Challenge to Dogma on Owning a Home

[88GT]

I've got a 3 bedroom in Mishawaka I bought for 12 grand.

I forgot. INGO statistics say that a sample set of n=1 is an acceptable sample size to use for drawing conclusions/making generalizations about trends.

 

[Westside]

I don't consider my house to be a money making venture. I consider it to be a hedge against inflation and in investment in my retirement home/living. When I am old and unable to take care of myself I will use the cash from the sale my home to fund retirement/end of life.

 

[eldirector]

I forgot. INGO statistics say that a sample set of n=1 is an acceptable sample size to use for drawing conclusions/making generalizations about trends.

MIBOR.com. There are currently 23 residential properties in Marion County for under $12,000. 67 total in the MIBOR directory (all locations).

Unless your landlord is REALLY bad at math, renting is always more expensive than owning the same home. But for some folks, that is perfectly fine. I don't knock folks that rent (we did for years). If you are highly mobile, or don't want to deal with owning your own, it is a great idea. What irks me are folks that over-buy a home (finance more than they can afford), and then complain about it.

 

[TiminMishawaka]

I forgot. INGO statistics say that a sample set of n=1 is an acceptable sample size to use for drawing conclusions/making generalizations about trends.

I also bought a 3 unit in Mishawaka for 25 grand and 13 other houses in South Bend for under 10 grand. Clearly lightning only strikes 15 times.

Or....maybe you're not the only one who understands this business.

 

[gdunn]

I own two homes, and I have two jobs... so I think this theory is flawed.

 

[Maximinus Thrax]

My wife and I hang out in that "mobile" category. I hate the idea of spending as much as I do on rent every month. However, considering we just graduated college, have loans to pay off, and still don't know where we will settle down, buying a house is not the road for us.

12K for a house? The lowest I've seen in this area was 30K and that was for dump in the shape of a house. New homes that were going for 90-95K two years ago are being built starting at 120K now. One major builder owns all of the new neighborhoods.

 

[Lex Concord]

MIBOR.com. There are currently 23 residential properties in Marion County for under $12,000. 67 total in the MIBOR directory (all locations).

Unless your landlord is REALLY bad at math, renting is always more expensive than owning the same home. But for some folks, that is perfectly fine. I don't knock folks that rent (we did for years). If you are highly mobile, or don't want to deal with owning your own, it is a great idea. What irks me are folks that over-buy a home (finance more than they can afford), and then complain about it.

What irks me more is when folks overbuy a home based on government urging of lenders who would not have otherwise made the loan, find they have overbought, default on the loan, then get bailed out (either buyer or lender) by the same government who had its hand in my pocket (and yours, if you're productive) to do the urging and fund the bailouts.

 

[Hohn]

Hi, I'm Kelly, I'm an Analyst (that's pretty much a statistician with people skills). I could show correlation between a company's workforce and the number of employee parking spots. That doesn't mean the company has the right number of employees to accomplish the job. I'll now read the story.

Statistician with people skills! Rep inbound.

The real question though is how many standard deviations above the mean is your level of people skill? You see what I did there? A little statistics joke.

 

[Hohn]

I tell sellers this all the time when they're trying to make a profit after 3 years of ownership. Owner occupied homes are NOT investments. Not in the sense of making more than you paid in.

However, comparing renting to owning, they are. Renting is literally (compared to owning) throwing your money away because the only thing you have to show for your payment is the immediate benefit of shelter. When you stop paying rent, you cease having that shelter.

With a mortgage payment, not only are you paying for your shelter, but you have a hard asset that contributes to your NET value and the equity can be leverage for other purposes than can become real investments that supply a concrete ROI. And you at some point, you own (property taxes aside) the property and continue to benefit from the shelter without having to pay for it.

Renters do pay a portion of the costs of homeownership. Though I doubt that the renter for a particular property ever pays what an owner of that same property would pay, when all the expenses are added up. And I'm not included the extras that translate into property improvement. Just the costs to maintain the status quo. Rent for a given home is usually more than what the mortgage might be (depending on financing terms, of course).

I've got one 2bd/1ba renting for $675/month. Assuming a 100% LTV and no deductions on the property taxes, 30 year term at a 5.00% rate, the PITI would be $582/month.

I've got a 3bd/2ba renting for $900/month. Same terms as above, PITI would be $718.

So renters absolutely bear the costs of taxes and insurance, as well as the costs of financing the mortgage if it exists. And then some.

For most people who buy on a 30yr with very little down, owning IS renting. The payments are almost all interest and since most folks will move in 7 years or so, the principal sees little if any actual pay-down.

