Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
Because spending 6K to get back 1.5K per year looks like a 25% return on investment to me.
Great if you are serious lets get started. I will give you my address and you can send me $6000 as often as you like and I will send you back $1500 every time. Now do you get it?
Great if you are serious lets get started. I will give you my address and you can send me $6000 as often as you like and I will send you back $1500 every time. Now do you get it?
Hey! Sure! I have $6,000 for you.
In return, I want equity, additional tax benefits since the $6000 deduction gets me into deduction land on my taxes, and recognition of the benefits of leverage and the gains on the capital I retained to put into alternate investments-does about 8% annually seem fair?
Where do I send my $6,000, and how soon can you return that $9,000 to me?
Hey! Sure! I have $6,000 for you.
In return, I want equity, additional tax benefits since the $6000 deduction gets me into deduction land on my taxes, and recognition of the benefits of leverage and the gains on the capital I retained to put into alternate investments-does about 8% annually seem fair?
Where do I send my $6,000, and how soon can you return that $9,000 to me?
Mike, I will speak slower for you so you can understand. Go back and read the original post. The $6000 is interest only. If you pay (waste) $6000 a year in interest you only get $1500 back. It's your kind of thinking that has this country in the mess it's in today.
Look at it this way . If you have a $300000 loan at 6% interest after the first FIVE years you will pay a total of $107919. Take a look at your balance remaining. It's only lower by $20000. If you don't believe me put in the numbers here: http://www.bretwhissel.net/cgi-bin/amortize
Mike, I will speak slower for you so you can understand. Go back and read the original post. The $6000 is interest only. If you pay (waste) $6000 a year in interest you only get $1500 back. It's your kind of thinking that has this country in the mess it's in today.
Look at it this way . If you have a $300000 loan at 6% interest after the first FIVE years you will pay a total of $107919. Take a look at your balance remaining. It's only lower by $20000. If you don't believe me put in the numbers here: Loan Amortization Schedule Calculator
The rudeness is unnecessary. I have read the original post, as it refers to the possibility of added negotiating strength with a cash offer.
Is there such additional negotiating power?
Yes. No. Maybe.
Case solved.
Now to move into the tangential discussion...
Here's a great tool for focused investors:
LEVERAGE
L-E-V-E-R-A-G-E:
I have had mortages before, have one now, and I like the position I am in currently. Very much.
I wish you nothing but the best in your cash approach, find no fault with it per se on a personal basis, but I have experienced the value of leverage and I like it.
The limits of the cash approach beg to be exposed when it is promulgated as the only way on a public forum.
One thing alot of people are forgetting in this situation is RISK. If I lose my job today and have a paid for house, I don't have to worry about losing my house. If I have a mortgage all of a sudden things just got way more serious. I think people having a mortgage for the "Tax Writeoff" is a cop out. If you wan't the tax writeoff donate the money to charity. You get the same writeoff and you are doing good with your money instead of paying interest to the bank. Another reason people take a mortgage instead of paying cash is to invest their money in a higher interest account to make money. On paper this is a good idea, however by the time you pay taxes on the interest you receive and add inflation and risk to the equation, you are basically making nothing. But if you want to take that risk just hope that your money was no more than 100,000.00$ and it was not stored in an account at IndyMac bank......
Location: Visitation between Wal-Mart & Home Depot
8,309 posts, read 38,768,892 times
Reputation: 7185
Quote:
Originally Posted by Cattknap
I would love to get the perspective of professional real estate agents on my question.
We are moving from So. California to Kentucky and are wondering if paying cash for a home might give us greater barganing power when we go to purchase. Thank you for your answers.
I doubt it. Whether you are financing or not doesn't have much effect on the seller.
Now, if you were to negotiate closing on the house for half of the asking price and bringing the other half in folding cash in a briefcase to be exchanged in the parking lot immediately afterwards (or before if the seller is sketched out), that would probably give you a considerably better bargaining position. NOTE: This only works if the seller is comfortable with tax fraud, has paid off the house, can talk the bank into a "recreational short-sale" or the amount changing hands at closing covers the remainder on the mortgage.
One thing alot of people are forgetting in this situation is RISK. If I lose my job today and have a paid for house, I don't have to worry about losing my house. If I have a mortgage all of a sudden things just got way more serious. I think people having a mortgage for the "Tax Writeoff" is a cop out. If you wan't the tax writeoff donate the money to charity. You get the same writeoff and you are doing good with your money instead of paying interest to the bank. Another reason people take a mortgage instead of paying cash is to invest their money in a higher interest account to make money. On paper this is a good idea, however by the time you pay taxes on the interest you receive and add inflation and risk to the equation, you are basically making nothing. But if you want to take that risk just hope that your money was no more than 100,000.00$ and it was not stored in an account at IndyMac bank......
You are missing the point. Owning a house outright also has costs and downsides. You have an asset that is not very liquid. If you lose your job you are living in a pile of cash that you cannot touch to get over the bad period. If it is bad you may well have to sell that asset at a fire sale price to stay above water.
Not that there is a real cost to owning your house outright. The sum of money involved could be used for other purposes if not tied up in the house.
In either case you benefit from appreciation. But note that the appreciation on a leveraged (mortgaged) house results in a much higher return on the investment.
Nothing wrong with owning your house outright if it makes you feel better...but if so you should have ready cash reserves of maybe a quarter or a third the value of the home available for problems.
I don't understand how paying interest on a mortgage results in a much higher return on investment. Seems to me you would be losing money by paying interest, no? I guess the point is that you are telling someone to go deeply into debt, pay interest that is more than the entire amount of the mortgage to the bank, and assume substantial risk for a "Tax writeoff" for the perceived higher return on investment....... no wonder we are in a credit crisis right now.
I think either way, whether you own your home outright or have a mortgage, ppl need to have an emergency fund for at least 6 months, even a year I think. You need to be able to pay your bills if you get laid off or sick w/o worrying about going into foreclosure. However if your home is paid outright, you need less of an emergency fund since you dont have to worry about a huge bill which is your mortgage.
I think for most ppl it's better to have a home paid off rather than dealing w/ a mortgage for the rest of their life.
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
