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Oh, come on, do I really have to point out that giving up a dollar to get 25 cents back still costs 75 cents?
So interest, tax, can equal 1.25 times rent and you are even. In your own words principal payments aren't an expense. A home purchase is a hedge against increase rental housing expense.
It is possible to beat the rising tide by specifically shopping for a property that is either financially and/or cosmetically "distressed".
By remedying the problems left by the previous owner, who may have gotten upside down as well doing nothing to improve the marketability of the property it is very likely that the appreciation on a low priced neglected home will far outstrip the appreciation of more attractive homes. Similarly, the next property that they target should NOT be the "gem of the neighborhood" but another "fixer upper". I personally have used this strategy to get benefit both with investment / rental properties as well as my personal residence. It is a well documented method to transform "sweat equity" into real wealth. It is not really "quick money" in the "you don't have to lift a finger" sense, but there is little doubt that one can nearly always find a property that a prior owner has neglected and/or lost their shirt on and subsequent owners can profit from.
That said, this is NOT as easy as some folks that make infomercials or HGTV shows make it seem. It takes LOTS of legwork to find the right kind of property to start with. You need the right kind of lender to line up a 203k loan OR EVEN BETTER family / friends / associates that will bankroll you so you can make an all cash offer. E
What happened to me, eventually, was that as got older and wiser I had less tolerance for the TIME that I was putting into such efforts and the frustrations of having incompetent tenants and competition. I have shifted my efforts at increasing my personal retirement to the more boring traditional financial investments which, as one's assets increase, can work very effectively.
For folks who see the upsides and potential pitfalls of the "property ladder" even the most inflated markets in the US still have opportunity...
We live in a world where everyone wants instant gratifications. Everyone wants to get from point A to B overnight. "Property ladder" concept don't work for a lot of folks because HGTV over simplify the process.
We live in a world where everyone wants instant gratifications. Everyone wants to get from point A to B overnight. "Property ladder" concept don't work for a lot of folks because HGTV over simplify the process.
If you can not afford the $500,000 home could you afford less costly homes in your area? What about an income producing property? Any 4 unit places you could get into? With a 4 unit place you would have three other people helping you pay the place off. Not sure if your area has any of these. Plenty of them in my area and for the most part they are built on the same land as a single family home. A woman I know was encouraged by her parents to save up and buy a low cost 4 unit building. She did that maybe 20+ years ago. She still owns it. Within five years of buying it she was able to buy a single family home that she loved. A couple years ago she bought a larger home. For her it took about 20 years to get the home she wanted and she now has a 4 unit rental and a single family home rental, plus her primary residence. I can kick myself for not doing the same thing.
Many people, even if they don't intend to keep their first home, use that as a springboard to get the home that they want. You want to save up for a home of your dreams and plan on taking time to get to that place in your life. is there a reason you can not find a less costly place to help you get into a dream home later in life?
We live in a world where everyone wants instant gratifications. Everyone wants to get from point A to B overnight. "Property ladder" concept don't work for a lot of folks because HGTV over simplify the process.
Exactly.
We lived in a less expensive house for ten years before "moving up". What is so wrong with buying a house you can truly afford, in a nice area that you can afford, and moving up? Why must you live in the most expensive areas of town? Short of coming up with major cash (which I think you won't do), just do what a lot of people do. Start small and work your way to big.
So interest, tax, can equal 1.25 times rent and you are even. In your own words principal payments aren't an expense. A home purchase is a hedge against increase rental housing expense.
Yes, it is a hedge against rising rent, but that does not make it necessarily the best decision. One must run the numbers.
If you can not afford the $500,000 home could you afford less costly homes in your area? What about an income producing property? Any 4 unit places you could get into? With a 4 unit place you would have three other people helping you pay the place off. Not sure if your area has any of these. Plenty of them in my area and for the most part they are built on the same land as a single family home. A woman I know was encouraged by her parents to save up and buy a low cost 4 unit building. She did that maybe 20+ years ago. She still owns it. Within five years of buying it she was able to buy a single family home that she loved. A couple years ago she bought a larger home. For her it took about 20 years to get the home she wanted and she now has a 4 unit rental and a single family home rental, plus her primary residence. I can kick myself for not doing the same thing.
Many people, even if they don't intend to keep their first home, use that as a springboard to get the home that they want. You want to save up for a home of your dreams and plan on taking time to get to that place in your life. is there a reason you can not find a less costly place to help you get into a dream home later in life?
You are assuming that buying comes out ahead of renting and investing the excess in the stock markets. It really depends on area. If I were in OP's situation, I'd definitely run the numbers but probably rent and invest the excess very aggressively, to try to get $320K in today's dollars in 15 years. A good tax-efficient mutual fund can be had for very low fees to grow money for this sort of thing.
If renting and investing the difference comes out ahead (which it may or may not), then buying a small one now is dumb.
Location: St Thomas, USVI - Seattle, WA - Gulf Coast, TX
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Simple answer: No.
Your best/perfect scenario right now: With perfect credit, little to no other revolving monthly expenses (car payment, etc.), a down payment of $60,000, a great interest rate (around 4%), and reasonably low property taxes + home insurance, a very generous bank will approve you to purchase a home for about $300,000 (your loan amount would be $240,000 after your down payment).
You would need a downpayment that would ensure that your monthly mortgage payment (principle + interest + taxes + insurance) would stay at or below about $2000 (this is based on your $60,000 salary and assuming you don't have other debts). For a $600,000 home, that means you would need a $360,000 downpayment.
Your best/perfect scenario right now: With perfect credit, little to no other revolving monthly expenses (car payment, etc.), a down payment of $60,000, a great interest rate (around 4%), and reasonably low property taxes + home insurance, a very generous bank will approve you to purchase a home for about $300,000 (your loan amount would be $240,000 after your down payment).
You would need a downpayment that would ensure that your monthly mortgage payment (principle + interest + taxes + insurance) would stay at or below about $2000 (this is based on your $60,000 salary and assuming you don't have other debts). For a $600,000 home, that means you would need a $360,000 downpayment.
OP never told us what exactly is meant by "save for years".
Isn't this why this country has so many foreclosures? People getting loans they could not afford? $60K is nothing what do you actually take home?
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