Author Topic: Paying for Location, location, location  (Read 3770 times)

eoc

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Paying for Location, location, location
« on: November 19, 2015, 12:39:23 AM »
I own a house that's valued at about 150k.

I've also been reading he book "The Millionaire Mind". It's an analysis of a survey of wealthy Americans. They point towards paying a premium to live in an ideal location where house prices should stay high.

If I did that in my city, it would be a 300k purchase.

We only have 20k in equity, so it would basically be abhuge mortgage. That goes against my goal of trying to pay off our mortgage.

Life is all compomises. How do you evaluate such a decision? Assuming I want to move to another area, is it worth going any more into mortgage debt to get a " lovely home"?

Freedomin5

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Re: Paying for Location, location, location
« Reply #1 on: November 19, 2015, 03:56:11 AM »
I was always taught to buy the smallest, least expensive house in the nicest neighbourhood I could afford. That way, when the neighbours make improvements to their homes, my house value also goes up. Also, I can change things about the house to make things nicer and therefore increase the value, but I can't change the location. I guess my point is that you do not necessarily have to go into more mortgage debt to live in an ideal location, though you may have to compromise and live in a smaller space.

For rental properties, I do like buying in nicer neighbourhoods as they tend to attract nicer (I.e., hassle-free) tenants. But then, I have a specific target market for my rental properties, and my market likes high end condos with parking in locations with convenient access to public transportation, and they have the income and willingness to pay a premium for those features.

undercover

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Re: Paying for Location, location, location
« Reply #2 on: November 19, 2015, 05:43:13 AM »
I think it depends. It's not that simple to say that the only way to make money in real estate is to buy the best location period, because that obviously isn't true. However, when it comes to appreciation, the only thing you can control is location unless you plan on adding value, or unless you just get an incredible deal.

Still, it's not as good of a bet as creating the value yourself by buying a fixer in a decent neighborhood and adding value to it. That's harder to do though and requires specific real estate knowledge that not everyone wants to do or has the time for.

I agree overall that buying in the best location you can afford makes sense for the average person, as a house is basically like a savings account. When you sell, there's a better chance you're going to get all of your money back. The above average person will always look for better deals though, regardless of location.

Maybe your goal shouldn't be to pay off your mortgage. There's many threads around here on this topic.

Fishindude

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Re: Paying for Location, location, location
« Reply #3 on: November 19, 2015, 08:40:56 AM »
Other school of thought might be to not consider your residence so much of an "investment", but more of a "place to live" very economically.


CashFlowDiaries

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Re: Paying for Location, location, location
« Reply #4 on: November 19, 2015, 10:07:00 AM »
Honestly it all comes down to what you think you can afford.   If you get a higher mortgage then you will have less money every month.  Money that you wont be able to use to invest in.   If you will be scraping by just to pay that mortgage then its a no brainer to NOT do it.   

eoc

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Re: Paying for Location, location, location
« Reply #5 on: November 19, 2015, 10:13:45 PM »
On that last point, CashFlowDiaries, the book I mentioned works from the same assumption. Regardless of where you buy the house, at least don't go into big unsustainable debt.

Maybe your goal shouldn't be to pay off your mortgage. There's many threads around here on this topic.

That's a good point. But then I would have to face many additional years in an office job to pay for the mortgage :)

Bearded Man

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Re: Paying for Location, location, location
« Reply #6 on: November 19, 2015, 10:25:09 PM »
I have houses from 150k t 350k and liked my 150k house best. Not too big, not too small, no HOA, decent area, paid for...

The person who has a small payment or no payment is more secure than the mcmansion dweller.

arebelspy

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Re: Paying for Location, location, location
« Reply #7 on: November 20, 2015, 03:49:54 AM »

Maybe your goal shouldn't be to pay off your mortgage. There's many threads around here on this topic.

That's a good point. But then I would have to face many additional years in an office job to pay for the mortgage :)

Your investments will pay for it, the extra money you invest instead of prepaying the mortgage.
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eoc

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Re: Paying for Location, location, location
« Reply #8 on: November 21, 2015, 09:26:10 AM »
The person who has a small payment or no payment is more secure than the mcmansion dweller.

This chimes well with me.

Your investments will pay for it, the extra money you invest instead of prepaying the mortgage.

I understand your point of view generally suspect of people paying for their mortgages.

On this investments point specifically, I'm in Ireland where ETFs have a 41% tax each seven years. Investment isn't as attractive as it is for a person in the States. Well, retirement investment is still quite attractive, so you can indeed save quite a percentage of your income into retirement accounts.

Bearded Man

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Re: Paying for Location, location, location
« Reply #9 on: November 21, 2015, 10:39:11 AM »
41% tax every 7 years? Talk about tyranny.

JRB_NW

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Re: Paying for Location, location, location
« Reply #10 on: November 25, 2015, 09:43:53 PM »
I have learned over the years to buy homes in better neighborhoods, or adjacent to them, because usually the schools and services (police, fire, libraries, etc) are better. Crime rates are lower. So people want to live there, and appreciation is stronger. And, look not just at a granular level within a metro area, but also at a state and/or regional level.

I have found that not only are homes in nicer neighborhoods more enjoyable to live in for many reasons, but they tend to make nice investments- better quality of tenant, solid appreciation, good code enforcement to prevent surprises that can affect home value, etc. The small or older home in a great area is an excellent suggestion.
« Last Edit: November 25, 2015, 09:45:28 PM by JRB_NW »

clarkfan1979

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Re: Paying for Location, location, location
« Reply #11 on: November 29, 2015, 11:32:44 PM »
I was always taught to buy the smallest, least expensive house in the nicest neighbourhood I could afford. That way, when the neighbours make improvements to their homes, my house value also goes up. Also, I can change things about the house to make things nicer and therefore increase the value, but I can't change the location. I guess my point is that you do not necessarily have to go into more mortgage debt to live in an ideal location, though you may have to compromise and live in a smaller space.

For rental properties, I do like buying in nicer neighbourhoods as they tend to attract nicer (I.e., hassle-free) tenants. But then, I have a specific target market for my rental properties, and my market likes high end condos with parking in locations with convenient access to public transportation, and they have the income and willingness to pay a premium for those features.

+1 for both points