Home buying first time, humbly asking advice

[NoHaveMSG]

Originally Posted by Irace86.2.0

It is also worth mentioning that the housing market is so tight right now that the entry price into starter homes is proportionally inflated. My wife and I don't have or want kids, so we only need a small place. Buying a condo with high HOAs is a financial waste compared to renting. Buying a smaller home means paying a premium. Buying a larger home means getting more value, but it will also be beyond our needs, so we incur higher costs than necessary and will need to devote more time and money to the larger property. We will also have to pay a premium to have a smaller place in a nicer neighborhood because most homes in nicer neighborhoods are larger, so smaller homes there are more impacted and go for a premium. Moreover, larger homes have larger occupants, which tend to have kids, which tend to want to be in better school districts, which also incur a premium.

Our best bet is to wait for the market to stabilize and for production to increase. This is unlikely to happen, so our other option is to move to a different market that isn't so hot, which will likely happen after I finish nursing school, and it gets us out of California and up north like in Washington where there hopefully will be less fires, but I could imagine renting forever too if this persists forever, as we aren't young either and starting a mortgage post 40 isn't ideal.

So much to consider.

Depends on your area. For me, to even rent a duplex with a garage is more then what I will be paying for my new place, an 1100sqft house with a 30X24 shop. I can see the pros to renting in area's like yours, for me it doesn't make sense. My mortgage with taxes and insurance is still a couple hundred less.

[WildCard600]

Originally Posted by Irace86.2.0

Where I live, the rental market is heavily impacted, yet a person could still rent a newer apartment in a nice area with central AC, washer/dryer with a detached garage, as I do for under $2k, but that same property would probably be $3000+ to own when all costs are considered. The cheapest condos that are converted apartments with less amenities in the worst neighborhoods start at $300k with $500+ HOAs. If someone planned to buy a condo and then move in 5-10 years into a starter home and then move in 5-10 years when they needed room for 2-3 kids and then added that granny flat edition in 15 years on top of upgrades, the outlook is less ideal for buying.

For most people, buying works out to be better, but it really depends on a lot of factors coming together. My parents bought low and sold high in a flip when retiring and made a lot of money on the swing in the market, regardless of the sales price difference of the home because the market was right, but if it had been the opposite then they wouldn't have been able to move into a retirement home, or they would have needed to take a $150k loss into the profits from downsizing. This could have nullified the benefits incurred from buying over renting.

I think it is important for every home buyer to consider their lifestyle choices and be realistic about their goals, but chiefly, they shouldn't blindly go into a home sale with the idea that their home is their strongest, best, only or safest investment option.

The bolded part, for sure, 100%. I can't help but wonder how much of the current mania is caused by the oft repeated falsehood that owning a home is some kind of magical surefire investment.

[Irace86.2.0]

Originally Posted by WildCard600

The bolded part, for sure, 100%. I can't help but wonder how much of the current mania is caused by the oft repeated falsehood that owning a home is some kind of magical surefire investment.

The other caveat to that is that a house is not a diversified portfolio. It is a good part of having a diversified portfolio, but I think a lot of people put all their chips in one basket, which is their house. At least with investing in the market, you can diversify with a Roth IRA, 401k, bonds, currency, etc. and inside of those investments, you can invest in commodities all the way to e-startups at variable risk levels.

I don't know if it is a driving factor, or at minimum a major driving factor, but it is definitely there.

I think demand is there, but supply hasn't kept up with demand, so there is a major housing shortage. Part of that housing shortage is because we have a greater amount of income inequality, which has lead to more people with money investing in property, but what is worse is that many people aren't renting out those homes to long term renters, but are using AirBnB to rent out the homes. This has raised the average price of a rental unit, which in turn has raised the average price of homes, which is a cyclical effect. That, fueled with the fear that home prices will only go up, so it is best to buy now or else pay more, continues to feed the demand cycle.

I think the bubble would have burst, and could still burst, if the WH ends protections on home loans that have defaulted. This would likely result in the rich or investment firms buying up more properties, so I am against this. Newsom says foreclosed homes will need to be on the market for 45 days before firms can make an offer. I don't know if this is going to happen, but I don't think people with multiple homes or firms or foreign investors should get first dibs on California's real estate, so I like this idea.

