patrick.net

Rent4Ever says

you should definitely try to maximize deductions to gain wealth?

A problem with this is that it assumes one will be in a high tax bracket for the duration. For most taxpayers, an extended period of unemployment will bring their bracket down so that less of the interest (and property tax) payment is deductible. Means more money out of pocket.
It's another card in that "house" of cards.

Rent4Ever says

I would rather take all money (downpayment, taxes, insurance, lower rent payments, etc) and invest it in a well diversified portfolio getting a CONSERVATIVE 5% a year and end up way ahead than the home that appreciates at about the same rate as inflation.

Yes, but you can't live in your portfolio...

B.A.C.A.H. says

For most taxpayers, an extended period of unemployment will bring their bracket down so that less of the interest (and property tax) payment is deductible.

So, you base your financial decisions on a forecast of being unemployed for extended period?

I would think being unemployed for a significant amount of time makes all planning irrelevant.

tatupu70 says

being unemployed for a significant amount of time makes all planning irrelevant.

I don't agree. One can build dealing with that contingency into their overall planning.

Doing so is one reason that my partner and I don't quiver and quake at every scowl our bosses make. On the other hand we see, too often, folks with high living costs relative to their nest egg, get stressed out. Some people don't deal with stress too well.
http://chitralekhan.wordpress.com/2008/11/16/companies-blog-about-their-layoffs-laid-off-employee-driven-to-killing-ceo/

B.A.C.A.H. says

I don't agree. One can build dealing with that contingency into their overall planning.

I agree, but I certainly wouldn't make tax decisions with the assumption that I will be laid off for an extended period. Unless you think the probability is high....

Make sure you have a sufficient nest egg to account for that possibility, yes. Use it as an excuse to never buy a house, no.

tatupu70 says

I agree, but I certainly wouldn't make tax decisions with the assumption that I will be laid off for an extended period. Unless you think the probability is high....

I don't disagree with you on that one. However, nor would I suggest to others that they "lockin" their expected cost of living as depending on the highest tax brackets to make it all work.

tatupu70 says

Make sure you have a sufficient nest egg to account for that possibility, yes. Use it as an excuse to never buy a house, no.

"excuse"? That insinuates it is normal and expected for everyone to buy a house (even if it involves/requiring borrowing with tax deductible interest payments), unless they are excused with a permissible excuse. (Are you a Realtor®?)

Owning/buying a house may be best for you but it is not for everyone. Not everyone needs

an excuse to never buy a house

dodgerfanjohn says

SubOink says

Who knows how to live life right? Nobody. It's a complex equation, in hindsight you are always smarter. That's also why it makes no sense to overanalyze everything because it comes different anyways.

Requiring 20% downpayment would not allow people to make such important decisions so lightly.

agreed.

SubOink says

dodgerfanjohn says

SubOink says

Who knows how to live life right? Nobody. It's a complex equation, in hindsight you are always smarter. That's also why it makes no sense to overanalyze everything because it comes different anyways.

Requiring 20% downpayment would not allow people to make such important decisions so lightly.

agreed.

20% seems like the bare minimum people should need in order to be even considering buying. If it was my island, I'd have it at 50% or higher. That'll wipe out the hint of any foreclosures. People need skin in the game, otherwise it is really just a virtual game. Dumb people running important decisions if you ask me. All for the sack of fake wealth.

marquismark says

Rent4Ever says

I would rather take all money (downpayment, taxes, insurance, lower rent payments, etc) and invest it in a well diversified portfolio getting a CONSERVATIVE 5% a year and end up way ahead than the home that appreciates at about the same rate as inflation.

Yes, but you can't live in your portfolio...

But you can take the dividends you are receiving and pay some underwater home owner rent, so he can relocate to his new job.

RentingForHalfTheCost says

marquismark says

Rent4Ever says

I would rather take all money (downpayment, taxes, insurance, lower rent payments, etc) and invest it in a well diversified portfolio getting a CONSERVATIVE 5% a year and end up way ahead than the home that appreciates at about the same rate as inflation.

Yes, but you can't live in your portfolio...

But you can take the dividends you are receiving and pay some underwater home owner rent, so he can relocate to his new job.

Yes...but you probably can't do it and be married. Few women would put up with it.

I would also caution you that we won't always be in a down economy, either. California has been known since inception for its booms and busts.

