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The Home Ownership Thread

Discussion in 'Fine Living, Home, Design & Auto' started by Douglas, Jan 31, 2012.

  1. Ataturk

    Ataturk Senior member

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    Are you sure? It's often hard to tell the difference (which is whether the pores are open at the ends, not what color the tree or the wood is).

    If it's got a long, straight trunk, and it's not full of nails (or bullets, or whatever), and you can find someone to come saw it up, and you don't mind stacking it in your yard somewhere for a couple years, etc., and you have a use for the boards, it might be worth doing. Probably not though.

    Quarter sawn white oak (sometimes called "tiger oak" or the like) can be really nice if you're interested in fine woodworking, but you need a lot of expensive tools to do anything with it.
     
  2. texas_jack

    texas_jack Senior member

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    Yeah, the tree guy told me he's an old pro. No, I'll probably just burn it. I need the wood and I don't have time to do any fine work. I'll count the rings here sometime in the next few day. It's got to be at least 100.
     
  3. SkinnyGoomba

    SkinnyGoomba Senior member

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    Sounds like he already cut it up into short chunks for you, if you planned to make it firewood. 100 yr old is not super old and especially sought after (typically oaks are considered mature around 175-200 yrs), but that wood was likely better as lumber than firewood.

    I say it's handy to have because you never know what you may need that kind BF around for in the future.
     
  4. RedLantern

    RedLantern Senior member

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    Finally bought what I think will be the rug for our living room. It's a roughly 8x10 floral pattern Tabriz, but the coloring is more whimsical than most Tabriz that I have seen - more what I think of when I see things listed as Caucasian rugs (it has a lot of reddish orange in it). I'll post some pictures when I get it. I know you're not supposed to buy rugs without seeing them in person, but they do accept returns, so I'm really only risking shipping charges.

    http://www.ebay.com/itm/222048120473?_trksid=p2057872.m2749.l2649&ssPageName=STRK:MEBIDX:IT

    ^ theres a link, FWIW
     
    Last edited: Mar 22, 2016
  5. mike1445

    mike1445 Senior member

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    was looking at wrong listing before. looks sharp though.
     
    Last edited: Mar 23, 2016
  6. SkinnyGoomba

    SkinnyGoomba Senior member

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  7. Master-Classter

    Master-Classter Senior member

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    I realize I'm talking to a group of proud home owners here... but then again i see some of you guys over in the stocks/bonds trading thread too. I was reading a blog post somewhere and it reminded me about the point of rent versus own debate and I figured eh I've got the time, so i spent a couple of days reading everything i could find and made up a list of pro/con for each side below... I'm curious to hear your guys' thoughts on this. Some of these points are obviously my own biases (I'm in favor of renting in many cases), and at least I think what it really comes down to is lifestyle choice/needs. I also put together a spreadsheet comparing the cost of owning versus renting but it's pretty detailed and a few small assumptions multiplied over large numbers and long time frames means that small adjustments are make or break at the end so it's hard to really know number wise since there are so many unknowns that far out. I will say however (I'm sure you guys agree) that people vastly underestimate the true cost of ownership, beyond the simple mortgage payment.

    Renting:

    Pro’s:
    No need to lay out capital (especially if you don't have it)
    Can put the capital instead into equity/markets (less risk, diversified and compounding regular returns).
    Flexibility to move as needed. At any time can go get a get cheaper rent, better location for job or kids/schools, more space then downsizing, etc. If want to spend more, or need to spend less, quick and easy to adjust within a month or two's notice.
    Landlord is responsible for all maintenance but may be slow or unwilling to do, or do bad job to save costs.
    Tenants have strong protection rights (area dependent) so can’t just be kicked out or forced behavior. Often argued the landlord can kick you out any time they want.
    Rent can only increase by small amount once locked in, compared to prime plus mortgages + maintenance. Again, rent control is area dependent. Renting is a more consistent cost. Owning has consistent mortgage cost but many large chunk costs pop up periodically.
    More likely to live in heart of the city, so less cost for transportation and less time spent commuting to work or play. Depends on value of time and love/hate commuting and type (train versus car traffic)
    Probably have less space in a rental so lower cost for and maintenance on the ‘stuff’ to fill it with.
    Owner might not have calculated full maintenance cost and only charge enough to cover mortgage + small profit. If housing costs have inflated a lot, rental costs may be comparatively very low versus getting a mortgage on that same house at the time.

