Housing Market Turnaround, Ideal Time to Buy?

Discussion in 'Business, Careers & Education' started by Khayembii Communique, Dec 27, 2011.

  1. Khayembii Communique

    Khayembii Communique Senior member

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    Apr 4, 2010
    Considering purchasing a duplex, living in the upper and renting out the lower. I've thought about this on and off for a while but this is a real possibility now that I have a confirmed and decent source of income. Was talking to my dad about this the other day and he said that now is the ideal time to buy, with housing prices still down but materials and labor costs rising. He said it would probably be best to get an interest-only loan, which would allow for it to pay for all expenses and gives me a better position in terms of cash flow during ownership as well as when I go to sell.

    My argument against this is that I currently have no obligations (aside from bills and stuff like that, I'm debt free) and am unsure of whether or not I want to take one on. However, I'm being swayed by the possibility of making a decent amount of money with appreciating home prices, lowering my living costs through the lower expenses associated with homeownership and subsidizing with a rental, and with having a place of my own.

    What is everyone's opinion of the housing market where it is currently at and where you see it going in the next few years? What does everyone think about this situation?

  2. GreenFrog

    GreenFrog Senior member

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    Oct 20, 2008
    Tough to say but I'm also in the mindset of purchasing real estate sometime next year or so. I have a coworker who bought a house and uses it as rental income. She lives in it with her BF but rents out the bottom floor to tenants, as you described. It's appreciated in price, according to her, but not by a lot. But she's living rent-free, in a way, because her mortgage payments are covered, plus more. So, yes, she is making rental income from it.

    When I talked to her about it, though, she said if she could do it over again, she would wait a couple years before buying a house. There will ALWAYS be things popping up that you have to take care of, unexpected or not.

    Being a landlord is tough shit and I definitely am not responsible enough to become one. The alternative is to hire a management company that acts as the landlord on your behalf, but they take a % of income.

    Also, consider how long you think you're going to live in your house. If you're young and likely to be mobile due to your career, it may not be the wisest choice and you might have to rely on a management company to take care of your house.

    All in all, there's a lot to consider with regards to owning a house and you just need to research, research, research.

    Do you have enough cash to put 20% for a downpayment? In this lending environment, a lot of banks won't lend to you unless you do.

    And, I think 2012 will be a good year. I think the economy is recovering (as long as Europe doesn't fucking crash and burn) and we'll get back to normal in the next couple of years, with housing prices recovering at a slightly slower rate. So, I think you might want to wait at least a year before making any big moves, but definitely stay in the loop with regards to real estate prices and the housing market in general during that time.

    That's my plan, at least.
    Last edited: Dec 27, 2011

  3. Lord-Barrington

    Lord-Barrington Senior member

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    Sep 20, 2010
    The housing market in a place like Milwaukee will never be boom or bust. As such, investing in property at this point will probably be a OK investment in the longterm. As I always point out in real estate threads though, look at any real estate investment as a low risk, longterm asset that will probably return 3-4% over its duration.

  4. Sunnydale

    Sunnydale Senior member

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    Nov 15, 2009
    You would have to think housing prices depends on the location. But from what I've read it seems that things overall might finally be turning around. Recall this article on Gerri Willis's sight about different economic indicators showing the housing market showing signs of life. I hope that is the case.

    "Housing Bust Over?"

    Sample from the article:

    Read more: http://www.foxbusiness.com/on-air/willis-report/blog/2011/12/22/housing-bust-over#ixzz1hrgaKT2c

  5. jgold47

    jgold47 Senior member

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    Mar 23, 2008
    The Mitten
    I would re-think interest only loans in a market like milwaukee. Since you don't have much of an opportunity to appreciate the property, your long term goal should be set at breaking even when you sell the house, and then if your lucky you turn a profit (and a modest one at that). With interest only, if you're not disciplined enough to pay down the principal as you go, you will get stuck having to cover around 9% of your selling costs yourself. If the house appreciates greater than 9% you make money. instead I would make a plan to say, I am young, I am going to get married or want to move or something in 3 years, 5 years, 7 years, and then do an ARM. the new ARM's are much safer than the old ARM's, but you have to be prepared to follow the plan so you don't get pinched when the rates start to adjust. Take all the money you were going to spend on your rent, pay down your mortgage, use the rental income to offset that cost and see where you wind up.

    All that said, I am talking people out of buying a house these days unless you are in your late 20's early 30's and VERY stable.

    I am not sure we are at the bottom yet, and without knowing exactly what part of Milwaukee you're in, you may have a little ways to go.

    Good luck

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