RentingForHalfTheCost says

But you can take the dividends you are receiving and pay some underwater home owner rent, so he can relocate to his new job.

Actually, there is no way in hell you could do that. The math doesn't even come close to adding up.

rootvg says

Yes...but you probably can't do it and be married. Few women would put up with it.

I would also caution you that we won't always be in a down economy, either. California has been known since inception for its booms and busts.

I don't live in CA. I am married, rent a house on a lake with a landlord that hasn't raised rent in the 5 years I've been here and housing costs (rent, utilities, etc) of 8% of our income. Wife wasn't always onboard with the longterm renting idea, but after seeing with her own eyes the mistakes people have made buying and being stuck in a bad job and an upsidedown mortgage and what we've gained because we didn't buy, she is onboard 100% now. I'm not saying I will never own a home, but definitely not until a house represents about 10-20% of our networth.

I simply don't view a house as an investment, it is a thing, a place to live. I am someone that avoids buying things in general. Money is freedom, and that is what I want, freedom from work and the daily grind. Buying a house will just ensure that I work to 65.

RentingForHalfTheCost says

marquismark says

Rent4Ever says

I would rather take all money (downpayment, taxes, insurance, lower rent payments, etc) and invest it in a well diversified portfolio getting a CONSERVATIVE 5% a year and end up way ahead than the home that appreciates at about the same rate as inflation.

Yes, but you can't live in your portfolio...

But you can take the dividends you are receiving and pay some underwater home owner rent, so he can relocate to his new job.

Exactly my point! With enough $ in a diversified portfolio you can absolutely do this. That is true freedom, living off yourself and not a paycheck.

Rent4Ever says

Exactly my point! With enough $ in a diversified portfolio you can absolutely do this. That is true freedom, living off yourself and not a paycheck.

So, you're saying it's better to have enough money so you don't have to work? No kidding. That's for that insight.

How does it relate to the rent vs. buy decision?

tatupu70 says

Rent4Ever says

Exactly my point! With enough $ in a diversified portfolio you can absolutely do this. That is true freedom, living off yourself and not a paycheck.

So, you're saying it's better to have enough money so you don't have to work? No kidding. That's for that insight.

How does it relate to the rent vs. buy decision?

Because you can make more money through a diversified portfolio than you can through buying a house.

Rent4Ever says

Because you can make more money through a diversified portfolio than you can through buying a house.

Of course you can. No sane person buys a house as an investment solely for the capital appreciation.

The vast majority buy a house as shelter.

Investors buy housing for the cash flow (rent).

tatupu70 says

Rent4Ever says

Because you can make more money through a diversified portfolio than you can through buying a house.

Of course you can. No sane person buys a house as an investment solely for the capital appreciation.

The vast majority buy a house as shelter.

Investors buy housing for the cash flow (rent).

Its not true that most people who mortgage a house in high(over?) priced areas....which is what we are discussing here...mortgage the house for shelter. Even now, almost everyone mortgaging a house in high priced coastal CA is doing so because they believe its a great investment. You might not get people to publicly admit it....they've been shamed into keeping it quiet...but they still stubbornly cling onto false beliefs, even in the face of a declining market and other negative prognosticating facorts.

dodgerfanjohn says

Even now, almost everyone mortgaging a house in high priced coastal CA is doing so because they believe its a great investment. You might not get people to publicly admit it

I'm not sure how you know what almost everyone in high priced coastal CA thinks. Regardless, they are likely looking at the rent vs buy over a longer time period and not solely capital appreciation of the house vs. other investments.

tatupu70 says

dodgerfanjohn says

Even now, almost everyone mortgaging a house in high priced coastal CA is doing so because they believe its a great investment. You might not get people to publicly admit it

I'm not sure how you know what almost everyone in high priced coastal CA thinks. Regardless, they are likely looking at the rent vs buy over a longer time period and not solely capital appreciation of the house vs. other investments.

We bought because we got sick of giving away thousands of dollars each year not only in rent but taxes as well. We have two six figure incomes and each year it's more brutal than the last.

rootvg says

tatupu70 says

dodgerfanjohn says

Even now, almost everyone mortgaging a house in high priced coastal CA is doing so because they believe its a great investment. You might not get people to publicly admit it

I'm not sure how you know what almost everyone in high priced coastal CA thinks. Regardless, they are likely looking at the rent vs buy over a longer time period and not solely capital appreciation of the house vs. other investments.

