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Things to consider when buying a home for investment at low cost and flipping every 5 years, realtors fees, closing costs, taxes, insurance and mortgage payments
Location: Halfway between Number 4 Privet Drive and Forks, WA
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Quote:
Originally Posted by aneftp
Yeah, I agree in these "new" market conditions, people should expect to buy and sell in 5 years and expect to make a large profit (your real profits after RE commissions, taxes, insurance will eat into whatever profits you plan on making).
Just be thank for that you can live "rent free" for 5 years. That's the real profit you can expect to make in 5 years in these current market conditions. But living rent free for 5 years is still a good deal to the majority of people.
Ditto.
Quote:
That being said, we all have to live somewhere.
Double Ditto.
My own perspective: Ultimately, a house is a place to live. It should not be exploited to "make money." That's why the market is in the mess it is in, because the housing market was treated like a stock.
although we call a home an appreciating asset its part of a much larger picture called your overall housing costs... because you live in it these costs are all paid by you and accumulate over a lifetime unlike rental property or investment property which you pay off the income . . the rise of the house in value over time merely offets the giant lifetime expenses of all the costs a homeowner has for the priveledge of owning that home..... your taxes, mortgage interest, repairs,renovation,maintaince,landscaping,insuranc e ,the gardner,the snow plow guy, the list goes on and on.
a lifetime in housing costs are really measured in who lost the least the buyer or the renter, not who made the most as those expenses whether you rent or buy usually eclipse the value of home appreciation over a lifetime. it never stops accumulating even if you sell a home and buy another... like rent just keep adding it all up over a lifetime.
soooooooo if your buying a house think of it as a consumption item, not an investment, think of it as a collector does of fine art, or your jewelry. its something you use and consume and costs you money. the fact a home rises may or may not mitigate the expenses to put you ahead of renting
buy a home for all the things a home can give you (good or bad)
the joy of owning something
doing as you please
the security of owning a payed off home
relatively fixed costs compared to renting
the fun of renovating and changing
etc
while technically a renter appears to be at a dis-advantage because hes not buying anything with his rent that may not be true in alot of areas or situations . here in the greater new york area the cost between renting and buying initially is 1/3 to 1/2 less a month and no massive down payment... it takes about a decade for the rent to equal the costs of buying at the 2 to 3% a year rent increases. each year though the renters advantage grows smaller and smaller as the rent goes up . all though just real estate taxes in alot of areas see bigger jumps the costs are offset with tax deductions on some expenses so its all about what the renter did with the money saved each month and down payment money that determines most of how a renter does.
you cant compare renting vs buying unless you have the renter putting equal amounts of money as well into an appreciating asset. thats where most comparisons fool us, they rarely do this. historically equities have outpaced home appreciation by 2x with alot less expenses in the early years of renting.
i can tell you because home real estate appreciates long term just above the rate of inflation in most markets a person who invests the money he planned to buy with and the money he saves each month compared with buying in nothing more than a mix of diversified index funds stands a great chance of coming out further ahead ...
infact i can say with my own expierience that if you were going to pay cash for the house like i did when i bought my house back in 1987 in queens ny and instead put that money in that same mix of funds (i did that also) i can tell you that today you can subtract out all the rent you would have paid for all those years and still have enough left to buy over 2 houses .....
you have to take a step back and stop looking at just one aspect of your overall cost of housing which is where everyone fixates THE HOUSE
and look at the total costs over a lifetime to know if you spent less renting or buying..... chances are they both cost you and took money out of the ole piggy bank and not made you richer .... housing costs are like food costs, they are expenses not gains
for a eye opening idea of expenses look at only 2 of the many components of expenses a homeowner has , taxes and mortgage interest,,, those two alone usually need the house to appreciate at least 3x and probley more in 30 years just to clear the after tax deduction amount you paid in...
most people pull out one piece of the puzzlel the house cost and what its worth without looking at the big picture namely a lifetime of housing costs and merely look at one aspect without the other parts... since we dont know how much future appreciation will be, we dont know rent increases, we dont know your future expenses or how many times you will sell a house and buy another and incurr more costs there is no answer.. in fact the biggest part on the renters behalf who chose to invest else where and rent is we dont know future market returns..... your trying to predict an outcome thats impossible... we dont know who will spend more in housing costs when all is taken into consideration.
picture it as if you were an investor.. you made big bucks on one investment (the house) but all your other investments tanked.... overall your down , the big gains of the one investment merely mitigated the overall loses
the jury is still out as far as whether the age old debate, is it better to buy or rent financially ?... there is no answer and probley never will be
Location: Halfway between Number 4 Privet Drive and Forks, WA
1,516 posts, read 4,591,098 times
Reputation: 677
Quote:
Originally Posted by mathjak107
as i say over and over:
although we call a home an appreciating asset its part of a much larger picture called your overall housing costs... because you live in it these costs are all paid by you and accumulate over a lifetime unlike rental property or investment property which you pay off the income . . the rise of the house in value over time merely offets the giant lifetime expenses of all the costs a homeowner has for the priveledge of owning that home..... your taxes, mortgage interest, repairs,renovation,maintaince,landscaping,insuranc e ,the gardner,the snow plow guy, the list goes on and on.
