It's a good idea to buy even if he lives there 1 year. He can rent it out most of his life, and sell it when it is time to retire.
It is a good idea to buy if you are going to live there at least 3+ years.
You mean like a house? :hmm:
It's a good idea to buy even if he lives there 1 year. He can rent it out most of his life, and sell it when it is time to retire.
A number of folks with a pulse on housing, not pumpers, are tossing out the word bubble at this point. So no, not a house in the current environment.
What bubble? Rates are still super low, home values are still pre-2006. The guy already said the house is valued more than what it will take for him to buy it, and he can buy it in one go. The only risk for him as far as real estate right now is if the economy completely crashes, in which case unless he's talked into buy in gold, every other investment he can possibly make will also end up worthless. At least with a depression and unemployment he will still have his house. It is tangible.
It's a good idea to buy even if he lives there 1 year. He can rent it out most of his life, and sell it when it is time to retire.
House values were already grossly out of line with median wages by 2006 and median wages haven't budged since then. Maybe use 2000 values as that was approximately when the real estate bubble started inflating. The OP still doesn't know the market value of the house, only the asking price and the assessed value.
Absolutely this. Do you really see these prices sustainable with median incomes not rising significantly? IMO the average price of a home should never exceed 3x the household income, and preferably less. Right now it seems like most homes are way past that.
With the baby boomers retiring and downsizing homes may be driven cheaper as well.
I agree. A shitty row house in my city (Canada, where the bubble never popped) in my hood is $600k. All the semis and detached are pushing a million. Just people borrowing to the max cause of low interest rates. Sales last month in August were the lowest in a decade or something like that. Something might be finally going down.
So I'm officially debt free.
I recently switched to part-time at my developer job so I could also have time to start a company with a friend (more programming related). I had been putting money into my 401k, but I don't have that anymore.
Should I invest my money somewhere or should I buy a house? FWIW: I am able to buy the house I'm living in (valued now at around 149k) for 110k. I would sort of be treating the home as an investment, but mostly as a place to live. If I didn't have this opportunity, I probably would focus on investing.
I haven't invested a day in my life so I need some tips on how to get started. Thanks in advance everyone.
Buying an asset like a home is an investment (regardless if anyone says otherwise).
My advice:
1) Invest in a small home that is easily affordable on your budget, but has the potential to gain value (IE: Don't buy a shit home in the ghetto, buy in an area they are building nice stores/property around).
2) Work on maxing out your 401k. That is the only investment you need at the moment if you're just now getting out debt.
One would be a fool not to get a 30 year with as little down as possible and invest the rest. Easy to beat 4.25% in the market for the long term. It is literally like FREE money. With rates this low it is equally foolish to pay any extra on the principal, you're throwing away free money. That low rate is locked for 30 years and tax deductible so your effective rate is more like 3%.
Well the issue here is that I don't really have a 401K with my part-time job. I was full-time, but since I switched to part-time, I don't have the 401K benefit anymore. I'm not really sure what happens to that money now.
The nice thing about the house we are in, is that the neighborhood is well-kept and the house is in average condition (could use some aesthetic updates). Buying right now would help me save more capital in the short term but I'm not sure how that entirely plays out since over time you end up paying interest.
What in the fuck are you smoking you dumb fuck? Please for the love of god don't handout shit advice (lack of) like this ^
LITERALLY for the first 5 years of a 30-year mortgage JACK SHIT goes to principal. Seriously. You might as well be renting.
Putting extra principal into a 30-year mortgage for the first 5 years is single handedly one of the most important factors. Putting extra principal into the first years is what makes paying the minimum after those 5 years worth more. It slices and dices your % paid interest exponentially.
Wrong. Putting extra principle at these low rates is just dumb. Do the math based on modest 7% gains investing. Run it 30 years. Your net worth will be significantly higher than paying down principal.
With these rates that's the dumbest thing one can can do. There are calculators out there to help see it.
Also at these rates nealy a third goes to principal month one.
Bullshit bullshit bullshit. It's one thing if you're talking 0.9% 5-10 year car loans or some shit, but 3.5%+ (Let's be honest it's 4.5% - 5.5% now) 30-Year home loans? You're out of your fucking mind. Seriously, you're handing out piss poor advice.
Don't get me wrong, NO WHERE IN MY POSTS did I say put every dime you have towards extra principle. There absolutely no question that you need to be putting in your 401k match at MINIMUM.
Feel free to toss out calculators, but between the up's and downs of the markets as of late 7% stacking isn't exactly realistic. You're also comparing apples to oranges. We're talking about paying off a $100-150k home in ~8 years instead of 30, you're talking about a 401k investment with stacking interest over the course of 30 years.
FWIW: I am able to buy the house I'm living in (valued now at around 149k) for 110k. I would sort of be treating the home as an investment, but mostly as a place to live. If I didn't have this opportunity, I probably would focus on investing.
Mathematically, he's correct. However, he's making assumptions that the investments continually go up. There's more risk at that end, than there is risk with the cost of a mortgage from month to month.
To keep the math at a very basic level, it's just the commutative and associative properties at work. Let's say you have an extra $100 dollars. What do you do with it - reduce the mortgage principal by $100, or invest the $100. The compounding is the same - the final realized value of that $100 by paying down the mortgage will be the $100 compounded over the remainder of the loan. The final realized value of the $100 invested is that compounded over, well, the life of the loan to make it an apples to apples comparison. If you're getting more interest than you're paying, you're coming out ahead. Further, many people can deduct the mortgage interest, so there's that working for you as well. (Though, you may have to pay interest on the capital gains, if you go the investment route as well.)
Houses aren't nearly the great investment they are portrayed to be. I lost 25k overnight when the housing market collapsed. I could have stuck it out sure. The properties near me went into foreclose and quickly became rental houses with trash tenants. So my once nice house became a house in suburban ghetto. My choice was to stay in a not safe neighborhood or lose the 25k. I sold the house.
Houses aren't nearly the great investment they are portrayed to be. I lost 25k overnight when the housing market collapsed. I could have stuck it out sure. The properties near me went into foreclose and quickly became rental houses with trash tenants. So my once nice house became a house in suburban ghetto. My choice was to stay in a not safe neighborhood or lose the 25k. I sold the house.
Feel free to toss out calculators, but between the up's and downs of the markets as of late 7% stacking isn't exactly realistic.