When to Buy a house?
05-22-2008 | 06:02 AM
#31
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Joined: Feb 2007
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Quote:
"You got to live somewhere, so if you sell that fancy house for lots of money, just means you have to spend lots of money on the next house and you are no better off."
Led Zepp typed:
*In most cases you have no choice but to purchase a more expensive home than the one you sold. If you make a profit on the sale and then downsize, you will be hit with capital gains taxes.*
This used to be true, but you have a $250K capital gains exclusion if you owner occupied the property for two years. So if you and your wife bought a house together, you would have a $500K gain on the sale of your house.
Then you could downsize and invest the rest.
In 1989 I purchased a townhouse in the SFO Bay area. I owner occupied this property for a year then converted it to rental status. In 2002 I did a 1031 exchange into a single family home in the bay area. This was rented for two years, then I did another 1031 exchange into a house in the NorthWest. We rented this house for just under 2 years and when I got laid off in 2006, we moved in and we are owner occupying the property. When the current down real estate market recovers eventually we will sell and downsize.
When/if we sell this property, I have to recapture the depreciation and the capital gains are mine to keep.
Being a landlord has been trying at times but overall it has done good things longterm for my families security and offered some good tax benefits as well.
More info than anyone needed but there it is. YMMV
"You got to live somewhere, so if you sell that fancy house for lots of money, just means you have to spend lots of money on the next house and you are no better off."
Led Zepp typed:
*In most cases you have no choice but to purchase a more expensive home than the one you sold. If you make a profit on the sale and then downsize, you will be hit with capital gains taxes.*
This used to be true, but you have a $250K capital gains exclusion if you owner occupied the property for two years. So if you and your wife bought a house together, you would have a $500K gain on the sale of your house.
Then you could downsize and invest the rest.
In 1989 I purchased a townhouse in the SFO Bay area. I owner occupied this property for a year then converted it to rental status. In 2002 I did a 1031 exchange into a single family home in the bay area. This was rented for two years, then I did another 1031 exchange into a house in the NorthWest. We rented this house for just under 2 years and when I got laid off in 2006, we moved in and we are owner occupying the property. When the current down real estate market recovers eventually we will sell and downsize.
When/if we sell this property, I have to recapture the depreciation and the capital gains are mine to keep.
Being a landlord has been trying at times but overall it has done good things longterm for my families security and offered some good tax benefits as well.
More info than anyone needed but there it is. YMMV
This used to be true, but you have a $250K capital gains exclusion if you owner occupied the property for two years. So if you and your wife bought a house together, you would have a $500K gain on the sale of your house. Then you could downsize and invest the rest.
05-22-2008 | 09:45 PM
#32
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Joined: Aug 2006
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From: SWA/FO
If you negotiate the price of the car rather than the payments and terms, you will be way ahead of the general population and it's ticks these slime balls off.
05-23-2008 | 08:50 AM
#33
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Joined: Mar 2006
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I sold cars briefly between airline jobs and it was eye opening in quite a few ways. I don't think you can really get under the skin of a seasoned dealer or salesman. I enjoyed dealing with someone that knew what they wanted and the dollar amount that they wanted to pay. All dealerships want to maximize their profits; but when you walk 90% of the time they will take the mini-deal over a lost sale. A deal at 100 bucks over invoice still nets them 500-1500 bucks depending on factory incentives and holdbacks If the car is sold, they are happy with the sale. It is nice when the customer leaves happy though.
There are some good sales people with ethics out there, if you get a stooge or stoogette give them the boot and work with someone that listens to what you have to say. I found that I knew within the first 5 minutes if the prospect was for real or just out kicking tires.
I enjoy dealing with salespeople more than I used to, it's pretty obvious when they are playing their sales games. If you are really interested in sale tactics read the book "Zero to Hero". This book addresses the automotive trade but alot of it applies to other retail as well.
Buying a house is usually easier than buying a car
There are some good sales people with ethics out there, if you get a stooge or stoogette give them the boot and work with someone that listens to what you have to say. I found that I knew within the first 5 minutes if the prospect was for real or just out kicking tires.
