Why your house is NOT a terrible investment (or at least my house)
invite response
2014 Sep 5, 7:57am 41,415 views 117 comments
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JH
2014 Sep 8, 2:45am
Really need to calculate it out vs assuming 1%
If somebody cares to calculate it out for a $1M home I will listen, but I will also counter argue. I completely understand that 1% is an overestimate, but I've already heard on this thread of a totally non exhaustive list: water heater, appliances, kitchen, paint. This hasn't included anything exterior, and it is non exhaustive on the interior. The number I used in the previous post was the OPs, which is less than $2000/yr. I for one will not be buying a $1M home from someone who paid less than $2000/yr on maintenance, unless it is sitting on a 3/4 acre lot. There are some here...and I have my eyes on them!! :)
Let's use your numbers. $4,400/mo payment vs renting the same unit at $3,400/mo. That's $1,000/mo extra they are paying. Most expensive areas don't up rent if there is not turnover, but that would cut into it, sure. Ok, so over 6 years, that is $72k more they paid to own than to rent.
You're conflating the two. My former place had PITI of about $2K (not $4400) and I rented it out in 2007 for $3400. I would bet you could get at least that in rent. Even if you bought it now at $699K, the PITI is $3600 or so. This assumes no deduction or principal paydown. You get the deduction, which is better than the standard deduction, or else you wouldnt qualify for the loan. Ignoring this messes up the numbers. Just like ignoring maintenance messes up the negative side of owning.
Current place for me is the same. $3077 for mortgage, $300 for ongoing maintenance and insurance, $850 for prop taxes. About $200 more than renting at $4K, but I get all the prop taxes back in a deduction, or else I wouldnt qualify for the loan based on income limitations. So not counting forced savings, it is $3377 vs $4K.
Of course if I bought now, my mortgage would be a good $800 more/month, and prop taxes would be higher. After the deduction for prop taxes, you are looking at breakeven, not counting principal forced savings.
If you have PMI because you didnt put down 20% and have a bigger mortgage, dont get the tax break from interest writeoff, etc, then it likely is better to rent.
If somebody cares to calculate it out for a $1M home I will listen, but I will also counter argue. I completely understand that 1% is an overestimate, but I've already heard on this thread of a totally non exhaustive list: water heater, appliances, kitchen, paint. This hasn't included anything exterior, and it is non exhaustive on the interior.
I said I paid $4K to paint the outside of my house. I also threw in FieldTurf at $2500 in my numbers. Figure both last 8+ years. At 1% of a $1M house, what are you annually spending $10K on?
Really need to calculate it out vs assuming 1%
If somebody cares to calculate it out for a $1M home I will listen, but I will also counter argue. I completely understand that 1% is an overestimate, but I've already heard on this thread of a totally non exhaustive list: water heater, appliances, kitchen, paint. This hasn't included anything exterior, and it is non exhaustive on the interior. The number I used in the previous post was the OPs, which is less than $2000/yr. I for one will not be buying a $1M home from someone who paid less than $2000/yr on maintenance, unless it is sitting on a 3/4 acre lot. There are some here...and I have my eyes on them!! :)
Totally get this, and it is a personal choice. I grew up on a 1/3 of an acre, which is a big lot in our town, but not where Im from. I have a rooftop deck here, and go to the beach every weekend for 5 months of the year. Sometimes I miss not having a lawn, but my kids seem fine. They still play basketball with our neighbors' kids in both driveways. Kids are resilient. They find ways to have fun no matter the size of the lot.
JH
2014 Sep 8, 3:32am
You're conflating the two. My former place had PITI of about $2K (not $4400) and I rented it out in 2007 for $3400. I would bet you could get at least that in rent. Even if you bought it now at $699K, the PITI is $3600 or so.
You are comparing apples to oranges. First, your PITI from 1999 purchase vs. the $4400 that is in your calculator for a 2008 purchase. Second, buying in 2014 vs 2008. Same monthly payment because the interest rate is lower now pretty much no matter the downpayment.
Not sure where you are getting $4400 from for a house priced at $699K with 20% down, but it isnt my calculator. My calculator says $3661. Again, no deductions, and no principal payments included.
I cant even get that for a house priced at $799K.
