Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Re: Am I making a mistake?
Old 04-02-2007, 01:15 PM   #41
Thinks s/he gets paid by the post
lazygood4nothinbum's Avatar
 
Join Date: Feb 2006
Posts: 3,895
Re: Am I making a mistake?

while i don't understand finance a fraction as much as these good people what i did learn quickly & recently was how illiquid is a house. having just inherited a million plus dollar house, i'm not rich enough to own a million dollar house even though it is free & clear. frankly, i'm not even crazy about owning my own 1/2 million dollar house anymore and am looking foward to the market coming back so i can downsize to a halfsize of that.
__________________

__________________
"off with their heads"~~dr. joseph-ignace guillotin

"life should begin with age and its privileges and accumulations, and end with youth and its capacity to splendidly enjoy such advantages."~~mark twain - letter to edward kimmitt 1901
lazygood4nothinbum is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Re: Am I making a mistake?
Old 04-02-2007, 01:23 PM   #42
Thinks s/he gets paid by the post
 
Join Date: Jun 2005
Posts: 1,543
Re: Am I making a mistake?

Quote:
Originally Posted by brewer12345
Heh, for 2006 I ended up with an AMT liability of something like $116. So I had just about the max amount of deductions I could manage and still get away with it. I suspect that AMT will be academic for me for 2007, since I won't have enough deductions to offset all the taxable income.
wife and i are technically in the 28% bracket but end up paying no more than 12% or so of gross income of income tax, so a possible 16% extra liability makes me shake with fear
__________________

__________________
al_bundy is offline   Reply With Quote
Re: Am I making a mistake?
Old 04-02-2007, 04:13 PM   #43
Thinks s/he gets paid by the post
tryan's Avatar
 
Join Date: Mar 2005
Posts: 2,449
Re: Am I making a mistake?

WOW 21k/year for TAXES and they NEVER go away (only go UP). I couldn't do it.

Just know if you do it, both of you will be working the entire time you're in the house.

__________________
FIRE'd since 2005
tryan is offline   Reply With Quote
Re: Am I making a mistake?
Old 04-02-2007, 06:29 PM   #44
Thinks s/he gets paid by the post
bright eyed's Avatar
 
Join Date: Jan 2007
Posts: 1,891
Re: Am I making a mistake?

2 adults and one kid and 3900 sq feet? sounds like way too much house, even if you have 3 more!

utilities, landscaping - whether you pay someone else or do it yourself it will be a drain.

didn't the seller lose money on the house?

what about childcare/preschool costs - those are huge, and generally more expensive in higher end areas...calc that too since you said both of you are working...especially if you are planning on having more - you may consider one of you staying at home for a while which will cut your income significantly... etc.
__________________
If i think of something clever to say, i'll put it here...
bright eyed is offline   Reply With Quote
Re: Am I making a mistake?
Old 04-02-2007, 09:30 PM   #45
Recycles dryer sheets
 
Join Date: Jul 2006
Posts: 214
Re: Am I making a mistake?

totally agree with you guys. 3900SF is too much. 21k tax is too much.

But IF, just if, the tax is 16k, is this a good deal? the owner spent 892k five years ago, now let's say 770k. if there is a crash ahead, the low will be lower than the price of 2001?
__________________
semtex is offline   Reply With Quote
Re: Am I making a mistake?
Old 04-02-2007, 09:37 PM   #46
Recycles dryer sheets
 
Join Date: Jul 2006
Posts: 214
Re: Am I making a mistake?

let me put it in another way.

Now you have a chance to buy a house at 2001 price, 892k, but you pay 770k, same time the difference 122k will pay in the 20 years, so 6k/year(just put it simple).

from this view, the deal is good or not?
__________________
semtex is offline   Reply With Quote
Re: Am I making a mistake?
Old 04-02-2007, 11:51 PM   #47
Thinks s/he gets paid by the post
SecondCor521's Avatar
 
Join Date: Jun 2006
Location: Boise
Posts: 2,402
Re: Am I making a mistake?

Quote:
Originally Posted by semtex
let me put it in another way.

Now you have a chance to buy a house at 2001 price, 892k, but you pay 770k, same time the difference 122k will pay in the 20 years, so 6k/year(just put it simple).

from this view, the deal is good or not?
It's not a good deal because you can't afford it. Lower property taxes are a red herring, the mortgage itself is too much.

