Author Topic: Please confirm or correct my assumptions about buying my first house  (Read 27251 times)

cranilation

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Hi friends!  I'm 30, married, we have about 30k in student loans, are bringing in about 100k a year, and have always rented.  I want to buy a house and I thought I should do a check in on my assumptions about how to do that. 

I sat down and though about everything I've read on here and overheard people talk about.  I wrote out what I think are the Assumptions that I have.  I am not confident in these assumptions and would like some advice.  Here they are:

  • We are paying $800/month which is, let's say, $10,000/year.  Therefore, if we live in a house for 10 years and lose $100,000 on it, it will only be as bad as if we rented.
  • Paying for repairs is cheaper than renting - see #1
  • A fixer-uper is fun
  • On that note, maintenance only takes as much time as you feel like spending
  • And yardwork isn't really that big of a deal, especially with an urban yard
  • Historic, built-to-last architecture is actually cheaper, higher-quality, and better in the long run than these shitty cardboard shoeboxes they are making these days
  • $ put into renovation turns directly into a higher price when you sell the house - so again, it's basically free in the long-run. - see #1 and #2
  • If you're going to sell a house in 10 years, you don't need to work to pay it off because it's not pants-on-fire debt
  • A $90k and $190k house are basically the same, because in 10 years when you sell it, the buyer will take out a mortgage and give you the whole cost.  As long as the market goes up faster than your interest payment, you will still come out ahead
  • $ put into the principle is an investment and should be compared with $ put into other investments.  The principle is not a pants-on-fire debt that you should pay down for its own sake.
  • I live in the top housing market in the nation, so while I will be paying TOO MUCH for a house, that's ok because the next buyer will, too.


Based on all of that, here is The Plan:

1. pay off student loans (on track to be paid off next february)
2. save up a down payment for six months ($20k)
3. go to the bank and see what kind of mortgage we qualify for
4. Attend open houses across the city to see what kind of house goes for what - do this starting today.
5. Decide what kind of house we think we want at the price we can afford, find a realtor who will deliver us that house.
6. Wait until that house becomes available, then buy it.

pbkmaine

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Re: Please confirm or correct my assumptions about buying my first house
« Reply #1 on: April 23, 2016, 02:31:12 PM »
House prices go down as well as up, even in the top housing market in the nation. You speak about 10 years. Is that how long you plan to stay in the house?

dandarc

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Re: Please confirm or correct my assumptions about buying my first house
« Reply #2 on: April 23, 2016, 02:35:33 PM »
Pretty much disagree with 1 through 11.

1.  Suppose it depends on how you define the term "lose".  Interest, maintenance, price fluctuations, opportunity cost, insurance, taxes, commissions when you sell.  It all adds up.  Potentially more than you're thinking over 10 years.
2.  I suppose over the long run this has to be true, or landlords couldn't make money.  Over the short-run though, it can be very much worse than renting.
3.  If you enjoy living in a construction site and spending the vast majority of free time on construction projects, I guess it could be fun.
4.  Not true - you can hire out a lot, but you can't get all the way to 0 here.
5.  Yard work is the bane of my existence!
6.  Depends.  Old house structure may or may not be better, but old house wiring, plumbing, and so on is almost certainly worse.  Also the older the house is, the more time there is for some none-standard work to have been done it.  Dandarc's potential big repair this year on his 1952 built house?  Rewiring the whole place.
7.  Renovation dollars often don't return as much as you spend on it.  If you can do a lot of the work yourself, you might make a better cash return, but remember to account for your time as well.
8.  OK - this one I agree with.  but has more to do with the interest rate vs. expected return on investments than the length of time you live there.  You need to stay in a house for a good while for it to work out financially, mostly due to transaction costs.
9.  That's what people were saying in 2006.  Also, the more expensive house generally comes with more expensive taxes, insurance, utilities (assuming larger), so not equal on financial terms.
10. This is the same thing as #8, essentially.
11. Grand Rapids is a fantastic city.  You're essentially duplicating #9, though.  There is no guarantee you'll be able to sell for what you have into the house.

So anyway, not a bad plan of action - pay off loans, save up down payment, buy a house if you want.  But you're making a lot of the "real estate is a sure thing!" type of potential mistakes here.  The house you live in is a consumption item with a possible, but far from guaranteed, speculative return built in.

prognastat

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Re: Please confirm or correct my assumptions about buying my first house
« Reply #3 on: April 23, 2016, 02:44:48 PM »
Pretty much disagree with 1 through 11.

1.  Suppose it depends on how you define the term "lose".  Interest, maintenance, price fluctuations, opportunity cost, insurance, taxes, commissions when you sell.  It all adds up.  Potentially more than you're thinking over 10 years.
2.  I suppose over the long run this has to be true, or landlords couldn't make money.  Over the short-run though, it can be very much worse than renting.
3.  If you enjoy living in a construction site and spending the vast majority of free time on construction projects, I guess it could be fun.
4.  Not true - you can hire out a lot, but you can't get all the way to 0 here.
5.  Yard work is the bane of my existence!
6.  Depends.  Old house structure may or may not be better, but old house wiring, plumbing, and so on is almost certainly worse.  Also the older the house is, the more time there is for some none-standard work to have been done it.  Dandarc's potential big repair this year on his 1952 built house?  Rewiring the whole place.
7.  Renovation dollars often don't return as much as you spend on it.  If you can do a lot of the work yourself, you might make a better cash return, but remember to account for your time as well.
8.  OK - this one I agree with.  but has more to do with the interest rate vs. expected return on investments than the length of time you live there.  You need to stay in a house for a good while for it to work out financially, mostly due to transaction costs.
9.  That's what people were saying in 2006.  Also, the more expensive house generally comes with more expensive taxes, insurance, utilities (assuming larger), so not equal on financial terms.
10. This is the same thing as #8, essentially.
11. Grand Rapids is a fantastic city.  You're essentially duplicating #9, though.  There is no guarantee you'll be able to sell for what you have into the house.

So anyway, not a bad plan of action - pay off loans, save up down payment, buy a house if you want.  But you're making a lot of the "real estate is a sure thing!" type of potential mistakes here.  The house you live in is a consumption item with a possible, but far from guaranteed, speculative return built in.

Yeah really it comes down to one thing. Do you want to live in a house you own and is it worth more than the risk of losing lots of money, even if the price remains stable the same amount of money invested over 10 years would roughly double at average market returns. The question really should be do you want the house owning lifestyle and are ok with everything attached to it. If so then I'd say go for it, but don't buy more house than you can really afford.

I would not go in to it looking at it as an investment though, because looking at it purely as an investment it is a terrible investment opportunity no matter how good your area is.
« Last Edit: April 23, 2016, 03:42:09 PM by prognastat »

Metric Mouse

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Re: Please confirm or correct my assumptions about buying my first house
« Reply #4 on: April 24, 2016, 07:41:47 AM »
Your plan for buying a house is pretty spot on.

Your assumptions about home ownership are obviously an attempt to troll.

ender

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Re: Please confirm or correct my assumptions about buying my first house
« Reply #5 on: April 24, 2016, 07:56:18 AM »
Your plan for buying a house is pretty spot on.

Your assumptions about home ownership are obviously an attempt to troll.

Yeah I can't decide if it's serious or not but it really looks not serious.

Rezdent

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Re: Please confirm or correct my assumptions about buying my first house
« Reply #6 on: April 24, 2016, 09:12:04 AM »
I dunno about the trolling, but I've heard other people say one or more of these assumptions.  Most of the time, what they were really trying to do is convince themselves or their SO to buy a house based on emotion, and they downplay or spin the negatives.

