The Home Ownership Thread

[Joffrey]



For us it was that the rents here where through the roof, and mortgage interest very low.
Decided on a city center apartment at a stones throw from the train station with parking as both our lives require a lot of travel, so flexibility in transport modality was key.

I specifically bought this with the option to rent it out in mind if we can get the mortgage down enough in the coming 3 years, at which point we'll own it 5 years. At that point kids will be just there or on the way hopefully, so the 900sqf won't do then and we'll move to something bigger. Looks like it will all work out as planned so far..

Lastly, im a BIG advocate for only buying/renting space you need, and when there are no kids in play (or in the near future) I don't see how it makes sense to fork out a lot of cash for a lot of space.

Not a fan of having bragging rights?

 

[MarkI]

Maybe not the right place to asks, but is a mortgage under 100,000 something a bank would do, it would probably be closer to around 80k. Is that veering into personal loan territory?

 

[ChrisGold]



Maybe not the right place to asks, but is a mortgage under 100,000 something a bank would do, it would probably be closer to around 80k. Is that veering into personal loan territory?

They should still do it without any issue, they write mortgages for condos all the time, in the same range.

 

[ChrisGold]

I never looked at home purchases as investments, more like a forced savings that would guarantee me a place to live in retirement, and hopefully the appreciation outpaces interest paid. I see all the time people talking about "profit" on their real estate transaction, but they often leave out many of the true costs involved. I am a big fan of home ownership, as a lifestyle decision but I try not to get too caught up in the potential for profit, because it's often an elusive dream. Just a typical hypothetical that might otherwise get someone excited:

500K home with 100K down, sold in 4 years for 600K

$3K closing cost on purchase
$48K interest
-$15K tax savings
$10K upgrades and maintenance (this doesn't cover many upgrades obviously, just fixtures)
$36K closing cost and real estate fees on sale
$10K for 2 local moves

$92K in costs added to the initial purchase, and obviously these are all hypotheticals, and really doesn't cover any work done to personalize the home except maybe paint and some fixtures. Not trying to be super accurate, just to paint with a broad brush. Simply showing that 100K appreciation is the break even point after 4 years, and doesn't include the opportunity cost on the money used for the down payment. If you actually upgraded any baths or the kitchen, break even goes much much higher. Use a full service mover to move a 3,500 - 4,500 square foot home, and the moving costs go through the roof too. 4 or 5 year break even on a home where you invested significant sums could be 200K appreciation, which for most would leave you disappointed in the investment.

 

[Fueco]

I never looked at home purchases as investments, more like a forced savings that would guarantee me a place to live in retirement, and hopefully the appreciation outpaces interest paid. I see all the time people talking about "profit" on their real estate transaction, but they often leave out many of the true costs involved. I am a big fan of home ownership, as a lifestyle decision but I try not to get too caught up in the potential for profit, because it's often an elusive dream. Just a typical hypothetical that might otherwise get someone excited:

500K home with 100K down, sold in 4 years for 600K

$3K closing cost on purchase
$48K interest
-$15K tax savings
$10K upgrades and maintenance (this doesn't cover many upgrades obviously, just fixtures)
$36K closing cost and real estate fees on sale
$10K for 2 local moves

$92K in costs added to the initial purchase, and obviously these are all hypotheticals, and really doesn't cover any work done to personalize the home except maybe paint and some fixtures. Not trying to be super accurate, just to paint with a broad brush. Simply showing that 100K appreciation is the break even point after 4 years, and doesn't include the opportunity cost on the money used for the down payment. If you actually upgraded any baths or the kitchen, break even goes much much higher. Use a full service mover to move a 3,500 - 4,500 square foot home, and the moving costs go through the roof too. 4 or 5 year break even on a home where you invested significant sums could be 200K appreciation, which for most would leave you disappointed in the investment.

Fair point, but you also have a place to live for those four years... Around here, four years of rent in a house is something upwards of $144,000....

 

[ChrisGold]



Fair point, but you also have a place to live for those four years... Around here, four years of rent in a house is something upwards of $144,000....

Absolutely, it's all predicated on having to spend $ on a place to live. I rushed through an example and could have used that as a positive opportunity cost. I was trying to illustrate how quickly ownership and sale expenses pile up and often erode what appears to be profit.

 

[Mr. Moo]



500K home with 100K down, sold in 4 years for 600K

3,500 - 4,500 square foot home.

What magical fairy land is this?

 

[RedLantern]



What magical fairy land is this?

Pretty much anywhere in non/coastal America that isn't Chicago?

 

[Piobaire]

I was just telling someone in PM that I now know for sure I do not want to ever be a small time landlord.

 

[ChrisGold]



Pretty much anywhere in non/coastal America that isn't Chicago?

Exactly. I was thinking more of it having appreciated to the 600K range, which brings even more into play. Probably 85% of American landmass, maybe more. I live in a top school district, commutable to Philly, PA pharma, NJ pharma, etc... and anything between 550-650K will comfortably buy you a large home, newer or brand new, 3200 - 3500 square feet easily, usually larger. My neighborhood tops out at comps in the $649K range, as we have small lots on a golf course, but that will get you 5000 square feet +. I've lived in those high priced coastal areas and I get how bad it is there, but they surely know that's not the norm??

 

[ChrisGold]



I was just telling someone in PM that I now know for sure I do not want to ever be a small time landlord.

I've run the numbers, looked at how people treat rental properties, etc... and I have come to the conclusion that I'd rather stuff my money in a mattress than deal with a tenant in any way.

 

[Find Finn]

I know multiple guys who are small time landlords (most work in real estate as their full time job), but they can pretty much pick from the top shelf, when looking for tenants, one guy told me he got 500-800 applicants on his $1500 a month 1br.

 

[SeaJen]

The top school districts in the Philadelphia burbs (T/E, Radnor, L. Merion) are a bit more than that. 3500 sq ft would be more like 750 for an older home and 850-1MM for rehabbed.

Exactly. I was thinking more of it having appreciated to the 600K range, which brings even more into play. Probably 85% of American landmass, maybe more. I live in a top school district, commutable to Philly, PA pharma, NJ pharma, etc... and anything between 550-650K will comfortably buy you a large home, newer or brand new, 3200 - 3500 square feet easily, usually larger. My neighborhood tops out at comps in the $649K range, as we have small lots on a golf course, but that will get you 5000 square feet +. I've lived in those high priced coastal areas and I get how bad it is there, but they surely know that's not the norm??

 

[dcg]



I was just telling someone in PM that I now know for sure I do not want to ever be a small time landlord.

Yeah, I really should rent out my old place rather than sell, but I don't want to deal with the hassle....

 

[ChrisGold]



The top school districts in the Philadelphia burbs (T/E, Radnor, L. Merion) are a bit more than that. 3500 sq ft would be more like 750 for an older home and 850-1MM for rehabbed.

Correct, if you're going in that direction. (West or South west) Central Bucks is anywhere from top 5 to top 12 depending on the year. This area has a ton of pharma and consumer goods people who commute over to Princeton or even up into Central NJ via 202, besides the Philly commuters. Besides Central Bucks SD we also have New Hope / Solebury which is very solid.