renting in retirement (states, adult, grandfather, relation)
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In the mid-1980s, my ex and I bought our first condo in California (condo was 12 years old, in the older part of town). Three years later we sold it for a good profit. Then bought a nice older more expensive home ... negotiated down the price, in the same town. Moved 4 years later and were lucky to sell it and break even (economy in aerospace/defense industry in early 1990s tanked for a short while). This same house recently sold for hundreds of thousands more .
Then moved to the Midwest and bought a newer house and bigger. Sold it 7 years later for a small profit. Then got divorced and with sold stock, I bought an older condo (3 bdr, 2 bath) in cash for under six figures in 2001. Same floor plan now sells for a bit higher, depending on condition and upgrades.
My parents bought a 4 bdr/2bath house in the 60's in California for $20,000. It's currently valued over half a million dollars, with view lot and pool. Before the bubble burst, it was getting close to $1 million.
After my father's death in the 70s, my mother started buying rentals in the area, and has one rental left, free and clear. Rent is my entire paycheck for a month. My mother likes her renters so is not charging the going rate.
Last edited by earlyretirement; 06-02-2013 at 10:02 AM..
Reason: Deleted personal information
Rent is my entire paycheck for a month. My mother likes her renters so is not charging the going rate.
That's great.
But quite honestly people shouldn't get too hung up on the value of real estate at any given time. I mean that is if you bought it for the long-term and didn't buy to flip it (which I never think is a good idea except those that are professionals and have the skills and understand the risks of flipping houses).
If you bought a house that you can comfortably afford, ignore all of the noise of what values are like. Never buy a house that you can't comfortably afford the payments. If you buy a rental property, do NOT buy it for future capital appreciation. Look at the cash flow and ROI yields. If you experience capital appreciation look at it as icing on the cake but don't expect it.
If you are always buying a property that you can easily and comfortably afford the payments you will avoid problems. As well as always buying a rental/investment property in good areas with strong rental demands. What I learned is even during the downturns, the Recessions, the stock market meltdowns.....there are always people looking to rent in the most desirable parts of town.
I own a lot of rental properties and I could care less what the market "says" they are worth. All I care about is cash flow on them and renting them out. I don't get caught up on all the noise of what it's worth, how much I could sell it for, etc. I think people make big mistakes getting too caught up in that.
I sold all my real estate in the USA during the "bubble" as I could clearly see it was going to crash. I rented for 7 years waiting for the market to crash and then bought. We bought a large home in San Diego 2 years ago in 2011 near the bottom. Well, now we are getting letters each week from private individuals with cash offering to buy our house for MUCH more than we paid. No realtors involved and they will pick up all legal fees. There is almost no good inventory on the market here and houses are selling in hours not days here once they hit the market.
No way I'd even think about selling this house. Even if I could make $200,000 in less than 2 years of owning it. The thing is I ignore the noise. Things move in cycles and nothing goes up forever and nothing goes down forever. I believe in this housing recovery just as much as I believe in this stock market. LOL.
Last edited by earlyretirement; 06-02-2013 at 09:51 AM..
But quite honestly people shouldn't get too hung up on the value of real estate at any given time. I mean that is if you bought it for the long-term and didn't buy to flip it (which I never think is a good idea except those that are professionals and have the skills and understand the risks of flipping houses).
If you bought a house that you can comfortably afford, ignore all of the noise of what values are like. Never buy a house that you can't comfortably afford the payments. If you buy a rental property, do NOT buy it for future capital appreciation. Look at the cash flow and ROI yields. If you experience capital appreciation look at it as icing on the cake but don't expect it.
If you are always buying a property that you can easily and comfortably afford the payments you will avoid problems. As well as always buying a rental/investment property in good areas with strong rental demands. What I learned is even during the downturns, the Recessions, the stock market meltdowns.....there are always people looking to rent in the most desirable parts of town.
I own a lot of rental properties and I could care less what the market "says" they are worth. All I care about is cash flow on them and renting them out. I don't get caught up on all the noise of what it's worth, how much I could sell it for, etc. I think people make big mistakes getting too caught up in that.
