Author Topic: Buy a house?  (Read 4779 times)

gsd802

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Buy a house?
« on: March 28, 2016, 09:07:45 AM »
Hi there, 26 year old and I am looking for advice.  Right now I have a job that gives me a house.  Decent 3 bedroom, 2 car garage.  Could use some updates, but no sense in putting money into something that I dont own.  Girlfriend and I have plans for marriage in baby in future, and would also like to build horse barn behind house on 2 acres.

We have these wants, not necessarily needs.  Happy to have a roof over our heads and food on the table, housing gives us opportunity to save.  In my area the house we live in would easily be $1,000 per month.  House value with 2 acres would be $200,000 (estimated)

Current salary = $48,200
Take home pay = $31,818
Contributions to ROTH = $5,500
Contributions to SIMPLE IRA = $4,800
Work contributes = $1,446
Spending Habits  = $1,400/month or $16,800/year
-(Insurances, fuel, utilities, food, dog, projects, pleasure etc.)

No debt

LEFT OVER  = $9,518 / year.

(All figures are myself only)

I have the opportunity to buy the house, but for one I'm not sure if I would get a raise in pay since the employer wont have housing expense anymore.  If I bought it, put money into it, house value would increase.  I would have a mortgage, so that money would need to come from retirement contributions or elsewhere.  We tend to eat out more than we should, not no more than the average individual. 

What I'm trying to ask, is it better to own a home and make more money from it in the future?  Or live in housing and save save save hoping to come ahead that way. I figure the house is $12,000 under the table pay to my salary.  By buying the house I would need to get that $12,000/year in my paycheck, but not sure employer is willing.

Thank you

Le Dérisoire

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Re: Buy a house?
« Reply #1 on: March 28, 2016, 09:17:24 AM »
In a balanced market, owning or renting a house to live in is more or less the same cost. Both are always an expense, never an investment. Don't buy into the myth that you "invest" by buying a house and "throw money out of the window" by renting.

Do I understand that you live in a FREE house right now? And you are asking if you should buy a house instead?

I will rephrase your question: "Hi, I'm living in a place I like for free. I would like to pay a monthly rent of hundreds/thousands of dollars to live somewhere else. Does that make Financial sense?"

The answer is no.

Drifterrider

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Re: Buy a house?
« Reply #2 on: March 28, 2016, 09:17:58 AM »
So, you are living rent free (kinda).  If you were to buy the house you would need the value (based on your numbers) of $12,000 plus the cost of the raise (remember all those taxes) which you say you aren't likely to get.

How long have you been with the company?  What is your stability there?  How long to you think you want to stay in that area or with that company?

Never buy a house or car because you think it will appreciate.

In 2008 I bought a house to live in.  One I looked at sold for $194K, and another one I looked at sold for $200K.  The first is on the market now for $156K and the second for $108K.  Mine could still sell for what I paid but I've made improvements that I couldn't recover by selling now.  Never fall into the trap of "but you will save on taxes".  You won't.


2Birds1Stone

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Re: Buy a house?
« Reply #3 on: March 28, 2016, 09:23:30 AM »
Unless you get a raise to offset the housing allowance I would continue living sans rent.

nereo

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Re: Buy a house?
« Reply #4 on: March 28, 2016, 09:24:07 AM »
Quote
What I'm trying to ask, is it better to own a home and make more money from it in the future?  Or live in housing and save save save hoping to come ahead that way. I figure the house is $12,000 under the table pay to my salary.  By buying the house I would need to get that $12,000/year in my paycheck, but not sure employer is willing.

Step 1: run this calculator and play with different inputs.  That will tell you whether the economics in your area favors buying or renting.

Step 2: There are many good non-economical reasons to own a house, and many good non-economical reasons to NOT own your own home.  Determine where you sit on that spectrum.  For example, owning a home secures you to that spot (both a good and bad thing) and means that you are in charge of all modifications, repairs, etc.

Trip

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Re: Buy a house?
« Reply #5 on: March 28, 2016, 09:29:31 AM »
In a balanced market, owning or renting a house to live in is more or less the same cost. Both are always an expense, never an investment. Don't buy into the myth that you "invest" by buying a house and "throw money out of the window" by renting.

