Author Topic: Buy a home cash or Loan  (Read 1957 times)

ColtCeverz

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Buy a home cash or Loan
« on: December 23, 2013, 11:18:08 AM »
Hi All,
Great articles here. I've been a fan of a modest living for some time. I've founded my investing on guru's such as Dave Ramsey, and Mr Money Mustache, the oxford club Both teach the principles of living within your means. I've been a fan of investing and have bought several books including, “who moved my cheese”, “Rich dad Poor dad" "The Gone fishing Portfolio" and have applied many of those principles. I'm torn with a recent division about investing. I've recently come into some money after a parent passing away. I have a good retirement saving and was planning to buy a house. I've heard nay Sayers say don't buy a house for tax purposes, that makes no sense to me why would I owe money to wright just a little off on my taxes? Recently a friend of mine approached me with the idea of putting 20% down on 4-5 homes and Renting them. He says that would create a revenue stream for me. It seems risky. Or putting a little down on a home and buying some commercial Realestate. Or buying a really big home and taking out a small loan because it will go up in value... What's the right decision here, ultimately I don't want to squander this money its the only thing I have left from my parent, and Biblically it says in Proverbs " the borrower is slave to the lender.." What's the right choice here.
Thanks,
Dave
« Last Edit: December 23, 2013, 11:29:42 AM by ColtCeverz »

Jamesqf

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Re: Buy a home cash or Loan
« Reply #1 on: December 23, 2013, 11:33:02 AM »
Buy the house because it's where you want to live, and you plan on living there for many years.  Don't buy a house that's 'too big' *for you needs/wants) because you expect it to appreciate: remember the housing bubble?

As for paying cash vs mortgage, if you can get a loan at under 4%, but can make an average of say 7% on investments, I think it makes sense to borrow.  Of course with a big enough downpayment that you aren't getting hit with PMI.

Rentals or commercial, take an honest look at the work involved, and decide if that's really something you want to do.  It's a personality thing - some people enjoy it, I'd avoid it lik a root canal.

ColtCeverz

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Re: Buy a home cash or Loan
« Reply #2 on: December 23, 2013, 12:14:58 PM »
Thanks Jamesqf!!
I’ve been pondering that very idea. I see what you mean about the housing bubble. The cash vs mortgage thing may seem the same to me, what about a “stock market crash”. If I Buy the house outright, there is just something that feels secure in that. If all else fails, at least I have a house, right?/ lol

Bruised_Pepper

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Re: Buy a home cash or Loan
« Reply #3 on: December 23, 2013, 01:38:40 PM »
The cash vs mortgage thing may seem the same to me, what about a “stock market crash”. If I Buy the house outright, there is just something that feels secure in that. If all else fails, at least I have a house, right?/ lol

The feeling that you are describing is called "risk". 

If owning a home outright is important to you, then you should buy it straight up, but know that you are missing out on a lot of returns by tying up your assets in a house. 

Jamesqf

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Re: Buy a home cash or Loan
« Reply #4 on: December 23, 2013, 02:46:11 PM »
...what about a “stock market crash”.

Think long-term.  Stock market crashes are temporary, typically lasting a year or two.  As long as you don't panic-sell, you'll find your investments will recover.  For instance, I have a 401k plan with Vanguard from a previous employer.  I'v been self-employed for a decade, so it's just sitting there with no contributions.  The total value dropped almost 50% from its previous high to the '08 bottom, but since has recovered to about 140% of the prior high.

KingCoin

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Re: Buy a home cash or Loan
« Reply #5 on: December 23, 2013, 03:05:08 PM »
I responded to the identical question cross posted in "Real Estate and Landlording". Perhaps a mod can consolidate the threads.