    Con’s:
    Lack of "stability" because it's not your home (possible to get kicked out?), or forced to move if landlord sells. But, they have to give notice to you, can't kick you out for any reason they want, and if you're renting you half expect to move anyway.
    Lack of pride of ownership and ability to renovate/decorate as you want. But don’t have to pay/do maintenance. Depends on skills and desire to renovate.
    Money is being paid towards someone else’s asset, so $ spent comparable to mortgage but mortgage = you own it at the end and rent = they own it at the end.
    Renting cost has built in profit/ROI for the landlord, so is more than mortgage would be if you owned it. ? May not always be true.
    Have to lay out last month’s rent and maybe damage deposit. But small compared to down payment.

    Buying:

    Pro’s:
    Over long term generally retails most of its value. Statistically over long term, but depends when selling.
    Can increase the value of the home by improving it, though limited by comparables and market
    Depending on down payment, mortgage cost can cost less monthly than renting cost. Note that mortgage payment includes interest which like rent doesn’t contribute to equity. Also full cost of ownership includes many other ongoing costs (insurance, taxes, etc). Continue after mortgage too.
    Personal sense of ownership, pride, safety and security and stability for raising a family. Might be illusion because bank has a lien against the house until the mortgage is paid off.
    More stability in terms of location so get to know neighborhood, neighbors, etc. Kids play with locals.
    Good opportunity to flip and can make a huge amount of money by buying and selling the right home (capital gains tax only or less if first time(?). High ROI because of leverage. Down payment vs profit.
    Paying off mortgage is equivalent to a small but guaranteed ROI.
    Some payments like mortgage interest are tax deductible.
    Can use extra space like a basement to make money by renting, or home office, etc
    Have to pay to live somewhere anyway, so either creating own equity or paying someone else’s. (?) Point mentioned already earlier. May be fake point.
    Forced saving plan, where renting and investing the difference requires discipline. But assumption is that you downsize at some point. People often keep leveraging up or just keep the house even when it’s now more than they need but it’s ‘paid off’. Keep incurring costs on an asset larger than needs. Most people don’t have the discipline to save the mortgage versus rent difference, or how to invest it either.
    Value of the house can be borrowed against either in emergency or leveraged for other investment.

    Con’s:
    Down payment = very high % of savings for most of the investment period (ie, over allocation) and over lifetime, usually represents large portion of income at any given time. One single decision, at one stage of life, with a huge amount of money, impacting the next 20-30 years. Young decision = lifelong mistake?
    Stable income and consistent mortgage is fine, but when something needs to be fixed/replaced, the one off cost of household items can be large and lead to a cash flow issue. Either a problem, or need to keep emergency fund available, which again is a lot of money that isn’t being invested.
    Large chunk of capital is non liquid for 25 years until sell. Can’t be accessed (but can take out HELOC)
    Will only buy it and sell it once or down payment $ could be moved around markets / taken out.
    Markets move up and down but you can dollar cost average and trim. Mortgage is locked in rate
    Single asset class, so non-diversified investment. One industry, one local market, one specific house. Almost like a penny stock type of bet.
    Value of the house is mostly determined by the surrounding market comparables (not controllable)
    ROI happens all at the end, compared to equities which either pay dividends (compounding) or can be bought/sold regularly and cycled through up/down markets. Small ROI if rent it out or pay down own mortgage, but most of the ROI happens as a lump sum when selling, a single bet on appreciation.
    Long term trends show value grows, but more or less comparable to inflation. And when selling it might be up or down and when need to sell, usually short window of 2-3 years and cycles are 5-10. Also stock markets can be volatile but major events are not that common, and they recover quickly (3-5 years?)
    Cost to buy and sell, financially and effort to move is relatively high, so might get stuck and can’t move.
    Ongoing maintenance costs cut into long term return, also requires a lot of regular effort and stress.
    Over the duration of ownership, most of the time the house is underutilized. First 5-10 years and last 5-10 is more space than needed, and ownership isn’t flexible.
    Mortgages are locked in, so no flexibility to move geographically, but also financially. Lose job, change careers, maternity leave, go back to school, etc. Less life choice flexibility because high cost of living.
    Might lock into a mortgage that is affordable at the time but over 20-30 years, prime will change faster than income.
    If you have more money and want to pay off the mortgage faster, might be penalties for doing so.
     
