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Old 04-30-2014, 09:40 AM   #41
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Not Mulligan, but live in the burbs of Dallas, and $700 is my PITI payment as well. Live in a 1650sf "ranch", built in 1984, that I paid $113k for in 2000. Currently owe around $83k; mortgage payment alone is about $400/mo.

Pluses are privacy, and a decent patio for grilling and such. Minuses are upkeep and yardwork. May move to a turnkey condo or somesuch in the future, but any place I would want to live would actually increase my mortgage, but hopefully lower total costs by eliminating all the extras involved in keeping up with a house and yard.

So in your area HFWR, would renting a property similar to what you presently own, would be more expensive?


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Old 04-30-2014, 09:59 AM   #42
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So in your area HFWR, would renting a property similar to what you presently own, would be more expensive?


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A house similar to mine would rent for $1100-$1300/mo, from a cursory look at craigslist rentals.
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Old 04-30-2014, 10:19 AM   #43
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A house similar to mine would rent for $1100-$1300/mo, from a cursory look at craigslist rentals.

Real estate is all local, and obviously you can't buy and sell every year anywhere and not lose your shirt. But in my area and apparently yours owning certainly is not a guaranteed money losing proposition. Although I would never consider getting into the landlord business, most here won't get a property unless it is revenue positive from the get go. Some will buy them for 40-50k, put a little lipstick on the pig, and boom next thing your getting $700-$800 a month rent cash flow positive from the get go. But the potential heartburn from dealing with renters is not worth it to me. I doubt there are any slightly fixer uppers in Silicon Valley for $40,000 though.


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Old 04-30-2014, 12:55 PM   #44
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Interesting thoughts on the homeowners insurance as a percentage of home value. We pay $1100/year for 2 homes on one lot (we have a detached granny flat). It's about 1/10% of the value of the home. AND we live in a fire risk area and are 1/4 mile from an earthquake fault.

But fire or earthquake won't wipe out the dirt - just the structures... Insurance doesn't replace the land - just the structures. So there is a big disconnect between the home value (which includes the dirt) and the replacement costs.

FWIW - our house is as UNFANCY as they come. 2k sf 1963 tract home. Still worth a lot more than it should be.
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Old 04-30-2014, 01:02 PM   #45
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Interesting thoughts on the homeowners insurance as a percentage of home value. We pay $1100/year for 2 homes on one lot (we have a detached granny flat). It's about 1/10% of the value of the home. AND we live in a fire risk area and are 1/4 mile from an earthquake fault.

But fire or earthquake won't wipe out the dirt - just the structures... Insurance doesn't replace the land - just the structures. So there is a big disconnect between the home value (which includes the dirt) and the replacement costs.

FWIW - our house is as UNFANCY as they come. 2k sf 1963 tract home. Still worth a lot more than it should be.
Does that include the earthquake insurance rider? If not the fault is irrelevant since homeowners policies exclude earthquake risk unless a rider is purchased.
But from the insurance premium , you clearly don't live in any area subject to many windstorms. In inland Tx its windstorms and hail that raise insurance premiums. The house I live in had its roof replaced twice, the second time with a metal roof, and would have had a shingle roof replaced a third time in 28 years. The last event meant that every roof in the neighborhood that was not metal had to be redone.
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Old 04-30-2014, 01:02 PM   #46
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Real estate is all local, and obviously you can't buy and sell every year anywhere and not lose your shirt. But in my area and apparently yours owning certainly is not a guaranteed money losing proposition. Although I would never consider getting into the landlord business, most here won't get a property unless it is revenue positive from the get go. Some will buy them for 40-50k, put a little lipstick on the pig, and boom next thing your getting $700-$800 a month rent cash flow positive from the get go. But the potential heartburn from dealing with renters is not worth it to me. I doubt there are any slightly fixer uppers in Silicon Valley for $40,000 though.


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I'm in a fairly good location, but there's so much housing in the area, and more coming in at a rabid rapid pace, that prices haven't gone up much since I bought.
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Old 04-30-2014, 01:10 PM   #47
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One-tenth of 1% of the home value is pretty cheap premium for a home insurance. Where I am, the land is worth perhaps 1/3 or 1/4 of the total home value.

By the way, our insurance covers the replacement value meaning what it costs to rebuild. We also have a $500 deductible, which may be too low.
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Old 04-30-2014, 01:33 PM   #48
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My homeowners policy is only about 8/100 of one-tenth of 1%. My land in the current market is 100% of the property value because it is coveted by developers to build a McMansion. Every single small house nearby (mine is < 1,200 sq ft) which has sold in the past 5 years has been razed and replaced with a McMansion. The vast majority of the houses which sold in the 10 years prior to that were razed, too. The lots aren't even that big. Even my tax assessment puts over 80% of my property's value in the land, and the remainder in the structure. I appealed the assessment, claiming that my structure should be valued at $0, but my appeal was denied. I joke that if my house were crushed by a meteorite, the resale value would increase because the developers would save on the destruction cost. My vegetable garden is some of the most expensive farmland in the country!
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Old 04-30-2014, 01:39 PM   #49
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I'm in a fairly good location, but there's so much housing in the area, and more coming in at a rabid rapid pace, that prices haven't gone up much since I bought.
This is a huge factor that is easy to overlook. Where building out is constrained, and certain neighborhoods have hard to duplicate amenities, personal housing is often a reasonable investment if you are going to be around for a while. I previously thought that in places like DFW eventually building would be constrained by increasing commuting distances, but I hadn't reckoned on the huge expansion of corporate employment in the various suburban cities They are suburban in layout and planning, but basically live unto themselves rather than function as bedroom communities for Dallas and Fort Worth.

Quite different from here in Seattle or Bellevue which are still and likely will remain the employment and transportation hubs in our area.

