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Old 11-12-2007, 02:30 AM
 
Location: Los Angeles Area
3,306 posts, read 1,170,291 times
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The only "market whim" that renters are more susceptible to is inflation, a 30 year fixed rate mortgage doesn't change regardless of inflation. But your house is susceptible to other sorts of "market whims", what happens when your neighborhood goes downhill?

Communities change pretty fast, its very unlikely that the area you purchase a house in will be the same 20-30 years down the road. It may end up being much nicer or total trash.

Anyhow, if you don't buy you have a lot of freedom. You can easily move for a better job, you can easily move to community to community as they change etc.
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Old 11-12-2007, 11:14 AM
 
Location: San Jose, CA
6,555 posts, read 15,652,148 times
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Quote:
Originally Posted by Ultrarunner View Post
Have you thought about looking in the East Bay? Housing is less expensive the farther it is from SF.
Not doable for me, at least not right now. I have regular work in Burlingame, Los Altos, and Campbell. I could save some money by renting in Newark or Union City, but the commute would make me miserable. It's worth a little extra to keep my sanity and to have some free time.
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Old 11-12-2007, 11:15 AM
 
Location: southern california
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buying is better but wait 6 months.
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Old 11-14-2007, 08:30 AM
 
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Its certainly a viable option, particularly for someone with your goals.

I thought the same for a while, but apartments tend to be noisy and our kid came along. Plus I like the idea of having a backyard and patio where I can drink my beer and grow trees.

Also, the monthly payment of the mortgage, taxes and insurance is just a bit more than our rent payment.

But sure, nothing wrong with renting forever.
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Old 11-14-2007, 12:59 PM
 
Location: Los Angeles Area
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Quote:
Also, the monthly payment of the mortgage, taxes and insurance is just a bit more than our rent payment.
Right now in California its much cheaper to rent.
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Old 11-15-2007, 10:37 AM
 
7,337 posts, read 10,190,509 times
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Quote:
Right now in California its much cheaper to rent.
You can find such scenarios everywhere. Overall, it is more expensive to own than to rent. But a rent payment buys you a month of living somewhere while a mortgage payment is akin to deposting money in an investment.

But it all depends on your particular situation. Both options are viable and have their apppropriate time.
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Old 11-16-2007, 02:27 PM
 
Location: Los Angeles Area
3,306 posts, read 1,170,291 times
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Quote:
while a mortgage payment is akin to deposting money in an investment.
A small part of it is like depositing money into an investment, most is interest. Regardless in areas like California renting would allow you to invest much more money than you would be able to in your house. Also the historic return on property is low compared to other investments (Bonds, Stocks etc).

Anyhow, I don't think one should think of their primary residence as an investment. Historically its a very poor investment, but its also not liquid. How do you cash out of your primary residence? People generally take out home equity loans to gain access to the value in their house, but that is nothing like selling your stocks.

Your primary residence is a good hedge against inflation at best.
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Old 11-16-2007, 04:51 PM
 
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Default I like "Owning" the roof over my head.

Quote:
Originally Posted by Humanoid View Post
Also the historic return on property is low compared to other investments (Bonds, Stocks etc).
Probably true... but I have never realized a loss on any Real Estate... Unfortunately, I can't say the same for the securities market and that includes the limited choices in my 401K

I confess to having a peasant mentality... I feel compelled to own something that is "Real", whereas... securities to me are only a line item on my Balance Sheet... here today and gone tomorrow. With Securities, all I can do is buy or sell... I can't invest my time and skill creating value by making improvements or get the satisfaction of creating something from nothing.

Over the years, I have often asked successful people in the Bay Area how they achieved financial security... Without exception, all have owned or own owned Real Estate.

I know a lot of retired contractors and semi-retired contractors... the ones that are enjoying retirement have a large portion of their income tied to investment properties... mostly commercial property.

A very good friend of mine is a retired electrical contractor. He told me that all he ever made was living running his business... he made his wealth by buying the warehouse that housed his business back in the mid 60's... Each month his business pd him enough rent to cover his mortgage. Today, the warehouse is paid for and worth 3 to 4 million.
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Old 11-17-2007, 03:35 AM
 
Location: Los Angeles Area
3,306 posts, read 1,170,291 times
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Quote:
...Unfortunately, I can't say the same for the securities market and that includes the limited choices in my 401K
The basis of my claim was that if you just invested in an index fund it would have historically done much better than real estate. Of course particular people may hand pick stocks and do a really bad job at it and lose money. But if you purchased property in 2005 you are going to lose money too, both markets go up and down.

Quote:
With Securities, all I can do is buy or sell... I can't invest my time and skill creating value by making improvements or get the satisfaction of creating something from nothing.
This isn't really true. When you own a stock you own a part of a company and you can have a say in the company that you own a piece of (Of course if you own very few shares you have little or no voice).

Regardless, my comment was directed towards one's primary residence as an investment. Treating your primary residence as an investment is problematic on many levels. I'm not suggesting everyone should rent, rather you should not purchase a primary residence as an investment.

Also, I should note that what a lot of people do in real estate is more small business than investment. With the exception of the last few years you can't just purchase a property let it sit for 5 years and then sell it for a gain. Instead you need to rent out the property, add value via improvements etc. To me this is a small business though.
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Old 11-17-2007, 11:27 AM
 
13,115 posts, read 23,395,010 times
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Default Dream Turned Nightmare.

Agreed, especially the part about Rental Property as a business.

On a separate note, I would like to add a small anecdote on one of the pitfalls/temptations of home ownership.

My street is a court in an older neighborhood. There are 24 homes and everyone knows each other. The last home to change hands was back in 1999. The home sold for 200k to a nice family.

Every year, without exception, my newest neighbor and his wife drove the nicest new cars, (BMW, Mercedes, Jaguar) in the area. They also regularly had contractors working in the home... new windows, hardwood floors, patio, kitchen, etc.

As neighbors, we would visit and comment to him that he was putting the rest of us to shame by the lifestyle he was living... most of us kept cars for 10 to 15 years... no one had done major renovations.

The "New" neighbor just lost his home to the Bank after 6 1/2 years of ownership. I spoke with my neighbor's brother last night and he said his brother's family got in over their heads.

They had refinanced 7 times and taken cash out each time. They lost the house because they could no longer keep up with the payments and couldn't get a temporary reprieve with another refinance loan.

The 200k home now has $740k of debt... the cars are gone, they are getting a divorce and he is driving borrowed cars and staying with family...

My neighbor and his wife are both 47 years old and have one daughter age 18
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