If the median house price today nationwide is like $275K, then 1% ($2750. a year ) would be low. If you had to replace big ticket items (roof, HVAC, kitchen, bathrooms, carpet, etc) over a period of years, you'd blow through a lot more then that...
Sounds right. Depends on the type of roof. Tile and concrete shingle roofs last 25-30 years. HVAC is what, $6K-$7K? (dont know..we dont have AC and heat isnt on a lot). Carpeting a 2000 sq foot place is $2500. Bathroom reno every 15 years for 2 baths is $20K. Kitchen reno is $40K every 15 years.
If you stay 15 years, then maybe an average of $5500/yr. Still not 1% of a $1M house. Likely 2% of a $275K house.
JH
2014 Sep 8, 4:00am
Not sure where you are getting $4400
Post 46. We are talking about the buyers of your house in 2008.
Likely 2% of a $275K house.
We are making progress. It's creeping up again. 2% of a 275k house is 5.5k/yr. You agreed that was for a $1M house. Now for your $620k house someone bought from you in 2008, let's estimate it as (0.62*5.5k/yr*6yr) $20k. That is twice the number I used in post 61 that you had previously agreed to. I like the direction we are going. Nothing like a boomer who has bought and sold 6 times to help us do the math :)
JH
2014 Sep 8, 4:21am
I was spending around 3% a year
You must be lining your baseboards in gold. Wait, what's your address again?
Post 46. We are talking about the buyers of your house in 2008.
Post 46 calculator includes property tax and insurance, and still is $900 less than $4400. Check out the image again.
JH says
Now for your $620k house someone bought from you in 2008, let's estimate it as (0.62*5.5k/yr*6yr) $20k. That is twice the number I used in post 61 that you had previously agreed to. I like the direction we are going. Nothing like a boomer who has bought and sold 6 times to help us do the math :)
The $5,500/yr is averaging it if you live there for 15 years. True. IF you do total renovate. The owners of my old place didnt, except for some room painting, a new dishwasher, fridge, and installed fake grass. They also didnt replace the roof and whoever owns it wont need to for another 15 years. They also didnt replace the HVAC. Total cost over 6 years that I could see...maybe $5K. They moved in with new carpeting, paint, refinished flooring, etc.
My current place is almost 14 years old. By the 15 year average I detailed, I should be replacing the HVAC (may do so, but likely wont; figure $3K of repairs), renovate the baths (I have nice baths so no; just painting the cabinets for $1500 and a new shower door of $1K), reno the kitchen (no again; new appliances over 15 years should run me $4K, and painting the cabinets to cost me $1500). I painted the outside for $4K, will again in another 10 years). Maybe roof repair of $4K, but doubt I will need another entire roof. One more carpeting run in 7 years of $2500. Total with the $20K I dumped in at the start and last three years is $41.5K. Figure another $4K in misc and unseen expenses. Average of about $3K/yr over 15 years.
BTW, GenX, not a Boomer. ;-)
JH
2014 Sep 8, 5:03am
Post 46 calculator includes property tax and insurance, and still is $900 less than $4400. Check out the image again.
It's still $4372; you changed it last night with the updated int rate. Yes, it includes tax/insurance. That is the TI in PITI.
Average of about $3K/yr over 15 years.
That's fine. I just used your 2% estimate on a smaller/cheaper house. But it depends on the person, age of home, etc.
BTW, GenX, not a Boomer. ;-)
I was referring to CiC, another person who understands the cost of ownership in a market that doesn't normally appreciate 20% a year. (Which is all markets, btw haha)
My current place is almost 14 years old. By the 15 year average I detailed, I should be replacing the HVAC (may do so, but likely wont; figure $3K of repairs), renovate the baths (I have nice baths so no; just painting the cabinets for $1500 and a new shower door of $1K), reno the kitchen (no again; new appliances over 15 years should run me $4K, and painting the cabinets to cost me $1500). I painted the outside for $4K, will again in another 10 years). Maybe roof repair of $4K, but doubt I will need another entire roof. One more carpeting run in 7 years of $2500. Total with the $20K I dumped in at the start and last three years is $41.5K. Figure another $4K in misc and unseen expenses. Average of about $3K/yr over 15 years
When comparing owning to renting, need to compare like to like. For example, few landlords are going to spend $4k on kitchen appliances every 15 years. A fridge is $600, dishwasher is $400, range is $500. And a range like that will last longer than a $5000 subzero-type appliance.
