 12,974,224 times
Reputation: 991
I think Orlando is more overvalued than PSL, how do they arrive at that? If PSL prices drop to $100k(in todays inflation adjusted money) my parents could relocate there. Not sure if I will as I would be living in the northeast for some time in a huge beautiful house with 2 stories, basement and attic and theres no way I want to give up this beautiful house for a much smaller house. I am not that determined to be in FL to make the huge sacriface.
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Old 02-27-2007, 07:26 PM
 
17,297 posts, read 25,645,113 times
Reputation: 8567
Quote:
Originally Posted by Need_affordable_home View Post
Well some people need a house soon or now. Once I make enough money, I want my own home. Rent in FL is too expensive, buying is also too expensive. $1500 a month on rent is $18000 a year! I would save so much more if I got a mobile home or better yet relocated which I am. The mortgage, insurance, property taxes is a fraction of the cost of rent in FL!
Why on earth are you paying $1500/month anyway if that's too much for you? You can get big houses in some parts of Florida for $1000/month or less.... OR you can roommate with a friend or significant other.


Quote:
Originally Posted by Need_affordable_home View Post
If you want to pay $1500 a month just to enjoy an overpriced location, go ahead. Ill be paying $1500 a year in property taxes to enjoy a house just as nice as yours in a location I am happy with.
Your "affordable nice location" is my idea of "crappy location I wouldn't want to drive through let alone live" every bit as much as my ideal location is and "overpriced" location. There's a reason why New York City is the center of the Universe and Oil City is not.


Quote:
Originally Posted by Need_affordable_home View Post
I would not buy nor rent in Florida. Why pay $1500 a month to rent in FL when you can buy a house elsewhere with a mortgage much less than that while making more money with the same job than FL?
I think we ALL get that. Loud and clear. What puzzles me, then, is why are you on the FLORIDA forum trying to convince yourself that you're making the right decision to move, when you SHOULD be on the other states' forums getting REAL opinions about the neighborhoods where all your "HUGE HOUSE FOR $50k" deals are?
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Old 02-27-2007, 07:31 PM
 
1,775 posts, read 7,334,663 times
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well everybody would like to have a bigger home than they can afford but MACGUY does have a point. You say you won't rent or buy in FL yet you live in FL? You must live with your parents or something. (that's not a bad thing. if i could stand living with my mom i probably would too) but once you get out in the real world and realize it's more than just Mortgage payment and insurance issue you'll realize it's not quite so easy. If you buy a cheap home, it's probably going to need some major repairs or fixing things and you won't have time to do it yourself if your working that is and believe me, hiring someone to do it is just as expensive. You seem to forget about calculating in your electric bill, phone bill, grocery bill, water bill, sewer bill, etc.
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Old 02-27-2007, 08:18 PM
 
Location: WPB, FL. Dreaming of Oil city, PA
2,909 posts, read 12,974,224 times
Reputation: 991
Quote:
Originally Posted by TriMT7 View Post
Why on earth are you paying $1500/month anyway if that's too much for you? You can get big houses in some parts of Florida for $1000/month or less.... OR you can roommate with a friend or significant other.

I live with parents. Even $1000 a month rent is too much, find me a house for $500 a month rent in a low crime city and ill consider it. No roomates, been there done that in college.


Quote:
Your "affordable nice location" is my idea of "crappy location I wouldn't want to drive through let alone live" every bit as much as my ideal location is and "overpriced" location. There's a reason why New York City is the center of the Universe and Oil City is not.

Thats your opinion. If I dont care much about location then good for me because I know I can be happy without living in an overpriced location. NYC is popular because of those high paying jobs and the young party guys.


Quote:
I think we ALL get that. Loud and clear. What puzzles me, then, is why are you on the FLORIDA forum trying to convince yourself that you're making the right decision to move, when you SHOULD be on the other states' forums getting REAL opinions about the neighborhoods where all your "HUGE HOUSE FOR $50k" deals are?
I post on all forums.


Quote:
Originally Posted by daniellefort View Post
well everybody would like to have a bigger home than they can afford but MACGUY does have a point. You say you won't rent or buy in FL yet you live in FL? You must live with your parents or something. (that's not a bad thing. if i could stand living with my mom i probably would too) but once you get out in the real world and realize it's more than just Mortgage payment and insurance issue you'll realize it's not quite so easy. If you buy a cheap home, it's probably going to need some major repairs or fixing things and you won't have time to do it yourself if your working that is and believe me, hiring someone to do it is just as expensive. You seem to forget about calculating in your electric bill, phone bill, grocery bill, water bill, sewer bill, etc.

Yes I live in West Palm Beach in my parents house and once I have enough money, im out like a rocket! But first I want to visit different cities and states, such as Oil city and check it out. I am not afraid to face the real world as long as I make $2k a month or more with my home internet business.
This is good money in a location with very low costs of living but is poverty in Florida.
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Old 02-27-2007, 09:46 PM
 
17,297 posts, read 25,645,113 times
Reputation: 8567
Quote:
Originally Posted by Need_affordable_home View Post
No roomates, been there done that in college.
Economic cooperation is not a bad thing for someone who is young, single, and unattached. I can't understand why "living with parents" is any less undignified than living with a roommate? I own my house and split the mortgage with a roommate. No shame, great credit booster for a grad student (albeit a headache to try to sell in the midst of graduating).


Quote:
Originally Posted by Need_affordable_home View Post
Thats your opinion. If I dont care much about location then good for me because I know I can be happy without living in an overpriced location. NYC is popular because of those high paying jobs and the young party guys.
Exactly. What I don't understand then is why it's such a big deal for you, then? If you have NO requirements except a cheap place to live and mild weather, I'd assume you'd have found your paradise by now?



Quote:
Originally Posted by Need_affordable_home View Post
Yes I live in West Palm Beach in my parents house and once I have enough money, im out like a rocket! But first I want to visit different cities and states, such as Oil city and check it out. I am not afraid to face the real world as long as I make $2k a month or more with my home internet business.
This is good money in a location with very low costs of living but is poverty in Florida.
What IS your internet business, by the way, if you don't mind sharing?

You have a very special situation that I don't think translates well to most people searching for housing. You have a home business, no kids, no desire for cultural or entertainment niceities. I am LOOKING where you live for professional opportunities that I feel are not as available up here where I am in my field (or too much competition, rather).
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