The difference between renting and buying is the difference in value between liability and flexibility. Renting gives you more ease of relocating, and this commands a price premium, all else being equal. Buying that home is a huge liability, and the owner takes on upkeep and all that.

I would never consider residential real estate to be much of an "investment." Commercial real estate, yes, but not so much with residential.

When interest rates are low, it would theoretically make owning a better deal than renting. But when owning is easier, it drives down rent. That's why, in the long run, the ratio of rent vs own is pretty stable.

Real estate can be a reasonably good place to PRESERVE wealth, but I don't see it as an appealing means of CREATING wealth.

 

[mydoghasfleas]

I enjoy hearing the "good news in the housing market" stuff on the news as they tell us that home "values" have gone up. (gotten more expensive as being good news )

That is good news for those who lend money, or have liens on property ie fanny/freddie. Plus they get to sucker more people into overpaying/overborrowing.

Why doent we all cheer when car "values" go up as well? Its not an "investment" but a home is?

Your home is not an investment, its shelter. Shelter is a neccesity.

It is however, an investment for the ones who loan the money for you to get it.

Banks are who the high home prices truly help the most.

 

[smokingman]

Harvey Organ's - The Daily Gold and Silver Report

The Federal Reserve already owns 28% of the entire mortgage market.By 2014 the FED will own 33%(by FED figures).





In terms of out standings, we expect the Fed to end up owning more than 33% of the total market by the end of 2014, which is also significant since many mortgage investors tend to reinvest paydowns. These investors would need to be persuaded to sell MBS to the Fed, which would require tighter spreads.

Want to know why Fannie and Freddy have not needed new bailouts?Why would they,they can sell garbage MBS(bad mortgages)directly to the FED,and have been since QE1.So take the worst of the worst mortgages and turn them over to the FED dollar per dollar when they are totally worthless.It is a stealth bailout of Fannie and Freddy,congressional approval not needed of course.

All this will end badly.

 

[Llamaguy]

I don't want to think it, but I almost wonder if this is a push for government rental properties.

If owning a home is so expensive and as noted above renters pay the extra costs plus profit to the landlord, then obviously the only civilized solution is to nationalize the housing market.

/tinfoilhat.

 

[Garand41]

I have never liked the idea of throwing money away each month on rent. Buying homes is the best investment we've ever made. We built a nice home 24 years ago, worked hard to get it paid off and now, as said above, just rent it from the state. At least we have something to show for our money spent.

 

[traderdan]

I don't want to think it, but I almost wonder if this is a push for government rental properties.

If owning a home is so expensive and as noted above renters pay the extra costs plus profit to the landlord, then obviously the only civilized solution is to nationalize the housing market.

/tinfoilhat.

We will get there eventually...

 

[ArmedProgrammer]

For most people who buy on a 30yr with very little down, owning IS renting. The payments are almost all interest and since most folks will move in 7 years or so, the principal sees little if any actual pay-down.

The difference between renting and buying is the difference in value between liability and flexibility. Renting gives you more ease of relocating, and this commands a price premium, all else being equal. Buying that home is a huge liability, and the owner takes on upkeep and all that.

I would never consider residential real estate to be much of an "investment." Commercial real estate, yes, but not so much with residential.

When interest rates are low, it would theoretically make owning a better deal than renting. But when owning is easier, it drives down rent. That's why, in the long run, the ratio of rent vs own is pretty stable.

Real estate can be a reasonably good place to PRESERVE wealth, but I don't see it as an appealing means of CREATING wealth.

I see your point - but I would suggest a couple of things.
1) "Commercial" vs. Residential needs to be better defined. I view residences as a GREAT investment and a GREAT way to create wealth. The residence that I personally live in - is NOT an investment. That much I agree with you on.
2) Based on that - the home you live in should on the less expensive end of comfortable - since it's an expense - NOT an investment.
3) An investment to me is something that puts money INTO my pocket regularly (every month)

An example. One rental property - a duplex

Rents total $825
Expenses, including PITI, allowance for vacancy, repairs have totalled an average of $725

So I started with a 70k investment - other people's money.
and for the last nine years, it has paid me $100/month in profit
further, the principle on the loan has been paid down.
Further yet - the value of the duplex went down for a few years, but it's coming back up - and can be expected to follow inflation for the foreseeable future.

So is that property commercial? Or Residential? I'd say it's a residential investment...

 

[Lucas156]

Why not rent where you live and buy a property as investment income(rent it out)