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"Owning" a home by way of a mortgage

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Re: "Owning" a home by way of a mortgage

Postby JTWood » Sun Jul 08, 2007 7:08 pm

jswede wrote:If you rented, then you didn't put money down to buy a house.

I've bought two homes, and I've put less down on them than I had to put on any of the 4 previous apartments I stayed in that required first and last month's rent.
jswede wrote:Renting doesn't get you anything, but it does not cost a downpayment+taxes+insurance either. That money invested, even conservatively, will create more wealth than a home over time.

I agree with you here, but ask yourself how many people actually have the self-control to do what you just said. Remember, this is a country that thinks that putting money into Social Security, a system with a negative ROI, is better than putting that money into the market.

I agree with your tenet, but it just won't work in practice - and that's not even considering what happens to the renters who lose everything in the market and then don't have any equity in a tangible asset to shore them up during the tough times.
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Re: "Owning" a home by way of a mortgage

Postby Pablo975 » Sun Jul 08, 2007 7:21 pm

Good point Jose.

Ask the middle class folks who invested solely in stocks in 1938 how great that worked out.

I'm not saying a good portfolio isn't a good thing to have. But to scoff at owning a home and/or land is way off base.

FYI: When you rent, you're paying down payments, insurance, taxes, repairs, etc, etc,......for someone else. All of those things are built into the amount the person charges you for rent. So, you're paying his expenses AND the principal on the property itself.....but he gets to keep it in the end. Where do you see that being a sound idea? At least when a mortgage is satisfied, you own the property free and clear.

Now, renting DOES have it's place. Depending on the market and a persons personal situation, renting may make the most sense. But if you're going to be in the same town for awhile, then 98% of the time, buying is the way to go.

Also, I work in the title & escrow business, so I see this stuff everyday. People paying $1400 per month to rent a house, when they could own the same house for $700 per month.
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Re: "Owning" a home by way of a mortgage

Postby jswede » Sun Jul 08, 2007 7:28 pm

josebach wrote:So you put $10,000 in stocks and I put $10,000 down on a house. At the end of 30 years I will be guaranteed to own a house. What will you be guaranteed?

Are you going to raise a family in an apartment? Oh, you're going to rent a house? Do you want to live in a nice neighborhood? Do you want your family to be at the owner's mercy if he decides to sell it?

There are no guarantees - your house could be worth a lot or a little in 30yrs. Same with a stock portfolio. Pretty safe to say the S&P 500 will advance, on average, 5-7% over 30yrs. Your house will be likely be worth more than now, and it 30 years older, probably still livable, but not without major work.

As I mentioned earlier, I'm perhaps in a more unique situation - I'd be in a condo in the city - yes, I could raise a family (and do) in a rental unit. I'm not as familiar elsewhere - perhaps that's not an option. Yup, you'd be at the owners mercy, I suppose

josebach wrote:I would seriously stop trying to convince yourself you're right by talking to people on a message board and go talk to somebody you trust.

Just testing my theory with a random sample - (after all, all we have in common is fantasy baseball). So far, so good.
Last edited by jswede on Sun Jul 08, 2007 7:37 pm, edited 2 times in total.
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Re: "Owning" a home by way of a mortgage

Postby jswede » Sun Jul 08, 2007 7:32 pm

JTWood wrote:I agree with your tenet, but it just won't work in practice - and that's not even considering what happens to the renters who lose everything in the market and then don't have any equity in a tangible asset to shore them up during the tough times.


You'd have to be able to outlast a downturn like we saw in 2001 - no doubt. but if you keep with it, and reinvest the would-be tax etc money yearly and stayed diversified, you'd be fine by the time you start diversifying into bonds for smaller, yet more certain, returns.
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Re: "Owning" a home by way of a mortgage

Postby josebach » Sun Jul 08, 2007 7:37 pm

jswede wrote:There are no guarantees - your house could be worth a lot or a little in 30yrs. Same with a stock portfolio. Pretty safe to say the S&P 500 will advance, on average, 5-7% over 30yrs. Your house will be likely be worth more than now, and it 30 years older, probably still livable, but not without major work.

As I mentioned earlier, I'm perhaps in a more unique situation - I'd be in a condo in the city - yes, I could raise a family (and do) in a rental unit. I'm not as familiar elsewhere - perhaps that's not an option. Yup, you'd be at the owners mercy, I suppose

josebach wrote:I would seriously stop trying to convince yourself you're right by talking to people on a message board and go talk to somebody you trust.

Just testing my theory with a random sample - (after all, all we have in common is fantasy baseball). So far, so good.


So far so good? Not sure what you mean by that. Not one person has agreed with you. The pros everybody has collectively listed FAR outweigh the pros you've listed. Isn't the only pro you've listed the stock market? Most families have limited funds. Are you going to risk your family's financial future on stocks? Hell, even stock brokers own homes. If your theory was right, they wouldn't.

I admit that the rules can sometimes change when living in a big city. A lot of people in cities don't buy their homes especially when rent control is a factor.
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Re: "Owning" a home by way of a mortgage

Postby jswede » Sun Jul 08, 2007 7:52 pm

Pablo975 wrote:FYI: When you rent, you're paying down payments, insurance, taxes, repairs, etc, etc,......for someone else. All of those things are built into the amount the person charges you for rent. So, you're paying his expenses AND the principal on the property itself.....but he gets to keep it in the end. Where do you see that being a sound idea? At least when a mortgage is satisfied, you own the property free and clear.