I wouldn't call a kitchen update "maintenance" if the old kitchen is serviceable but outdated. It is true that an owner is more likely to spend money on house improvements than a renter, but, that's a discretionary choice.
JH
2014 Sep 9, 3:47am
It is true that an owner is more likely to spend money on house improvements than a renter, but, that's a discretionary choice
Buyers also have free will. And they tend to exercise it. IOW, if one tries to sell a serviceable but old kitchen with olive appliances and then slap a $1M price tag on the house...well...
This is not a hypothetical example, by the way.
I would definitely call upgrades "maintenance". It's called "maintaining" the house in a condition that is marketable. But you can budget it in whatever category you want. It still subtracts from your bottom line...either as payments to maintain or as lost "appreciation" opportunity value.
JH
2014 Sep 9, 4:18am
One of the fabled wives tales
Fabled? Don't all wives think that way ;-)
Actually my wife is low maintenance...a better budgeter than I. :) :)
JH
2014 Sep 9, 4:29am
hahha. My (demanding, young) kids provide a nice buffer for me. But I could see that once they are gone, we will become project kings. Actually, we do quite a bit on our rental. Painting, cleaning (both her ideas groan), and a LOT of outside work (my pet projects). As much as when we owned, except then I built a new bedroom. Won't do that on a rental haha!
JH
2014 Sep 9, 4:31am
Oh, and garage painting, shelving, and workbench...as I sit here working at it... All her ideas, I think... Wait, who said renting is any cheaper???
JH says:
"Yes, there is a clarion vision: buy when low and sell when high. "
Exactly my point! They ascribed their success to talent in decision making where it was mostly manipulated markets. The graph is awesome. Thx!
You're pretty accurate with the 401k, although I have a PSP and I401K, not 401K. I own a business and can deduct a lot to minimize my YE taxes.
As for college, no one saves more for college than retirement. $56K is more like $12K-$15K/year these days. I've been saving since 2001. You can always borrow for college, but not for retirement. Below is proof. Notice the name of the 529 plan is included in the image.
$17,500 retirement
$15,000 College
$18,000 SSI/Medicare
$48,000 Mortgage PITI
$6,500 Federal income taxes
$2,000 State taxes (assuming CA)
$2,400 Electricity/Gas/Utilities
$1,200 Cable TV/Internet
$1,200 Insurance
$12,000 Food/Entertainment (family of 4)
$123,800
I went completely light on all your expenses in your million dollar home. You are completely house poor. You have zero money at the end of the month and if your car breaks down you will have to do a heloc to buy a new one. /golfclap
The funny shit is that you think you have made good choices.
My current place is almost 14 years old. By the 15 year average I detailed, I should be replacing the HVAC (may do so, but likely wont; figure $3K of repairs), renovate the baths (I have nice baths so no; just painting the cabinets for $1500 and a new shower door of $1K), reno the kitchen (no again; new appliances over 15 years should run me $4K, and painting the cabinets to cost me $1500). I painted the outside for $4K, will again in another 10 years). Maybe roof repair of $4K, but doubt I will need another entire roof. One more carpeting run in 7 years of $2500. Total with the $20K I dumped in at the start and last three years is $41.5K. Figure another $4K in misc and unseen expenses. Average of about $3K/yr over 15 years.
Your million dollar home is starting to look like some dude making 120k/year owned it. You will have a dump in 15 years with your idiotic amounts that you think you need to spend.
bubblesitter
2014 Sep 10, 6:36am
Your million dollar home is starting to look like some dude making 120k/year owned it. You will have a dump in 15 years with your idiotic amounts that you think you need to spend.
Real(hidden) cost of home ownership, every one involved in a real estate transaction does not want a buyer to know about it.
I went completely light on all your expenses in your million dollar home. You are completely house poor. You have zero money at the end of the month and if your car breaks down you will have to do a heloc to buy a new one. /golfclap
The funny shit is that you think you have made good choices.
No, to me, the funny shit is you think I dont have any money saved up. Your estimates for taxes are way off (SSI was way less last year based on me receiving partner payments as half my income). I have a really good CPA who is very honest, but smart. Im also able to shelter a ton of money based on contributions to retirement. (in case you dont know, the tax code was written for business owners, especially small business owners). This year I saved $38K in retirement. I also am contributing $12-$15K for my kids' 529s.