JMHO.

2Cor521
__________________
"At times the world can seem an unfriendly and sinister place, but believe us when we say there is much more good in it than bad. All you have to do is look hard enough, and what might seem to be a series of unfortunate events, may in fact be the first steps of a journey." Violet Baudelaire.
SecondCor521 is offline   Reply With Quote
Re: Am I making a mistake?
Old 04-03-2007, 03:20 AM   #48
Full time employment: Posting here.
 
Join Date: Mar 2005
Posts: 699
Re: Am I making a mistake?

Wow, 21k in property taxes alone. Even 16k sounds horrificly high to me. Divide those numbers by 10 and you're talking my language. Otherwise, you're paying a very high rent to the state just to keep your own home.

New Jersey must be heaven on earth to be able to command such sums...
__________________
bpp is offline   Reply With Quote
Re: Am I making a mistake?
Old 04-03-2007, 06:03 AM   #49
Recycles dryer sheets
 
Join Date: Jul 2006
Posts: 214
Re: Am I making a mistake?

One thing puzzled me is that small size houses are more expensive.

On Feb, we bid a older colonial(1980) with 2700SF, tax 14300. We offered 62, 65, 66k and gave up. It was sold 68.7K. Compare to the McMansion, which is more expensive?

size 3900SF 2700SF
year 1996 1980
lot 1.2 1.1
price 770k 68.7k
tax 21k 14k
location same area, bigger one is in the best spot.

from the compare, the tax is the killer. If tax is 16k, isnot the bigger one cheaper?

House price at good spot is not in a free fall. Yes, maybe 5, or 5+ years down trend ahead. But we could not wait for another five years.
__________________
semtex is offline   Reply With Quote
Re: Am I making a mistake?
Old 04-03-2007, 06:30 AM   #50
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
brewer12345's Avatar
 
Join Date: Mar 2003
Posts: 16,391
Re: Am I making a mistake?

The issue isn't whether prices are moving up, down, or sideways. The problem is the absolute amount of money you would have to part with every year to live in such a place. You can probabbly carry the costs of the house, but it will likely preclude ER.
__________________
"There are three kinds of men. The one that learns by reading. The few who learn by observation. The rest have to pee on the electric fence for themselves."



- Will Rogers
brewer12345 is offline   Reply With Quote
Re: Am I making a mistake?
Old 04-03-2007, 07:25 AM   #51
Thinks s/he gets paid by the post
tryan's Avatar
 
Join Date: Mar 2005
Posts: 2,449
Re: Am I making a mistake?

Quote:
the owner spent 892k five years ago, now let's say 770k. if there is a crash ahead, the low will be lower than the price of 2001?
Don't count on the town re-assessing your house DOWN upon the sale. The town is only required to reassess every few years (3 or 5 years typically). And the nieghbors (paying 21k too) would storm town hall demanding the same treatment. The town would have to reassess EVERYONE ... then the tax rate increases and you're right back where you started.

As far as a price drop - if the past in any indication - the high end will drop some then go FLAT for about a decade. The low end will be in a death spiral (as every other house is in some phase of foreclosure). Wouldn't expect the high end to drop too far below 2001 prices ... BUT who really knows.
__________________
FIRE'd since 2005
tryan is offline   Reply With Quote
Re: Am I making a mistake?
Old 04-03-2007, 07:30 AM   #52
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
brewer12345's Avatar
 
Join Date: Mar 2003
Posts: 16,391
Re: Am I making a mistake?

Quote:
Originally Posted by tryan
Don't count on the town re-assessing your house DOWN upon the sale. The town is only required to reassess every few years (3 or 5 years typically).
Every 10 years in my county of NJ, and my town is a year or two late.
__________________
"There are three kinds of men. The one that learns by reading. The few who learn by observation. The rest have to pee on the electric fence for themselves."



- Will Rogers
brewer12345 is offline   Reply With Quote
Re: Am I making a mistake?
Old 04-03-2007, 07:31 AM   #53
Thinks s/he gets paid by the post
 
Join Date: Jun 2005
Posts: 1,543
Re: Am I making a mistake?

Quote:
Originally Posted by semtex
One thing puzzled me is that small size houses are more expensive.

