Author Topic: Overheard at Work 2  (Read 757380 times)

Kris

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Re: Overheard at Work 2
« Reply #1900 on: December 06, 2019, 11:02:25 AM »
Not from work, just read, but still, a finance tip:

Trouble with spending too much? Make three categories.
1. Needed 2. Wanted 4. Superfluous
and make a budget for each.

Wait! WTF? Budget?

If you need, buy. You cannot not buy if you need, after all. Why a budget? But even more - a budget for things you _don't_ want? Why would you lose money for things you don't want???

I very often get the vibe from people in our culture that they buy things just because... I dunno, because they haven't bought anything yet today? I think there's a not-insubstantial percentage of people for whom the idea of not spending money for an entire day would make them feel panicky/anxious.

imadandylion

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Re: Overheard at Work 2
« Reply #1901 on: December 06, 2019, 12:07:20 PM »
Not from work, just read, but still, a finance tip:

Trouble with spending too much? Make three categories.
1. Needed 2. Wanted 4. Superfluous
and make a budget for each.

Wait! WTF? Budget?

If you need, buy. You cannot not buy if you need, after all. Why a budget? But even more - a budget for things you _don't_ want? Why would you lose money for things you don't want???

My criticism with advice like that which are similar to those pie charts you see on Pinterest on how to budget your money is that they always include a "spending" budget. They usually like to suggest a percentage of what your monthly/biweekly income should go towards. Basic living expenses make sense, and savings, but they always include discretionary spending and this kind of leads to normalizing the amount of spending. More often than not, if a total money "beginner" tries to search on google questions to learn about money management, there are a slew of articles and images depicting the suggested ranges to be spent on certain things. There's a lot of information that tries to be helpful but somehow ends up doing more harm...

These "budgets" typically include things like transportation, entertainment, and "miscellaneous." I honestly believe that some people take this to mean, that if they look at their finances or otherwise tweak their monthly spending to fit those suggested percentages per category that they're doing well or "OK" with their money. Like for instance, "Oh, my rent is 25% of my budget! That fits in! Great. No need to change anything here." That train of thought coupled with the fact that a lot of people just haven't been exposed to very many ideas and the opportunities that saving vastly more money can afford, it's hard for them to think there's something better. A lot of people do what they think is best based off what they know at the time, often without question or consideration that there could be a better or different way.

Also, consumerism is normalized, so it's not really so surprising that people are buying things they don't need or are having issues distinguishing that. A lot of times people won't realize this until they're in debt.

merula

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Re: Overheard at Work 2
« Reply #1902 on: December 06, 2019, 12:47:34 PM »
To add on to this, the entire concept of retirement savings in mainstream financial media is purely as a percentage of current income. You save 5-10% of your income for retirement, you retire when you've saved 20, 25, 30 times income. No one mentions spending. Why? Because the default is that you're spending every single penny you have outside of that 5-10% of retirement savings, and you couldn't possibly stop spending that much after you retire, so retirement income needs to be your prior income less retirement savings and any obviously work-related expenses like dry cleaning.

Wrenchturner

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Re: Overheard at Work 2
« Reply #1903 on: December 06, 2019, 12:49:57 PM »
Not from work, just read, but still, a finance tip:

Trouble with spending too much? Make three categories.
1. Needed 2. Wanted 4. Superfluous
and make a budget for each.

Wait! WTF? Budget?

If you need, buy. You cannot not buy if you need, after all. Why a budget? But even more - a budget for things you _don't_ want? Why would you lose money for things you don't want???

I very often get the vibe from people in our culture that they buy things just because... I dunno, because they haven't bought anything yet today? I think there's a not-insubstantial percentage of people for whom the idea of not spending money for an entire day would make them feel panicky/anxious.

I'm fascinated by this too.  I agree with your point about a  consumerist mindset.  It also seems that people buy ideas or emotions or something, rather than items.

Consider a car loan: I work with dozens of people who buy new cars every couple years, presumably rolling over their loans.  This seemed silly to me because I didn't understand why someone would pay five figures for heated seats or new rims, when their existing car does 95% of the new one.  But if you only look at payments, you might think it's worth it. (Of course, it isn't)

So really it comes down to the fact that people don't save the capital to buy an asset like a car, so they're always playing this psychological financing game with themselves.

LennStar

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Re: Overheard at Work 2
« Reply #1904 on: December 07, 2019, 01:16:02 AM »

I'm fascinated by this too.  I agree with your point about a  consumerist mindset.  It also seems that people buy ideas or emotions or something, rather than items.

That is certainly true for ads today. The industry has learned that people don't buy stuff, they buy emotions. That is why in car ads you will never see (except maybe the PS) and actual data about the car until the very end for 2 seconds. The rest is all landscape and maybe smiling faces.

Just yesterday I saw an ad by the McD. A mother had lost her child, searched for it etc. She also asked at a McD but you could see the company logo for only 1 second. It only reappeared in the last moment after the happy reunification.
See the trick here?

Imma

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Re: Overheard at Work 2
« Reply #1905 on: December 07, 2019, 11:21:36 AM »
Not from work, just read, but still, a finance tip:

Trouble with spending too much? Make three categories.
1. Needed 2. Wanted 4. Superfluous
and make a budget for each.

Wait! WTF? Budget?

If you need, buy. You cannot not buy if you need, after all. Why a budget? But even more - a budget for things you _don't_ want? Why would you lose money for things you don't want???

I very often get the vibe from people in our culture that they buy things just because... I dunno, because they haven't bought anything yet today? I think there's a not-insubstantial percentage of people for whom the idea of not spending money for an entire day would make them feel panicky/anxious.

I'm fascinated by this too.  I agree with your point about a  consumerist mindset.  It also seems that people buy ideas or emotions or something, rather than items.

Consider a car loan: I work with dozens of people who buy new cars every couple years, presumably rolling over their loans.  This seemed silly to me because I didn't understand why someone would pay five figures for heated seats or new rims, when their existing car does 95% of the new one.  But if you only look at payments, you might think it's worth it. (Of course, it isn't)

So really it comes down to the fact that people don't save the capital to buy an asset like a car, so they're always playing this psychological financing game with themselves.

I think this holds true for mortgages as well. There's a feeling it's normal to spend an x% of your income on your mortgage. When your income increases you buy a bigger house. That's just the done thing. You need to reward yourself for all your hard work and what's a better reward than a home so big you can't keep it clean and well maintained on your own?

We've owned the same house for 5 years and our income has increased quite a bit over those years. People often ask if we're planning on moving to a bigger house. We are a childless couple in a 3-bedroom home (we each have a home office for our businesses). Our needs haven't changed, why would we want a bigger home? Thankfully I have quite a vague job description so people outside of my field aren't really aware of my income. When I tell coworkers we're happy where we are and don't want to move I can see from their face they don't believe me. Well, it's fine with me if they think I'm in debt or something :) eventually I'd like to move to a more rural location with maybe a bit of land but I really don't need a 5 bedroom house ever.

OtherJen

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Re: Overheard at Work 2
« Reply #1906 on: December 07, 2019, 11:59:21 AM »
Not from work, just read, but still, a finance tip:

Trouble with spending too much? Make three categories.
1. Needed 2. Wanted 4. Superfluous
and make a budget for each.

Wait! WTF? Budget?

If you need, buy. You cannot not buy if you need, after all. Why a budget? But even more - a budget for things you _don't_ want? Why would you lose money for things you don't want???

I very often get the vibe from people in our culture that they buy things just because... I dunno, because they haven't bought anything yet today? I think there's a not-insubstantial percentage of people for whom the idea of not spending money for an entire day would make them feel panicky/anxious.

I'm fascinated by this too.  I agree with your point about a  consumerist mindset.  It also seems that people buy ideas or emotions or something, rather than items.

Consider a car loan: I work with dozens of people who buy new cars every couple years, presumably rolling over their loans.  This seemed silly to me because I didn't understand why someone would pay five figures for heated seats or new rims, when their existing car does 95% of the new one.  But if you only look at payments, you might think it's worth it. (Of course, it isn't)

So really it comes down to the fact that people don't save the capital to buy an asset like a car, so they're always playing this psychological financing game with themselves.