Do I understand that you live in a FREE house right now? And you are asking if you should buy a house instead?

I will rephrase your question: "Hi, I'm living in a place I like for free. I would like to pay a monthly rent of hundreds/thousands of dollars to live somewhere else. Does that make Financial sense?"

The answer is no.

This. If you are not paying rent, then save save save.

gsd802

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Re: Buy a house?
« Reply #6 on: March 28, 2016, 09:35:46 AM »
Yes the cost of living for me in this house is absolutely free, besides paying for electric and internet.  I burn wood that we cut on the employers property. 

I have been with these guys for 3 years now and have made a lot of great changes.  The numbers that go along with it prove it.  I believe I am a key asset to them and if I "threatened" to leave because I wanted something different they would help me out. 

You're right, the numbers don't add up unless they gave me $12,000 more for salary.  Living for free is the way to go economically.  I guess it's the "wants" that make me think of owning.  Insulating my garage, building horse barn, those kinds of things. 

Trip

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Re: Buy a house?
« Reply #7 on: March 28, 2016, 09:42:26 AM »
Completely understand your perspective there. I find myself wanting a lot of the same things in a house as well, however, it just does not make the most financial sense at this point. I'm willing to delay that gratification in the meantime. Running the numbers helps me avoid making the large costly mistake of jumping the gun.

neo von retorch

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Re: Buy a house?
« Reply #8 on: March 28, 2016, 10:25:57 AM »
While I'll give you the benefit of the doubt that your marriage and family building is completely certain, I'd never recommend that someone buy a house together with someone until after they are married. So if you would move forward with it for whatever reason, I'd just take the precaution of getting the house completely in your own name, and having your girlfriend "rent" from you by paying a portion of the living expenses. At the same time, if you wanted to then co-own the house, there may be an expense in getting the title redone. My opinion here is that you should take advantage of the savings and put away money for a down payment, and once you are married, reevaluate your choices, but with a hefty savings account prepared for you.

marcela

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Re: Buy a house?
« Reply #9 on: March 28, 2016, 10:26:30 AM »
Can you ask your employers about doing some of the improvements you are interested in? If you present it as a value added, they might be willing to pay for it or split the cost with you.
This would apply more towards something like insulating the garage, not the horse barn which seems very specific to your particular needs.

gsd802

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Re: Buy a house?
« Reply #10 on: March 28, 2016, 11:00:54 AM »
Yes I would buy the house in my name at this time and then after marriage do something different if we chose to.

That is a good point I should ask them if they could do some of the renovations. I feel like I'm in a tough spot, I do like saving money, but I also have hobbies that I enjoy. Most of my time is spent working, so it would be nice to come home to something that is mine, or work towards improving what I have. We all have hopes and dreams right?

My employers and I have a good working and a good personal relationship.  I am thinking maybe telling him one day I will want these things, and if they can't offer them then I may have to look elsewhere. That might persuade them in making a change. I am confident I could make my salary plus the $12,000 at another employer without housing, but I worked my way up to where I am now and have a lot of say in what goes on. Starting over turns me off from that idea.

humbleMouse

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Re: Buy a house?
« Reply #11 on: March 28, 2016, 12:13:08 PM »
You have a free house and you want to buy a house?  Hell no!

JZinCO

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Re: Buy a house?
« Reply #12 on: March 28, 2016, 12:50:34 PM »
That is a good point I should ask them if they could do some of the renovations. I feel like I'm in a tough spot, I do like saving money, but I also have hobbies that I enjoy. Most of my time is spent working, so it would be nice to come home to something that is mine, or work towards improving what I have. We all have hopes and dreams right?
Or, "Most of my time is spent working, so it would be nice to come home and not have the mental weight of house projects/meeting with plumbers/electricians on my mind."

I'm in a similar position as you. Home owner has expressed interest in selling the house. Given the low rent, there is little incentive for me to buy it. Instead I get the option to work on projects that increase the home's value and receive a cut in rent.