a lifetime in housing costs are really measured in who lost the least the buyer or the renter, not who made the most as those expenses whether you rent or buy usually eclipse the value of home appreciation over a lifetime. it never stops accumulating even if you sell a home and buy another... like rent just keep adding it all up over a lifetime.
soooooooo if your buying a house think of it as a consumption item, not an investment, think of it as a collector does of fine art, or your jewelry. its something you use and consume and costs you money. the fact a home rises may or may not mitigate the expenses to put you ahead of renting
buy a home for all the things a home can give you (good or bad)
the joy of owning something
doing as you please
the security of owning a payed off home
relatively fixed costs compared to renting
the fun of renovating and changing
etc
while technically a renter appears to be at a dis-advantage because hes not buying anything with his rent that may not be true in alot of areas or situations . here in the greater new york area the cost between renting and buying initially is 1/3 to 1/2 less a month and no massive down payment... it takes about a decade for the rent to equal the costs of buying at the 2 to 3% a year rent increases. each year though the renters advantage grows smaller and smaller as the rent goes up . all though just real estate taxes in alot of areas see bigger jumps the costs are offset with tax deductions on some expenses so its all about what the renter did with the money saved each month and down payment money that determines most of how a renter does.
you cant compare renting vs buying unless you have the renter putting equal amounts of money as well into an appreciating asset. thats where most comparisons fool us, they rarely do this. historically equities have outpaced home appreciation by 2x with alot less expenses in the early years of renting.
i can tell you because home real estate appreciates long term just above the rate of inflation in most markets a person who invests the money he planned to buy with and the money he saves each month compared with buying in nothing more than a mix of diversified index funds stands a great chance of coming out further ahead ...
infact i can say with my own expierience that if you were going to pay cash for the house like i did when i bought my house back in 1987 in queens ny and instead put that money in that same mix of funds (i did that also) i can tell you that today you can subtract out all the rent you would have paid for all those years and still have enough left to buy over 2 houses .....
you have to take a step back and stop looking at just one aspect of your overall cost of housing which is where everyone fixates THE HOUSE
and look at the total costs over a lifetime to know if you spent less renting or buying..... chances are they both cost you and took money out of the ole piggy bank and not made you richer .... housing costs are like food costs, they are expenses not gains
for a eye opening idea of expenses look at only 2 of the many components of expenses a homeowner has , taxes and mortgage interest,,, those two alone usually need the house to appreciate at least 3x and probley more in 30 years just to clear the after tax deduction amount you paid in...
most people pull out one piece of the puzzlel the house cost and what its worth without looking at the big picture namely a lifetime of housing costs and merely look at one aspect without the other parts... since we dont know how much future appreciation will be, we dont know rent increases, we dont know your future expenses or how many times you will sell a house and buy another and incurr more costs there is no answer.. in fact the biggest part on the renters behalf who chose to invest else where and rent is we dont know future market returns..... your trying to predict an outcome thats impossible... we dont know who will spend more in housing costs when all is taken into consideration.
picture it as if you were an investor.. you made big bucks on one investment (the house) but all your other investments tanked.... overall your down , the big gains of the one investment merely mitigated the overall loses
the jury is still out as far as whether the age old debate, is it better to buy or rent financially ?... there is no answer and probley never will be
Easy answer:
Depends on where you are and what you buy. My house payment (with taxes and insurance included) equals that to renting a comparable house.
At least I have a chance at getting some of my money (if not all) back that I paid on house payments. If I were renting, that money would be gone forever.
yes and no,,,it all depends how much of a difference you save in the beginning between renting and buying and what kind of return did you get with the down payment money and the difference saved...its not as clear cut as you think.... here in new york i was ahead renting and investing the difference in a 20 year time frame to the tune of more than 2x ahead after subtracting out the rent i would have paid..soooo many variables from the prices where you are, the rents, your expenses, future market returns.... there really is no way to say for sure
Last edited by mathjak107; 01-26-2009 at 06:00 PM..
Most people view home ownership as an investment. Some hold onto their investment longer than others. All investments have an element of risk and there is no certaintly you will get a return on your investment.
That being said, we all have to live somewhere.
Hmmmmm...maybe if you said "real estate ownership" rather than "home ownership" I'd agree. Buy a home to live in, raise a family, and be safe and comfortable. Buy investment real estate to make money, trade properties, and otherwise take profits. If your home has low debt, or no debt; you don't pledge it as collateral for your real estate ventures; and you otherwise assure that you always have a home, the real estate market can go to the dogs but you've kept your family safe.
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