Usually goes something like this:
Person 1:  I really, really want a house.  Really.
Person 2:  I don't think now is a good time to buy.  Houses are overpriced here, and the calculator indicates we are better off renting.
Person 1:  But, but, we could lose 100k and still come out ahead!
Person 2:  Whatever.  I don't want to get saddled with the yardwork, anyway.
Person 1:  It's really no big deal - these tiny lots are so easy to maintain.

cranilation:  It's sounds like you are motivated to buy, have done some research on it, and formulated a plan.
Houses almost always end up with unexpected expenses, may depreciate significantly at a most inconvenient moment, and require more care than most people expect.

Miss Piggy

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Re: Please confirm or correct my assumptions about buying my first house
« Reply #7 on: April 24, 2016, 09:35:51 AM »
It's extremely easy for a house to become a money pit.

FIRE47

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Re: Please confirm or correct my assumptions about buying my first house
« Reply #8 on: April 24, 2016, 09:41:29 AM »
Hi friends!  I'm 30, married, we have about 30k in student loans, are bringing in about 100k a year, and have always rented.  I want to buy a house and I thought I should do a check in on my assumptions about how to do that. 

I sat down and though about everything I've read on here and overheard people talk about.  I wrote out what I think are the Assumptions that I have.  I am not confident in these assumptions and would like some advice.  Here they are:

  • We are paying $800/month which is, let's say, $10,000/year.  Therefore, if we live in a house for 10 years and lose $100,000 on it, it will only be as bad as if we rented.
  • Paying for repairs is cheaper than renting - see #1
  • A fixer-uper is fun
  • On that note, maintenance only takes as much time as you feel like spending
  • And yardwork isn't really that big of a deal, especially with an urban yard
  • Historic, built-to-last architecture is actually cheaper, higher-quality, and better in the long run than these shitty cardboard shoeboxes they are making these days
  • $ put into renovation turns directly into a higher price when you sell the house - so again, it's basically free in the long-run. - see #1 and #2
  • If you're going to sell a house in 10 years, you don't need to work to pay it off because it's not pants-on-fire debt
  • A $90k and $190k house are basically the same, because in 10 years when you sell it, the buyer will take out a mortgage and give you the whole cost.  As long as the market goes up faster than your interest payment, you will still come out ahead
  • $ put into the principle is an investment and should be compared with $ put into other investments.  The principle is not a pants-on-fire debt that you should pay down for its own sake.
  • I live in the top housing market in the nation, so while I will be paying TOO MUCH for a house, that's ok because the next buyer will, too.


Based on all of that, here is The Plan:

1. pay off student loans (on track to be paid off next february)
2. save up a down payment for six months ($20k)
3. go to the bank and see what kind of mortgage we qualify for
4. Attend open houses across the city to see what kind of house goes for what - do this starting today.
5. Decide what kind of house we think we want at the price we can afford, find a realtor who will deliver us that house.
6. Wait until that house becomes available, then buy it.


Not sure if trolling with some of these tbh - not going to go over all of them but #1 seems like the most off base and most potentially damaging assumption so I'll go with that one.


Yes every cent you spend on rent is "lost" as in it is an expense and does not have any equity component - However owning a house involves a bunch of expenses that are "lost" as well.

Interest (a large part of each mortgage payment), repairs, property taxes etc

alexgodden

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Re: Please confirm or correct my assumptions about buying my first house
« Reply #9 on: April 24, 2016, 09:45:54 AM »
You are completely forgetting interest!

So you pay $800 in rent at the moment? Say you go for the $190K house, and save up a pretty generous $20K down payment - you have to borrow $170K. At a fairly good mortgage rate of 4% that works out to around $567 per month in interest. Or the cost of "renting" your purchase price money from the bank.

So really, you are saving very little by renting, but have all the additional costs and risk.

bacchi

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Re: Please confirm or correct my assumptions about buying my first house
« Reply #10 on: April 24, 2016, 09:48:27 AM »
3) Does your spouse think that a fixer-upper is fun? This also, of course, depends on how much of a fixer upper you buy.

5) Agreed, an urban yard doesn't take much work as long as there's no HOA involved. Put in native plants and let it grow wild. Your neighbors may complain but, hey, you only have so many fucks to give.

9) and 11) are big IFs. A housing market can stay depressed for a long time (see Houston from the late 80s to the late 90s).

Dmy0013

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Re: Please confirm or correct my assumptions about buying my first house
« Reply #11 on: April 24, 2016, 09:53:04 AM »
So confused....

Kitsune

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Re: Please confirm or correct my assumptions about buying my first house
« Reply #12 on: April 24, 2016, 12:02:54 PM »
Maintenance = as much time as you feel like putting into it ONLY if you're willing to put in more time eventually.

I did NOT want to spend an hour re-caulking 2 sinks and a tub this morning. I wanted it more than dealing with mold and water damage in 6 months, though.

Kinda like how I don't WANT to spend 300$ on grass seed and this afternoon sowing it (we built last summer, so... No grass yet), but I want to deal with soil erosion and water-related foundation issues even less.

JAYSLOL

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Re: Please confirm or correct my assumptions about buying my first house
« Reply #13 on: April 24, 2016, 12:06:58 PM »
You pay $800 a month to live "in the top housing market in the nation" and admit you will be paying too much for a house but it's ok because someone even more foolish will bail you out in the future?  Are you being serious?  $800 a month where I am gets you a tiny one bedroom basement suite in a shitty part of town.  If this is getting you a reasonable place to live consider yourself lucky and keep renting.  Your not "loosing" the money you spend on rent, you are buying the freedom of not worrying about property values, repairs and maintenance and when to time the market and get out.  It also buys you the freedom to move anywhere at little cost without a financial anchor potentially dragging you down. 

lbmustache

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Re: Please confirm or correct my assumptions about buying my first house
« Reply #14 on: April 24, 2016, 12:23:30 PM »
Fixer-uppers, maintenance, and yard work are only "fun," if you are into that sort of thing.

Fixing things is a lot of work. You're not painting or assembling things IKEA-style - you're ripping things out, digging into walls, getting cuts, bruises, and sore muscles - and getting dirty and grimy and gross. I happen to enjoy it but I can also devote 8 hours of a day to fixing something, others can't.

Maintenance is either time or money, usually both. Example: water heater blew up, well now I gotta buy another one ($$$) and either install it myself (time) or call someone else (time waiting around + money).

I enjoy minor gardening but do not enjoy pest control, mowing lawns, etc.

Melody

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Re: Please confirm or correct my assumptions about buying my first house
« Reply #15 on: April 24, 2016, 05:24:23 PM »
My friends very basic reno cost $30k (to date).
This was mostly DIY, though the professionals were called in to gut and re-do the bathroom.
She hasn't touched the kitchen except with paint (she painted the old cabinets). She still has no flooring in the kitchen and laundry. The yard is a dump. The walls in the sunroom are yet to be plastered. There are still no curtains and blinds. She hasn't even thought about street appeal. She didn't do anything hard like knock out walls - which was a big mistake, as the bathroom which she spent a lot of her reno budget on is still in the wrong place and she lost the opportunity to design a nice indoor/outdoor flow with the dining area opening onto the patio. She'll likely hit $60k+ by the time she's done and the spec will still be "too low" for the area she bought in. (She paid $660k house, in an area where houses go for $650-$800k, the area is almost exclusively populated by DINKS who would generally expect a higher spec renovation and a decent amount of street appeal).  By the time she's done she will have spent $720k - for $720 she could have bought something at a much higher spec than what her completed product will be, and not spent a year of weekends doing the labor.
Renovating is generally best left to:
Investors who renovate apartments where an ikea kitchen, new vanity, laminate floor boards and lick of paint (<$10k budget) can increase your rent returns by $50-$100 a week and add $20-$30k to the valuation. Apartment renovations are a lot simpler and cheaper than home renos.
Those who want to create their dream home
For the rest of us, the total cost is generally lower if we just buy something fully renovated.