TabbyCat

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Re: Buy a house?
« Reply #13 on: March 28, 2016, 08:56:41 PM »
I agree on not buying property until you're married. If you don't buy it, is there a chance they would sell to someone else? If they're offering to you for sale they might be giving you first pick before listing it. If not, rent for free - better deal.

gsd802

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Re: Buy a house?
« Reply #14 on: March 29, 2016, 05:17:15 AM »
They are offering to sell it because they know I want to do more to it than they are wiling to put into it and we both feel that I will be employed here for a long time. I love working on things, and if I owned the house I would tear down garage and rebuild bigger. Concrete is all busted up, garage was built chinsey.  They won't sell the house to someone else because bascially the house comes with the job.

So let's say they gave me that $12,000 / year raise for me to buy the house. Will I be ahead financially to own, because with that raise and added mortgage, (if my numbers are correct) I will still be getting same take home pay. At the same time, I'm already talking about renovations, and that's going to cost money out of pocket.

Nickels Dimes Quarters

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Re: Buy a house?
« Reply #15 on: March 29, 2016, 05:45:32 AM »
I'd continue to live in the house for free, and use my extra cash to buy other properties as rentals. Free housing is amazing!

NDQ

Le Dérisoire

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Re: Buy a house?
« Reply #16 on: March 29, 2016, 06:57:44 AM »
So let's say they gave me that $12,000 / year raise for me to buy the house. Will I be ahead financially to own, because with that raise and added mortgage, (if my numbers are correct) I will still be getting same take home pay. At the same time, I'm already talking about renovations, and that's going to cost money out of pocket.

To calculate the owning cost, you have to add all costs incurred by owning (interests payments, insurance, renovation, taxes, general maintenance, real estate agent, closing costs, etc.). The capital portion of your mortgage repayment is not a cost. Note that most people greatly underestimate renovation and general maintenance costs.

Then, you have to add to that the opportunity cost of not investing the equity value of your house in the stock market (or whatever in what market you would invest). This is a BIG cost that most people do not even take into account.

Finally, you have to subtract the expected appreciation of your house. This varies greatly from year to year and from neighborhood to neighborhood, but the average is about 2.5% / year (long term).

Alternatively, you can estimate the annual cost by dividing the house price by 16 (that’s VERY approximate). A cost of 12000$ a year would mean a house worth 192000$.

slappy

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Re: Buy a house?
« Reply #17 on: March 29, 2016, 07:22:30 AM »
If you buy the house, wouldn't your mortgage be more than $1000 per month? My mortgage is over $1300 per month and we borrowed about $150k. Granted, we have relatively high taxes, so yours may differ, but I can't imagine it would be $1k or under.

bobechs

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Re: Buy a house?
« Reply #18 on: March 29, 2016, 07:28:48 AM »
They are offering to sell it because they know I want to do more to it than they are wiling to put into it and we both feel that I will be employed here for a long time. I love working on things, and if I owned the house I would tear down garage and rebuild bigger. Concrete is all busted up, garage was built chinsey.  They won't sell the house to someone else because bascially the house comes with the job.

So let's say they gave me that $12,000 / year raise for me to buy the house. Will I be ahead financially to own, because with that raise and added mortgage, (if my numbers are correct) I will still be getting same take home pay. At the same time, I'm already talking about renovations, and that's going to cost money out of pocket.

You seem compelled to try to to convert a sweet deal into a money pit.  That's okay; a lot of people up on a high place will visualize what it would be like to jump off.

Just don't do it.



(A prosaic footnote re: your imaginary $12K raise to finance your dream,
You will have to pay taxes on that additional income, so it won't be nearly as much as you hope.  Neither you nor the employer will benefit from that additional taxation.)

gsd802

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Re: Buy a house?
« Reply #19 on: March 29, 2016, 10:04:03 AM »
Ok thanks everyone. I like to lay out all my options and figure out what the best option is.

It's clear everyone seems to agree that what I have now is how I should keep it. In the mean time I will keep saving.

Dmy0013

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Re: Buy a house?
« Reply #20 on: March 30, 2016, 08:47:18 AM »
Sounds like you already made your decision!

STAY STAY STAY...