It's interesting around afternoon quitting time to see all the huge double-decker or tandem buses leaving Seattle full of commuters for points north, south, and east. And way more people are driving home on I-5 or I=90 or 520.

Ha
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Old 04-30-2014, 01:47 PM   #50
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I've never considered my house to be a great investment. Quite the contrary - it is a money and time suck for sure.

We've been in this house about a decade and it has appreciated about $13K/year (that is already taking into account the 6% off the top we would have to pay to unload the house). While the appreciation is decent I guess (and certainly better than it going down in value!), that is about what I pay a year in interest, taxes, and insurance on the property. Factor in what seems to be an endless list of to-dos and we are not coming out ahead.

OTOH, we are in a lovely, spacious (i.e., energy-hog) single family 5 bedroom home. The two-bedroom apartments down the street are more than $500/month over my mortgage payment (which includes the insurance and taxes). So, maybe we are getting better living space for the money. I don't know.

The plan is to sell this joint when the youngest chick leaves the nest in a few years. Then we either rent somewhere cheap or buy a smaller place and have no mortgage. I'd love a small, cheap, condo-type place, but my DH hates sharing walls with others and likes more room. I foresee a battle on this.
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Old 04-30-2014, 02:02 PM   #51
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This is a huge factor that is easy to overlook. Where building out is constrained, and certain neighborhoods have hard to duplicate amenities, personal housing is often a reasonable investment if you are going to be around for a while. I previously thought that in places like DFW eventually building would be constrained by increasing commuting distances, but I hadn't reckoned on the huge expansion of corporate employment in the various suburban cities They are suburban in layout and planning, but basically live unto themselves rather than function as bedroom communities for Dallas and Fort Worth.

Ha
Yep, and we just bagged Toyota's U.S. headquarters.
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Old 04-30-2014, 02:03 PM   #52
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Yep, and we just bagged Toyota's U.S. headquarters.
I saw that. Huge win.

Ha
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Old 04-30-2014, 02:09 PM   #53
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Does that include the earthquake insurance rider? If not the fault is irrelevant since homeowners policies exclude earthquake risk unless a rider is purchased.
But from the insurance premium , you clearly don't live in any area subject to many windstorms. In inland Tx its windstorms and hail that raise insurance premiums. The house I live in had its roof replaced twice, the second time with a metal roof, and would have had a shingle roof replaced a third time in 28 years. The last event meant that every roof in the neighborhood that was not metal had to be redone.
Good point on that. We bagged the EQ insurance after stiffening the house (Husband is an architect) and finding out that we're on "good dirt" when we built our casita. (One of the least likely types of dirt to liquify and slide in a seismic event according to our soils report.) Stiffening meant increasing diagonal bracing, adding bolts/straps between 2nd floor, 1st floor, and foundation. And adding significantly more sheer wall.
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Old 04-30-2014, 02:40 PM   #54
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Unless you get lucky in your area (and you could just as well buy a biotech and try to get lucky there) a house is a pretty horrible investment.

...
I got really, really, really lucky. Was in fact, probably the best investment I've ever made.
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Old 04-30-2014, 03:04 PM   #55
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Had a nasty wind storm blow 1/2 dozen shingles off the roof ... It's a 3 story house ... I HATE ladders.

Same thing happened last year. Sooo I rented a 50 ft lift for the day ($250). Then since I had the lift, we:

1. fixed the roof
2. trimmed the lillacs (15ft high ... waay over grown)
3. cleaned the chimney
4. trimmed the tree branches threatening the house.

Not bad for $250. This year it'll be: roof, chimney, clip catipillar nests and drop a dead tree.

Just need to be creative!
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Old 04-30-2014, 03:21 PM   #56
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Very interesting thread. There are some risks that are unique to renting. One is having to move at the end of a lease term even though you've been a good tenant and incurring the costs (monetary and psychological) associated with being forced to move. Another is if the landlord defaults you could end up again having to move, this time without much warning.
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Old 04-30-2014, 05:54 PM   #57
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I got really, really, really lucky. Was in fact, probably the best investment I've ever made.
Well that is my point, although if you bought before 2006 I am curious if you would have made out better buying Apple stock and just renting.

I did not get lucky in our house, probably worth 50k less than we paid 13 years ago.
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Old 04-30-2014, 06:14 PM   #58
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Very interesting thread. There are some risks that are unique to renting. One is having to move at the end of a lease term even though you've been a good tenant and incurring the costs (monetary and psychological) associated with being forced to move. Another is if the landlord defaults you could end up again having to move, this time without much warning.
Don't forget the risk of rent increases each year. If you don't live in a rent-controlled area - the increases can be significant. With a *fixed rate* mortgage your P&I are a known quantity. Taxes and insurance can still increase, though.
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Old 04-30-2014, 06:18 PM   #59
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Maybe renting is like putting your money in CDs. Safe and predictable. You will not get the big capital gains nor take any capital losses.

My parents house went up 5 fold in 20 years. Not too bad and handily beat renting.

My first house went up 75% over 10 years and our current house value has remained unchanged over the last 12 years. In our case renting was about the same as owning.

Who knows going forward but I am leaning toward renting in retirement for awhile.
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Old 04-30-2014, 06:26 PM   #60
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Don't forget the risk of rent increases each year. If you don't live in a rent-controlled area - the increases can be significant. With a *fixed rate* mortgage your P&I are a known quantity. Taxes and insurance can still increase, though.
That was why I bought a house as soon as I could in the Washington, DC area. It was definitely a strain and I was "house poor" for several years but four or five years later rent on a one-bedroom apartment was more than my house payment. And I was planning on staying for 15 years at least. So buying worked out well for me.

At the time no one I knew had ever heard of house prices going down. That just never happens.

But it is definitely a local characteristic.
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