JLee

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Re: Please confirm or correct my assumptions about buying my first house
« Reply #16 on: April 24, 2016, 06:12:27 PM »
3) Does your spouse think that a fixer-upper is fun? This also, of course, depends on how much of a fixer upper you buy.

5) Agreed, an urban yard doesn't take much work as long as there's no HOA involved. Put in native plants and let it grow wild. Your neighbors may complain but, hey, you only have so many fucks to give.

9) and 11) are big IFs. A housing market can stay depressed for a long time (see Houston from the late 80s to the late 90s).

City ordinances can require lawn maintenance as well.  I left my house to the care of my roommates for a few months and learned that the hard way.

vhalros

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Re: Please confirm or correct my assumptions about buying my first house
« Reply #17 on: April 24, 2016, 06:42:12 PM »
For my own edification, what is "street appeal"?

Kitsune

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Re: Please confirm or correct my assumptions about buying my first house
« Reply #18 on: April 24, 2016, 06:50:20 PM »
For my own edification, what is "street appeal"?

Things that make the house look nice from the street. ;)

In practical terms: landscaping, flowers, trees, bushes, painted porches, etc.

cranilation

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Re: Please confirm or correct my assumptions about buying my first house
« Reply #19 on: April 25, 2016, 06:15:22 PM »
Hey thanks for all the replies and feedback!  I was not trolling, but I do know nothing so I'm not surprised Poe's law kicked in :)

I'm going to do some more thinking on this topic - I'm less gung-ho, that's for sure. I gotta thank Rezdent especially for making me ask myself if I'm not really just trying to convince myself and my partner that this is a good idea.  I think I might be.

2Birds1Stone

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Re: Please confirm or correct my assumptions about buying my first house
« Reply #20 on: April 25, 2016, 07:21:50 PM »
Wow....

Dmy0013

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Re: Please confirm or correct my assumptions about buying my first house
« Reply #21 on: April 25, 2016, 07:44:28 PM »
Still confused

pbkmaine

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Re: Please confirm or correct my assumptions about buying my first house
« Reply #22 on: April 25, 2016, 07:52:53 PM »
http://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html?_r=0

This might be useful for your future consideration.

K-ice

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Re: Please confirm or correct my assumptions about buying my first house
« Reply #23 on: April 25, 2016, 10:10:39 PM »

1) As others mentioned don't forget about interest. Taxes, utilities, insurance and anything else you are now responsible for paying. You will be surprised how close to rent the total is.

2) "Paying for repairs is cheaper than renting" probably, but get estimates on the big items like, roof, furnace...

3) "A fixer-uper is fun". I agree but my SO does more of the hard work than me.

4) "maintenance only takes as much time as you feel like spending" on the fun stuff yes.
But on the new roof etc. you need to plan or have an emergency fund.

5) "yardwork isn't really that big of a deal". Depends on the yard.

6) "...built-to-last architecture..." I prefer good bones to new.

7) "$ put into renovation turns directly into a higher price". Google this. Very few things pay off. Painting & staging help but major renos don't always pay off.

8) "...you don't need to work to pay it off". Unless you want to pay interest "rent" to the bank forever I would work at paying it off. However other debt is on fire first.

9) "$90k = $190k"  once you do step 3 & 4 of your plan below you will see this is not true.

10) "$ put into the principle is an investment" this is true but I never count it towards my savings. I do count it in my net worth calc but since it's hard to liquidate, & I need a place to live, it can't be counted towards my FIRE goal.

11) no comment. I don't know your market of the future.

Quote

"Based on all of that, here is The Plan:

1. pay off student loans (on track to be paid off next february)
2. save up a down payment for six months ($20k)
3. go to the bank and see what kind of mortgage we qualify for
4. Attend open houses across the city to see what kind of house goes for what - do this starting today.
5. Decide what kind of house we think we want at the price we can afford, find a realtor who will deliver us that house.
6. Wait until that house becomes available, then buy it."


Your plan is quite good. I would add:

7. Spread sheet all of the home owner costs and use that to help pick your home.



Cyaphas

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Re: Please confirm or correct my assumptions about buying my first house
« Reply #24 on: April 25, 2016, 10:49:45 PM »
Make sure you have enough of a down payment to not have to pay PMI. THIS IS A BIG DEAL.

Renovations can be fun, you might like them. Offer to be a slave on a few of your days off to a contractor. Work for free, find out if it's something you're really willing/motivated to do.

Never pay a premium price on a place with an older heating/cooling system. Replacing them gets extremely expensive.

LOCATION LOCATION LOCATION: get a place close to where you're going to be traveling the most. Work, Food, Schools, Family... Work usually being the highest priority. If you can find a place that's easily bikeable to work or could eliminate you or your SO from having to own a vehicle, you'd be saving a lot of time and money.

Learn your area's traffic. Spending 25 mins trying to get to your new place in the burbs sitting at stop lights sucks. In my case, Texas, being near or far from the Interstate and which Interstate makes a world of difference in time spent traveling.

In major metro areas, is there public transportation? Are you going to use it? How far away is it? Walkable/bikeable?

HOA's / Amenities: before you EVER buy into an HOA that offers amenities, find out how much the HOA is going to cost and seriously consider if you're actually going to be using the amenities offered. If the HOA doesn't offer you anything, don't buy there.

Yards, most people use them as doggy litter boxes. Don't buy a large yard for what could be. Buy a large yard if you KNOW you're going to use it. Even then, buy near a nice large park and you'll have a nice big lawn you don't have to mow.

Your hopey dreamy, I might want to, just incase items. No one uses their formal dining room, except dust mites. It's not 1950 anymore. Pool tables, also known as laundry collecting tables. Pools, are you really going to swim in it? Will it be worth the $100 a month in electricity and the countless hours spent taking care of it? Will it be worth the $10k renovation when the sides crack or the gunnite needs redone? Hot tubs... are you fucking serious? Jetted tubs, break, often. They're also a pain in the ass to work on. Security systems are usually a joke. Get a couple of decent security cameras, put them ina couple of conspicuous places and they'll do far more to deter would be criminals than an ADT sign. They're pretty cheap too. Motion sensor flood lights, install two on the front of your house one facing the driveway. You won't regret.

Kids? More kids? Don't buy a 5 bedroom house for a family you haven't started yet. You can use 2 bedrooms for how ever many kids you pop out for 10 years before you need to start expending to a bigger home. Paying heating and cooling on empty space gets extremely expensive over time. Bunk beds are your friend.

I really think we can help you a lot more if we know more about your family's hobbies and goals.

Nickels Dimes Quarters

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Re: Please confirm or correct my assumptions about buying my first house
« Reply #25 on: April 26, 2016, 05:21:13 AM »
Stick to your plan to eliminate the student loan debt and build you savings/investments. This will take some time and give you more months to look at what you want to do and how you both want to live. Be aggressive with keeping out of debt and living well under your means.