I enjoy dealing with salespeople more than I used to, it's pretty obvious when they are playing their sales games. If you are really interested in sale tactics read the book "Zero to Hero". This book addresses the automotive trade but alot of it applies to other retail as well.
Buying a house is usually easier than buying a car
05-27-2008 | 08:25 AM
#35
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Joined: Apr 2008
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From: Chief Pilots Office
Now, take a look around, don't you see the same thing happening? People over the past 5 years have seen large gains in real estate. So more and more people took big loans, went into huge debt, to buy real estate in hopes that they would make it big.....and it collapsed. They burrowed money to invest.
Buy what you need....and scramble to get debt free.
05-27-2008 | 08:29 AM
#36
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Joined: Apr 2008
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From: Chief Pilots Office
Burrow money from the bank to have a reasonable home to live in.
Then once it's paid off, save up money and pay CASH for a rental home. That's what you call investing. Don't burrow money to invest.
Let's think about it. Say you take 150,000 loan from the bank on a 30 year mortgage to buy a rental house. It cost's you 1100 dollars a month after principal, interest, taxes & insurance. You charge 1300 in rent. You have 200 dollars a month left over that HAS to be saved for repairs and months where you don't have a renter. Remember one month is 1100 out of pocket without a renter.
So after 30 years, you can have equity! Bullcrap!!
Save 30,000 a year for 5 years. Then pay cash, and take home all that money instead of giving it to the bank (for interest) every month for 30 years.
Invest with YOUR cash, not with the BANKS cash.
Then once it's paid off, save up money and pay CASH for a rental home. That's what you call investing. Don't burrow money to invest.
Let's think about it. Say you take 150,000 loan from the bank on a 30 year mortgage to buy a rental house. It cost's you 1100 dollars a month after principal, interest, taxes & insurance. You charge 1300 in rent. You have 200 dollars a month left over that HAS to be saved for repairs and months where you don't have a renter. Remember one month is 1100 out of pocket without a renter.
So after 30 years, you can have equity! Bullcrap!!
Save 30,000 a year for 5 years. Then pay cash, and take home all that money instead of giving it to the bank (for interest) every month for 30 years.
Invest with YOUR cash, not with the BANKS cash.
05-27-2008 | 09:06 AM
#37
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Then once it's paid off, save up money and pay CASH for a rental home. That's what you call investing.
Your home is your shelter. Your rental property is someone else's shelter and your asset.
10-21-2012 | 08:46 PM
#38
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Joined: Jul 2009
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From: C525
I will likely be purchasing my first house in the coming year. While there is some good advice in here, I was wondering if anyone has anything to add. I am still pretty young so any tips would be greatly appreciated.
10-22-2012 | 05:07 AM
#39
A Second Past V1
Joined: Feb 2007
Posts: 743
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From: Assumed
Do not deal with ARMs. Either get an interest only or conventional loan.
Before people get all backslash happy about the interest only...think about it this way:
In an example of a $200K house, 20% down, 30 year at 5%:
If it was a hard month, and cash suddenly became tight, would you rather be required to pay...
$533 (interest only) or...
$763 (conventional)?
If you choose to go interest only, BUDGET LIKE IT IS A CONVENTIONAL LOAN. Keep applying that extra amount (and more) that results in principle reduction and a quicker payoff time on the note. Otherwise the interest only loan is a stupid, stupid, stupid idea.
More importantly, if you do not have the 20% to put down on a house at a minimum, keep renting and save up the cash. There will be houses for sale when you are ready, no matter when that is.
Before people get all backslash happy about the interest only...think about it this way:
In an example of a $200K house, 20% down, 30 year at 5%:
If it was a hard month, and cash suddenly became tight, would you rather be required to pay...
$533 (interest only) or...
$763 (conventional)?
If you choose to go interest only, BUDGET LIKE IT IS A CONVENTIONAL LOAN. Keep applying that extra amount (and more) that results in principle reduction and a quicker payoff time on the note. Otherwise the interest only loan is a stupid, stupid, stupid idea.
More importantly, if you do not have the 20% to put down on a house at a minimum, keep renting and save up the cash. There will be houses for sale when you are ready, no matter when that is.
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