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Old 04-16-2015, 10:36 PM
 
147 posts, read 211,468 times
Reputation: 234

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Quote:
Originally Posted by Smooth23 View Post
Your imagined numbers are way way too hi for 150k house..
No, they're not. Actually - kind of low.

Your taxes could be right. Could be about $25/50 per month higher if you buy in the wrong spot.
Insurance WILL be higher if you're talking Harris county. That's actually about 50% low.
Maintenance is probably high, unless you're running an accrual for one time expenses.

The major flaw in the math is utilities. You're paying those in both places - not a sunk cost, a service.
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Old 04-16-2015, 10:39 PM
 
Location: East Bay
701 posts, read 1,420,743 times
Reputation: 1420
I've made hundreds of thousands of dollars buying and selling my homes over the past 25 years. If it weren't for buying my own home(s), my retirement would be considerably less pleasant.
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Old 04-16-2015, 10:40 PM
 
983 posts, read 1,170,170 times
Reputation: 1988
I am a 54yo single guy

I own a 5br home

I rent out 2 bedrooms downstairs to a couple early 20s single females. Their rent payment pays the entire mortgage.

Gee I wish I never bought this house .... duh ?
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Old 04-16-2015, 10:46 PM
 
Location: Salem, OR
15,494 posts, read 40,186,319 times
Reputation: 17332
Quote:
Originally Posted by MikeJaquish View Post
A fixed rate mortgage will peg your monthly Principle and Interest for up to 30 years.
Where can one say the same about a rent payment?
This is what I was going to say. That the OP wasn't factoring in the increased cost of rent over those years compared to the fixed cost of a 30 year mortgage.
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Old 04-16-2015, 11:21 PM
 
4,152 posts, read 4,390,868 times
Reputation: 10031
Quote:
Originally Posted by StrkAliteN View Post
I am a 54yo single guy

I own a 5br home

I rent out 2 bedrooms downstairs to a couple early 20s single females. Their rent payment pays the entire mortgage.

Gee I wish I never bought this house .... duh ?
Now that sounds like a very nice arrangement...

The OP hasn't mentioned a few key things such as: lifestyle, savings rate, and value of his time. In his particular 'lifestyle case' it may make sense to not purchase if he's saving at a good rate. If anyone can find a place where property taxes haven't increased during the time of their mortgage of whatever length please let us all know.

Also if the individual is not a do it yourselfer type the homeownership expenses increase with every little thing as he has to take his time to find someone who hopefully will fix whatever little things come up for maintenance / repairs or dealing with local municipalities changing laws or services impacting homeowners from trash removal policies with fees to communities in areas of country looking to tax water runoff / recapture etc...

Last edited by ciceropolo; 04-16-2015 at 11:33 PM.. Reason: additional
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Old 04-16-2015, 11:28 PM
 
13,011 posts, read 12,955,020 times
Reputation: 21912
Quote:
Originally Posted by FalconheadWest View Post
Being an accountant, why didn't you factor in the tax benefits of owning the home, and then calculate the profit of appreciation when you sell in 5-7 years? You didn't fully run the numbers. You ran the numbers to satisfy your own thinking, that you do NOT want to buy. You didn't prove that you shouldn't.
There are no tax benefits to owning a home. At best, the tax deduction is a discount on the interest rate.

Using the OPs numbers, let's assume a $120,000 mortgage at 5%. Interest in year one will be $6,000. Assuming a marginal tax bracket of 32%, your deduction would be $1980. So, you pay $6,000 to save $1,980. Doesn't seem like much of a benefit to me.

Quote:
Originally Posted by Silverfall View Post
This is what I was going to say. That the OP wasn't factoring in the increased cost of rent over those years compared to the fixed cost of a 30 year mortgage.
Ok, but you are not faltering the increased cost of repairs over the life of your house either. A new roof, lots of paint, a generation or two if appliances, lawn care, the occasional furnace repair, a new hot water heater, carpet replacement, etc.

OP is paying $950 for her apartment. The house she is hypothesizing would cost about $1550 (utilities as in OP, plus $650 for mortgage principal and interest). Of this, only $150 goes to principal, so can be viewed as an asset. There would be a savings of about $150 on taxes, so the difference in cost between owning and renting is about $450/month (not including repairs).

