patrick.net

Already on my long list of reasons not to have kids.

brilliant thanks everybody for the advice. really appreciate it! esp Therapin - will check out posts from those guys you mentioned.

Living in Oslo, Norway fyi. Housing market here is completely nuts see section "housing reality check" in:
http://lettersfromnorway.com/norwegian-economy-2017-black-swans-hovering-overhead/

However,... whiff of a correction coming in the next few months as they've tightened the restrictions on loan-to-income ratio and also capital requirements for investment buyers means less buyers in the market but doesnt make me feel any better about buying something that's overpriced.

Either way great to know from ppl with kids that buying is better as it's been really stressing me out for a while what to do... btw we definitely plan on being able to finance our entire life on a single salary.

brno says

Living in Oslo, Norway fyi.

I was just there! Have to say it's worth a lot to live in such a clean, beautiful, prosperous place.

Then again, maybe I would not survive the winter. But still.

Strategist says

bob2356 says

If the rent to house price ratio is favorable to renting ( you can rent for less than you can mortage) then rent and put the difference in the bank (the key point to the exercise), If it's favorable to buying then buy. This isn't rocket science. Houses are just big wooden boxes.

Bad formula. If you don't account for price gains, you will get wrong results.

Garbage in, garbage out.

Not just "price gains' but rent increases too. it cant just be a single snapshot in time. It must be weighed against the expected length of ownership/tenancy. Otherwise you get this (2008 renter with expected 25 year stay):

2008 rent = 2000
2008 buy = 2300
Formula choice = rent

2013 rent = 2400
2013 buy = 2600
Formula choice = rent

2017 rent = 2800
2017 buy =2850
Formula choice = rent

2020 rent= 3100
2020 buy =3000
Formula choice = buy

Here the dipshit who decided not to buy at $2,300 a month is somehow the "winner" when he purchases 12 later and pays $3,000? Nope. The "correct" answer is travel back in time and kick the shit out of your 2008 self for not buying at the bottom. Absent that, assuming you can afford it, the longterm buyer should just buy at the lowest price you can and hope for the best. It sucks but it beats renting for life or traveling back in time to kick your own ass.

One thing I didn't really acknowledge when I was renting, was that renting is throwing money away. Whatever I put into my mortgage, I have something of value-unless you live in detroit. Here prices don't go up much-well after I bought, it went up 30%-which is unheard of. But even if you are even, you have a couple of hundred grand at the end.

Now with trump's proposed changes -inability to deduct property taxes and mortgage interest-things might change.

P principal = savings with long term growth
I interest = fed tax deduction
T tax = fed tax deduction
I insurance = constant

R rent = disposed income
I insurance = constant

there are cases where renting makes sense, but not very many. one case is a temporary living arrangement. another case is the reason why patrick.net was popular - a global financial crisis and period of uncertainty.

lostand confused says

Now with trump's proposed changes -inability to deduct property taxes and mortgage interest-things might change.

i do not believe that applies to one's primary residence?

Therafin says

Here the dipshit who decided not to buy at $2,300 a month is somehow the "winner" when he purchases 12 later and pays $3,000? Nope. The "correct" answer is travel back in time and kick the shit out of your 2008 self for not buying at the bottom. Absent that, assuming you can afford it, the longterm buyer should just buy at the lowest price you can and hope for the best. It sucks but it beats renting for life or traveling back in time to kick your own ass.

I could not agree more. They always said buying your own is the best investment you can make. They were always right.
Real estate investments were almost always the best investments I ever made. Nothing beats the buy and hold strategy in real estate.

also, if you live in your primary residence for at least 2 years, then married couples can keep up to around $500,000 TAX FREE in appreciation gains from the sale of that property.

landtof says

lostand confused says

Now with trump's proposed changes -inability to deduct property taxes and mortgage interest-things might change.

i do not believe that applies to one's primary residence?

It won't matter on rental property either, because interest paid is an expense. I believe it applies to second homes.

Strategist says

bob2356 says

If the rent to house price ratio is favorable to renting ( you can rent for less than you can mortage) then rent and put the difference in the bank (the key point to the exercise), If it's favorable to buying then buy. This isn't rocket science. Houses are just big wooden boxes.

Bad formula. If you don't account for price gains, you will get wrong results.

Garbage in, garbage out.

How many houses have you owned and how many do you currently own that you based this opinion on? All real estate is local. What makes sense in one place might not make any sense at all in another. You have to do your homework. Even then possible price gains are just a guessing game.

The more price gains the better the ratio of rent to price. Rents increases always lag way behind price increases in a rising market. Invest the money you sock away every month and smile. You can't invest price gains without selling the house. I did that with a 1.5 million house on the beach 2008-2011 putting away money every month while watching the price of the property drop and drop. Came out very, very nicely thank you.