You called my "bluff" and basically called me a liar about saving. I showed you the balances in my kids' 529 in post 53, but I heard crickets from you. Why? You on the other hand have not shown me anything about how you are a great money manager.
As for my place being a dump, think what you want. My place is really nice, has very nice finishes, new flooring, etc. Only thing I dont have is much of a backyard with space. The beach is my backyard.
I am really good at getting bargains. My wife is even cheaper than I am, which is one reason I married her. We are trying to raise our kids to respect money and save; so far, so good. I dont believe in materialistic crap, but have a nice home in an upper middle class neighborhood. When I go out to eat lunch, I go and eat from Wendy's value menu. (meanwhile, my college friends are investment bankers, lawyers, doctors--they aren't eating at Wendy's) My last car was a Hyundai, yet my sister who is broke drives a Beemer and before that an Infiniti. My friends are amazed, and some of them make a good amount more than me. I even end up traveling to Europe every summer with my wife and two kids to see family. Havent paid for a plane ticket to Europe since 1993 (tons of frequent flyer miles).
You are right about one thing...no money at the end of month. Sometimes it gets pretty tight, and I have to tap my business line of credit to make payroll, pay vendors, etc. However, I have no cc debt and my business line of credit is all paid off--I never carry debt for long for my business, and never for me. All my partner payments besides expenses go to retirement, college savings, and a cash cushion of nearly $100K. Im a super saver, and have been forever. Heck, when I couldnt get a job after graduating with an MBA 20 yrs ago, I delivered pizzas and still managed to sock away retirement money (ok, just $2K).
I have no reason to lie. None of you know my name, only my user name, and I dont get my jollies from praise with my user name. Not sure yup1 why you are sour grapes.
This year I saved $38K in retirement. I also am contributing $12-$15K for my kids' 529s.
You make 120k - (38k + 12k + 48k(PITI)) = 98k
Your estimates for taxes are way off (SSI was way less last year based on me receiving partner payments as half my income).
ok 9k SSI + 98k = 107k+
lahossain says
$2,400 Electricity/Gas/Utilities
$1,200 Cable TV/Internet
$1,200 Insurance
$12,000 Food/Entertainment (family of 4)
No taxes 107k + 16.8k = 123,800 HOLY F*** exactly what I said here
lahossain says
$123,800
No federal or state taxes yeah right....
Broke dick million dollar beach home owner!
You claim that you make 120k and live in a house you bought for 800k that is now worth 1M.
A. You wouldnt qualify for the loan
B. Your claims of all your savings for retirement and kids college would leave you with no money.
C. You are admitting that you live like a poor person in a million dollar home. I would hate to be your neighbor.
D. You spend way too much money on housing for your income. You are a super saver but drop 4k a month on rent or mortgage, that would be ok if you made 200k but not at 120k. You do realize you make 10k/month BEFORE taxes and you are saying spending 40% of your pretax income on a house is OK. Really.....
E. When did you save this 100k? You rented for $3800 from 07 through 11 and now you live paycheck to paycheck which means you lived paycheck to paycheck from 07-14.
You are a housing snob. You got completely lucky on your timing of buying and selling houses. Now you are on here with a stupid thread about how your house is not a terrible investment when you are house poor. In my opinion it makes you look like an idiot. You under estimate the cost of everything in your million dollar home. If you own it for even 10 more years all the shit you said you would just fix will have to be replaced. Kitchen, bathrooms, HVAC, you are talking about full replacements which in a million dollar home you are going to get raped by every contractor. Wake up. Sell your overpriced home that you cannot afford and buy a home you can afford. Think of it this way you bet on housing 2 times and nailed it through blind luck. If the market crashes like 2008 you will be looking at your new neighbors paying 2k a month for the same home that they bought for half the price and you will be kicking yourself for not bailing.
You are a housing snob. You got completely lucky on your timing of buying and selling houses. Now you are on here with a stupid thread about how your house is not a terrible investment when you are house poor. In my opinion it makes you look like an idiot. You under estimate the cost of everything in your million dollar home. If you own it for even 10 more years all the shit you said you would just fix will have to be replaced. Kitchen, bathrooms, HVAC, you are talking about full replacements which in a million dollar home you are going to get raped by every contractor. Wake up. Sell your overpriced home that you cannot afford and buy a home you can afford. Think of it this way you bet on housing 2 times and nailed it through blind luck. If the market crashes like 2008 you will be looking at your new neighbors paying 2k a month for the same home that they bought for half the price and you will be kicking yourself for not bailing.