  8. RedLantern

    RedLantern Senior member

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    ^ man. You are doing the most.

    It makes sense to buy if you have a strong preference to stay somewhere (and the ability to act on that preference). It makes sense to rent if you don't care that much about creating a "home", getting things just the way you like them, or you like to move around (or work might move you around).
     
    Last edited: Mar 25, 2016
  9. otc

    otc Senior member

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    Short version of my opinion:

    Buying's not bad, just don't look at it like an investment. Sure, maybe your house will explode in value...but unless you want to leave the neighborhood, you can't actually capture that gain. You aren't going to move your kids out of their schools just because of a market fluctuation. Most people's homes won't beat the market (although the forced "savings" of your equity can be helpful for people who wouldn't otherwise save or invest anything). Treat it like you are buying a "home".

    If you want to stick around and find the perfect house, great! If you want to do the Skinny Goomba treatment and perfect every detail of your home? Great!

    But renting's not so bad either. Especially if you aren't sure you are going to stick around for a while, or you don't care about the fine details of your place, or you simply haven't found the right place yet. I'd rather rent for the next 10 years than be rushed into buying a place I didn't really like because my parents or somebody though "you should really look into buying".
     
  10. brokencycle

    brokencycle Senior member

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    As always really sound advice.

    I also think it makes sense to look at your local market for rental vs purchase prices. I have a friend in DC who was able to buy a condo, pay less a month than he was paying in rent, and now he gets a nice tax deduction.

    Here in Minneapolis, I think the housing market is out of control and about due for a correction. We're seeing pre-crash rises in home prices
     
  11. ellsbebc

    ellsbebc Senior member

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    2 people like this.
  12. Master-Classter

    Master-Classter Senior member

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    I think you guys hit the overall main points which are that houses aren't really 'investments' and depending on your lifestyle/plans one option may work better. They might make money, but in all likelihood between the cost to buy/sell and maintenance cost+effort and risk of lack of diversity, more or less assume you'll break even and probably could have made a bit more by investing the money in a market, but if you're getting married and having kids and don't plan to move for at least 10-15 years then it's probably an ok thing to do.

    I also made a note not included in the above pro/con about the cost of renting versus house prices discrepancy. For example here in Toronto, mortgage rates are pretty low so we have people taking on huge loans and driving up house prices and they'll be in for a shock in 5 years when rates renew. Plus our rents tend to not increase that much per year. So as of now, renting makes more sense. However (I'm 30) in about 5-7 years if the prices come down pretty hard/fast I'd consider buying in with a willingness to sell 10-15 years later.

    I just figured you guys might be interested to see all the pros/cons I could come up with based on reading around and was also curious to hear your thoughts and see if I missed anything important too.

