Home/Condo Buying Advice

[riaelise]

Originally Posted by SandyJet

120K is is a dual income. So lets say 60k each.

A lot of companies for folks with engineering or accounting degrees 60k is the starting salary.

60K used to be a good salary. Now I have had staff who I hired a few days out of school making 60K living at home rent free, student loan free whining they need a raise as stuff costs a lot. Once you have a few kids 60K would just be credit card bills and such.

Back in the day I spent 300K for my house and to rent a house is like $2,300 a month.

However, 300k at 10 percent is 30K a year lost opportunity costs plus I pay property taxes, homeowners insurance and repairs of almost 100k in my 15 years of owning.

I own my house free and clear so I do save on rent. I like owning my own home cause it frees me from whims of landlord and dont have to worry about moving and the USA has a stigma against long term renters so owning is better feeling.

But that does not make a solid investment. Real Estate is generally not an investment at all. Real Estate like Gold, Classic Cars, Artwork is a hedge against inflation a hard asset.

Here is an extreme example a condo near me became condo in last 70s when mortgage rates were like 15%. A 30 year treasury also paid like 15%.

Person buying condo was betting condo would rise greater than 15% a year every year for next 30 years, he should have just bought treasury and then reinvested the 15% each year in more 30 year treasuries and he would have been rich.

The condo today guess what appreciation has not been great. Why, building is now 35 years old and looking dated and run down and maint has rising from $50 bucks a month in 1970s to $500 a month today.

Land actually can sometimes work out. My cousin when he was 29 bought a one acre plot on Southampton and bribed his way into a rent controled apt in NYC. The land had only two or three hundred bucks a year taxes last 25 years but has gone up 20x in value his rent controled apt landlord loses money each month. Perfect hedge.

To blindly way over time Real Estate is a money maker is foolish and a bad way to increase wealth.

Other downside is no dollar cost averaging into real estate. It is pure lottery. Buy a house March 1999 you are did great, but a house March 2006 you are broke. But stocks or mutual funds you dollar cost average into. Less risk of buying only at peak. Imagine if you bought the Nasdaq on March 10, 2000 all in at 300K one day and then spent next 30 years paying if off. Instead you put a little in on March 10 2000 and for next 14 years kept it up through 2 major stock market crashes.

My professor in business school once said you can buy a new car or you can buy that new car spray at the car wash spray it into your car and flush $10,000 down the toliet and it would be the same thing.

And there are a lot of people who don't make that much, including in NYC. Not everyone wants to be in tech or an engineer. In addition, the OP is in Texas. His dollar goes much farther here, since you obviously don't realize that and want to poop on his salary. I bet you, the guy making 120k here or less is living way better than the higher salaried salaryman slogging away in the city, commuting to his small ranch house or Brooklyn apartment.

[austin-steve]

Originally Posted by SandyJet

..blah blah blah ...

Bottom Line Warren Buffet kept a tiny house and never bought a bigger house and says the tiny house was a bad investment as it was out of stocks.

Also I did not add in fact there is a mortgage, property taxes and maint.

BTW I own two homes, both no mortgage. I am not saying folks should not buy real estate but compared to the plain old S&P it is a terrible investment that requires a lot of work.

Since you involked the Oracle of Omaha, maybe you should know what he specifically said about real estate investing in 2012.

Source: Warren Buffett on CNBC: I'd Buy Up 'A Couple Hundred Thousand' Single-Family Homes If I Could.

Warren Buffett says along with equities, single-family homes are a very attractive investment right now.

Appearing live on CNBC's Squawk Box, Buffett tells Becky Quick he'd buy up "a couple hundred thousand" single family homes if it were practical to do so.

If held for a long period of time and purchased at low rates, Buffett says houses are even better than stocks. He advises buyers to take out a 30-year mortgage and refinance if rates go down.

The reason he doesn't think it's practical to buy a couple hundred thousand single family homes is that it would be impossible to effectively centralize the property management function. Property management is very localized, there are no national companies. Most are mom and pop, including mine.

That said, I routinely talk people out of investing in real estate. IT's risky and should only be done with extra left over money that can be placed at risk. The most cautious/conservative path to becoming a rental property owner is to purchase an owner-occupied home (easier financing, better terms) and at some point move up and retain the first home as a rental. Then do the same with the second.

Steve

[SandyJet]

Wonderful, a newspaper today published something about home prices and the effect of inflation. Great timing, paper is Newsday which is a Long Island New York Paper.

Newsday today reported that homes on Southshore of Long Island rose 1.3% from a year earlier and homes now hit a median sales price of 390K . The previous year prices were flate (rose zero). Realtors/NAR made that annoucement as a sign home prices are once again on the rise.

However, Newsday point out that if you take the average home price from two years ago and inflation adjusted it (no gains, just inflation), the average home should be priced at $404,000.
There was no gain in homes. Folks when inflation adjusted homes fell in value. Realtors forget about inflation.

Realtors are reporting the average home owner has a 1.9% gain when in fact the average home owner lost $14,000 in value when taking into account inflatin.

In regards to Warren Buffet and single family homes. he was stating after the RE Market Collaspe if you locked in 30 year rates while at all time lows and put tenants in them next 30 years they are great investments. He is right. Lots of variables.

I own a rental property and I have a tenant. Guess what the home price barely keeps up with inflation and after expenses (I dont have a mortgage) I get 4% a year. Not selling, not complaining but I cant have 100% of funds in stocks and muni bonds and cash. I also own my primary home with no mortgage.