On Feb, we bid a older colonial(1980) with 2700SF, tax 14300. We offered 62, 65, 66k and gave up. It was sold 68.7K. Compare to the McMansion, which is more expensive?

size 3900SF 2700SF
year 1996 1980
lot 1.2 1.1
price 770k 68.7k
tax 21k 14k
location same area, bigger one is in the best spot.

from the compare, the tax is the killer. If tax is 16k, isnot the bigger one cheaper?

House price at good spot is not in a free fall. Yes, maybe 5, or 5+ years down trend ahead. But we could not wait for another five years.
smaller house you are probably paying a larger cost to live at that location.

and about tax assessing, i heard a lot of towns in NJ went on a reassesment rampage last year because of all the bubble talk
__________________
al_bundy is offline   Reply With Quote
Re: Am I making a mistake?
Old 04-03-2007, 08:22 AM   #54
Recycles dryer sheets
 
Join Date: Jul 2006
Posts: 214
Re: Am I making a mistake?

But issue is I want to buy a house.

The kind house I want (2500SF, 12K, 50mins to city, nice school) is around 650k to 700k. They are not even the first wave down.

The worst senario, the McMansion down to 600k from 760k I paied. Then the mid end house down to 500k. I could sell the Mc and buy the mid end, rit? The big house I lost 160k, the mid I save 150k. It is even.

The point is the mid end not down yet and I could not wait for another two years. The Mc already down 33%( 1.1M to 760k).

By the way, this morning, I called the township officer, he confirmed with me the property tax of this house will down to 17k.

__________________
semtex is offline   Reply With Quote
Re: Am I making a mistake?
Old 04-03-2007, 08:46 AM   #55
Thinks s/he gets paid by the post
tryan's Avatar
 
Join Date: Mar 2005
Posts: 2,449
Re: Am I making a mistake?

... sounds like you're gonna do it ... what are you listening to us for?
__________________
FIRE'd since 2005
tryan is offline   Reply With Quote
Re: Am I making a mistake?
Old 04-03-2007, 08:54 AM   #56
Recycles dryer sheets
 
Join Date: Jul 2006
Posts: 214
Re: Am I making a mistake?

No, not decide yet. It is a big decision and I trust your guys wisdom.
I truely believe there is more down trend going. Just want to figure out which way have less loss.

Let's not considering renting and watch side way.

Still use the two sample below, which to pick?

size 3900SF 2700SF
year 1996 1980
lot 1.2 1.1
price 770k 68.7k
tax 17k 14k
location same area, bigger one is in the best spot.
__________________
semtex is offline   Reply With Quote
Re: Am I making a mistake?
Old 04-03-2007, 08:56 AM   #57
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
brewer12345's Avatar
 
Join Date: Mar 2003
Posts: 16,391
Re: Am I making a mistake?

I wouldn't pick either (and I didn't in real life either). The financial obligation wouldn't leave me enough wiggle room , cash-flow wise. I also think you will be pulled more into consumerism if you live in such a place. But that is for you to decide.
__________________
"There are three kinds of men. The one that learns by reading. The few who learn by observation. The rest have to pee on the electric fence for themselves."



- Will Rogers
brewer12345 is offline   Reply With Quote
Re: Am I making a mistake?
Old 04-03-2007, 09:03 AM   #58
Recycles dryer sheets
 
Join Date: Jul 2006
Posts: 214
Re: Am I making a mistake?

Cash flow analysis. Did I do it correctly?