Area's where rents are high relative to housing costs (not the price, the overall cost) don't usually have much price upside. Sometimes renters turn into owners, but unless there is a influx of people then you are taking renters out of the market as fast as you are taking rental properties out of the market. Even so if you will be paying less for PIT than rent so you might as well go for it. Bought a house when I came back to the states because the rents were absurd in the area I moved to (overly protective tenant laws killed the rental market, people let houses sit empty until they sell them rather than rent) vs the cost of owning. I took a 10 year mortgage because even with outrageous taxes and maintenance t was still cheaper than renting.

I don't believe in counting on price gains for my own house or investment properties. Maybe in CA but I'm never going to be in the CA market. I invest in cash flow.

bob2356 says

I don't believe in counting on price gains for my own house or investment properties. Maybe in CA but I'm never going to be in the CA market. I invest in cash flow.

@bob2356
That's a strategy many go for. Whatever works for you. My strategy has always been to invest in properties that have rising populations, attractive climate, and limited desirable land areas, even though the gross rent multipliers tend to be very high. All my rental homes are in OC with never a regret of buying them. I also invest in vacant residential lots mostly in So Cal. The prices of vacant lots are very volatile, but they do have advantages of virtually no maintenance. The risk that comes with property investments, especially vacant lots, does not bother me.
I think the best place to buy property is in coastal Florida. The gross rent multipliers are much better than California, and the population increase virtually guarantees steadily rising property prices. If i did not have roots in California, I would leave right away for Florida.

I rented with kids. Didn't find it all that difficult. * Apt with one kid, then rented a house in the same neighborhood when the second arrived.

*) except having to take my last landlord to court for return of security deposit.

Had to leave our rental in the middle of winter 2015 with a three year old and a 2 month old because the property management company had to fix dry rot in the bathroom subfloor, RIGHT FUCKING NOW! Didn't matter that it was present when we moved in 2 years earlier and was probably their many years before that. They could've fixed it in between tenants but no. Why do that? That makes too much fucking sense!

They were going to remodel the bathroom and we were told by the idiot dolt of a maintenance manager that it would take 2 weeks max. I tried to hold them off until spring when my son was a little older and the temp was warmer but no deal. I was threatened with eviction from the assistant maintenance manager if we didn't leave as told. To top it off we were told we would get no help in relocating as they are not responsible for finding us a temporary place to live or to provide any money to assist with obtaining a temp residence. I coordinated a vacation and a stay with a relative in the North Bay for the two weeks to stay out of the apartment. We moved the necessary kids things and some clothes to the North Bay and were still allowed to enter the apartment as needed.

I should've known they would fuck this project up like every other maintenance call they responded to during our time living there. Sure enough a couple days after leaving we stopped by to get some things and noticed they hadn't started work. Me being a civil engineer I immediately think about project duration. WTF is going on I ask myself and call the property management company to follow up on progress. Finally after calling them for two days, now nearly a week into a two week project, I get a call back saying they don't have the fucking permits yet! Unbelievable, but par for the course with this shit show of a property management company. Long story short it took them 2.5 months to complete a "2 week" bathroom remodel.

During this time the focus became to get the fuck out of this rental. Although they never mentioned this to me, we continued to pay rent the whole time we were out so they couldn't evict us. We ended up purchasing a home in central contra costa toward the end so when they told us we could go back I told them to fuck off and that we were moving. We got 2.5 months of free rent while we did some quick remodeling to the house and moved our shit.

Lesson learned: Never again will I be a tenant, these assholes scarred me for life. Doing this without kids would have been tough but with kids made this a real PITA.

By the way if anyone is interested we were renting from Gallagher and Lindsey. Believe me, the reviews of them on yelp and other places are the truth. Before we moved I read the reviews and figured we can deal with their shit but never in a million years did I expect to have to deal with what we had to deal with. Stay the fuck away from those assholes if you're in Alameda.

Strategist says

I think the best place to buy property is in coastal Florida.

That's because you don't believe in rising sea levels. I think coastal appreciation will be very limited in the next couple of decades.

rigidmember says

Lesson learned: Never again will I be a tenant, these assholes scarred me for life. Doing this without kids would have been tough but with kids made this a real PITA.

Humans don't take well to having their caves forcibly moved on them.

I second the "buy" if you've got kids thing. When they are really young, not a very big deal. Soon as they are school age, you don't want to be messing with that. Destabilizing enough for an adult. Go put down some roots somewhere. Buying into a location, a community, it's something very very different than being a renter.

tr6 says

Strategist says

I think the best place to buy property is in coastal Florida.

That's because you don't believe in rising sea levels.