Honestly, I could care less what you think. If you think I make too little for my house, then be a banker somewhere and turn me down for a loan. Just like the post above, I have the documentation to prove it if you really want to see it but dont want to bore you. If you think Im house poor, fine. Suit yourself. In the meantime, Im on the way to retirement and in 4-5 years, will be done with paying for my kids in state tuition, room, and board. I will also be sitting on $400K in equity, unless the market tanks. Even in 2008, it went down just 15% here. $2K/month? Where do you think I live? Compton?
Yes, I was making $240K before the downturn when the money was good. (ESPN was a client) Now, it's about half. Was able to save a lot then.
I've already said I got lucky. I also though knew when to sell and buy after reading a lot on Pat.net.
Enlighten us on your situation. Do you own or rent? How much? Any money in the bank for emergency fund, college, retirement? Im curious. Or do you just enjoy taking pot shots? Pony up or shut up, Suze Orman.
You are a housing snob. You got completely lucky on your timing of buying and selling houses. Now you are on here with a stupid thread about how your house is not a terrible investment when you are house poor. In my opinion it makes you look like an idiot. You under estimate the cost of everything in your million dollar home. If you own it for even 10 more years all the shit you said you would just fix will have to be replaced. Kitchen, bathrooms, HVAC, you are talking about full replacements which in a million dollar home you are going to get raped by every contractor. Wake up. Sell your overpriced home that you cannot afford and buy a home you can afford. Think of it this way you bet on housing 2 times and nailed it through blind luck. If the market crashes like 2008 you will be looking at your new neighbors paying 2k a month for the same home that they bought for half the price and you will be kicking yourself for not bailing.
Whats is wrong with being "house poor"? What does that have anything to do whether it is a good investment or not? I agree that the OP got luck with timing but do you think it is better to spend the money on cable TV/entertainment, etc instead? If the numbers work for the OP why be so judgmental? You also know that most of the value of the house is in the land so the replacement cost/maintenance isn't nearly as high as you think. He already stated that in his market, housing never "crashed" even in 2008. I doubt his neighbors are going to be paying 2K for rent.
Anyway I don't think that housing is really an "investment" but there are a lot worse things that you could be spending money on.
Whats is wrong with being "house poor"? What does that have anything to do whether it is a good investment or not? I agree that the OP got luck with timing but do you think it is better to spend the money on cable TV/entertainment, etc instead? If the numbers work for the OP why be so judgmental? You also know that most of the value of the house is in the land so the replacement cost/maintenance isn't nearly as high as you think. He already stated that in his market, housing never "crashed" even in 2008. I doubt his neighbors are going to be paying 2K for rent.
Anyway I don't think that housing is really an "investment" but there are a lot worse things that you could be spending money on.
Thanks Bofo, but Im not house poor. I live pretty well. Two trips overseas/yr, we drive newer cars, and save money for retirement, college, and emergency fund. We go out to eat when we want. We just dont blow money on clothes, etc. Not sure why yup1 got his attitude, but to each their own.
He is smoking something if he thinks the house next door will go to $2K. It just rented a week ago for $3500 to two engineers even though it is not something I would live in. Funny how an ocean view is worth something.
Enlighten us on your situation. Do you own or rent? How much? Any money in the bank for emergency fund, college, retirement? Im curious. Or do you just enjoy taking pot shots? Pony up or shut up, Suze Orman.
I make more than you, my house payment is less than half of yours and is a 15 year loan, I have a 1 year emergency fund, I have retirement savings and am on track to have way more income than I need at age 62, I am planning on paying off my house in the next 5 years.
I know you are full of shit because I have layed out cash light outlays for some of your expenses and I have burned up ALL OF YOUR INCOME! Pony up where are you getting the 5-10 K to live off of you cheap million dollar home "owner".
Yes, I was making $240K before the downturn when the money was good. (ESPN was a client) Now, it's about half. Was able to save a lot then.
You PERMANENTLY lost half your income 5 years ago and bought a house that you can barely afford. I stand by my statement, you are an idiot!