You may decide that the real estate gamble isn't for you, but you will be able to buy other types of investments that will keep your money growing and earning for you.

There are lots of ways to build wealth. Keep at it!

NDQ

ShoulderThingThatGoesUp

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Re: Please confirm or correct my assumptions about buying my first house
« Reply #26 on: April 26, 2016, 05:31:34 AM »
  • We are paying $800/month which is, let's say, $10,000/year.  Therefore, if we live in a house for 10 years and lose $100,000 on it, it will only be as bad as if we rented.
Property taxes are probably a big part of your rent. How much would those be on your house? That's your "guaranteed" loss.
Quote
  • Paying for repairs is cheaper than renting - see #1
Not in real life, because you'll want to make things better rather than simply make them acceptable. You'll put more money in to your own home than you would has a landlord.
Quote
  • A fixer-upper is fun
Sometimes, but I didn't really like it. It's very, very, stressful.
Quote
  • On that note, maintenance only takes as much time as you feel like spending
No. How could this possibly be true?
Quote
  • And yardwork isn't really that big of a deal, especially with an urban yard
It's not that big of a deal with a small yard, true.
Quote
  • Historic, built-to-last architecture is actually cheaper, higher-quality, and better in the long run than these shitty cardboard shoeboxes they are making these days
Right after I bought my brick pre-First World War house, I had to put a lot of money into it because water would just pour through the foundation sometimes.
Quote
  • $ put into renovation turns directly into a higher price when you sell the house - so again, it's basically free in the long-run. - see #1 and #2
Most money put into renovation will maintain the value of your house - you're keeping up with buyers' expectations. Everybody else is renovating occasionally too.
Quote
  • If you're going to sell a house in 10 years, you don't need to work to pay it off because it's not pants-on-fire debt
Depends on interest rate
Quote
  • A $90k and $190k house are basically the same, because in 10 years when you sell it, the buyer will take out a mortgage and give you the whole cost.  As long as the market goes up faster than your interest payment, you will still come out ahead
No. You pay property taxes, heating and cooling bills, and there's more that can break.
Quote
  • $ put into the principle is an investment and should be compared with $ put into other investments.  The principle is not a pants-on-fire debt that you should pay down for its own sake.
True
Quote
If you really believe it's too much, don't buy. Somebody's going to drop the hot potato - maybe you!
[/quote]

BlueHouse

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Re: Please confirm or correct my assumptions about buying my first house
« Reply #27 on: April 26, 2016, 05:53:52 AM »


  • We are paying $800/month which is, let's say, $10,000/year.  Therefore, if we live in a house for 10 years and lose $100,000 on it, it will only be as bad as if we rented.
  • Paying for repairs is cheaper than renting - see #1
  • A fixer-uper is fun
  • On that note, maintenance only takes as much time as you feel like spending
  • And yardwork isn't really that big of a deal, especially with an urban yard
  • Historic, built-to-last architecture is actually cheaper, higher-quality, and better in the long run than these shitty cardboard shoeboxes they are making these days
  • $ put into renovation turns directly into a higher price when you sell the house - so again, it's basically free in the long-run. - see #1 and #2
  • If you're going to sell a house in 10 years, you don't need to work to pay it off because it's not pants-on-fire debt
  • A $90k and $190k house are basically the same, because in 10 years when you sell it, the buyer will take out a mortgage and give you the whole cost.  As long as the market goes up faster than your interest payment, you will still come out ahead
  • $ put into the principle is an investment and should be compared with $ put into other investments.  The principle is not a pants-on-fire debt that you should pay down for its own sake.
  • I live in the top housing market in the nation, so while I will be paying TOO MUCH for a house, that's ok because the next buyer will, too.


I immediately thought you were a realtor / broker / mortgage sales agent. Every one of these points can be used to overcome an objection to buying, but only with an uneducated or highly motivated buyer. These are the things the other guy says to make you spend too much money. Don't be the sucker in the sale.

norabird

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Re: Please confirm or correct my assumptions about buying my first house
« Reply #28 on: April 26, 2016, 01:25:11 PM »
The most important thing is to see that rent is money you spend to have a place to live without worrying about large unexpected costs of repairs. It's not 'thrown' away and doesn't obligate you to a creditor or place you at the whims of the real estate valuation. You don't lose money by renting--but if you bought a house and it ended up 100k underwater, that really would be a loss!

opnfld

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Re: Please confirm or correct my assumptions about buying my first house
« Reply #29 on: April 26, 2016, 02:08:08 PM »
I like knowing whether I stay or go is my decision.  My parents have been forced to move out of their rented condo twice in the last 10 years because the owner or owner's family members needed to move in.  This has happened to my sister-in-law's family in Oakland and may happen to some renting friends in our neighborhood - their lease is ending and the owner wants to sell.  OTHH, I know of two other couples who have rented their houses for over a decade.  They are happy and their rents are low.

Renovation, maintenance and yard work are fun.  Home ownership provides ample opportunity for all three.

CmFtns

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Re: Please confirm or correct my assumptions about buying my first house
« Reply #30 on: April 26, 2016, 03:32:55 PM »
Here's my experience:
Pros:
-Possibility of house appreciating
-No more rent payment
-Sometimes remodeling is fun
-Yard work is sometimes fun
-In the right market you will usually live cheaper than renting an equivalent house
-The beautiful, peaceful, wonderful feeling of never having to deal with god damn rental bullshit ever again

Cons:
-Possibility of house depreciating
-Remodeling is expensive
-Remodeling will slowly eat your soul
-Remodeling is stressful and will wear on a couple's relationship
-Yard work sucks so much

JLee

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Re: Please confirm or correct my assumptions about buying my first house
« Reply #31 on: April 26, 2016, 04:10:28 PM »
Here's my experience:
Pros:
-Possibility of house appreciating
-No more rent payment
-Sometimes remodeling is fun
-Yard work is sometimes fun
-In the right market you will usually live cheaper than renting an equivalent house
-The beautiful, peaceful, wonderful feeling of never having to deal with god damn rental bullshit ever again

Cons:
-Possibility of house depreciating
-Remodeling is expensive
-Remodeling will slowly eat your soul
-Remodeling is stressful and will wear on a couple's relationship
-Yard work sucks so much
It's offset by having to deal with the god damn water heater, air conditioner, furnace, roof....

Beaker

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Re: Please confirm or correct my assumptions about buying my first house
« Reply #32 on: April 26, 2016, 04:28:15 PM »
When you're so off base that people think you're trolling, that's a bad sign! But you've still got time to learn.

-The beautiful, peaceful, wonderful feeling of never having to deal with god damn rental bullshit ever again

That's funny, I've been yearning for the beautiful, peaceful, wonderful feeling of never having to deal with god damn house maintenance (and related expenses) ever again.

Cantilever balcony leaking? Spend the next 4 weekends tearing apart half the house to locate the issue, fix it, reassemble and repaint everything!

Basement leaks when it rains? Spend a few weekends and a few grand figuring out how to fix that!

Furnace doesn't turn on sometimes when it rains? Spend a few evenings researching that and a few hundred bucks getting it fixed!

Seller didn't bother priming anything before painting it? Spend the weekend sanding down and repainting it all just two years after it was last done!

Different strokes, grass is always greener, no such thing as a free lunch, and so forth.

CmFtns

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Re: Please confirm or correct my assumptions about buying my first house
« Reply #33 on: April 26, 2016, 04:51:35 PM »
When you're so off base that people think you're trolling, that's a bad sign! But you've still got time to learn.