I don't think rising sea levels is a problem to the extent people think it is. Besides, a few years from now pollution will start declining due to clean energy.

tr6 says

I think coastal appreciation will be very limited in the next couple of decades.

Why is that? Coastal properties are the most desired.

lostand confused says

One thing I didn't really acknowledge when I was renting, was that renting is throwing money away. Whatever I put into my mortgage, I have something of value-unless you live in detroit.

You should also acknowledge that a mortgage is simply renting money.

Interest is the rent on borrowed money exactly the same way that rent is the rent on a borrowed house. You get to use the capital (the money or the house) for a while, for a price.

Once you understand that, you can start to make valid calculations as to the relative value of renting vs owning.

The next step is to understand that your equity in a house is exactly like your equity in the stock market -- except that the stock market has a far greater historical return than housing equity does.

So (renting + stock market) make be less, equal, or more than (paying interest + bet on housing equity).

It depends on the numbers. Owners who overpaid during the bubble frequently ended up with zero and a damaged credit record, whereas if they had rented a house instead of renting money, and then put the equity that they would have put in a monthly mortgage check into the stock market instead, they would have ended up with something.

It all depends on the numbers.

Rew says

When they are really young, not a very big deal. Soon as they are school age, you don't want to be messing with that. Destabilizing enough for an adult. Go put down some roots somewhere.

Plenty of families with school age children move with no problem at all. Like everyone in the military for an example. As a military brat I did the move every 2 years ting. No big deal. What's destabilizing abut moving?

rando says

You should also acknowledge that a mortgage is simply renting money.

Interest is the rent on borrowed money exactly the same way that rent is the rent on a borrowed house. You get to use the capital (the money or the house) for a while, for a price.

You need to acknowledge that when you rent you are paying back someone else's rented money. A big very point.

rando says

So (renting + stock market) make be less, equal, or more than (paying interest + bet on housing equity).

It depends on the numbers. Owners who overpaid during the bubble frequently ended up with zero and a damaged credit record, whereas if they had rented a house instead of renting money, and then put the equity that they would have put in a monthly mortgage check into the stock market instead, they would have ended up with something.

Why would someone who overpaid during the bubble end up with a damaged credit record? Only if they overextended in the first place, used the house as a piggy bank, and were forced to sell or walk away. That kind of person wouldn't do any better renting since they would just piss any extra money anyway. If they weren't overextended they can just continue to pay the mortgage and live in the house. It would suck being under water, but long term it would be fine.

then put the equity that they would have put in a monthly mortgage check into the stock market You do know there is very little equity the first 10 years of a 30 year mortgage don't you? You don't hit 50% equity until the 20 year mark. After 10 years on a 30 year 200k at 4% the equity is $36,000. The first 5 year is $17,500. That's not a hell of a lot of stocks. Unless you can pick the next microsoft, facebook, amazon you aren't going to be retiring early on those numbers.

I've never had a 30 year, I only go with 10 or 15 year mortgage. My current mortgage is 10 year at 2.65% and didn't pay any points. I could have paid cash but I'm getting 10%+ (considerably plus where I'm buying right now) net yield in rentals and paying the bank 2.65% for my mortgage. Duh.

I don't have a dog in this fight. My (now my wife's) consulting career makes moving every 1-3 year a fact of life the last 35 years. With kids the last 15. I buy where it makes sense to buy and I rent where it makes sense to rent. Houses are just big wooden boxes.

bob2356 says

As a military brat I did the move every 2 years ting. No big deal. What's destabilizing abut moving?

Look what happened to you?

Strategist says

bob2356 says

As a military brat I did the move every 2 years ting. No big deal. What's destabilizing abut moving?

Look what happened to you?

Having a very successful career, living all around the world, and managing to have an immense amount of fun pursuing large quantities of things like surfing, skiing, windsurfing, wakeboarding, kitesurfing, and hard partying along the way is a bad outcome some how? Not to my way of thinking.

bob2356 says

Strategist says

bob2356 says

As a military brat I did the move every 2 years ting. No big deal. What's destabilizing abut moving?

Look what happened to you?

Having a very successful career, living all around the world, and managing to have an immense amount of fun pursuing large quantities of things like surfing, skiing, windsurfing, wakeboarding, kitesurfing, and hard partying along the way is a bad outcome some how? Not to my way of thinking.

I'm glad for you, and i would like to enjoy life even more. Next Saturday I am going with my sister to jump out of a plane, and am looking forward to it.

Strategist says

Next Saturday I am going with my sister to jump out of a plane, and am looking forward to it.

I was never inspired to jump out of a perfectly good air plane. Dancing on the water/snow and being very good at things that few people can do well is where it's at for me. Like pretty much all my friends I've arranged my work life around my play life.