I think this holds true for mortgages as well. There's a feeling it's normal to spend an x% of your income on your mortgage. When your income increases you buy a bigger house. That's just the done thing. You need to reward yourself for all your hard work and what's a better reward than a home so big you can't keep it clean and well maintained on your own?

We've owned the same house for 5 years and our income has increased quite a bit over those years. People often ask if we're planning on moving to a bigger house. We are a childless couple in a 3-bedroom home (we each have a home office for our businesses). Our needs haven't changed, why would we want a bigger home? Thankfully I have quite a vague job description so people outside of my field aren't really aware of my income. When I tell coworkers we're happy where we are and don't want to move I can see from their face they don't believe me. Well, it's fine with me if they think I'm in debt or something :) eventually I'd like to move to a more rural location with maybe a bit of land but I really don't need a 5 bedroom house ever.

This is very true. When we were first looking at houses as newlyweds in entry-level jobs, people kept telling us to buy as much house as we could possibly afford (even if it was a stretch to make the payments) because it would be easier later when our wages went up. We ignored that advice and bought a 3-bed ďstarterĒ house well within our price range. I think people are surprised that weíre still in this house 16 years later, which is crazy because we have no kids and donít need more space. The mortgage is even more affordable now. Why would I want to give up cash in savings and cash flow every month for something we donít need?

dragoncar

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Re: Overheard at Work 2
« Reply #1907 on: December 07, 2019, 12:13:14 PM »

This is very true. When we were first looking at houses as newlyweds in entry-level jobs, people kept telling us to buy as much house as we could possibly afford (even if it was a stretch to make the payments) because it would be easier later when our wages went up. We ignored that advice and bought a 3-bed ďstarterĒ house well within our price range. I think people are surprised that weíre still in this house 16 years later, which is crazy because we have no kids and donít need more space. The mortgage is even more affordable now. Why would I want to give up cash in savings and cash flow every month for something we donít need?

Itís not terrible advice for someone who views a small house as a ďstarterĒ house and is likely to move again quickly.  The transaction costs add up, and over time homes get more expensive.  If they actually invested the difference, it would be way better to start small but as discussed here most people are going to spend whatever is left over after their mortgage.  In that case it just reinforces the aspect of forced savings that we have with mortgages

Wrenchturner

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Re: Overheard at Work 2
« Reply #1908 on: December 07, 2019, 12:28:36 PM »

I'm fascinated by this too.  I agree with your point about a  consumerist mindset.  It also seems that people buy ideas or emotions or something, rather than items.

That is certainly true for ads today. The industry has learned that people don't buy stuff, they buy emotions. That is why in car ads you will never see (except maybe the PS) and actual data about the car until the very end for 2 seconds. The rest is all landscape and maybe smiling faces.

Just yesterday I saw an ad by the McD. A mother had lost her child, searched for it etc. She also asked at a McD but you could see the company logo for only 1 second. It only reappeared in the last moment after the happy reunification.
See the trick here?
McD as in McDonald's?  That's a weird ad regardless, but I see the trick.

Wrenchturner

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Re: Overheard at Work 2
« Reply #1909 on: December 07, 2019, 12:32:08 PM »
Not from work, just read, but still, a finance tip:

Trouble with spending too much? Make three categories.
1. Needed 2. Wanted 4. Superfluous
and make a budget for each.

Wait! WTF? Budget?

If you need, buy. You cannot not buy if you need, after all. Why a budget? But even more - a budget for things you _don't_ want? Why would you lose money for things you don't want???

I very often get the vibe from people in our culture that they buy things just because... I dunno, because they haven't bought anything yet today? I think there's a not-insubstantial percentage of people for whom the idea of not spending money for an entire day would make them feel panicky/anxious.

I'm fascinated by this too.  I agree with your point about a  consumerist mindset.  It also seems that people buy ideas or emotions or something, rather than items.

Consider a car loan: I work with dozens of people who buy new cars every couple years, presumably rolling over their loans.  This seemed silly to me because I didn't understand why someone would pay five figures for heated seats or new rims, when their existing car does 95% of the new one.  But if you only look at payments, you might think it's worth it. (Of course, it isn't)

So really it comes down to the fact that people don't save the capital to buy an asset like a car, so they're always playing this psychological financing game with themselves.

I think this holds true for mortgages as well. There's a feeling it's normal to spend an x% of your income on your mortgage. When your income increases you buy a bigger house. That's just the done thing. You need to reward yourself for all your hard work and what's a better reward than a home so big you can't keep it clean and well maintained on your own?

We've owned the same house for 5 years and our income has increased quite a bit over those years. People often ask if we're planning on moving to a bigger house. We are a childless couple in a 3-bedroom home (we each have a home office for our businesses). Our needs haven't changed, why would we want a bigger home? Thankfully I have quite a vague job description so people outside of my field aren't really aware of my income. When I tell coworkers we're happy where we are and don't want to move I can see from their face they don't believe me. Well, it's fine with me if they think I'm in debt or something :) eventually I'd like to move to a more rural location with maybe a bit of land but I really don't need a 5 bedroom house ever.

Having kids seems like the big influence for a larger house.  Those things soak up space like crazy!  At least, if they're allowed to fill the house with toys(more materialism)...  I'm not a huge fan of a large house, just more space to heat and clean.  And humans are too soft and sedentary anyways, we spend too much time indoors doing little.

OtherJen

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Re: Overheard at Work 2
« Reply #1910 on: December 07, 2019, 09:15:04 PM »

This is very true. When we were first looking at houses as newlyweds in entry-level jobs, people kept telling us to buy as much house as we could possibly afford (even if it was a stretch to make the payments) because it would be easier later when our wages went up. We ignored that advice and bought a 3-bed ďstarterĒ house well within our price range. I think people are surprised that weíre still in this house 16 years later, which is crazy because we have no kids and donít need more space. The mortgage is even more affordable now. Why would I want to give up cash in savings and cash flow every month for something we donít need?

Itís not terrible advice for someone who views a small house as a ďstarterĒ house and is likely to move again quickly.  The transaction costs add up, and over time homes get more expensive.  If they actually invested the difference, it would be way better to start small but as discussed here most people are going to spend whatever is left over after their mortgage.  In that case it just reinforces the aspect of forced savings that we have with mortgages

We were getting recommendations to get a mortgage beyond what we could comfortably afford without regular parental help. I donít think thatís good advice.

SwordGuy

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Re: Overheard at Work 2
« Reply #1911 on: December 07, 2019, 09:31:45 PM »

This is very true. When we were first looking at houses as newlyweds in entry-level jobs, people kept telling us to buy as much house as we could possibly afford (even if it was a stretch to make the payments) because it would be easier later when our wages went up. We ignored that advice and bought a 3-bed ďstarterĒ house well within our price range. I think people are surprised that weíre still in this house 16 years later, which is crazy because we have no kids and donít need more space. The mortgage is even more affordable now. Why would I want to give up cash in savings and cash flow every month for something we donít need?

Itís not terrible advice for someone who views a small house as a ďstarterĒ house and is likely to move again quickly.  The transaction costs add up, and over time homes get more expensive.  If they actually invested the difference, it would be way better to start small but as discussed here most people are going to spend whatever is left over after their mortgage.  In that case it just reinforces the aspect of forced savings that we have with mortgages

We were getting recommendations to get a mortgage beyond what we could comfortably afford without regular parental help. I donít think thatís good advice.

You are absolutely right.  It's horrible advice.   

zolotiyeruki

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Re: Overheard at Work 2
« Reply #1912 on: December 07, 2019, 09:52:40 PM »
I remember back when we had just graduated college.  We were pre-approved for a mortgage around 3.5x my starting salary.  Thank heavens that as naive as we were back then, we were smart enough to buy a starter home for just under half that amount.

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Re: Overheard at Work 2
« Reply #1913 on: December 07, 2019, 11:18:30 PM »

This is very true. When we were first looking at houses as newlyweds in entry-level jobs, people kept telling us to buy as much house as we could possibly afford (even if it was a stretch to make the payments) because it would be easier later when our wages went up. We ignored that advice and bought a 3-bed ďstarterĒ house well within our price range. I think people are surprised that weíre still in this house 16 years later, which is crazy because we have no kids and donít need more space. The mortgage is even more affordable now. Why would I want to give up cash in savings and cash flow every month for something we donít need?