I know you are full of shit because I have layed out cash light outlays for some of your expenses and I have burned up ALL OF YOUR INCOME! Pony up where are you getting the 5-10 K to live off of you cheap million dollar home "owner".
Fine...here is my financial life (taxes paid, retirement saved, etc) for last year. Retirement contributions underlined. Already showed you my kids' 529. I dont know too many people that are worried about their finances and contributing these amounts to retirement and 529 plans.
You do the same, chief. (bet you cant and wont)
Congrats on your financial success! I won't flatter you with the term idiot.
129332 (way to come up with 10k more income)
-17500 401k
-5500 IRA (which I don't think is legal with a 401k)
-4590 FICA
-600 SDI
-5500 FIT
-2000 SIT
-48000 PITI
-15000 529
-12000 Food/ENT
-4800 Utilities/cable/internet/insurance
+13842
-15000 profit sharing that I will assume comes from your company and not out of your 129k salary although I will point out that you made it seem as though it came out of salary.
You will also notice that I only allocated $1000/month for food/ent/household goods/pet care/pet food/kids clothes/your clothes/haircuts/makeup/gas/maintenance/repairs/travel/and your trips to the Wendy's value menu..........
+13842
-15000 profit sharing that I will assume comes from your company and not out of your 129k salary although I will point out that you made it seem as though it came out of salary.
You will also notice that I only allocated $1000/month for food/ent/household goods/pet care/pet food/kids clothes/your clothes/haircuts/makeup/gas/maintenance/repairs/travel/and your trips to the Wendy's value menu..........
You overshot the 529 by $3000; it's $15K if I decide to max it out or not; some years might make $124K, some $132K, other $120K, so then it is $12K for the 529. Our $12K is more like $6K for Food/ent; $3800 for Util, cable, internet, etc. I have an LLC so everything passes through to me as the owner for the profit sharing.
The IRA is not illegal. There are income limitations:
http://money.usnews.com/money/retirement/articles/2014/01/06/how-to-max-out-your-retirement-accounts-in-2014
In the end, calling me a liar over $3K in a year is splitting hairs. Im still contributing to all these things and I proved it to you.
What's your point? I can't afford my house, yet Im contributing to all the things financial experts tell you to do? I guess if I were eating cat food, you would be right, but Im not...
This thread has gotten way off the original post. I said that sometimes buying a home is a good investment, other times not. You derailed it by calling BS, and I provided proof otherwise.
Now, again, prove to me how successful you are. Im guessing you are the one lying since someone as laden with money as you wouldnt care if someone else was doing equally as well with saving and their home.
BTW, my wife decided to work part time to raise our kids. She is now going back full time and switching jobs. That should at least double her income since her pre kid salary was 3.5X the current. Still want to say Im overspending?
You will also notice that I only allocated $1000/month for food/ent/household goods/pet care/pet food/kids clothes/your clothes/haircuts/makeup/gas/maintenance/repairs/travel/and your trips to the Wendy's value menu..........
Our $12K is more like $6K for Food/ent;
$500/month for a family of 4? That is $1.38 per meal per person. You are a fucking liar. SNAP (FOODSTAMPS) pays $604/month for a family of 4 in California. You are living off 80% of what a broke dick homeless, living in the car single mother of 3 lives off of, but you are in a million dollar home.
SO JUST IN CASE YOU STILL DON'T GET IT YOU SAID YOU ARE GOOD AT MATH, YOUR MATH DOES NOT ADD UP, THAT MEANS YOU ARE LYING BECAUSE NUMBERS DON'T LIE!
BTW, my wife decided to work part time to raise our kids. She is now going back full time and switching jobs. That should at least double her income since her pre kid salary was 3.5X the current. Still want to say Im overspending?
So you have had this discussion and only now you are going to divulge that yes in fact you have more income, which was my whole fucking point. ASS!
All with a salary between me and my wife of $120K/yr.
You keep changing the facts!
So you have had this discussion and only now you are going to divulge that yes in fact you have more income, which was my whole fucking point. ASS!
What exactly again is your point? The thread is about whether it is better to rent or own. Not about my household budget and whether I can afford to contribute to a 401K and 529 or not.