Let's assume OP puts the $450/month into a mutual fund. The $450 is likely to return about 8% over the next 30 years, while the $150 in equity will only appreciate at about 3%. This comes to $4921 for the mutual fund, but only 368.53 for the principal.

Yes, it's all a bit more complicated than that. Neither inflation, house appreciation or mutual fund returns are guaranteed. I am not including any solid figures for repairs. Rent will go up, while the amount spent on interest will decrease. Most people don't live in a house for a full 30 years. Owners take a 6% penalty for realtor fees when they sell. This also assumes you have the duscipline to out that kind of money in a mutual fund instead of spending it on lattes.

Bottom line, you can make a very good care for home ownership not being a financial slam dunk success.
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Old 04-16-2015, 11:33 PM
 
35,095 posts, read 50,961,628 times
Reputation: 62660
Quote:
Originally Posted by statisticsnerd View Post
I'm 30 and don't plan on getting married and starting a family anytime soon. However, everyone and their aunt is telling me to buy a home. The reasons I get all the time are: I'm throwing money away on rent, interest rates are at rock bottom and will only go up, and a house is a good investment.

Well, being an accountant I ran the numbers and buying a home really isn't attractive at all from a financial standpoint. Here's the figures (I live in the Houston area btw):

Rent for a 1 bedroom apartment + all utilities + rental insurance costs = $950/month

Assuming I buy a $150,000 home, here are the estimated monthly expenses:

$300 property taxes (high property taxes around here)
$250 average for all utilities (Houston is hot!)
$100 insurance
$250 all maintenance costs, including having the grass cut

So, in housing expenses alone, I will be "throwing away" $900/month, just $50/month less than I am throwing away with my apartment. That's not even counting interest on the mortgage. As far as "a house is an investment" goes, houses historically have only appreciated in value at the rate of inflation. Your money will earn MUCH higher returns over time in quality stock index funds. You have to consider the opportunity cost of putting your down payment into something that will provide a very low return, as well as the commission when you decide to sell the house.

Then there is the flexibility aspect of renting. For a single person, homeownership just isn't that great of a deal unless you really just want a house for emotional reasons rather than financial.

Why would you even think about spending that kind of money on a home?

Why not a smaller 2 bedroom home that cost much less than $150,000.00, less maintenance, mow your own lawn, keep the place clean yourself, do your own laundry, cook at home, etc.

I have never understood the need for a huge home and our daughter and son in law just bought a home that is over 5000 square feet for themselves and their two sons.
I just shake my head and dont' say a word.
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Old 04-16-2015, 11:43 PM
 
2,755 posts, read 4,381,472 times
Reputation: 7524
I agree with the OP, although I also agree her analysis is simplistic. But fishbrains has added great points.

I am also single, in my 40's, and renting works great for me. The numbers do not favor buying in my city for me, especially as I take the $$ instead and invest it well and have made good returns. I find that most of my single friends have decided to buy, they usually choose a condo or house bigger than they really need, which leads to higher payments/taxes/utilities costs as well. I have also seen that people usually underestimate expected maintenance costs on the home they buy.

I also have NO desire to rent out rooms in my bigger house to strangers to make cash on the side. That sounds like a great idea if that is the lifestyle you want, but that's not for me. I do like having the possibility of moving easily, so renting allows more flexibility.

It is a very individual decision. But it is definitely NOT a slam dunk to buy property, just because you can. Especially if you are single, and financially savvy.
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Old 04-16-2015, 11:49 PM
 
1,326 posts, read 1,129,132 times
Reputation: 3279
I bought my house when I was 19. My mortgage was several hundred below the rent I was paying for a condo at the beach.

Best decision I ever made!

OP, do whatever you want but I actually saved money by purchasing a house instead of renting.
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Old 04-17-2015, 12:00 AM
 
Location: Delray Beach
1,135 posts, read 1,758,906 times
Reputation: 2527
Doesn't anyone realize that there is no right answer for any one?
I didn't 'BUY' till almost 40 yo! Then I did... and lost money!
So what?

I was single - in a gay sorta way - and then I wound up owning two homes at once to boot.

Now I have to worry about having too much income for SS and Medicare!!

Go effing' figure!
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