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Old 06-18-2013, 09:21 PM
 
454 posts, read 817,190 times
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Quote:
Originally Posted by ATLTJL View Post
This may be true. It may also be true that shares of Berkshire Hathaway good longterm investments. You just have to be able to afford them first.

I was thinking about all this, and came up with some simple math. This is for the OP.

For the sake of simplicity, let's use simple, round numbers. Imagine the OP has $1 million in cash. Here are the choices:

1) $500k home in Alpharetta
2) $1 million home in Buckhead/VaHi/etc.

Okay. Let's imagine that in 15 years, the OP can sell the Buckhead home for $1.5 million and the Alpharetta home for $625k. That assumes double appreciation intown than the suburbs.

Okay, so the OP would net $500k on the intown sale, but only $125k on the Alpharetta sale.

Now let's assume in Buckhead, both kids have to attend private school, just for high school, at $20k per year. So now we are down to $340k profit in Buckhead. Now let's imagine the OP put the $500k he saved buying in Alpharetta in a conservative fund that yielded 5% per year. That account would now be worth $1.05 million, a net profit of $505k. So now in Alpharetta, he's up to $755k profit.

I left a bunch of stuff out, assuming things like extra gas used in Alpharetta would be offset by increased property taxes in Buckhead, etc. I'm assuming a wash on all other fronts.

This is just sort of a reasonable example that came to my mind. Naturally, you can manipulate the numbers to tell whatever story you want, I used some pretty broad assumptions.

The big point I'm trying to make is that from a pure investment standpoint, forget personal preference, you can't assume that buying intown is a better investment because you're failing to consider that buying a less expensive home frees up cash for other investments. 5% is a pretty conservative estimate of returns.

Naturally, if you spend the extra money on things like cars, this math doesn't apply. I'm also assuming fiscal intelligence.

Of course personal preference trumps all. I'm just challenging the traditional notion that buying intown if you can is always a smarter investment. Maybe it is, maybe it isn't, a lot depends on factors that can't easily be predicted. That makes it really difficult to say with any authority that any particular area of town is a better investment than another, unless it's reasonable to see the area not appreciating at all, going down, etc.
Interesting read and I agree that personal preference trumps all. You are however leaving out the fact that in the Buckhead/private scenario you kids attended Westminster or similar. As good as some suburburban schools are they are not close to Westminster and co. There is a big RIO for the top private schools both financially and culturally. The 20k a year is not a total loss.
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Old 06-18-2013, 09:50 PM
 
9,008 posts, read 13,962,159 times
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Quote:
The 20k a year is not a total loss.
True.

It is, though, a total loss financially for the parents, unless it helps get a scholarship. Otherwise, the gains realized from that education would be seen by the children, not the parents.....until some day the parents need to be taken care of in a nursing home!

I mean, you could argue it would get the kids good jobs and keep the parents from having to support them. But you could also argue that it would get them into more expensive Ivy League schools and cost you more.

There's really no way to put a fair monetary value on it, so I just left it off.
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Old 06-19-2013, 06:34 AM
 
Location: Atlanta, GA
1,050 posts, read 1,681,839 times
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You would also have to compare economic backgrounds. You have many dual income high earners intown who come from upper-middle/upper income families. This creates a different economic landscape than the person who makes it, but has to subsidize elderly family members.

Private school tuition is paid by many grandparents in these families even if their children can afford it, because educational/health care expenses are excluded from the gift tax.

It comes back to the wealth vs. income thing.
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Old 06-19-2013, 06:51 AM
 
2,302 posts, read 2,961,418 times
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I would say at both my children's intown private schools, about a third of the children (mine are elementary age so these are the families choosing 13 years of private) are from families in which one of the parents has hit it big entrepreneurially and doesn't need to work. I think the idea that people are weighing the financial risk/reward of private school tuition and a big house in Buckhead/Ansley/Brookhaven is overblown. There are plenty of people to fill these schools and neighborhoods for whom the money is of no concern. The other 1/2 of the families have very high income working parents and a few seem to have grandparents helping out, or I don't know as it isn't my business.
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Old 06-19-2013, 07:59 AM
 
40 posts, read 68,174 times
Reputation: 12
"This is why IMHO longterm the best investment is a house in the prime intown areas."