Itís not terrible advice for someone who views a small house as a ďstarterĒ house and is likely to move again quickly.  The transaction costs add up, and over time homes get more expensive.  If they actually invested the difference, it would be way better to start small but as discussed here most people are going to spend whatever is left over after their mortgage.  In that case it just reinforces the aspect of forced savings that we have with mortgages

We were getting recommendations to get a mortgage beyond what we could comfortably afford without regular parental help. I donít think thatís good advice.

You are absolutely right.  It's horrible advice.   

I just had a flashback to my first home purchase, when the Realtor and my parents were pushing me to buy as much house as I could "afford", as in the maximum amount I could get from any lender. Having seen my parents struggle from time to time after over-purchasing on real estate until they obtained a sizable inheritance and a more lucrative line of work, I decided to not slip on the golden handcuffs. In fact, I said something to my Realtor about a fox guarding the henhouse and insisted that she show me dwellings only within my specific price range. It wasn't that I was educated any better than the average person. My position came mostly from hardheadedness and overall tightwaddery, plus a generous helping of Stanley and Danko.

How many people don't have the dumb luck to read Stanley and Danko or to be natural tightwads? Probably most of them.

Imma

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Re: Overheard at Work 2
« Reply #1914 on: December 08, 2019, 01:36:26 AM »
I remember back when we had just graduated college.  We were pre-approved for a mortgage around 3.5x my starting salary.  Thank heavens that as naive as we were back then, we were smart enough to buy a starter home for just under half that amount.

Well the house we did buy was 3 times our income then, but lending 3-4 times your income is normal in my country. The average house cost 6,5 times the average income when we bought and close to 8 now. Our place was a great deal even then. Rent and mortgages are both very high compared to income because there's such a massive housing shortage. We did buy a modest townhouse (800 sq ft/ 75 sq  m), but with several bedrooms on purpose, as it was only 25% more expensive than a studio flat and a house this size would give us more options for the future / lower chance of selling after a few years. We rented out a bedroom for a while, we have home offices now, if we ever have a child they could have a bedroom.

Our rent payment before was 650/month excl. bills which was the cheapest apartment we could find, we went on to pay Ä300 in mortgage a month - and we don't have PMI or sky high property taxes in here (taxes + insurance = <Ä50/month). The energy bills for this place are a lot lower too. It's mandatory to pay off the mortgage completely but that's no big deal as only a small amount of money  is tied up in this house. I still think this is the single most important financial decision we've ever made. We were always able to save a little bit every month but from the moment we moved we were able to increase our savings rate. Our mortgage payment is now less than 10% of our income and we barely notice the money going out of our account.

Many of our friends have now moved to giant homes in the suburbs and none of them have enough kids (or businesses, or roommates) to fill them. It's one thing to buy a 5 bedroom if you have 6 kids but few have more than 1 and only vague plans for more children. The majority had significant parental help to buy something they don't even need. I think my mother would kick me out if I asked for money to buy a fancy house I can't afford and really don't even need.... But I think some parents also get a kick from bragging about their child who lives in a newbuild in the Fancy Rich Neighbourhood. That's somehow more acceptable than saying 'my kid is self sufficient and lives well within her means'.

dragoncar

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Re: Overheard at Work 2
« Reply #1915 on: December 08, 2019, 01:48:06 AM »

This is very true. When we were first looking at houses as newlyweds in entry-level jobs, people kept telling us to buy as much house as we could possibly afford (even if it was a stretch to make the payments) because it would be easier later when our wages went up. We ignored that advice and bought a 3-bed ďstarterĒ house well within our price range. I think people are surprised that weíre still in this house 16 years later, which is crazy because we have no kids and donít need more space. The mortgage is even more affordable now. Why would I want to give up cash in savings and cash flow every month for something we donít need?

Itís not terrible advice for someone who views a small house as a ďstarterĒ house and is likely to move again quickly.  The transaction costs add up, and over time homes get more expensive.  If they actually invested the difference, it would be way better to start small but as discussed here most people are going to spend whatever is left over after their mortgage.  In that case it just reinforces the aspect of forced savings that we have with mortgages

We were getting recommendations to get a mortgage beyond what we could comfortably afford without regular parental help. I donít think thatís good advice.

Ok, but I'm talking about advice to buy as much as you can afford, not advice to buy more than you can afford.

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Re: Overheard at Work 2
« Reply #1916 on: December 08, 2019, 05:58:01 AM »
Consider a car loan: I work with dozens of people who buy new cars every couple years, presumably rolling over their loans.  This seemed silly to me because I didn't understand why someone would pay five figures for heated seats or new rims, when their existing car does 95% of the new one.  But if you only look at payments, you might think it's worth it. (Of course, it isn't)

So really it comes down to the fact that people don't save the capital to buy an asset like a car, so they're always playing this psychological financing game with themselves.

I can't tell you how many people I know think that paying off a car loan means that it's time to start shopping for a new car.  I guess that's better than rolling negative equity into a new loan, but come on man.

OtherJen

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Re: Overheard at Work 2
« Reply #1917 on: December 08, 2019, 07:56:30 AM »

This is very true. When we were first looking at houses as newlyweds in entry-level jobs, people kept telling us to buy as much house as we could possibly afford (even if it was a stretch to make the payments) because it would be easier later when our wages went up. We ignored that advice and bought a 3-bed ďstarterĒ house well within our price range. I think people are surprised that weíre still in this house 16 years later, which is crazy because we have no kids and donít need more space. The mortgage is even more affordable now. Why would I want to give up cash in savings and cash flow every month for something we donít need?

Itís not terrible advice for someone who views a small house as a ďstarterĒ house and is likely to move again quickly.  The transaction costs add up, and over time homes get more expensive.  If they actually invested the difference, it would be way better to start small but as discussed here most people are going to spend whatever is left over after their mortgage.  In that case it just reinforces the aspect of forced savings that we have with mortgages

We were getting recommendations to get a mortgage beyond what we could comfortably afford without regular parental help. I donít think thatís good advice.

Ok, but I'm talking about advice to buy as much as you can afford, not advice to buy more than you can afford.

I still think itís shitty advice. On paper, sure, we could have (barely, just) afforded a larger home and larger mortgage payments, especially if weíd taken the strongly suggested adjustable rate loan. In reality, any unexpected expense would have sent us running for parental help or credit (more likely), and we would have lost our house a few years later when the bottom fell out of the economy and the house lost 80% of its purchase value, the mortgage rate spiked, and husband lost his job. 

I canít see any scenario in which advice to go beyond what you can comfortably afford, with the assumption that your finances/the economy will always grow, is not a recipe for disaster. I do accept that like people who went through the Depression, my view of real estate and economic impermanence may be biased.

Dicey

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Re: Overheard at Work 2
« Reply #1918 on: December 08, 2019, 08:33:42 AM »
I guess I need to go hide my $600 dog before everyone shows up with torches and pitchforks.

No one is going to literally murder you for paying for a dog.

But that doesn't mean people can't have opinions about it.

Do I need to follow up my posts with a bazinga or something to indicate that I'm not serious?

If you're regularly being misunderstood by multiple readers, then possibly yes.

As far as I know, it's just been one reader. But I'll start doing that to avoid the vengeful ire.

Edit: added a disclaimer to signature
If your screen name doesn't give them a clue, I'm not sure the disclaimer will either, but kudos to you for being so responsive, @DadJokes.

SwordGuy

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Re: Overheard at Work 2
« Reply #1919 on: December 08, 2019, 08:34:33 AM »
Our first home purchase was at 200% of annual salary.  We only had one car payment and it was affordable, but we needed to pay close attention to finances.

Our 2nd home was about 150% of annual salary.   Much more affordable!

Our 3rd home was about 80% of annual salary.   We had two car payments and a business loan at the time.  Fast forward 5 years and the car loans and business loans were gone, which made it so affordable we were making 2 1/2 to 3 1/2 mortgage payments a month to pay it off early!  (Wish I had known to invest instead!)