The best way out of this cycle is to build more homes. Unfortunately, that requires either capital with a predictable/likely return on the investment, or it requires governments to foot the bill, or it requires governments to guarantee a predictable rate of return for investors if the market takes a shit. Realistically, the whole industry thinks this is a bubble that will burst, so they won't be building too aggressively. Moreover, investors know that buyers can't endless foot the bill on more expensive properties, despite the feds lowering interest rates continually, so that is keeping them from building too. Most of the new development in my area are large track homes on small parcels. This has the highest rate of return on investors, but it means the average home prices are beyond most people and beyond the entry level of small families, and it means people are living shoulder to shoulder up each other's noses. The government could step in and build cheap housing like in other countries that have a far higher ownership rate, but the well-off and rich don't want to see that happen because that could destroy their property value or the value of their rental, so that idea doesn't get much support.

[soundman98]

Originally Posted by Irace86.2.0

Buy the house you want to retire in. Rent it out for 30 years. Live in a cheap rental. Take the savings from your rental and invest it in a 401k. In 30 years, move into your house that is paid off. Keep investing.

i genuinely thought you were trolling/joking when you posted this.


my dad's been flipping and renting houses in the chicagoland area for the last 30 years.

he's never had a renter that has maintained the house in a way that is even remotely acceptable, 'acceptable' generally being defined as owning even one type of cleaning device... decades worth of typical garbage piled up the in the garage. clean a kitchen? haha, just let the grease roll off. faucets leaking for months(if they called thursday, he'd have looked at it by saturday, but they never call) until he does an inspection a year later, and by then, it's rotted through the cabinet and the subfloor, with mold on the wall behind the cabinet...

it's common practice in my area for landlords to remove the doors from the rooms and closets before the tenant moves in, and after the rental inspection.
if they don't, it's quite common for the doors to be ripped off the hinges in unfathomable ways, or the tenants seem to enjoy punching through them for some reason.

in order to live in one of the houses he'd previously rented out, i'd need to entirely renovate all of it all over again just to clean things up.

it's actually impossible for me to imagine anyone renting a house and doing things like cleaning the floor after spilling pop in the kitchen, or even wiping down the windows from time to time.

[Irace86.2.0]

Originally Posted by soundman98

i genuinely thought you were trolling/joking when you posted this.


my dad's been flipping and renting houses in the chicagoland area for the last 30 years.

he's never had a renter that has maintained the house in a way that is even remotely acceptable, 'acceptable' generally being defined as owning even one type of cleaning device... decades worth of typical garbage piled up the in the garage. clean a kitchen? haha, just let the grease roll off. faucets leaking for months(if they called thursday, he'd have looked at it by saturday, but they never call) until he does an inspection a year later, and by then, it's rotted through the cabinet and the subfloor, with mold on the wall behind the cabinet...

it's common practice in my area for landlords to remove the doors from the rooms and closets before the tenant moves in, and after the rental inspection.
if they don't, it's quite common for the doors to be ripped off the hinges in unfathomable ways, or the tenants seem to enjoy punching through them for some reason.

in order to live in one of the houses he'd previously rented out, i'd need to entirely renovate all of it all over again just to clean things up.

it's actually impossible for me to imagine anyone renting a house and doing things like cleaning the floor after spilling pop in the kitchen, or even wiping down the windows from time to time.

Seems like he needs to screen his tenants better lol That, and hopefully he collects a large deposit.

[Spuds]

Originally Posted by Irace86.2.0

Buy the house you want to retire in. Rent it out for 30 years. Live in a cheap rental. Take the savings from your rental and invest it in a 401k. In 30 years, move into your house that is paid off. Keep investing.

Who is going to rent a nice house for the same payment it takes to buy one?

And why would anyone put the time and effort into maintaining a house they don't even live in?

[Sapphireho]

Do not buy a fixer upper.

Do not have a rental.

[Irace86.2.0]

Originally Posted by Spuds

Who is going to rent a nice house for the same payment it takes to buy one?

And why would anyone put the time and effort into maintaining a house they don't even live in?

Rent goes up over time, but the mortgage payment doesn't, so the rent will be less than the mortgage payment at first, but then it will go up beyond the price of the mortgage payment, even if it stays below the cost to buy a new home.

I don't get your second statement. The owner rents the house out to tenants who pay off the home over time and then the owner moves in when they retire. People do this all the time. Typically, it isn't done through renting. Typically, someone buys a starter home, but then they may have enough capitcal and income to buy a second home instead of selling because they don't need the capital from the sale of the first home. They live in the second, bigger home and rent out the apartment, condo or small home, and then when they retire, they sell the big home and downsize back into their original home. The renters and owner maintains the property, and when the owner returns, they can do any upgrades they want. Typically, the home will see less upgrades and renovations over the life of the 30 years with renters than with the owners, so when the owner moves in, any improvements or renovations will be easily afforded from their invested savings.

[jflogerzi]

I would wait it out if you can. Market is stupid. Wait for prices to drop.