     
  13. SeaJen

    SeaJen Senior member

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    Part of your assumption appears to be the prime+ aspect of mortgages, but in the US we have fixed rate mortgages, so the payment in yr 1 is the same as in yr 30.
    You also build in the assumption that for any given location comparable homes are avaliable to rent or own, which is true in urban areas, but not in the burbs. There is a home that is rented near me (just one though) and it's rent is more than twice my piti...actually closer to 3x, because the rental inventory allows it, I guess.

    So all that to say, real estate is always local, so very hard to generalize.
     
    2 people like this.
  14. jbarwick

    jbarwick Senior member

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    I look at home ownership as a lifestyle choice and not an investment. You have to live somewhere and it really depends on what you make of it. I do not really count my house as an asset because monetizing it is tough if you need the money.

    That NYT rent vs. buy calculator is really useful in the decision making process.
     
  15. jcman311

    jcman311 Senior member

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    I know around here the housing market has been crazy. I feel (and have no actual proof, just guessing) that prices for both renting and buying have been skyrocketing here because new homes and new rentals stopped building during the recession and now cant be built fast enough to accomodate the demand.

    I know with my house that it was crazy devalued (city assessment) about 5 years ago and now all the houses I look at are selling for what seems to be a lot more than before houses were devalued. We are always shopping for a newer home (still in our "starter" home) but we are definitely waiting until this trend subsides.
     
    Last edited: Mar 26, 2016
  16. RedLantern

    RedLantern Senior member

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    Also, your opportunity cost with respect to other investments really depends on how much you put down. For example, my wife and I only put 5% down on our house, then refinanced a year later because the value had increased enough that we could drop our PMI. After we got rid of the PMI, our PITI was the same as what we were paying in rent (in a place that we were renting at probably 4-500 below market). I realize, however, that we've been extremely fortunate in the way those things worked out, and most people could not expect to replicate that.
     
  17. Master-Classter

    Master-Classter Senior member

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    couple of good points there, thanks. Yes, so as far as I know, for places like Toronto, our mortgages reset every 5 years (which actually seems fair game). If you could lock in for 30 years at a low rate that would be pretty great. Also becuase of the current low rates, people are overleveraged... my parents house is a fairly cookie cutter suburban 3/4 bedroom 2 bathroom 3 floors type dealio and should sell for maybe $650-750 but the local comps are selling for more like $900-1.1M so that's a sense of how inflated these are.

    Also, good second point, I hadn't thought of that. What I may want to rent may not be rentable. My suspicion is that I'd probably rent for the first 5 years until I'm married and with a young kid up to 3 years old or something, in a downtown/fun kind of area, then buy for 15-20 years and sell ideally if I can catch on the upcycle and the kid's 20-25 and moves out for college and then spend the next 5-10 renting until the market comes back down and buy something smaller. Best laid plans of mice and men right. In reality will probably buy too much house and stay there till I die.

    Sounds like some good timing on your part. I'm hoping to hold off on buying a few years while I rent and save up enough for a good solid downpayment including some equities growth while I can still do that before the money's locked into a house.
     
    Last edited: Mar 26, 2016
  18. ellsbebc

    ellsbebc Senior member

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    In my parts of Tennessee,real estate is very affordable. You can get a 4BR/3BA at 2,500-3,000 sqft for $200-230k. Or you can rent a basic 2BR apartment for $1,200/month. The only thing preventing us from a home purchase is the uncertainty of if we stay in this area and for how long. Real estate transaction costs can eat you alive, but it's not terrible when talking cheap real estate.

    One issue I have with the NY Times calculator is it fails to account for a potential Termination Fee if you break your lease while renting.
     
  19. otc

    otc Senior member

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    Yeah, but the termination fees don't matter if you stay out the lease, or find a subletter/person to re-lease to (laws vary, but where I live, the landlord can't stop you from doing so)...unlike real estate closing costs, the majority of renters never pay a termination fee.
     
  20. Piobaire

    Piobaire Senior member

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    I don't think homes should be viewed as a short or medium term growth investment but an investment they are. View more as an IRA type investment is my take.
     

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