And cool it with the name calling (ASS, IDIOT, LIAR, etc). It's my thread, I can delete all your comments, even the polite ones, if I want. You dont like that, start your own thread. Allow me to remind you of Patrick's rules:
http://patrick.net/?p=1208339
Users that deliberately insult other users will be suspended for a day or more. Please use the dislike link to mark personally insulting comments.
YUP1,
We get your point. Waitingtobuy got incredibly lucky with his timing. His house is not too expensive for him because he had 300k to put into it when he bought it. For another joe making 120k an 800k house is out of reach.
yup1 says
You keep changing the facts!
My point is that his home is still way too expensive for him. He is living like a poor guy in a million dollar home. He is house poor and has no clue that he is house poor. His neighbors they know he is house poor. His kids they know. His wife oh yeah she knows.
Keep on bragging about your paper gains and how you buying a house was a great investment. I will keep laughing at you saying your food and entertainment budget for a family of 4 is $500/month and with a straight face claiming you are not house poor........
My point is that his home is still way too expensive for him. He is living like a poor guy in a million dollar home. He is house poor and has no clue that he is house poor. His neighbors they know he is house poor. His kids they know. His wife oh yeah she knows.
OK, let me do some basic math for you.
$129,332 of income - $12690 in FICA, SIT, FIT, and SDI = $116,642
$116,642 - $48,000 in PITI = $68,642/yr leftover after taxes and housing
That's $5,720/month to spend on food, clothing, transportation, utilities, etc
Congratulations. You've just redefined being house poor. Oh the humanity! Fortunately, my wife and kids are taking poverty in stride. And the neighbors are chipping in with free food too.
You do realize that my contributions to retirement are VOLUNTARY, right? I do it to lower my tax exposure. 529 is also voluntary.
Would you recommend I live in a $2500/month 2 BR apt in my neighborhood so I only have $7,220/month leftover?
OK, let me do some basic math for you.
$129,332 of income - $12690 in FICA, SIT, FIT, and SDI = $116,642
$116,642 - $48,000 in PITI = $68,642/yr leftover after taxes and housing
That's $5,720/month to spend on food, clothing, transportation, utilities, etc
How is it that you only spend $12,690 in taxes? Also, where is the $17,500 401K money in your calculation? I genuinely want to know because I make significantly more, max out my 401k, my rent is only $2950/month, but end up with roughly the same $5,720 per month after taxes, 401k, healthcare and housing.
Same here. Something is off with your calculations.
For PITI... only the interest and property taxes are deductible, not the principal. In your calculations you reduce all of it pre-tax.
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I know the history of this site in terms of many being in favor of renting vs owning. My own experience with owning vs renting is different.
I live in a beach community in LA. Bought in 1999 for $329K, sold in 2008 for $620K (after renting out this place for one year to college students). At the downturn, houses here lost maybe 15% in value, tops.
Rented from 2007-2011. Burned through $180K in rent, or $3800/month.
Bought again in 2011 for $799K. My place now has an approximate valuation of $1M to $1,050,000. To rent a place similar to mine, we are looking at about $4K/month.
So in a period of 39 months, my place climbed in value (on paper, mind you) $200K-$250K (let's say $225K). I put in an additional $20K in improvements, maintenance, etc. My property taxes are $850/month, but I get nearly all of that back from the tax deduction for home loan interest and property tax deduction. My mortgage runs me $3077/month, and that amount is on a 30 year loan at 4.25%. Principal paydown each month is about $1K. Interest alone is about $2100/month.
If I sold it today, after 5% commission, I would net $175K of increase in property value. Taking out $20K of improvements and maintenance, it is now $155K. Over 39 months, that's about $4K/month in profit. Again, assuming I sold today, I am making about $1900/month ($4000/month profit-$2100/month in interest) to live here.
In the same period, I would have spent $156,000 in rent. That's a $230K swing in just 39 months! (making $74,000 vs paying $156,000) Even if I dont sell now, I will have spent $102K in interest and improvements, which is better than $156K in rent.
I've been incredibly lucky with real estate. (had some sense on buying and selling at the right time too, but better to be lucky than good)
If I stay here for the next 27 years of my mortgage, other than property taxes, I'm locked in at $3077/month + maintenance on a place that is now 13 yrs old. Who knows what $4k/month in rent will look like in 2041, but it will be a lot more than $4K!
For me, owning has been much better than renting. Each individual has a different experience. One size does not fit all.
#housing