Our 4th house was about 112% of annual income.  (Note use of word income, not salary.  We now had passive income plus salary.)   It's still quite affordable. 

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Re: Overheard at Work 2
« Reply #1920 on: December 08, 2019, 09:29:08 AM »
Our current house was 3x our annual household salary when we bought it and that felt like a bit of a stretch stepping up from the under market rental we had been in. But then I set up the automatic payments and other than a text message each month, I didnít even notice the mortgage payment going out.

Dicey

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Re: Overheard at Work 2
« Reply #1921 on: December 08, 2019, 09:37:24 AM »
^^That's great, Sword Guy^^, but if you live where housing is more expensive, you just don't have those kind of options. [Dicey waves to ysette9.]

*Sidebar Rant Alert*

Not harshing on you specifically, SG, but comments like this frustrate the shit out of me. When I was starting out, despite having a year's salary in the bank, I could afford nothing in the city where my job was, so I bought a rental in the cheaper place where I grew up. It still cost 3.5x my salary. Eight years later, my income had increased, and I found a deal on a tiny condo that was a short sale during a market dip, so I bought it, moved in, and sold the rental for a very small profit. The tiny condo cost roughly half my take home pay, but I made it work. Four years later, I needed more space, so I sold it for more than double what I paid and bought something that cost about 5-6x my salary. It was bigger, so I had space for a roommate and I made it work once again.

When DH and I got married, we each had our own homes and were happily planning on living in one and renting the other. Until his dad died, and we realized his mom had ALZ. Our houses were two story with no downstairs bedrooms. I retired, we sold both houses and bought a suitable house on a short sale. Here's the kicker: the new house cost 10x DH's salary. Fortunately, our houses had appreciated so much that we were able to buy the new house with no mortgage.

The point is that if you're frugal (i.e. mustachian), and you want to own property, you can still figure out a way, even in a HCOLA. You may have to "overspend", but you can do it. It's just a lot harder than it is in cheaper places with a plethora of affordable options.
/End sidebar rant


SwordGuy

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Re: Overheard at Work 2
« Reply #1922 on: December 08, 2019, 10:28:16 AM »
^^That's great, Sword Guy^^, but if you live where housing is more expensive, you just don't have those kind of options. [Dicey waves to ysette9.]

*Sidebar Rant Alert*

Not harshing on you specifically, SG, but comments like this frustrate the shit out of me. When I was starting out, despite having a year's salary in the bank, I could afford nothing in the city where my job was, so I bought a rental in the cheaper place where I grew up. It still cost 3.5x my salary. Eight years later, my income had increased, and I found a deal on a tiny condo that was a short sale during a market dip, so I bought it, moved in, and sold the rental for a very small profit. The tiny condo cost roughly half my take home pay, but I made it work. Four years later, I needed more space, so I sold it for more than double what I paid and bought something that cost about 5-6x my salary. It was bigger, so I had space for a roommate and I made it work once again.

When DH and I got married, we each had our own homes and were happily planning on living in one and renting the other. Until his dad died, and we realized his mom had ALZ. Our houses were two story with no downstairs bedrooms. I retired, we sold both houses and bought a suitable house on a short sale. Here's the kicker: the new house cost 10x DH's salary. Fortunately, our houses had appreciated so much that we were able to buy the new house with no mortgage.

The point is that if you're frugal (i.e. mustachian), and you want to own property, you can still figure out a way, even in a HCOLA. You may have to "overspend", but you can do it. It's just a lot harder than it is in cheaper places with a plethora of affordable options.
/End sidebar rant

All very good points, @Dicey.   

House #2, for example, was in Atlanta less than a mile outside the perimeter interstate.   I haven't always been in smaller, LCOL towns.  :)

A huge percentage of the population lives in areas that do not have horribly expensive housing.   And for them, getting a much more affordable house is clearly an option.   

But I have to say, I hear how horrible home prices are in various parts of the country.  Then I go on Zillow and do a search of homes sold in the last 2 years and hey! presto!   I find things like this:

https://www.zillow.com/homes/recently_sold/house,condo,apartment_duplex,townhouse_type/1-_beds/1.0-_baths/?searchQueryState={%22pagination%22:{},%22mapBounds%22:{%22west%22:-122.7087176191406,%22east%22:-121.98087338085935,%22south%22:47.37671523873406,%22north%22:47.84855793774056},%22isMapVisible%22:true,%22filterState%22:{%22isRecentlySold%22:{%22value%22:true},%22isForSaleByAgent%22:{%22value%22:false},%22isForSaleByOwner%22:{%22value%22:false},%22isNewConstruction%22:{%22value%22:false},%22isComingSoon%22:{%22value%22:false},%22isAuction%22:{%22value%22:false},%22isForSaleForeclosure%22:{%22value%22:false},%22isPreMarketForeclosure%22:{%22value%22:false},%22isPreMarketPreForeclosure%22:{%22value%22:false},%22isMakeMeMove%22:{%22value%22:false},%22price%22:{%22max%22:200000,%22min%22:50000},%22monthlyPayment%22:{%22max%22:745,%22min%22:186},%22isLotLand%22:{%22value%22:false},%22isManufactured%22:{%22value%22:false},%22beds%22:{%22min%22:1},%22baths%22:{%22min%22:1},%22doz%22:{%22value%22:%2224m%22}},%22isListVisible%22:true}


1813 homes/apartments/townhomes sold in the last two years in the Seattle, WA area shown on the map for a price between $50k and $200k.   I picked $50k as the lower boundary because quite a few goobers trying to rent a place list it for sale for the monthly rental price so that filters them out.

I look at photos of some of the places and quite a few of them look nice.   Toss in another $25k to $50k for renovations if needed and it's still a heck of a lot lower than the real estate prices I see quoted by the woe is me crowd.

Clearly, quite a few folks found a way to purchase affordable housing in the Seattle area.   Maybe everyone can't do it, but that's no reason not to be one of those who do!






Dicey

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Re: Overheard at Work 2
« Reply #1923 on: December 08, 2019, 11:09:16 AM »
^^That's great, Sword Guy^^, but if you live where housing is more expensive, you just don't have those kind of options. [Dicey waves to ysette9.]

*Sidebar Rant Alert*

Not harshing on you specifically, SG, but comments like this frustrate the shit out of me. When I was starting out, despite having a year's salary in the bank, I could afford nothing in the city where my job was, so I bought a rental in the cheaper place where I grew up. It still cost 3.5x my salary. Eight years later, my income had increased, and I found a deal on a tiny condo that was a short sale during a market dip, so I bought it, moved in, and sold the rental for a very small profit. The tiny condo cost roughly half my take home pay, but I made it work. Four years later, I needed more space, so I sold it for more than double what I paid and bought something that cost about 5-6x my salary. It was bigger, so I had space for a roommate and I made it work once again.

When DH and I got married, we each had our own homes and were happily planning on living in one and renting the other. Until his dad died, and we realized his mom had ALZ. Our houses were two story with no downstairs bedrooms. I retired, we sold both houses and bought a suitable house on a short sale. Here's the kicker: the new house cost 10x DH's salary. Fortunately, our houses had appreciated so much that we were able to buy the new house with no mortgage.

The point is that if you're frugal (i.e. mustachian), and you want to own property, you can still figure out a way, even in a HCOLA. You may have to "overspend", but you can do it. It's just a lot harder than it is in cheaper places with a plethora of affordable options.
/End sidebar rant

All very good points, @Dicey.   

House #2, for example, was in Atlanta less than a mile outside the perimeter interstate.   I haven't always been in smaller, LCOL towns.  :)

A huge percentage of the population lives in areas that do not have horribly expensive housing.   And for them, getting a much more affordable house is clearly an option.   