We bought because we got sick of giving away thousands of dollars each year not only in rent but taxes as well. We have two six figure incomes and each year it's more brutal than the last.

#1.) If you already bought, why are you still posting here and why would you care at this point about RE value?

#2.) Making a six figure income, you work 50-60 hours per week. How do you even have time to post here?

#3.) Is the decline in value worth the tax savings? 5% drop per year on a million dollar house is $50K the first year.....

tatupu70 says

dodgerfanjohn says

Even now, almost everyone mortgaging a house in high priced coastal CA is doing so because they believe its a great investment. You might not get people to publicly admit it

I'm not sure how you know what almost everyone in high priced coastal CA thinks. Regardless, they are likely looking at the rent vs buy over a longer time period and not solely capital appreciation of the house vs. other investments.

Spun like a true realtor. Good job.

dodgerfanjohn says

Spun like a true realtor. Good job.

I think you are giving realtors way too much credit...

It's not spin. It's basic finance. You think doing a rent vs. buy calculation is spin?

I post here because I want to. I'm not chronically angry at the world but it's entertaining to watch people who are.

We each make what we make working about fifty hours a week, much of it from home.

The area we bought in is almost completely homes in the 750K range but ours was a fixer and we got it for considerably less.

dodgerfanjohn says

#3.) Is the decline in value worth the tax savings? 5% drop per year on a million dollar house is $50K the first year.....

I mentioned this so many times before. Even seasoned bulls do underestimate the compounding effect of that loss over the period of loan(probably 30 years) - in some cases,too much focused on positive cash flow. In this case a loss of $50K,how much would that money have made if you had that money in your hand and invested else where - over the period of 30 years :)

Why are people who can't afford a house so desperate to obtain 30 yrs of debt?

It's because there are a lot or really stupid people out there. Always have been and always will be.

bubblesitter says

dodgerfanjohn says

#3.) Is the decline in value worth the tax savings? 5% drop per year on a million dollar house is $50K the first year.....

I mentioned this so many times before. Even seasoned bulls do underestimate the compounding effect of that loss over the period of loan(probably 30 years) - is some cases,too much focused on positive cash flow. In this case a loss of $50K,how much would that money have made if you had that money in your hand and invested else where. :)

Yep. Opportunity cost is a bitch when you're on the wrong side of the decision.

I also have a hard time understanding why people buy large houses to begin with. No one, and I mean not a single married couple without kids needs a 2,000+ square foot home. It's absolutely absurd why anyone needs that much space except to store stuff/junk that they've acquired throughout their life. Even with 2 young kids, you don't need a 2,000 square foot house. The only time you actually might need that kind of space is when the kids are 12-18 and young adults that need privacy, etc. But that is only 6-8 years. Once they are off in college, you don't need a big house. People let their STUFF determine how big a house they need to live in.

Rent4Ever says

Yep. Opportunity cost is a bitch when you're on the wrong side of the decision.

I also have a hard time understanding why people buy large houses to begin with. No one, and I mean not a single married couple without kids needs a 2,000+ square foot home. It's absolutely absurd why anyone needs that much space except to store stuff/junk that they've acquired throughout their life. Even with 2 young kids, you don't need a 2,000 square foot house. The only time you actually might need that kind of space is when the kids are 12-18 and young adults that need privacy, etc. But that is only 6-8 years. Once they are off in college, you don't need a big house. People let their STUFF determine how big a house they need to live in.

You need to watch a few episodes of Hoarders.

rootvg says

tatupu70 says

dodgerfanjohn says

Even now, almost everyone mortgaging a house in high priced coastal CA is doing so because they believe its a great investment. You might not get people to publicly admit it

I'm not sure how you know what almost everyone in high priced coastal CA thinks. Regardless, they are likely looking at the rent vs buy over a longer time period and not solely capital appreciation of the house vs. other investments.

We bought because we got sick of giving away thousands of dollars each year not only in rent but taxes as well. We have two six figure incomes and each year it's more brutal than the last.

Funny, I sold because I got tired of losing equity year over year and paying property taxes. Like you we have two six income figures and each year now is better than the last rather than worse when we owned. ;)