-The beautiful, peaceful, wonderful feeling of never having to deal with god damn rental bullshit ever again

That's funny, I've been yearning for the beautiful, peaceful, wonderful feeling of never having to deal with god damn house maintenance (and related expenses) ever again.

Cantilever balcony leaking? Spend the next 4 weekends tearing apart half the house to locate the issue, fix it, reassemble and repaint everything!

Basement leaks when it rains? Spend a few weekends and a few grand figuring out how to fix that!

Furnace doesn't turn on sometimes when it rains? Spend a few evenings researching that and a few hundred bucks getting it fixed!

Seller didn't bother priming anything before painting it? Spend the weekend sanding down and repainting it all just two years after it was last done!

Different strokes, grass is always greener, no such thing as a free lunch, and so forth.

Well renting costs more than double what a mortgage costs here so with that kind of savings I can just pay someone to fix everything and still have some left over... but of course I do it all myself in order to attempt be the badass moneysaving machine that most of us strive to be.


And I feel like when I rented and something went wrong I still had to deal with a huge hassle trying to get the landlord on top of it... I would rather just fix the damn thing myself.
« Last Edit: April 26, 2016, 04:54:02 PM by comfyfutons »

CmFtns

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Re: Please confirm or correct my assumptions about buying my first house
« Reply #34 on: April 26, 2016, 05:16:19 PM »
When you're so off base that people think you're trolling, that's a bad sign! But you've still got time to learn.

-The beautiful, peaceful, wonderful feeling of never having to deal with god damn rental bullshit ever again

That's funny, I've been yearning for the beautiful, peaceful, wonderful feeling of never having to deal with god damn house maintenance (and related expenses) ever again.

Cantilever balcony leaking? Spend the next 4 weekends tearing apart half the house to locate the issue, fix it, reassemble and repaint everything!

Basement leaks when it rains? Spend a few weekends and a few grand figuring out how to fix that!

Furnace doesn't turn on sometimes when it rains? Spend a few evenings researching that and a few hundred bucks getting it fixed!

Seller didn't bother priming anything before painting it? Spend the weekend sanding down and repainting it all just two years after it was last done!

Different strokes, grass is always greener, no such thing as a free lunch, and so forth.

Well renting costs more than double what a mortgage costs here so with that kind of savings I can just pay someone to fix everything and still have some left over... but of course I do it all myself in order to attempt be the badass moneysaving machine that most of us strive to be.


And I feel like when I rented and something went wrong I still had to deal with a huge hassle trying to get the landlord on top of it... I would rather just fix the damn thing myself.

I was thinking about this on the way home... I think the problems that come along with renting are worse than the problems that come along with owning for me and this is because I can understand, figure out, and fix a physical problem. I can take it apart... do research whatever but what I can not understand and what really drives me crazy is the bullshit that is caused by people... I just can not/will not understand people
« Last Edit: April 26, 2016, 05:18:15 PM by comfyfutons »

JLee

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Re: Please confirm or correct my assumptions about buying my first house
« Reply #35 on: April 27, 2016, 06:37:28 PM »
When you're so off base that people think you're trolling, that's a bad sign! But you've still got time to learn.

-The beautiful, peaceful, wonderful feeling of never having to deal with god damn rental bullshit ever again

That's funny, I've been yearning for the beautiful, peaceful, wonderful feeling of never having to deal with god damn house maintenance (and related expenses) ever again.

Cantilever balcony leaking? Spend the next 4 weekends tearing apart half the house to locate the issue, fix it, reassemble and repaint everything!

Basement leaks when it rains? Spend a few weekends and a few grand figuring out how to fix that!

Furnace doesn't turn on sometimes when it rains? Spend a few evenings researching that and a few hundred bucks getting it fixed!

Seller didn't bother priming anything before painting it? Spend the weekend sanding down and repainting it all just two years after it was last done!

Different strokes, grass is always greener, no such thing as a free lunch, and so forth.

Well renting costs more than double what a mortgage costs here so with that kind of savings I can just pay someone to fix everything and still have some left over... but of course I do it all myself in order to attempt be the badass moneysaving machine that most of us strive to be.


And I feel like when I rented and something went wrong I still had to deal with a huge hassle trying to get the landlord on top of it... I would rather just fix the damn thing myself.

That definitely depends very much on where you are.  The house I'm in right now was last sold in 2007 for $630,000. The units rent for $1500 and $2100 each and taxes are ~$10,400/year.  Including all down payment money (to come up with an appropriate monthly expense, factoring in the opportunity cost of a down payment), you'd be looking at $3784/mo plus homeowners insurance and maintenance.  Renting both units would cost $3600/mo.

CmFtns

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Re: Please confirm or correct my assumptions about buying my first house
« Reply #36 on: April 28, 2016, 10:09:58 AM »
When you're so off base that people think you're trolling, that's a bad sign! But you've still got time to learn.

-The beautiful, peaceful, wonderful feeling of never having to deal with god damn rental bullshit ever again

That's funny, I've been yearning for the beautiful, peaceful, wonderful feeling of never having to deal with god damn house maintenance (and related expenses) ever again.

Cantilever balcony leaking? Spend the next 4 weekends tearing apart half the house to locate the issue, fix it, reassemble and repaint everything!

Basement leaks when it rains? Spend a few weekends and a few grand figuring out how to fix that!

Furnace doesn't turn on sometimes when it rains? Spend a few evenings researching that and a few hundred bucks getting it fixed!

Seller didn't bother priming anything before painting it? Spend the weekend sanding down and repainting it all just two years after it was last done!

Different strokes, grass is always greener, no such thing as a free lunch, and so forth.

Well renting costs more than double what a mortgage costs here so with that kind of savings I can just pay someone to fix everything and still have some left over... but of course I do it all myself in order to attempt be the badass moneysaving machine that most of us strive to be.


And I feel like when I rented and something went wrong I still had to deal with a huge hassle trying to get the landlord on top of it... I would rather just fix the damn thing myself.

That definitely depends very much on where you are.  The house I'm in right now was last sold in 2007 for $630,000. The units rent for $1500 and $2100 each and taxes are ~$10,400/year.  Including all down payment money (to come up with an appropriate monthly expense, factoring in the opportunity cost of a down payment), you'd be looking at $3784/mo plus homeowners insurance and maintenance.  Renting both units would cost $3600/mo.

I totally realize this and that's why I said in my original post under pros:
"In the right market you will usually live cheaper than renting an equivalent house"

Just for comparison's sake, where I live, I rented a house worth around $160k for $1,400/mo and then later bought a house for $150k that could be rented for about the same amount. My mortgage interest, property taxes, and homeowners insurance is about $575/mo...

I believe this is the right market to buy... yours is the market to rent just different places to live but I think in a majority of markets you will live cheaper owning rather than buying

TheOldestYoungMan

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Re: Please confirm or correct my assumptions about buying my first house
« Reply #37 on: April 28, 2016, 11:12:54 AM »
It's a really hard topic to give advice to people on.  This board is going to be really heavy into the nuts and bolts of the specific house, the specific terms of the purchase and any financing, and the nature/scope of any work you'd do on the house.  If it's something you want that's going to come across as killing your dream.

Mustachians, the dreamkillers!

But that's alot of answering the question as asked.  Your assumptions are the same as most first time homebuyer's assumptions.  Some people live out their entire lives blissfully unaware that pretty much all of them are false.  And that's because it will generally work out as long as the house and ownership is something you really want.