Mc Mid end
House Purchase Price $760,000 $680,000
Down Payment $100,000 $100,000
Down Payment Requirement 20% 20%
Primary Mortgage Amount ($608,000) ($544,000)
Property Tax ($16,500) ($14,500)
Interest Rate 6.13% 6.13%
Second Mortgage Amount ($52,000) ($36,000)
Second Mortgage Rate 8.50% 8.50%
Term 30 30
Base Pay $200,000 $200,000
Paid Bonus $0 $0
Self Employment Income $0 $0
Mortgage Interest ($41,660) ($36,380)
Total Income $200,000 $200,000
State Tax Rate 6.000% 6.000%
State Tax ($6,350) ($6,787)
Bonus State Tax Paid ($1) ($1)
401k Contributions ($30,000) ($30,000)
Payroll Deductions ($6,000) ($6,000)
Itemlized Deductions ($64,510) ($57,667)
Adjusted Itemlized Deductions ($63,640) ($56,797)
Exemptions ($9,900) ($9,900)
Total Deductions ($109,540) ($102,697)
Taxable Income $90,460 $97,303
Federal Tax Due ($15,462) ($17,173)
Bonus Federal Tax Paid $0 $0
Average Federal Tax Rate 17.09% 17.65%
Implied Federal Tax Rate 9.43% 10.47%
Social Security Tax ($6,045) ($6,045)
Bonus Social Security Tax Paid $0 $0
Medicare Tax ($2,378.00) ($2,378.00)
Bonus Medicare Tax Paid $0.00 $0.00
SDI ($31) ($31)
Total Tax ($30,267) ($32,415)
Monthly Net Pay $11,144 $10,965
Effective Tax Rate 18.46% 19.77%
Monthly Mortgage Payment ($4,112.99) ($3,595.28)
Monthly Association Fee ($110.00) ($110.00)
Monthly Mortgage + Tax+other ($5,597.99) ($4,913.62)
Child Care ($1,000.00) ($1,000.00)
Commute ($0.10) ($0.10)
Monthly Allowance $4,546 $5,052
__________________
semtex is offline   Reply With Quote
Re: Am I making a mistake?
Old 04-03-2007, 09:15 AM   #59
Recycles dryer sheets
 
Join Date: May 2006
Posts: 144
Re: Am I making a mistake?

Some thoughts based on our experience:

I think you really want this home and are trying to justify it. It looks good on paper and you are imagining the lifestyle that you will have.

We did the same thing when our kids were young and bought the mcmansion. It is spacious and the schools are exemplary.

However, there are downsides:
We have over 4,000 square feet to heat, a/c and maintain. It gets really old to replace water heaters, a/c units, paint etc and is expensive. It seems like something is always breaking and frankly I hate cleaning it! Our taxes are very high and we would rather use that money for travel. In addition, we have to pour a lot of money into our home to keep it "updated" so that we can sell it. I would rather use the money for experiences for our family.

When you live in an expensive area (the homes in neighborhoods around ours are 2 to 10 times the value of our home/neighborhood) the kids your kids grow up with tend to be spoiled and indulged. There is a lot of materialistic peer pressure and you don't want your kid to feel deprived. The neighbors tend to be very materialistic also.

We are glad we live here because the schools are good. However, if I were to do it over, I would have moved to a smaller home in a less expensive area that still had very good schools, but I would have wanted my kids to grow up with other kids that were more appreciative and didn't feel "entitled". Believe me, it rubs off on your kid! It takes a lot to keep them "grounded".

In addition, if you want your child to be successful in school it is hard to stand out in a school where there is so much wealth that almost all the kids have tutors and private coaches that work with them from before they enter kindergarden. Where we live, it is almost impossible to make sports teams, unless you are a super athelete at a young age. I think my kids would have been much happier with less pressure. They did well in school, but they would have been outstanding in a less-pressured environment.
__________________
BarbaraAnne is offline   Reply With Quote
Re: Am I making a mistake?
Old 04-03-2007, 09:32 AM   #60
Thinks s/he gets paid by the post
tryan's Avatar
 
Join Date: Mar 2005
Posts: 2,449
Re: Am I making a mistake?

wow ... thanx for sharing. Might explain why the McMansions seem to turn over so often.

Some friends live on a McMansion circle ... they're the only ones who have been in their house longer than 5 years. Small sample ... I know ... but an observation none the less. AND the OP's McMansion ... built in 1996 and is selling for a third time in 11 years!
__________________

__________________
FIRE'd since 2005
tryan is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Making the Best of Investment Real Estate emi guy FIRE and Money 7 02-27-2007 06:28 AM
Building new house- am I making a mistake boutros Young Dreamers 15 05-30-2006 09:46 PM
Still making money in RE Arif FIRE and Money 14 05-20-2006 03:48 PM
Addicted to making money shiny FIRE and Money 25 03-23-2006 01:51 PM
making lawyers look bad Martha Other topics 68 06-12-2005 09:23 AM

 

 
All times are GMT -6. The time now is 04:36 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.