But I have to say, I hear how horrible home prices are in various parts of the country.  Then I go on Zillow and do a search of homes sold in the last 2 years and hey! presto!   I find things like this:

https://www.zillow.com/homes/recently_sold/house,condo,apartment_duplex,townhouse_type/1-_beds/1.0-_baths/?searchQueryState={%22pagination%22:{},%22mapBounds%22:{%22west%22:-122.7087176191406,%22east%22:-121.98087338085935,%22south%22:47.37671523873406,%22north%22:47.84855793774056},%22isMapVisible%22:true,%22filterState%22:{%22isRecentlySold%22:{%22value%22:true},%22isForSaleByAgent%22:{%22value%22:false},%22isForSaleByOwner%22:{%22value%22:false},%22isNewConstruction%22:{%22value%22:false},%22isComingSoon%22:{%22value%22:false},%22isAuction%22:{%22value%22:false},%22isForSaleForeclosure%22:{%22value%22:false},%22isPreMarketForeclosure%22:{%22value%22:false},%22isPreMarketPreForeclosure%22:{%22value%22:false},%22isMakeMeMove%22:{%22value%22:false},%22price%22:{%22max%22:200000,%22min%22:50000},%22monthlyPayment%22:{%22max%22:745,%22min%22:186},%22isLotLand%22:{%22value%22:false},%22isManufactured%22:{%22value%22:false},%22beds%22:{%22min%22:1},%22baths%22:{%22min%22:1},%22doz%22:{%22value%22:%2224m%22}},%22isListVisible%22:true}


1813 homes/apartments/townhomes sold in the last two years in the Seattle, WA area shown on the map for a price between $50k and $200k.   I picked $50k as the lower boundary because quite a few goobers trying to rent a place list it for sale for the monthly rental price so that filters them out.

I look at photos of some of the places and quite a few of them look nice.   Toss in another $25k to $50k for renovations if needed and it's still a heck of a lot lower than the real estate prices I see quoted by the woe is me crowd.

Clearly, quite a few folks found a way to purchase affordable housing in the Seattle area.   Maybe everyone can't do it, but that's no reason not to be one of those who do!
In our experience, often things that show up on Zillow are not sales at all. They're other transactions, such as people setting up trusts, getting reverse mortgages, inheriting property, inside deals or anything else requiring a title change. Don't move to Seattle expecting to find deals like this to fall into your lap. And typically, renovations, including materials, are more expensive in HCOLAs, so "tossing" $25k--$50k is hilarious, as is the assumption that people have that much left after getting into the property.

We looked at a "cheap" house last weekend for "only" $430k. The previous owners had previously done work to shore up the house and then gotten old and done nothing else to maintain it, except for getting suckered into putting solar on the old roof, sigh. Interestingly, at some point they covered most of the concrete slab with plywood and installed carpet over it. They most likely did this to deal with foundation cracking. The carpet had been removed, but the cat pee smell in the plywood persisted. Walls were cracked in every direction. There were asbestos tiles visible in some bedrooms. The bathroom was original. There was probably asbestos in the walls and surely there was lead in the paint. The roof and gutters were shot. There were no appliances. The laundry sink in the garage had leaked for years and the studs in the walls around it were rotted. It was a probate sale, cash only. They got seven offers in two and a half days, at least one for over asking. Sure, if you had cash, you could buy for "under market", but you couldn't live in it, nor could you fix it for $25k-$50k, nor could you change the fact that it's in a marginal neighborhood that backs up to a busy road that's across from the back of a busy shopping center. Oh, and the schools are crap, too. But hey, it looked okay from the picture of the front of the house, which is all you'll see when you do a future Zillow search. Well, that and a "below market" selling price.

SwordGuy

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Re: Overheard at Work 2
« Reply #1924 on: December 08, 2019, 11:56:57 AM »

https://www.zillow.com/homedetails/1208-Broadway-Ave-Bremerton-WA-98337/23425558_zpid/

This one appears to have been put up for actual sale and sold last month.  (Hint: they don't bother to put up photos of the home interior for an inheritance or family gift.)   The photos show a habitable condition though, of course, they are selective.  It definitely needs work.  FYI, I put $7k to $25k into my properties, plus sweat equity.   So $25k to $50k is not an unreasonable price for someone willing to do similar work. 

Someone who is renting in the area and looking for a deal could purchase the house and fix it up on weekends and evenings whilst remaining in their apartment.   The extra costs, possibly even including breaking a lease early, would still pale in comparison to buying a $500k house. 

Obviously, other houses in bad shape would cost ever so much more but I walk away from them.

Here's one that appears to be in much better condition and also appears to have been an actual sale last month:

https://www.zillow.com/homedetails/1917-2nd-Ave-W-Bremerton-WA-98312/23444824_zpid/


Unless a physical inspection showed much bigger problems that the photo selection is hiding, $25k to $50k should be God's plenty to fix that up if you do much of the work yourself.   

Many people in my area don't think you can buy nice houses for what I buy them for, either.   They think prices are much higher.   The reason is their selection criteria and their house hunting methods.



Imma

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Re: Overheard at Work 2
« Reply #1925 on: December 08, 2019, 12:30:32 PM »
I just did a quick search on my country's alternative to zillow and it looks like there's a catch to basically all extremely cheap homes. Aside from all being in really remote areas, mahy are vacation homes that you can't legally live in for more than 6 months a year and quite a few apartments are in senior living facilities with extremely high monthly HOA dues and age limits. Other homes are just in a terrible state and require way more than 25k and a bit of sweat.

(If you're curious: all houses for sale in my country Ä50k-Ä125k:  https://www.funda.nl/koop/heel-nederland/0-125000/woonhuis/ #1 in Klazienaveen is a vacation home and not legal to live in fulltime #3 in Oosterhout is actually a really sweet deal and fairly good location, close to the city, but the park itself is notorious, and comes with park fees, ground rent and you can't get a mortgage on a trailer, #4 Veendam is in an area with frequent earthquakes, etc etc etc. There's a reason why no one wants them when they're practically given away.

I'm sure if you look really well you'll find a good deal sometimes and being a cash buyer and experienced at DIY really helps, but my mother always taught me that if something looks too good to be true.... It usually is.

dragoncar

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Re: Overheard at Work 2
« Reply #1926 on: December 08, 2019, 12:43:21 PM »
Why are you harping in Washington SG?  Where we are from people move to WA for its relative affordability

LennStar

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Re: Overheard at Work 2
« Reply #1927 on: December 08, 2019, 02:20:07 PM »
In 99% there is no such thing as "under-market", as there is no such thing as a free meal.
With hundreds of people looking for "a deal" you need to be really lucky to finf one yourself.

At least that is what people who do their (scientific) job on that topic say.

ysette9

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Re: Overheard at Work 2
« Reply #1928 on: December 08, 2019, 02:58:31 PM »
Why are you harping in Washington SG?  Where we are from people move to WA for its relative affordability
Yeah, Iím confused what is being argued here and why WA. Dicey and I are in the Bay Area, and yes, people from here move to Seattle for more affordable housing. Iím actually surprised at something that was listed for $400s and was a house. On my side of the bay it is hard to find a tear down for under $1M.

But that is neither here nor there. Real estate is very local, as we all know. Each area has pros and cons and we all choose based on our particular mix of values. So I just donít think comparisons are that helpful between different areas of the country when it comes to housing costs. The thing that is comparable is the idea of buying less than you can absolutely afford to buy. Whether that is 0.8x or 4x your salary is a different matter.

SwordGuy

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Re: Overheard at Work 2
« Reply #1929 on: December 08, 2019, 03:27:54 PM »
I just picked Seattle because I've seen many comments in the press and from people in the area about how high the property costs are.   

I didn't pick NYC or San Francisco because those are way more expensive than most areas in the country.

As for "most people" can't do it, most people don't try.    It takes work, knowledge and time.   Luck just makes that happen faster.
As I pointed out, over 1800 people in the last year bought living quarters for less than $200k in the Seattle area.  Some had to spend money to fix them up right away, others could have waited awhile.

You only need one house.   :)    Seems to me that the potential to save $200k to $500k on one's living quarters would be worth a fair bit of effort.   


TomTX

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Re: Overheard at Work 2
« Reply #1930 on: December 08, 2019, 03:52:24 PM »
#1 in Klazienaveen is a vacation home and not legal to live in fulltime

Could you buy two "vacation homes" and alternate using each of them for 6 months? What about renting them out when you're not living there? Or finding another family who wants to alternate between two "vacation homes" and you just swap with them twice a year.

