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Old 05-12-2015, 10:18 AM
 
Location: Florida -
10,213 posts, read 14,745,546 times
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The simple answer is that it is unrealistic for someone just starting-out with a $60K salary, to expect to buy a $500K first house. And, by the time one saves to do so (at $60K), prices and interest rates will probably have proportionately increased. If 2007 comes around again, jump on it, but, know when to get out at a profit.

Otherwise, as Chet Everett suggested, the rational and reasonable approach, particularly with today's historically low interest rates, is to start with a great 'growth potential' house in the $200K range ... and then leverage appreciation and savings toward the $500K objective.

Of course, "A rising tide raises all ships", so that when the initial $200K house appreciates to $300-350K, the $500K house will also appreciated to $700K+. Buy the best you can afford now (including taxes, repairs, maintenance) and live within your means. (One doesn't have to look far to see what has happened to folks who got in over their heads a few years back. The banks and easy money only accommodated the real problem. That problem was created by 'greedy people trying to 'get rich quick' by buying more house than they could afford.
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Old 05-12-2015, 10:31 AM
 
18,485 posts, read 15,436,109 times
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Quote:
Originally Posted by jghorton View Post
The simple answer is that it is unrealistic for someone just starting-out with a $60K salary, to expect to buy a $500K first house. And, by the time one saves to do so (at $60K), prices and interest rates will probably have proportionately increased. If 2007 comes around again, jump on it, but, know when to get out at a profit.
Not if the money is invested in good mutual funds that go up faster than inflation. In my calculation inflation is already accounted for.

Quote:
Originally Posted by jghorton View Post

Otherwise, as Chet Everett suggested, the rational and reasonable approach, particularly with today's historically low interest rates, is to start with a great 'growth potential' house in the $200K range ... and then leverage appreciation and savings toward the $500K objective.
This is going to depend on lifestyle factors and economic ones. Buying a $200k house is not necessarily the best option. Also keep in mind that a low rate on the first house will not help OP buy the next house at then-current rates unless owning comes out ahead of renting in the interim period.
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Old 05-12-2015, 10:40 AM
 
Location: Mount Laurel
4,187 posts, read 11,868,394 times
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Quote:
Originally Posted by Freealex View Post
What do you all think? How long would it take and how big do you think the down payment should be?
It all depends. Buying a house is one thing but maintaining it is another story. Does the $60K salary support it. In my neck of the wood, a $500K home may cost your $15k+ year in property tax.
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Old 05-12-2015, 10:48 AM
 
28,455 posts, read 84,950,339 times
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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...
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Old 05-12-2015, 03:39 PM
 
Location: Southern California
4,453 posts, read 6,764,526 times
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Quote:
Originally Posted by ncole1 View Post
Not if the money is invested in good mutual funds that go up faster than inflation. In my calculation inflation is already accounted for.



This is going to depend on lifestyle factors and economic ones. Buying a $200k house is not necessarily the best option. Also keep in mind that a low rate on the first house will not help OP buy the next house at then-current rates unless owning comes out ahead of renting in the interim period.
A 10% return on $50,000 is 5k, 3% inflation on $500,000 is $15,000. It is very hard for a mutual fund to match the inflation.
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Old 05-12-2015, 03:41 PM
 
18,485 posts, read 15,436,109 times
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Originally Posted by thelopez2 View Post
A 10% return on $50,000 is 5k, 3% inflation on $500,000 is $15,000. It is very hard for a mutual fund to match the inflation.
You are ignoring mortgage interest.
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Old 05-12-2015, 05:31 PM
 
28,455 posts, read 84,950,339 times
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Default more complicated than that...

Quote:
Originally Posted by ncole1 View Post
You are ignoring mortgage interest.
The specific situation would require an analysis of the extremely favorable tax treatment give to home ownership
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Old 05-12-2015, 05:34 PM
 
Location: Texas
44,257 posts, read 64,072,561 times
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Quote:
Originally Posted by Freealex View Post
It must have taken a while to save $482k though. Where I want to move a lot of the cool houses are around 500k. I always wonder what those people do for a living. I'm sure not all of them have a 100k+ income!
I'm sure 99.9% have.
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Old 05-12-2015, 07:02 PM
 
18,485 posts, read 15,436,109 times
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Quote:
Originally Posted by chet everett View Post
The specific situation would require an analysis of the extremely favorable tax treatment give to home ownership
Oh, come on, do I really have to point out that giving up a dollar to get 25 cents back still costs 75 cents?
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Old 05-12-2015, 09:12 PM
 
Location: Southern California
4,453 posts, read 6,764,526 times
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Quote:
Originally Posted by ncole1 View Post
You are ignoring mortgage interest.
Intentionally If you hope to rent and hope your cash grows faster than appreciation, good luck to you.

Buying a $200,000 place is a small hedge against real estate inflation. A small place as a stepping stone will get the OP into their desired house faster than sitting on cash and mutual funds.
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