That may be true, but most people buying houses aren't buying them for an investement. Of course houses are seen as an investment, but the reason most people buy a house is for a place to live and raise their family. If you live in that 'investment' house but the neighborhood is not a particularly safe/pleasant environment for your kids, and the schools are so-so, is that worth the potential future payoff when you sell the house, or pass it down to your children? Our house turned out to be a good ivestment, but that is not why we bought it. And while the neighborhood has become more desirable, with our kids at school age we realize it is just not "there" yet to be where we want to raise our kids. If a childless couple buys our house then by the time they have kids then they will be OK and have made a good investment. But we need to make our decision for right now, not the future investment -- and so do a lot of people. I'd love to be able to hold onto it and rent it but that is just not feasible since we need to buy a house to live in. We're close to the 150k income, and even with some equity from this house, buying in Decatur, Morningside, etc would be a stretch, and private school would be a no-go. I think this situation is reflective of a lot of people who choose to leave intown for suburbs.
As for the high name private schools -- sure sometimes it pays off big in the kids college and future earnings (but as someone else said, for the kids not the parent), but I also know a few people who went to those schools and are teachers or working part time! If I know a few there must be a lot more. So that 80k in private high school may not yield such a big payoff, since so much depends on the kid and what they want to do.
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Old 06-19-2013, 09:03 AM
 
31,993 posts, read 36,507,354 times
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Quote:
Originally Posted by jpatlanta View Post
I think a lot of this comes down to perspective and where you come from. Property taxes in Atlanta are still much much cheaper than most cities. House prices even in places like Buckhead and Morningside etc are still extremely cheap compared to the NE or Europe. Try looking for a house in NJ, CT or Westchester for example. In fact at the global company I work for Atlanta is considered the cheapest place of all office locations to live. In the pool of high earners at large companies even if you add in private school and a Buckhead house Atlanta is still crazy crazy cheap. You live like a king here on 500k yet like dirt in NYC, London, Zurich or SF etc.

Some of you are also underestimating the number or rich and high earners in Atlanta. There a literally tens of thousands of couples making 250k joint incomes here and many, many making 500k plus too, on top of that lots of folks are beginning to get inheritances from parents. Many of these will desire to live in areas like Morningside/Buckhead and will pay.

In a nutshell Atlanta is beginning to grow into an older/establised city with the same living patterns. Longterm that means more and more of the rich living in three or four intown zip codes just like a small London or NYC. It also means less and less poor people in the city as costs rise This is why IMHO longterm the best investment is a house in the prime intown areas.
Valid points.

In Atlanta you can live in a sweet intown home with a beautiful lot, excellent public and private schools, etc., for $750K to $1.5 million. That's not bad at all compared to other big cities.
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Old 06-19-2013, 12:36 PM
 
Location: 30312
2,431 posts, read 3,813,508 times
Reputation: 1996
Quote:
Originally Posted by essdeebee View Post
"This is why IMHO longterm the best investment is a house in the prime intown areas."

That may be true, but most people buying houses aren't buying them for an investement. Of course houses are seen as an investment, but the reason most people buy a house is for a place to live and raise their family. If you live in that 'investment' house but the neighborhood is not a particularly safe/pleasant environment for your kids, and the schools are so-so, is that worth the potential future payoff when you sell the house, or pass it down to your children? Our house turned out to be a good ivestment, but that is not why we bought it. And while the neighborhood has become more desirable, with our kids at school age we realize it is just not "there" yet to be where we want to raise our kids. If a childless couple buys our house then by the time they have kids then they will be OK and have made a good investment. But we need to make our decision for right now, not the future investment -- and so do a lot of people. I'd love to be able to hold onto it and rent it but that is just not feasible since we need to buy a house to live in. We're close to the 150k income, and even with some equity from this house, buying in Decatur, Morningside, etc would be a stretch, and private school would be a no-go. I think this situation is reflective of a lot of people who choose to leave intown for suburbs.
As for the high name private schools -- sure sometimes it pays off big in the kids college and future earnings (but as someone else said, for the kids not the parent), but I also know a few people who went to those schools and are teachers or working part time! If I know a few there must be a lot more. So that 80k in private high school may not yield such a big payoff, since so much depends on the kid and what they want to do.
If you don't mind my asking, what neighborhood do you live in? And around how much did you pay for your home there? Secondly, are the schools that bad? Is it like fights and discipline issues or poor academics?
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