Cassie

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Re: Overheard at Work 2
« Reply #1931 on: December 08, 2019, 05:37:13 PM »
40 years ago our first home was a fixer upper but livable. It was double our income and we had 2 kids with a third on the way. If houses had been more money we would have kept renting.  Sometimes people canít afford to buy.

SwordGuy

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Re: Overheard at Work 2
« Reply #1932 on: December 08, 2019, 06:03:30 PM »
#1 in Klazienaveen is a vacation home and not legal to live in fulltime

Could you buy two "vacation homes" and alternate using each of them for 6 months? What about renting them out when you're not living there? Or finding another family who wants to alternate between two "vacation homes" and you just swap with them twice a year.

Very clever!

RetiredAt63

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Re: Overheard at Work 2
« Reply #1933 on: December 08, 2019, 06:28:47 PM »
#1 in Klazienaveen is a vacation home and not legal to live in fulltime

Could you buy two "vacation homes" and alternate using each of them for 6 months? What about renting them out when you're not living there? Or finding another family who wants to alternate between two "vacation homes" and you just swap with them twice a year.

Very clever!

Would they be inhabitable year round?  Here there are 3 season cottages and 4 season cottages.  3 season cottages are not equipped for winter habitation.

Dicey

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Re: Overheard at Work 2
« Reply #1934 on: December 09, 2019, 05:34:40 AM »
I just picked Seattle because I've seen many comments in the press and from people in the area about how high the property costs are.   

I didn't pick NYC or San Francisco because those are way more expensive than most areas in the country.

As for "most people" can't do it, most people don't try.    It takes work, knowledge and time.   Luck just makes that happen faster.
As I pointed out, over 1800 people in the last year bought living quarters for less than $200k in the Seattle area.  Some had to spend money to fix them up right away, others could have waited awhile.

You only need one house.   :)    Seems to me that the potential to save $200k to $500k on one's living quarters would be worth a fair bit of effort.
Citation, please?

BTW, I looked at both of the Bremerton houses you cited. I checked the school ratings and the street views, too. Not a chance. Hard pass, with a huge portion of gratitude.

I also checked the price history. The potential for appreciation appears to be quite limited, and it's not certain that money spent on making either these two abodes reasonably up to date and/or code would even return what they cost. And I'm not talking about quartz countertops and SS appliances.

I appreciate and admire that you have capitalized on the opportunities that exist in your area. I do not understand your conviction that these opportunities exist everywhere and that anyone can do as you have.

Owning real estate in HCOLAS, even though it required a much higher percent of my income than the guidelines suggest, made me quite wealthy through sheer appreciation. Of course, it didn't hurt that I've updated everything I ever owned on a shoestring budget, but I'm no savant. Appreciation did the heavy lifting.


OtherJen

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Re: Overheard at Work 2
« Reply #1935 on: December 09, 2019, 06:49:13 AM »
#1 in Klazienaveen is a vacation home and not legal to live in fulltime

Could you buy two "vacation homes" and alternate using each of them for 6 months? What about renting them out when you're not living there? Or finding another family who wants to alternate between two "vacation homes" and you just swap with them twice a year.

Very clever!

Would they be inhabitable year round?  Here there are 3 season cottages and 4 season cottages.  3 season cottages are not equipped for winter habitation.


I wondered that, too. My grandparentsí fairly rustic cabin in northern Michigan was not insulated for winter use.

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Re: Overheard at Work 2
« Reply #1936 on: December 09, 2019, 07:34:55 AM »
I'm from the same area as Imma, and vacation homes in general cannot be registered as official address.

Our bank offered us 6.5x my income as mortgage; I refused and didn't want to take out more than 4.5x my income. I knew my income was going to go up and husband would be starting to work soon. He did, and then our mortgage was just 2.5x our income. We bought a home in a small village, that needed a lot of renovation we couldn't do ourselves, so we paid out around Ä50,000 for renovations, and received around Ä10,000 in subsidies for those renovations :)

Our kitchen extension (there when we bought the house) has now started to leak, so we will have more renovations coming up, this time with a proper architect to maximize any changes we (need to) make, and make this house liveable for the next 40 years. I don't want to leave the village, having settled in, and properties that are coming on to the market right now are all fixer-uppers for at least Ä300,000. My commute (by electric bike) is only 30 minutes, and as commutes are a waste of time, I don't want to move further out.

SwordGuy

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Re: Overheard at Work 2
« Reply #1937 on: December 09, 2019, 08:55:14 AM »
I just picked Seattle because I've seen many comments in the press and from people in the area about how high the property costs are.   

I didn't pick NYC or San Francisco because those are way more expensive than most areas in the country.

As for "most people" can't do it, most people don't try.    It takes work, knowledge and time.   Luck just makes that happen faster.
As I pointed out, over 1800 people in the last year bought living quarters for less than $200k in the Seattle area.  Some had to spend money to fix them up right away, others could have waited awhile.

You only need one house.   :)    Seems to me that the potential to save $200k to $500k on one's living quarters would be worth a fair bit of effort.
Citation, please?
The Zillow link I posted above shows the count of houses sold in the $50k to $200k price range.

Quote
BTW, I looked at both of the Bremerton houses you cited. I checked the school ratings and the street views, too. Not a chance. Hard pass, with a huge portion of gratitude.
A family that intends to home school because they will be FIREing before they have kids (as in MMM) would not need to care about the school rating.

A family or individual who won't be having children would not need to care.

Quote
I also checked the price history. The potential for appreciation appears to be quite limited, and it's not certain that money spent on making either these two abodes reasonably up to date and/or code would even return what they cost. And I'm not talking about quartz countertops and SS appliances.

I appreciate and admire that you have capitalized on the opportunities that exist in your area. I do not understand your conviction that these opportunities exist everywhere and that anyone can do as you have.

Owning real estate in HCOLAS, even though it required a much higher percent of my income than the guidelines suggest, made me quite wealthy through sheer appreciation. Of course, it didn't hurt that I've updated everything I ever owned on a shoestring budget, but I'm no savant. Appreciation did the heavy lifting.

If my strategy is to make money via index fund investing and live in the house for many years, the lack of property appreciation is immaterial.   (If my plan were to live in a house until I died, the appreciation wouldn't matter either because I wouldn't be selling it.  Actually, it would be bad because my property taxes would go up.)

As for the street view, lots of areas start that way and then gentrify over time as more and more folks with resources move into the area and fix up their homes.   The early adopters often make a killing on appreciation. 

My point is that the opportunity to get more affordable housing **is** there and that you, as well as gobs of others, have just chosen not to take advantage of it.

And that's fine.   Everyone needs to pick a path that works for them.   

What I object to is folks telling others that a path doesn't exist when what's really true is that they themselves don't want to take that path.

TheGrimSqueaker

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Re: Overheard at Work 2
« Reply #1938 on: December 09, 2019, 09:45:59 AM »

This is very true. When we were first looking at houses as newlyweds in entry-level jobs, people kept telling us to buy as much house as we could possibly afford (even if it was a stretch to make the payments) because it would be easier later when our wages went up. We ignored that advice and bought a 3-bed ďstarterĒ house well within our price range. I think people are surprised that weíre still in this house 16 years later, which is crazy because we have no kids and donít need more space. The mortgage is even more affordable now. Why would I want to give up cash in savings and cash flow every month for something we donít need?

Itís not terrible advice for someone who views a small house as a ďstarterĒ house and is likely to move again quickly.  The transaction costs add up, and over time homes get more expensive.  If they actually invested the difference, it would be way better to start small but as discussed here most people are going to spend whatever is left over after their mortgage.  In that case it just reinforces the aspect of forced savings that we have with mortgages

We were getting recommendations to get a mortgage beyond what we could comfortably afford without regular parental help. I donít think thatís good advice.

Ok, but I'm talking about advice to buy as much as you can afford, not advice to buy more than you can afford.

