Home Appliances

[Sirharles]

Those things make your home more valuable, so in effect it is adding equity.

[Nubbins]

Nice... actually, it's probably not a bad thing to be doing with the economy the way it is.  Easier than buying a new house anyway.

[monkey!]

Everybody lives in negative equity now anyway.

It's a losers or a winners game.

[Cassander]

so, wait, in your first scenario, aren't you just putting down 100k as a down payment?  that's what i don't get.  it seems like equity is awfully imaginary.  you couldn't use the re-appraised value of your house to pay off your mortgage.  you can only use that as a bargaining chip if you wanted to make some other kind of loan, right? 

as a person nearing 30 i'm really trying to come to grips with this whole "home ownership" thing.  i mean, it really sounds to me like i'll save money in the long run by renting.  i mean, i see the point of "investing" in a house so that you don't have to pay anything for shelter (except taxes, of course) after you retire and you're living on SS.  but if you saved what you would be spending on homeowners' insurance, taxes, repairs, new appliances, upkeep, and the mortgage payment and invested it in a low-yield, long-term investment, wouldn't you be able to make just about as much money or more in thirty years?  granted, you don't "own" anything, but you've also saved yourself the stress of owning a house and/or watching it burn, flood, get torn apart by locusts, or losing the deed in a poker game. 

[nacho]

Take my grandfather as a good example of your scenario, Cass -- land rich in Silver Spring come retirement, but short on money.  So he just constantly got loans against the house to pay for the repairs and minor things, as well as post-retirement life, and it turned into a vast, sucking, horrible money pit nightmare... Selling in a frenzy as the market collapsed.

Granted, he made about a million bad choices.  Maybe a million and one.  But...that basic scenario was the root of the problem.

I don't know... I think it makes much more sense to build up a massive cash reserve instead of acquiring land.  The goal should be to retire with at least a million of your own money socked away, plus SS and whatever else.  While you're young, you can't enjoy the house because you're at work 12 hours a day and, when you're old, you just need one room with a hot plate and a TV and no stairs.  So why bother?

I don't see rent as flushing money down the toilet, either.  It's cheaper than 30 years of mortgage plus natural home disasters that end up costing you a grand every three months because a squirrel chewed on a wire or a toilet backed up and, just when you're ahead, your deck collapses or you need new windows and you're out 10k.  In the renter's life, there's nothing to bring you down when you hit that "just got ahead of things" moment except for your own hubris (e.g. a publishing company).  So, when you do just get ahead, you throw that money happily into the retirement fund!

I mean, god, a 30 year mortgage!  Every cent I earn would be tied up in a house until I'm 64.  Or, hell, if I need to refinance or take out a loan because the kitchen floor fell through thanks to a steady, undetected leak from the dishwasher, then it's longer than 30 years, isn't it?  Next thing you know I fully own a house when I'm too old to work or fully enjoy it.

And when it comes to tax writeoffs -- start a company!  I write off everything.  Rent, utilities, the Nissan, my trip to NOLA, the cell phone, the internet, beers with girls...

That's one thing I love about running a company -- it buys and pays for everything.  And the auditors are confused by publishing companies.  "A month's worth of beer?  Really?"  *shrug* "Well, writers.  They're drinkers."  "Like Bukowski!"  "Yessss... Can I go now?"

[monkey!]

Renting is cheaper!

[RottingCorpse]

Owning a house or land made sense in the 1800s . . . sort of.

[monkey!]

If you wanted to bury your wife in the land then shag her under each full moon.

[Reginald McGraw]

This may be a simple example:

We're 30 years old.

You rent a town house at 1800 / month.
I buy a town house with no money down, pay 250,000 and my mortgage @ 5% is 1800/month.

At age 60, we've each paid 648,000.

I've had to spend maybe 25,000 on repairs over that time.

At age 90, you've paid 1,296,000.

Assuming another 25,000 of maintenance.  I've spent 798,000.

Say I sell my house at this point and it's now worth 500,000.

Now you've paid 1,296,000 and have to make rent every month still.

I've paid 298,000, and have $500,000 in hand to do whatever I want.

This ignores the ENORMOUS tax benefits of mortgage interest, but that is just a tool that the rich use to keep the poor under boot anyway.

I've made crazy assumptions about longevity to keep numbers round, but either way...home ownership (if you can afford to do maintenance without borrowing from equity) is 99% of the time going to be a long-term win.

[nacho]

Hmmm... And I do, secretly, want to own and live a little cabin deep in the woods so I can trap and skin tourists. 

[Sirharles]

Thank you Reggie, couldn't have said it better myself.

[Nubbins]

Yep.  I definitely would rather put money into a house, even with all the repairs.  Problem is I can't afford mortgage + property tax + repairs + etc. right now.

[Cassander]

i see your point (kind of) but that's assuming your house doesn't completely fall apart or that you can sell it whenever you want, which, as we all know now, is not the case.  plus you need to tack on your insurance and taxes. 

[nacho]

Yeah...what are the tax savings?  Are you saving more than you're owing?  Does buying a house mean you get a ton of money back each year to...uh...pay for the new sewer line that was too small because the contractor cut a corner 10 years ago?

[Cassander]

and, god forbid the bank and the city/county disagree about how much your home is worth.  so you pay taxes on the $300,000 the government says but you only get the value of what the bank says. 

plus, we're forgetting the ultimate rent pro: cutting the string at any time and moving wherever you want to go.  if you own a house and the neighborhood goes to shit (happened to my grandparents, who saw their home value go up then back down like a bell curve over their 38 years there because of crime), you're left holding the bag. 

plus, nacho, we all know a little murder cabin in the woods isn't going to need a 30 yr. loan.