I had one goal with home ownership that I didn't see listed for you, and that was stabilizing the cost of housing.  I wanted to lock in the price of my housing, regardless of it was an investment or a expense, the dollar amount fluctuation in my cash flow that came with renting just killed my soul every year at renew/move time.

I thought buying a house would settle that down.  I hadn't ever heard this complaint (though it was because I wasn't listening): 
"My mortgage payment went up again! because the goddamn escrow people can't get their shit together!"

So now I have this advice, based on what I did wrong the first time (unhappy house) and following it made the second time much better (better than renting appt; house - still not great).

1.  You need at least 20% down, preferably 100% (fuck banks).
2.  Applying for a loan is going to suck.  It's a humiliating, long, awful process.  Go through it with multiple banks, because even a half a point difference is huge for you.  Don't be surprised if every couple of years you have to send the check to a new place, learn to read all new forms, re-do all your automated shit because the fucking bank sold your fucking note to some other fucking bank.  Oh and they lost at least one check in there and FUCK BANKS!
3.  If you have your financial shit together, waive escrow.  If you do not have your financial shit together, do not buy a house.  You want control of the taxes/insurance money, when it gets paid, and you want control of all of those accounts.  It will cost you thousands and thousands of dollars if you do escrow.  The only reason to do it is if you just are incapable of budgeting for these known and expected costs.
4.  Only buy a house you want to live in right now.
5.  Only buy a house if you want to be a homeowner.
6.  Do not buy your house as an investment.  If it ends up giving you a return, great.  If taking massive sustained losses on the house will shatter your financial plans, you shouldn't buy a house yet.
7.  Go ahead and buy a house, but keep all of this and more in mind, learn at every opportunity.  The real estate agent isn't the one who fucked you, the bank didn't fuck you, the county didn't fuck you, the previous owner didn't fuck you, YOU fucked YOURSELF.  Nobody in the process isn't going to fuck you if you let them.

And then, just, because, wow:

On that note, maintenance only takes as much time as you feel like spending -said everyone who never owned property

There will come a time, sooner than it has any right to come, when some essential thing breaks.  You're thinking now you'll just put up with it being broken until you are inclined to fix it!  I know you are! That's what you're thinking!  Many things, sure, like a cabinet door handle.  That's an eight minute repair that remains undone for 25 years, the grandkids will have stories of grandma and grandpa's fight where he finally just ripped the cabinet off the wall.  That's fun.  That's what you're thinking.

No.

You're going to be alternately launching yourself off the toilet with the force of your explosive diarrhea then vomiting into the toilet violently as your body tries to explain why it's important you never do what you just did, the same day the 'fridge breaks, and your 6 mo old baby's supply of breast milk is about to turn into so much additional mess, and Mrs. Cranilation doesn't want to hear about how you'll be able to fix the fridge eventually on account of your badassity, you have 4 hours to install a working fridge before the careful schedule she's worked out to keep the kid flush in Cranilation's finest cream and work 40 hours per week gets totally fucked, and you won't be able to leave that toilet for another 26.

It's going to be $1,200 on a credit card plus a tip to the delivery driver.

Shit happens.  And it has to be dealt with.  And if you're the owner it is your problem and no one else's.

Now that's fine, and yes, many many times it is fun.  And you get to be all awesome mustachian etc.  I fixed my dryer two weeks ago!  Had a screwdriver and some willingness to get electrocuted and I took some shit apart and I put it back together and I fucking fixed the shit out of it.  A week later it broke again and I spent two days figuring out the part I needed isn't sold separately from the motor, and nobody sells the motor anymore, and I've got tenants who think they need a dryer, think they paid for a dryer, and fuck if I didn't end up at the store paying retail for a goddamn dryer.  I'll fix the old one eventually, when I get time to hit the junkyard to find the part I need, but that's just stubbornness.  It's a minor business loss on the year, no big deal.  Just frustrating cuz I don't even use the damn thing anymore.

You WILL spend more money as a homeowner.  Your expenses WILL be higher.  Your savings rate WILL go down.  It's possible to mitigate these effects.  I rent out two rooms of my 3 bedroom house and it feels pretty baller!  No lie.  But renting out two rooms my total out of pocket is still almost as much as renting my one bedroom apartment.  And according to personal capital, the curve of my net worth is constantly increasing.  But the two times I've been a homeowner it's gone up at about half speed.

If I had never bought a house I would be retired already.  The LUXURY of living in my own personal mansion has a cost.  I've decided it is worth it, but that's something for each of us to decide for ourselves.

GuitarStv

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Re: Please confirm or correct my assumptions about buying my first house
« Reply #38 on: April 28, 2016, 12:12:05 PM »
How many fixer upper houses have you completely renovated on your own while holding down a full time job?  If the answer to this is less than one, I suspect that most of the rest of your points are rendered invalid.

PursuingIndependence

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Re: Please confirm or correct my assumptions about buying my first house
« Reply #39 on: April 28, 2016, 12:59:41 PM »
Quote
Based on all of that, here is The Plan:
1. pay off student loans (on track to be paid off next february)
2. save up a down payment for six months ($20k)
3. go to the bank and see what kind of mortgage we qualify for
4. Attend open houses across the city to see what kind of house goes for what - do this starting today.
5. Decide what kind of house we think we want at the price we can afford, find a realtor who will deliver us that house.
6. Wait until that house becomes available, then buy it.

I think every one did a great job and adding comments to your assumptions so I am going to suggest revising your plan a bit. In looking at your plan, I would re-order and add a couple items based on what you are starting and working on.

Based on all of that, here is The Plan:
(1.) 4. Attend open houses across the city to see what kind of house goes for what - do this starting today. (Also look online, get an idea of what typical price per sq foot is and continue looking to see how the market fluctuates. Buying in winter can be nice because you tend to have less competition as a buyer but there is generally less inventory. Also you can use this as an opportunity to start determine what you need vs what you want in a house and make a list so you can check items off when you go looking)
(2. Determine the area/neighborhood you want to live in. This is important, can you find a house by where you work and with a high walk score to get rid of commuting costs? Drive through different neighborhoods and walk around parks and get a feel for an area.)
(3.) 1. pay off student loans (on track to be paid off next february)
(4.) 2. save up a down payment for six months ($20k)
(5.) Save up money for unexpected repairs/furnishing the house. This doesn't have to be a crazy high amount but we had to replace our air conditioner 3 months after purchase because they couldn't test during winter. Having that money available was very helpful.
(6.) 5. Decide what kind of house we think we want at the price we can afford, find a realtor who will deliver us that house. (Figure out what you want and what you are willing to pay before going to a bank. They are generally too willing to put people into houses that will make them house poor and if incomes change that can be a huge cost. Keep in mind the costs for repairs/remodel as they should change what you are willing to pay for a house)
(7.) 3. go to the bank and see what kind of mortgage we qualify for
(8.) 6. Wait until that house becomes available, then buy it. (That would be ideal but what happens if another person puts in an offer at the same time? Have you established your max price? I find that at the point you put in an offer you are generally invested a bit in the house so it is important to have this determined beforehand)

Other advice, it can be a time consuming and stressful process going to different houses. We had a spreadsheet set up with requirements and wants and had them pointed. The last weekend we went out looking for houses we found 3 were willing to put an offer on. Having the requirements and points helped us narrow the options down and stick to our original plan versus emotions. I am so happy with the house we got and the area.
Another to keep in mind would be how property taxes can affect your monthly payment, we had a spreadsheet with the cost of the home and property taxes to show estimated monthly expense. Property taxes can change of course, generally will go up, especially if you do plan on re-modeling.