The root cause of the problem is that lenders and selling brokers tend t be unclear about how much their buying customers "can afford", and too many customers don't understand that taking a lender's advice about how much they can afford to borrow is like letting the fox advise them about henhouse construction. A lender has a financial incentive to get the customer on the debt hook for life and to extract maximum interest over as long a period of time as possible. The lender is not a fiduciary, and many people don't even realize what a fiduciary is.

six-car-habit

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Re: Overheard at Work 2
« Reply #1939 on: December 09, 2019, 11:08:56 AM »
 In regards to both of the Bremerton properties listed by SwordGuy.  I'm familiar with both neighborhoods.  The house on Broadway is at least close to the local college, and might make for a good rental. I would not say it is "downtown" like the ad claims, but you could get downtown in 15 minutes if you walk fast. It might be reasonable for a Seattle commuter by Ferry.

***"As for the street view, lots of areas start that way and then gentrify over time as more and more folks with resources move into the area and fix up their homes.   The early adopters often make a killing on appreciation. "***
 
The house on 2nd Street is in a crap neighborhood, nowhere near 'downtown' or even a grocery store. If you fancy a neighborhood where houses are 10 feet apart, where the homes are mostly older mobiles, manufactured homes, and cheaply built - and/or old + neglected "stick built" homes, where there are many brokedown cars in driveways, junk filled yards, and Lots of Grown men riding BMX bicycles wearing backpacks [ meth user or dealer ] - you might like it.
  That 2nd Street neighborhood will never Gentrify, its been sketchy for decades and will remain that way.

 All that said, there are some very nice neighborhoods in that town, houses with architectural appeal, etc - just not the ones/areas that were picked as examples.

afuera

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Re: Overheard at Work 2
« Reply #1940 on: December 09, 2019, 11:49:28 AM »
Our first dog came free from a friend/coworker.  They had purchased her from a breeder for something like $1200 but couldn't keep her any longer.  We had never heard of the breed before we got her and ended completely falling in love with her and the breed. When we decided to get a 2nd dog, we found a breed specific rescue so we could both rescue a dog but get the same breed as our first dog.   When people see us in public, they probably think we spent $$$$ on our fancypants dogs.

Curious what breed?

Me too. 

I understand falling in love with a breed.  I loved the breed characteristics of our first dog that our second and third dogs were also that breed.
Missed your question, they are Airedale Terriers :)

« Last Edit: December 09, 2019, 12:48:14 PM by afuera »

SwordGuy

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Re: Overheard at Work 2
« Reply #1941 on: December 09, 2019, 12:25:15 PM »
In regards to both of the Bremerton properties listed by SwordGuy.  I'm familiar with both neighborhoods.  The house on Broadway is at least close to the local college, and might make for a good rental. I would not say it is "downtown" like the ad claims, but you could get downtown in 15 minutes if you walk fast. It might be reasonable for a Seattle commuter by Ferry.

***"As for the street view, lots of areas start that way and then gentrify over time as more and more folks with resources move into the area and fix up their homes.   The early adopters often make a killing on appreciation. "***
 
The house on 2nd Street is in a crap neighborhood, nowhere near 'downtown' or even a grocery store. If you fancy a neighborhood where houses are 10 feet apart, where the homes are mostly older mobiles, manufactured homes, and cheaply built - and/or old + neglected "stick built" homes, where there are many brokedown cars in driveways, junk filled yards, and Lots of Grown men riding BMX bicycles wearing backpacks [ meth user or dealer ] - you might like it.
  That 2nd Street neighborhood will never Gentrify, its been sketchy for decades and will remain that way.

 All that said, there are some very nice neighborhoods in that town, houses with architectural appeal, etc - just not the ones/areas that were picked as examples.

Let's assume that the substantial savings ($10-12k) on property taxes and insurance between a $200k house and a $800k house are poured into the $200k house over a ten year period of time, as is the difference between the required down payments.   So, we're looking at $130-150k worth of improvements to the smaller house.   Let's assume that the smaller house doesn't appreciate in value, it just keeps pace with inflation.   

At the end of 10 years, the person buying the $200k house will have half a million dollars in their stash of index funds, given historical average rates of return (less inflation) just from investing the P&I savings from the smaller house.  Even more if they didn't fix the place up so much.    Plus, if the economy tanked and they lost their job, they would be more likely not to lose their house.    They would be much more able to just up and leave for a different area if they wanted to without the weight of a big mortgage payment on their budget. 

If they were maxing out their 401K in addition to the P&I savings on the mortgage, they could be FIRED in 10 years.
If they couldn't afford to invest at all with the bigger mortgage, the now could do so very successfully in the cheaper house.

For the right person in the right circumstances, this could be a really good financial move.   

PS:   To hear tell from middle class white folks in my area, the black part of town is nothing but a crime-ridden cesspool of drugs and violence.   And yet I drive thru those neighborhoods and many of them are very well kept up, well maintained, and appear to be fine places to live.   Working class neighborhoods tend to have better neighbors, they are more likely to go out of their way to help a neighbor out.   I check the crime reports for different neighborhoods, affluent, working class and poor, and there's really not that big a difference between them.

PPS:   There are plenty of drug dealers in more affluent areas too.  They can just afford to be more discrete, so they don't stand out as much in the crowd.   

honeybbq

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Re: Overheard at Work 2
« Reply #1942 on: December 09, 2019, 12:42:07 PM »
Biggest topic of discussion at work today ó the nearest Starbucks has closed down and now people will have to walk an extra three minutes to the next nearest Starbucks thatís one block down the street. Apparently that news ruined a lot of peopleís day.

The consolation is that at least Starbucks delivers so you can just order it online and pay the extra delivery fee.

I think Lewis Black had a comedy routine about Starbucks being across the street from another Starbucks.

Samuel

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Re: Overheard at Work 2
« Reply #1943 on: December 09, 2019, 12:42:50 PM »
I just picked Seattle because I've seen many comments in the press and from people in the area about how high the property costs are.   

I didn't pick NYC or San Francisco because those are way more expensive than most areas in the country.

As for "most people" can't do it, most people don't try.    It takes work, knowledge and time.   Luck just makes that happen faster.
As I pointed out, over 1800 people in the last year bought living quarters for less than $200k in the Seattle area.  Some had to spend money to fix them up right away, others could have waited awhile.

You only need one house.   :)    Seems to me that the potential to save $200k to $500k on one's living quarters would be worth a fair bit of effort.
Citation, please?
The Zillow link I posted above shows the count of houses sold in the $50k to $200k price range.
Respectfully, that data is absolute garbage. I don't know Bremerton, but I've lived in the greater Seattle area my whole life and have been actively monitoring the sub $450k market for several years hoping to find something that feels like a decent deal. I've toured dozens of homes and condos in that time and can definitely say that nearly all those listings are not actual open market sales (sold for $130k a month ago but "zestimate" is $900k, riiight). All you have to do is flip the "sold" filter to "for sale" and see what's left within 90 minutes of Seattle below $200k: tiny parcels of marginal land that will be challenging to build on, mobile homes (often in senior only communities) or houseboats on leased land/water, and a few teardowns on the very edges of that area.

There are plenty of smart, industrious, well off people with high risk tolerances in the Seattle market desperate for any whiff of a good deal. This is not an inefficient market. Anything truly under priced still goes quickly.
« Last Edit: December 09, 2019, 02:40:54 PM by Samuel »

talltexan

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Re: Overheard at Work 2
« Reply #1944 on: December 09, 2019, 12:43:29 PM »
Not from work, just read, but still, a finance tip:

Trouble with spending too much? Make three categories.
1. Needed 2. Wanted 4. Superfluous
and make a budget for each.

Wait! WTF? Budget?

If you need, buy. You cannot not buy if you need, after all. Why a budget? But even more - a budget for things you _don't_ want? Why would you lose money for things you don't want???

I very often get the vibe from people in our culture that they buy things just because... I dunno, because they haven't bought anything yet today? I think there's a not-insubstantial percentage of people for whom the idea of not spending money for an entire day would make them feel panicky/anxious.

I am holding a piece of paper, and I really don't give a shit about pieces of paper.

I can trade that piece of paper to someone in exchange for a thing that will make my grandkids happy, or a thing I can wear, or a thing that will make my car look cooler. And it's a lot less hastle than locating those things without spending money, and--by the way--I am already holding the money, anyway.

SwordGuy

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Re: Overheard at Work 2
« Reply #1945 on: December 09, 2019, 02:49:47 PM »
I just picked Seattle because I've seen many comments in the press and from people in the area about how high the property costs are.   