[Spuds]

Originally Posted by Irace86.2.0

Rent goes up over time, but the mortgage payment doesn't, so the rent will be less than the mortgage payment at first, but then it will go up beyond the price of the mortgage payment, even if it stays below the cost to buy a new home.

I don't get your second statement. The owner rents the house out to tenants who pay off the home over time and then the owner moves in when they retire. People do this all the time. Typically, it isn't done through renting. Typically, someone buys a starter home, but then they may have enough capitcal and income to buy a second home instead of selling because they don't need the capital from the sale of the first home. They live in the second, bigger home and rent out the apartment, condo or small home, and then when they retire, they sell the big home and downsize back into their original home. The renters and owner maintains the property, and when the owner returns, they can do any upgrades they want. Typically, the home will see less upgrades and renovations over the life of the 30 years with renters than with the owners, so when the owner moves in, any improvements or renovations will be easily afforded from their invested savings.

What you originally said was buy one house, and rent it out, then live in an apartment you are renting from someone else. You are basically taking on all the burdens of home ownership without many of the benefits. If all you are interested in is money, sure you can make it work if you live in a real cheap apartment. Not worth it to most people though.

You ever had to maintain one house, much less 2? I know people that do it and all I hear is complaints about it being a PITA, especially when renters leave and you need to attract new ones. If you are going that route, you are treating the house like an investment, which seems to be against what you were saying before.

[humfrz]

Originally Posted by Irace86.2.0

For many people, renting is better. ......

WOW! Irace86.2.2, that post was quite a dissertation -

The first part of your strategy is where you lost me.

"Buy the house you want to retire in".

Let's say a person is about 25-30 years old when they are ready (prepared) to buy their first house and they are about 65-70 years old when they retire.

How many people have any idea where they want to retire to at age 25?

[Spuds]

Originally Posted by humfrz

WOW! Irace86.2.2, that post was quite a dissertation -

The first part of your strategy is where you lost me.

"Buy the house you want to retire in".

Let's say a person is about 25-30 years old when they are ready (prepared) to buy their first house and they are about 65-70 years old when they retire.

How many people have any idea where they want to retire to at age 25?

How many people have no imagination?

[Irace86.2.0]

Originally Posted by Spuds

What you originally said was buy one house, and rent it out, then live in an apartment you are renting from someone else. You are basically taking on all the burdens of home ownership without many of the benefits. If all you are interested in is money, sure you can make it work if you live in a real cheap apartment. Not worth it to most people though.

You ever had to maintain one house, much less 2? I know people that do it and all I hear is complaints about it being a PITA, especially when renters leave and you need to attract new ones. If you are going that route, you are treating the house like an investment, which seems to be against what you were saying before.

Well, initially I said live in a cheap rental, which could be an apartment or whatever. In general, a rental is cheaper than owning with even the same amenities. The difference can be invested in a diversified account. Depending on the savings, this can lead to the generation of more wealth for retirement, which should be on everyone’s agenda. And of course a house is an investment. It shouldn’t be the only investment, nor should people assume it is a guaranteed investment or that a renter is not making a sound decision to rent and not buy. I’ve demonstrated that renters could live a quality life, while reaching retirement at a similar or even a higher financial level than a buyer. Renting isn’t inherently wasteful.

I leave rental properties better than when I moved in. That isn’t the typical case, but it really depends on the home and the type of occupants. Even if the home isn’t maintained well cosmetically, at the end of 30 years the cosmetics can be taken care proportionally cheaply relative to the gains from this strategy.

I listen to a few finance channels. One guy rents, but he owns seven different rental properties. Renting affords him more flexibility, saves him money and fits his lifestyle. Buying a home doesn’t need to be for everyone, even if they could afford it.

[Irace86.2.0]

Originally Posted by humfrz

WOW! Irace86.2.2, that post was quite a dissertation -

The first part of your strategy is where you lost me.

"Buy the house you want to retire in".

Let's say a person is about 25-30 years old when they are ready (prepared) to buy their first house and they are about 65-70 years old when they retire.

How many people have any idea where they want to retire to at age 25?

Worst case scenario is the renters paid off a house you don’t want to live in, so you sell it and move into a similar sized or smaller home. Most people move anyways.

The point is that most people can afford one mortgage, and they have enough savings to maybe cover short periods between renters. Qualifying for a third or fourth home is harder. Buying one then renting it out immediately brings in a second source of income: the renters. People who find the means to repeat this process have multiple investment houses with more passive income.

Again, the point was to stimulate conversation on alternatives to buying a home in the typical way.