I sold all my real estate in the USA during the "bubble" as I could clearly see it was going to crash. I rented for 7 years waiting for the market to crash and then bought. We bought a large home in San Diego 2 years ago in 2011 near the bottom. Well, now we are getting letters each week from private individuals with cash offering to buy our house for MUCH more than we paid. No realtors involved and they will pick up all legal fees. There is almost no good inventory on the market here and houses are selling in hours not days here once they hit the market.
No way I'd even think about selling this house. Even if I could make $200,000 in less than 2 years of owning it. The thing is I ignore the noise. Things move in cycles and nothing goes up forever and nothing goes down forever. I believe in this housing recovery just as much as I believe in this stock market. LOL.
Yes, that's all very true. My father grew up during the Depression, and my mother during WWII in Europe. Both from very poor families. They believed in paying everything in cash, or at least as quickly as possible and were extremely frugal. Having money in savings was also very important. Owning a home and getting it paid off, and having no debt was drilled into us as kids ... so no one could take away our home. Making money from a home was not the issue. Living debt free was. In the mid-1970s, no one would have guessed how much property would increase in the next few years.
When I bought my first condo, we just were happy to be able to afford something we could get into. Never did we dream we would see an appreciation in it like we did. After we had our kids, the 3-level condo was just not practical and small. With my ex-husband's job advancements, we decided to get into a house for the family.
We never thought of it as a money maker ... just a place to live for our family with a yard. I remember when we sold our condo, the buyer was a young professional who was very nervous that there would be an eventual downturn in the housing market, but went ahead and bought it. Where we lived, there were no alternatives. It just eventually became a very expensive place to live. We were just lucky to make a small profit, never expecting it here. I guess I was just emphasizing my experience and that we were just lucky to be in the right place at the right time and it worked out well for us. Now I have some piece of mind in my current situation and see myself living here a long time. Knowing my property has increased is just a nice feeling. If it should decrease in the future, I still have a home to live in that I can afford. That's what it's all about for me. I know very little about investing and markets, etc.
Last edited by earlyretirement; 06-02-2013 at 10:03 AM..
Reason: Deleted personal information
I own and I rent. I converted my primary home into a rental and I have no plans to sell it. I like renting because it gives me freedom to move if I choose. It is great to not have to pay for repairs which is awesome. Renting also affords you the opportunity to live in a better neighborhood. However, I do not believe renting is a good long term financial investment unless you can also afford to invest enough money to meet your retirement needs. I like the freedom of renting but I will most likely buy another property in a few years and rent it out.
Don't know about other people, but our investments are tied in trust and can only be released under certain conditions. They are not taxable to us and not counted toward our income or assets under any circumstances until we dip into it. I cannot tell you what kind of trust they are since the older ones was set up more than six decades ago and the newer ones are handled by our legal-minded children.
There isn't a trust that will protect you from Medicaid knocking at your door if and when the time comes.
Why not pay 20-percent down on your $300K property, leaving you $240K to 'double over the next 10-years. This will leave you the option to make money on both house appreciation and your other investment/s... plus the flexibility to 'change horses' if one option proves stronger than the other.
The problem with that is that many retired people don't have the income to qualify for a mortgage. Your investments don't count when assessing your mortgage application, only your income.
i have found that not to be true at all. 70% of retirement assets are counted as liquid assets. that is only because some retirement plans have early withdrawal penaltys.
i have found that not to be true at all. 70% of retirement assets are counted as liquid assets. that is only because some retirement plans have early withdrawal penaltys.
The way the banks look at this is if you can spend the asset after the closing it doesn't count toward your ability to pay.
I have a good amount of assets, but I will have a small pension when I retire. I doubt I would qualify for a large mortgage.
The way the banks look at this is if you can spend the asset after the closing it doesn't count toward your ability to pay.
I have a good amount of assets, but I will have a small pension when I retire. I doubt I would qualify for a large mortgage.
not true at all , my son got a 400k mortgage on unemployments based on assets . in fact assets are safer than income today the way jobs are lost.
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