Terrestrial

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Re: Please confirm or correct my assumptions about buying my first house
« Reply #40 on: April 28, 2016, 02:16:04 PM »
      I didn't read all the other replies but here are my thoughts.

      • We are paying $800/month which is, let's say, $10,000/year.  Therefore, if we live in a house for 10 years and lose $100,000 on it, it will only be as bad as if we rented.
      This is a flawed/incomplete way to look at it at best.  There are alot of costs to owning that need to be accounted for.  There is also the opportunity cost of the down payment....20k in the market could be worth ~40k after 10 years.  I recommend looking at a good rent/buy calculator to get a good grasp of ALL the cost variables between your two choices.

      • Paying for repairs is cheaper than renting - see #1
      A good rent/buy calculator will include maintenance cost.

      • A fixer-uper is fun
      This is subjective but I could see it being true depending on the person - My wife and I have always liked renovating our houses, but we are that kind of person.  I know people that hate it. And even with us being people who like it there are still significant amounts of time that are NOT fun.  If you have never lived through a renovation before dont assume it will always be fun. There are plenty of terrible times, you will hit setbacks and unanticipated costs, you will run into late nights when you are struggling to deal with a setback so you can get the water turned back on, you will be inconvenienced greatly when you have your whole kitchen torn out, etc. 

      • On that note, maintenance only takes as much time as you feel like spending
      100% False for MANY reasons.  First, you can't just chose how much maintenance to do if you expect to have a well maintained house, and slacking on maintenance and letting stuff go WILL end up costing you in the long run, especially when it's time to sell and buyers pick your house apart.  The more you slack off on it the more it costs to fix (you ignore a small roof leak for a while and suddenly you have a wall full of mold).  Also - you don't chose when stuff breaks, and trust me it will frequently break at bad times. I have rarely had something conveniently go wrong at 4:30 on a friday afternoon when I have all weekend to work on it at my own pace.  Unless you like having cold water until you 'feel like' spending the time to replace the water heater, or freezing in the winter until you 'feel like' servicing the furnace, or shutting off water til you 'feel like' fixing a leak...yeah...

      • And yardwork isn't really that big of a deal, especially with an urban yard
      Depends on the yard.  Could be true.

      • Historic, built-to-last architecture is actually cheaper, higher-quality, and better in the long run than these shitty cardboard shoeboxes they are making these days
      Mixed thoughts on this.  First, not all newly built houses are shitty.  Second, construction methods and materials have actually vastly improved over the last 30-50-100 whatever timeframe you are referring to, just like any thing else.  A pretty crappy new car these days will run for 100k miles easily even if neglected, quality cars from the 50's couldn't touch that without overhauls.  One thing to consider is that yes the house probably wont fall down, but even new tract homes are likely vastly more efficient than very old homes, unless they have been thoroughly gutted and renovated already, in which case they are likely expensive.  Also - 50 year old plumbing/electric/etc is creakier than brand new any way you cut it, especially with the difference in material quality.  I'm not saying there is no benefit to old homes or they should be avoided but there are things to consider.

      • $ put into renovation turns directly into a higher price when you sell the house - so again, it's basically free in the long-run. - see #1 and #2
      Not really.  Depends on what renovations you are doing and it may increase the sale price but rarely for what you spent unless you are doing all the labor (a cost that most people choose not to consider).  Rarely do they add dollar for dollar even for 'good' high return renovations like kitchen remodels - for highly personalized or specialized stuff you could be as low as 20-30 cents on the dollar.

      • If you're going to sell a house in 10 years, you don't need to work to pay it off because it's not pants-on-fire debt
      How quickly you should pay off a house is a function of the interest rate, not how long you are going to stay there.  If for some reason you had to take a mortgage at 12% I would probably put alot of money at the mortgage, that return is guaranteed and higher than most other investments.  If you get one dirt cheap like many who bought in the past 3-4 years (mine is a little over 3%) there is no compelling reason to pay it off quickly, I'd rather invest my money at 6-8%.

      • A $90k and $190k house are basically the same, because in 10 years when you sell it, the buyer will take out a mortgage and give you the whole cost.  As long as the market goes up faster than your interest payment, you will still come out ahead
      I dont even really understand what this means.  I will take a stab at it - no they aren't the same.  The 190k cost will cost more to carry (not just interest, prop taxes and insurance are also usually based on value/rebuilt cost).  Again I recommend the rent/buy calculator.  More money spent carrying the house means less going to other investments.  On the flip side the 190k house will probably increase more in terms of pure value than the 90k over the same period, assuming all things equal.

      • $ put into the principle is an investment and should be compared with $ put into other investments.  The principle is not a pants-on-fire debt that you should pay down for its own sake.
      See answer to the payoff question.

      Very dangerous assumption.  Please don't tell me this was serious.  Plenty of people who bought overpriced houses in 04-07 found out how untrue this was.  That said, overpriced is a relative term.  A 900SF apartment probably costs $1M in San Fransisco or Manhattan and might cost 50k in backwoods Kansas.  Whether property is overpriced is a variable of alot of things - supply/demand for housing, supply of new land in the area to build more housing, how much incomes dictate people can pay, how the holding cost of a house compares to an equivalent rental, etc.

    Good luck. 
    « Last Edit: April 28, 2016, 02:20:40 PM by Terrestrial »

    cranilation

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    Re: Please confirm or correct my assumptions about buying my first house
    « Reply #41 on: May 02, 2016, 04:56:08 PM »
    Thank you for the replies! I'm learning more from you telling me how dumb I am than from going out and reading blogs.  I'm very grateful!

    obstinate

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    Re: Please confirm or correct my assumptions about buying my first house
    « Reply #42 on: May 02, 2016, 07:47:47 PM »
    Wrong on pretty much everything. The second response does a pretty good job of explaining how. DO NOT buy a house if these assumptions are required for it to work with your finances.

    Johnez

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    Re: Please confirm or correct my assumptions about buying my first house
    « Reply #43 on: May 02, 2016, 09:19:11 PM »
    This thread is a real dream killer.

    Would I be wrong in assuming buying a semi new house (built within the last decade or so) mitigates the maintenance/random shit breaking problem some of you guys are describing?

    My main reason for wanting to own a house is simple freedom. I want a woodshop, a fishroom, a garden, the ability to make changes to the house, to not need to pay rent (paid off). I rent an apartment right now, it's tiny, ghetto, and I can't do anything. I think I'd trade paying quarters into broken washers for having to learn how to fix a dryer. I hate renting.

    pbkmaine

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    Re: Please confirm or correct my assumptions about buying my first house
    « Reply #44 on: May 02, 2016, 09:27:34 PM »
    Then you should have a house. It's not purely a financial decision. What we are doing here is trying to provide a counterpoint to the prevailing "wisdom" that buying a house is always the right thing to do.

    obstinate

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    Re: Please confirm or correct my assumptions about buying my first house
    « Reply #45 on: May 02, 2016, 10:47:14 PM »
    This thread is a real dream killer.

    Would I be wrong in assuming buying a semi new house (built within the last decade or so) mitigates the maintenance/random shit breaking problem some of you guys are describing?
    I don't have hard numbers on that, but anecdotally, things seem to break early or after a long time. In the middle, not so much.

