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Renting isn't for everyone - I'd much rather have a modest home with a 15-year mortgage and a nice bit of money in the bank. Even if everything goes to hell in a handbasket, I'll be just fine.
I would do neither. In my area, I could purchase three nice starter type homes and carry the financing for buyers. The interest rate I could get carrying the financing would trump any CD's or bank interest. I would do a fairly short term balloon (2-5 years) for the loan. In my area, sellers that can carry financing is in demand. So I would step up and meet that demand.
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Very interesting. I hadn't thought of that. I wonder if the same demand is in southern California. May I ask what sort of interest rates you find for seller financing up there, 5.5%, 6.0%? I really hadn't been thinking of selling but that has me curious.
Giving all that is happening in the economy and that's likely to happen which would you choose and why:
a. $500,000 in a bank
b. ownership of a house worth $500,000
I find myself in this vexing situation, having to choose between one or the other and some advice would be very much appreciated. Thanks in advance to those who contribute.
Is this all your money?
Do you have a house now (or more specifically, is this house for you to live in?)
Do you work?
How old are you?
I will make some assumptions and give you what I would do.
$100,000 cash (liquid stuff)
$200,000 house to live in
$200,000 (stocks+bonds+commodities)
Very interesting. I hadn't thought of that. I wonder if the same demand is in southern California. May I ask what sort of interest rates you find for seller financing up there, 5.5%, 6.0%? I really hadn't been thinking of selling but that has me curious.
Giving all that is happening in the economy and that's likely to happen which would you choose and why:
a. $500,000 in a bank
b. ownership of a house worth $500,000
I find myself in this vexing situation, having to choose between one or the other and some advice would be very much appreciated. Thanks in advance to those who contribute.
Well, I'd definitely choose the money in the bank. First of all, I have no use whatsoever for a $500,000 house! At least with the money you know that in 5 or 10 years it will still be worth at least that much. With the house - not so.
Giving all that is happening in the economy and that's likely to happen which would you choose and why:
a. $500,000 in a bank
b. ownership of a house worth $500,000
I find myself in this vexing situation, having to choose between one or the other and some advice would be very much appreciated. Thanks in advance to those who contribute.
I'm in a similar situation. Here are my thoughts:
Invest the money so that it generates 10% per year or more growth compounded and spend less than $2000 per month on rent and you are WAY AHEAD of the game than you would be if you took a lot of it to buy a big house that will probably decline in value for a while after you buy it.
On the other hand, maybe you could get a deal on a foreclosure. Take $30K for a 25% downpayment and buy a home that once sold for $300k for $120k. Carry a fixed rate 30 year mortgage with payments around $550 per month. Between the mortgage payments taxes and HOA fees etc your monthly costs run about $750k per month and if you want you can pre-pay your mortgage (send an extra thousand dollars or so with instructions to add it to the principle) so that you save a ton on interest; pay less than you would if you rented and live in your own home. Maybe it isn't the dream house you envisioned living in a few years ago but it is sensible; practical and comfortable.
The only downside of owning in this market is being married to your house and your mortgage and not being able to get rid of it if you ever wanted to leave. If things get REALLY bad here and this country turns into a Russia in the 60's or a Cuba, you might want to be able to have the option of leaving the country altogether until things get better here. Owning a home would make that more difficult as I would not want to be a long distance landlord.
On the other hand, if you'd lived in it for 5 years when you wanted to leave, your investments combined with your savings from not having to pay so much each month for rent), would have done well enough for you to underprice it and take less money than you paid for it if necessary-- just to quickly get rid of it.
In your mind you could say to yourself that if you'd been renting you'd be paying an extra $1250 every year or $15k. Even if you had to come to the table with $30k to get rid of it, you'd still have not paid out as much for housing as you would have if you'd rented the whole time.
Of course you would have lost the earning power of the 10% growth on $30k that you used for a down payment which in five years would have amounted to $18k but losing $18k investment return might be better than than the $75k you'd have saved over five years in rent payments paying $2000 per month for rent vs. the $750 you'd been paying-- owning.
Some real estate experts just interviewed on CNBC said that they expect the prices to drop more this winter with the first time homebuyers credit going away - which only makes sense. That is why I wouldn't take too much away from your investments to buy a house you can expect to decline in value.
The house is owned free and clear. It's an older house built in 1935, downslope, things going wrong with it. It's either one or the other: keep the house or sell it and get $500,000. If the dollar crashes I would still have the house to rent for a few bucks to survive, as well as a tangible asset. If the economy weathers this storm then I'd rather have the cash in the bank and relieve myself of the headaches. So I can only have one or the other--no splits. Thanks to all who responded. Given this, any votes for one or the other?
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