I didn't pick NYC or San Francisco because those are way more expensive than most areas in the country.

As for "most people" can't do it, most people don't try.    It takes work, knowledge and time.   Luck just makes that happen faster.
As I pointed out, over 1800 people in the last year bought living quarters for less than $200k in the Seattle area.  Some had to spend money to fix them up right away, others could have waited awhile.

You only need one house.   :)    Seems to me that the potential to save $200k to $500k on one's living quarters would be worth a fair bit of effort.
Citation, please?
The Zillow link I posted above shows the count of houses sold in the $50k to $200k price range.
Respectfully, that data is absolute garbage. I don't know Bremerton, but I've lived in the greater Seattle area my whole life and have been actively monitoring the sub $450k market for several years hoping to find something that feels like a decent deal. I've toured dozens of homes and condos in that time and can definitely say that nearly all those listings are not actual open market sales (sold for $130k a month ago but "zestimate" is $900k, riiight). All you have to do is flip the "sold" filter to "for sale" and see what's left within 90 minutes of Seattle below $200k: tiny parcels of marginal land that will be challenging to build on, mobile homes (often in senior only communities) or houseboats on leased land/water, and a few teardowns on the very edges of that area.

There are plenty of smart, industrious, well off people with high risk tolerances in the Seattle market desperate for any whiff of a good deal. This is not an inefficient market. Anything truly under priced still goes quickly.

Ok, I flipped it from "sold" to "for sale".   76 properties for sale.       Some may be too small for you but might be just right for others.   Some might be expandable over time, like my parent's and prior generations used to do.  Some are condos.
Some are in horrible condition, others appear to be in excellent condition.

You only need one.

FYI -- if you look at the pricing info tab on a property it will often list how often it has been offered for sale and at what price.  It will show how many days the property has been on the market.  There are ones on the market as I write this that have been available for months.   One of the ones I mentioned previously had been on the market gobs of times over the last decade and didn't sell.

So, again, the properties are there, for sale, and some of them might be more than suitable for a mustachian family.


dragoncar

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Re: Overheard at Work 2
« Reply #1946 on: December 09, 2019, 03:15:45 PM »
I havenít looked at the specific properties, but stuff thatís been on the market many times and for long times without selling is not likely a good deal.  It probably has major issues that are preventing serious buyers at that price point.

SwordGuy

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Re: Overheard at Work 2
« Reply #1947 on: December 09, 2019, 04:19:31 PM »
I havenít looked at the specific properties, but stuff thatís been on the market many times and for long times without selling is not likely a good deal.  It probably has major issues that are preventing serious buyers at that price point.

That will be true for some of the properties.    Again, you only need one place to live in.

Someone who is renting can take time to learn real estate investment techniques and learn how to find and identify properties.

Honestly, the pushback on this is pretty much the same kind of pushback I see when we expose people to MMM techniques for getting ahead.

I'm not going to convince anyone new at this point, so I'm done.





honeybbq

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Re: Overheard at Work 2
« Reply #1948 on: December 09, 2019, 04:29:34 PM »
Some of those zillow links are serious garbage.
https://www.zillow.com/homedetails/4208-E-Lynn-St-Seattle-WA-98112/97781953_zpid/
For instance, this house, that was listed at 2.2 million, sold for $200,000.
Something is wayyyy fishy there. And it's not the only one.



Zestimate
$201,366

ZESTIMATE RANGE
$191,000 - $211,000

LAST 30 DAY CHANGE
-$1,333,510 (-86.9 %)

ONE YEAR FORECAST
$202,171 (+0.4 %)
Zestimate history & details
Price / Tax History
Price HistoryTax History
DATE   EVENT   PRICE      $/SQFT   SOURCE
10/25/2019   Sold   $200,000   -91.3%   $70   --
6/8/2019   Listing removed   $2,288,000      $806   Realogics Sotheby's International Realty


And this one, worth $800,000 sold for $131k? These must be gifts to the family where you must sell at least the land value or something. I'm not up to date on real estate law but these are not "real" real estate transactions that anyone can get in on.


https://www.zillow.com/homedetails/154-NE-53rd-St-Seattle-WA-98105/49143795_zpid/

Home Value
Zestimate
$800,381

ZESTIMATE RANGE
$752,000 - $848,000

LAST 30 DAY CHANGE
+$11,020 (+1.4 %)

ONE YEAR FORECAST
$800,461 (+0.0 %)
Zestimate history & details
Price / Tax History
Price HistoryTax History
DATE   EVENT   PRICE      $/SQFT   SOURCE
1/25/2019   Sold   $27,000   +718.2%   $18   Public Record
3/7/2001   Sold   $3,300      $2   Public Record



There are a FEW really small, really tragic houses within a 5 mile radius of Seattle that are under <500k. But areas like Bremerton, Woodinville, Tacoma, etc. are all semi-affordable considering the price point in Seattle. If you are willing to commute, there's great places to live with good access to the outdoors and all that the PacNW offers. But Seattle proper is another story.

As often pointed out in FIRE movements, it's what you value and want to spend your money on.

SwordGuy

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Re: Overheard at Work 2
« Reply #1949 on: December 09, 2019, 04:54:07 PM »
Some of those zillow links are serious garbage.
https://www.zillow.com/homedetails/4208-E-Lynn-St-Seattle-WA-98112/97781953_zpid/
For instance, this house, that was listed at 2.2 million, sold for $200,000.
Something is wayyyy fishy there. And it's not the only one.



Zestimate
$201,366

ZESTIMATE RANGE
$191,000 - $211,000

LAST 30 DAY CHANGE
-$1,333,510 (-86.9 %)

ONE YEAR FORECAST
$202,171 (+0.4 %)
Zestimate history & details
Price / Tax History
Price HistoryTax History
DATE   EVENT   PRICE      $/SQFT   SOURCE
10/25/2019   Sold   $200,000   -91.3%   $70   --
6/8/2019   Listing removed   $2,288,000      $806   Realogics Sotheby's International Realty


And this one, worth $800,000 sold for $131k? These must be gifts to the family where you must sell at least the land value or something. I'm not up to date on real estate law but these are not "real" real estate transactions that anyone can get in on.


https://www.zillow.com/homedetails/154-NE-53rd-St-Seattle-WA-98105/49143795_zpid/

Home Value
Zestimate
$800,381

ZESTIMATE RANGE
$752,000 - $848,000

LAST 30 DAY CHANGE
+$11,020 (+1.4 %)

ONE YEAR FORECAST
$800,461 (+0.0 %)
Zestimate history & details
Price / Tax History
Price HistoryTax History
DATE   EVENT   PRICE      $/SQFT   SOURCE
1/25/2019   Sold   $27,000   +718.2%   $18   Public Record
3/7/2001   Sold   $3,300      $2   Public Record



There are a FEW really small, really tragic houses within a 5 mile radius of Seattle that are under <500k. But areas like Bremerton, Woodinville, Tacoma, etc. are all semi-affordable considering the price point in Seattle. If you are willing to commute, there's great places to live with good access to the outdoors and all that the PacNW offers. But Seattle proper is another story.

As often pointed out in FIRE movements, it's what you value and want to spend your money on.

So, this is all just some sort of conspiracy of thousands of real estate transactions for houses owned in less desireable areas by people who have so much money they know how to do this mysterious real estate technique?

Seriously?   

Or, perhaps, it was just a typo by a careless realtor's assistant or homeowner who posted it for sale?    Who typed 2288000 instead of 288000 and didn't proofread their work carefully? 

One of the reason I put in a $50k bottom filter on my search was to avoid the veritable host of rental property managers who code the houses for sale when they mean for rent.   I don't know whether they don't do it correctly because they are bad at their job or some marketing company has discovered they get better quality of renters from people looking for houses to buy.  As in, "Honey, why buy at $800,000 when we can rent for a fraction of that a month?"

You have any idea how many houses for sale I've looked at online where the photos are posted upside down or sideways?   I mean, really, how hard is that to get right?

There's no shortage of clueless, lazy, or inept folks entering in this data.

It's not like we don't see badly written signs in stores all the time...    This country is chock full of people with piss-poor literary and/or numeric skills.