Home Ownership Overated?

[bow-tie]

...although it's pretty typical weather for the upper midwest. The midwest with its winters is not a place for sissies.

The weather here can be pretty hateful, but its home.

 

[Bob_Smith]

The weather here can be pretty hateful, but its home.

Right. Plus there are many other advantages here that supersede the weather. I'd take a cold winter over the brutal humidity of Louisiana any day. There are trade-offs no matter where one lives, I guess. I have seen some places that don't seem to offer any advantages, however. Just driving through, I've wondered about Gary, Indiana, for example. Now I can add Worthington MN to the list.

 

[Cut-Throat]

Right. Plus there are many other advantages here that supersede the weather. I'd take a cold winter over the brutal humidity of Louisiana any day. There are trade-offs no matter where one lives, I guess. I have seen some places that don't seem to offer any advantages, however. Just driving through, I've wondered about Gary, Indiana, for example. Now I can add Worthington MN to the list.

It's on my list!

- Moving to the Twin Cities was like paradise compared to Worthington. We have Hills, Trees, trout steams, 50 plus lakes in the cities. We have milder winters and summers without the wind!

I'm not even including the restuarants and cultural activites!

 

[jazz4cash]

Home ownership is not in any way over-rated due to very favorable tax treatment of mortgage interest and ability to leverage. What other appreciating asset can you buy had for 0-5% down?

What's over-rated is appreciation of real estate (because it only benefits when you can sell and move to a lower cost lifestyle). The way I figure it, even if appreciation is zero, if I can sell for close to what I spent to purchase it, I'm gonna have a lot more when I sell than if I had paid rent.

Another thing that's over-rated is buying a home that exceeds your needs or does not suit your lifestyle. ( if ya don't like yard work, then buy a townhouse or condo).

The ONLY reason I can think of for not owning is being unable or unwilling to stay in one place long enough to make it worthwhile.

 

[unclemick]

Prior to buying a duplex(1977) - the longest I stayed in one place(1966-1977) was two years.

Up/down economic cyles prevented making a 'killing' - the old location,location,location - the rentals, and staying ahead of inflation afforded a modest profit afer 15 yrs. And rental/cap gain helped the first ten years of ER.

I have no desire to become a landlord again - but real estate(all forms) can be a viable path for some.

 

[otako]

Home ownership is not in any way over-rated due to very favorable tax treatment of mortgage interest and ability to leverage.  What other appreciating asset can you buy had for 0-5% down?  

What's over-rated is appreciation of real estate (because it only benefits when you can sell and move to a lower cost lifestyle).  The way I figure it, even if appreciation is zero, if I can sell for close to what I spent to purchase it, I'm gonna have a lot more when I sell than if I had paid rent.

Another thing that's over-rated is buying a home that exceeds your needs or does not suit your lifestyle. ( if ya don't like yard work, then buy a townhouse or condo).

The ONLY reason I can think of for not owning is being unable or unwilling to stay in one place long enough to make it worthwhile.

What's moving every two years? I'm going to officer in the Air Force for foreseeable future. That means a move almost every two years to a new duty location. It could be a location in the states or overseas. Buy or Not buy?

 

[Cut-Throat]

Here is my advice.

Only being in an area for a short period of time is difficult to turn a profit in real estate.

If you get money to live off of the base team up with a few guys and rent a place and invest your extra $. You'll have a better time and can concentrate on Girls (assuming that you are straight and a Male).

Less hassle
and you won't have to dump any of your own $ into a place that you won't be staying in.

 

[Nords]

Don't buy until you homestead.

What's moving every two years?  I'm going to officer in the Air Force for foreseeable future.   That means a move almost every two years to a new duty location.  It could be a location in the states or overseas.  Buy or Not buy?

We moved every 2-3 years for 20. We bought in every duty station when we expected to be there for more than a couple years, but this was when RE was hot. In retrospect we had far more luck than planning (or common sense).

We know plenty of people that bought at every duty station. As absentee owners with the cost of property managers, they're usually in the red for 5-10 years before the cashflow turns. If you're saving 20-25% of your paycheck (and if you can trust the property manager not to rent the place out on their own while claiming it's vacant), then eventually you can make money.

We bought here in 1989, got flattened by the Japanese real estate collapse of the '90s, and had to be absentee landlords between '94-97. We had good tenants and realistic expectations but the property still took a lot of hard wear. If we'd had to sell then our losses would have been above $50K. It also took 11 years to have the appraised value equal our cost basis.

USAF is notorious for moving officers every 18-24 months to cover gapped billets. If you buy and have to sell in less than two years with almost no notice, it's almost impossible to win this lottery every time. If the RE market is having a down year, that'll quickly turn you into a long-term owner/absentee landlord. The challenge is being able to finance all those mortgages during prolonged vacancies & low rents!

 

[Hyperborea]

Home ownership is not in any way over-rated due to very favorable tax treatment of mortgage interest

The problem with that argument is that the tax advantage has probably been fully priced into the market. The only people who benefited were those who bought before the introduction of the tax break and sold afterwards.

Couple that with the fact that many people are better off taking the standard deduction than itemizing anyways. Those taking the standard deduction might even be worse off since the home prices are higher to account for the tax deductibility of mortgage interest for some but they are unable to take advantage of it.

 

[haha]

I think in many cases the decision between ownership or renting depends on what someone wants, local factors, life style, etc.

But there can be a bedrock security in owing a home, all other things constant. A woman I know has had terrible health. She is 59, and on SS Disability. She is qualified for Medicare, but not
Medicaid. She owns her house outright. Because of her disability, she gets some break on real estate tax.

She is able to live in a decent house in a decent neighborhood on the approx. $765 per month that she gets. Clearly she depends on her kids, neighbors, etc. for some help with maintenance emergencies. But if she were renting, she likely would have been evicted long ago.

Mikey