    My main reason for wanting to own a house is simple freedom. I want a woodshop, a fishroom, a garden, the ability to make changes to the house, to not need to pay rent (paid off). I rent an apartment right now, it's tiny, ghetto, and I can't do anything. I think I'd trade paying quarters into broken washers for having to learn how to fix a dryer. I hate renting.
    These are actually good reasons to own a house. Just so long as you're not lying to yourself about how much it costs.

    csprof

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    Re: Please confirm or correct my assumptions about buying my first house
    « Reply #46 on: May 02, 2016, 11:30:31 PM »
    This thread is a real dream killer.

    Would I be wrong in assuming buying a semi new house (built within the last decade or so) mitigates the maintenance/random shit breaking problem some of you guys are describing?

    My main reason for wanting to own a house is simple freedom. I want a woodshop, a fishroom, a garden, the ability to make changes to the house, to not need to pay rent (paid off). I rent an apartment right now, it's tiny, ghetto, and I can't do anything. I think I'd trade paying quarters into broken washers for having to learn how to fix a dryer. I hate renting.

    You're probably not crazy - except for the "totally random crap."  Which happens.  Most engineered systems follow a bathtub curve -- infant mortality, stable middle, then old age (wear-out).  There's a risk, though, of design flaws leading to premature wear-out.  A hole in the roof -> water into the insulation -> mold in 5-10 years.  Will it happen to yours?  Probably not - but there are a lot of things that can break and probably one will.

    All that said - I'm glad I own a house.  I'm renting this year while away, and I'm reminded on a near-weekly basis about the nice things about owning.  But some of those nice things involve spoiling myself by spending money to make the house the way I like it, which comes at a cost.

    I'm also having the house renovated while I'm gone, and am reminded of the hidden gotchas of an older house - "oops, we spotted that there's been water leaking behind this section of brick for the last 30 years" (hello, another $1400 change order).  :)  That probably won't be you, but changing the house involves construction risk ("oops, there was an active gas line in that wall we're removing!" -- $800 more).

    Ultimately, I *like* that the problems in my house are mine.  I get them solved.  Sometimes I fix them myself, and sometimes I use the universal exchange medium, but I can get them solved to my satisfaction, which isn't the case while renting.

    My biggest happiness about owning, though, is that I really like my neighbors & neighborhood.  We hang out together, and I know almost everyone.  The kids play.  It's a stable neighborhood (the people we bought the house from moved a few doors down to get a bigger place).  My neighbors know they can send their kids over to my house if they have an emergency, and vise-versa (we've hosted extra kids for dinner twice in the last two years when the parents had something come up).  You can get that renting if you're lucky, but it's harder.

    But I'm pretty sure the thing costs more than when I was renting before, despite the "official" savings (it's about 25% cheaper than the place we were renting when factoring in reasonable upkeep costs, but it's WAY more when you factor in the evil temptation of remodeling).  And as others have noted -- you won't get your money back out of most remodeling unless you do it yourself, or have specifically targeted it as a good flip opportunity.

    neo von retorch

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    Re: Please confirm or correct my assumptions about buying my first house
    « Reply #47 on: May 03, 2016, 06:07:28 AM »
    2.  Applying for a loan is going to suck.  It's a humiliating, long, awful process.  Go through it with multiple banks, because even a half a point difference is huge for you.  Don't be surprised if every couple of years you have to send the check to a new place, learn to read all new forms, re-do all your automated shit because the fucking bank sold your fucking note to some other fucking bank.  Oh and they lost at least one check in there and FUCK BANKS!

    I've got two mortgages, and both went pretty well, though my first mortgage was sold. But I refinanced to my credit union, and this time around, we just went with them. It was not at all a bad process. It wasn't humiliating, long or awful. The paperwork at closing was a very small pile. Since I have no interest in paying off my mortgage any time soon, I went with a 30 year at 3.75% (no points.) So sorry you've had such a bad experience with this!

    GuitarStv

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    Re: Please confirm or correct my assumptions about buying my first house
    « Reply #48 on: May 03, 2016, 06:27:41 AM »
    This thread is a real dream killer.

    Would I be wrong in assuming buying a semi new house (built within the last decade or so) mitigates the maintenance/random shit breaking problem some of you guys are describing?

    My main reason for wanting to own a house is simple freedom. I want a woodshop, a fishroom, a garden, the ability to make changes to the house, to not need to pay rent (paid off). I rent an apartment right now, it's tiny, ghetto, and I can't do anything. I think I'd trade paying quarters into broken washers for having to learn how to fix a dryer. I hate renting.

    My preference for buying a house is something that's 5-15 years old.  That's new enough that you usually benefit from more modern building code practices and don't have to dick around with the terrible wiring, years of odd 'improvements' other owners have made, and stuff . . . but old enough that if the builder did a poor job you'll be able to see it (uneven floors, cracking foundation, properly installed drainage, water problems, etc.)

    2.  Applying for a loan is going to suck.  It's a humiliating, long, awful process.  Go through it with multiple banks, because even a half a point difference is huge for you.  Don't be surprised if every couple of years you have to send the check to a new place, learn to read all new forms, re-do all your automated shit because the fucking bank sold your fucking note to some other fucking bank.  Oh and they lost at least one check in there and FUCK BANKS!

    I've got two mortgages, and both went pretty well, though my first mortgage was sold. But I refinanced to my credit union, and this time around, we just went with them. It was not at all a bad process. It wasn't humiliating, long or awful. The paperwork at closing was a very small pile. Since I have no interest in paying off my mortgage any time soon, I went with a 30 year at 3.75% (no points.) So sorry you've had such a bad experience with this!

    My experience applying for a loan was also short, simple, and easy.  We shopped around between a couple banks and some mortgage brokers and picked the one with the best rate.  They were all tripping over themselves to loan us much more than we wanted.

    Drifterrider

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    Re: Please confirm or correct my assumptions about buying my first house
    « Reply #49 on: May 03, 2016, 06:43:37 AM »
      • Paying for repairs is cheaper than renting - see #1
        Unless it is a roof, HVAC, septic, etc
      • A fixer-uper is fun
      The first time.  TV makes is look soooo much fun.
      • On that note, maintenance only takes as much time as you feel like spending
      If you don't mine repairs not getting made
      • And yardwork isn't really that big of a deal, especially with an urban yard
      Unless you have a strict HOA
      • Historic, built-to-last architecture is actually cheaper, higher-quality, and better in the long run than these shitty cardboard shoeboxes they are making these days
      Depends.  They had bad workers back then too.
      • $ put into renovation turns directly into a higher price when you sell the house - so again, it's basically free in the long-run. - see #1 and #2
      Not really.  You ever see the TV shows where they tell you if you put in a bath you get a 85% return?  What they aren't saying is you lost 15%
      • If you're going to sell a house in 10 years, you don't need to work to pay it off because it's not pants-on-fire debt
      Debt is debt
      • A $90k and $190k house are basically the same, because in 10 years when you sell it, the buyer will take out a mortgage and give you the whole cost.  As long as the market goes up faster than your interest payment, you will still come out ahead
      Just NO.
      • $ put into the principle is an investment and should be compared with $ put into other investments.  The principle is not a pants-on-fire debt that you should pay down for its own sake.
      • I live in the top housing market in the nation, so while I will be paying TOO MUCH for a house, that's ok because the next buyer will, too.
      See the record number of foreclosures during the last crash and look for "ghost inventory".
      [/list]

      Make a list of "must haves", "nice to have" and "don't care" (these would be features of the house, neighborhood, etc).  Then, start watching the area (on computer, www.realtor.com and other sites).  Save money.  When ready, start looking at houses.  Really LOOKING.  Try to find things wrong with each house.  Save money.  Be aware of your credit situation and financial situation.  Save money.

      You are on the right track.