My thoughts are based on the fact that rents for condominiums are attractive compared to a similar condo's mortgage. Renting from a property manager with many units is in fact cheaper per month than buying with a 30yr 6.5% interest mortgage right now - at least here. I made the assumption that this was true elsewhere in America - I'm seeing that it's apparently not.

Pablo975 wrote:Now, renting DOES have it's place. Depending on the market and a persons personal situation, renting may make the most sense. But if you're going to be in the same town for awhile, then 98% of the time, buying is the way to go.

Also, I work in the title & escrow business, so I see this stuff everyday. People paying $1400 per month to rent a house, when they could own the same house for $700 per month.

"OWN"? Someone can actually put a meaningful dent into a home's equity for $700/mo? To actually own they'd have to pay more than that, almost regardless of the overall price of the home. This must just be some interest-only or teaser rate - which is not building any equity. Also, rents are not double what mortgages are where I live.
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Re: "Owning" a home by way of a mortgage

Postby jswede » Sun Jul 08, 2007 7:58 pm

josebach wrote:So far so good? Not sure what you mean by that. Not one person has agreed with you. The pros everybody has collectively listed FAR outweigh the pros you've listed. Isn't the only pro you've listed the stock market? Most families have limited funds. Are you going to risk your family's financial future on stocks? Hell, even stock brokers own homes. If your theory was right, they wouldn't.


That was a little smug - my apologies. So far so good in my mind, as I'm not convinced I'm wrong yet - I'm not being arrogant, I'm just thinking a little differently and I respect - and appreciate - everyone's input. I really do.

For my theory to work, you have to trust that you'll earn a modest return in another investment - I would choose stocks. If you don't believe that, my argument holds no water and I would agree with you. Take a look at stock returns over long periods of time and it's hard not to feel confident about that. (again, you'd have to be able to stick out a temporary downturn like in 2001)

Oh, and another "PRO" I listed was not paying $1.1mil ($600k in interest over 30yrs) for a $500k house.
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Re: "Owning" a home by way of a mortgage

Postby josebach » Sun Jul 08, 2007 8:12 pm

jswede wrote:
josebach wrote:So far so good? Not sure what you mean by that. Not one person has agreed with you. The pros everybody has collectively listed FAR outweigh the pros you've listed. Isn't the only pro you've listed the stock market? Most families have limited funds. Are you going to risk your family's financial future on stocks? Hell, even stock brokers own homes. If your theory was right, they wouldn't.


That was a little smug - my apologies. So far so good in my mind, as I'm not convinced I'm wrong yet - I'm not being arrogant, I'm just thinking a little differently and I respect - and appreciate - everyone's input. I really do.

For my theory to work, you have to trust that you'll earn a modest return in another investment - I would choose stocks. If you don't believe that, my argument holds no water and I would agree with you. Take a look at stock returns over long periods of time and it's hard not to feel confident about that. (again, you'd have to be able to stick out a temporary downturn like in 2001)

Oh, and another "PRO" I listed was not paying $1.1mil ($600k in interest over 30yrs) for a $500k house.


Fair enough. That other "pro" isn't really a pro, though because you're paying rent, right? For our little exercise, I thought money spent on rent and money spent on mortgage offset each other which means you'll be spending $1.1 mil rent for nothing.

Anyway, believe it or not I was just trying to help. It certainly doesn't sound like you're young and naive which I thought may have been the case originally, so I've really said all I need too. Good luck with whatever you decide! ;-D
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Re: "Owning" a home by way of a mortgage

Postby jswede » Sun Jul 08, 2007 8:54 pm

josebach wrote:
jswede wrote:
josebach wrote:So far so good? Not sure what you mean by that. Not one person has agreed with you. The pros everybody has collectively listed FAR outweigh the pros you've listed. Isn't the only pro you've listed the stock market? Most families have limited funds. Are you going to risk your family's financial future on stocks? Hell, even stock brokers own homes. If your theory was right, they wouldn't.


That was a little smug - my apologies. So far so good in my mind, as I'm not convinced I'm wrong yet - I'm not being arrogant, I'm just thinking a little differently and I respect - and appreciate - everyone's input. I really do.

For my theory to work, you have to trust that you'll earn a modest return in another investment - I would choose stocks. If you don't believe that, my argument holds no water and I would agree with you. Take a look at stock returns over long periods of time and it's hard not to feel confident about that. (again, you'd have to be able to stick out a temporary downturn like in 2001)

Oh, and another "PRO" I listed was not paying $1.1mil ($600k in interest over 30yrs) for a $500k house.


Fair enough. That other "pro" isn't really a pro, though because you're paying rent, right? For our little exercise, I thought money spent on rent and money spent on mortgage offset each other which means you'll be spending $1.1 mil rent for nothing.

Anyway, believe it or not I was just trying to help. It certainly doesn't sound like you're young and naive which I thought may have been the case originally, so I've really said all I need too. Good luck with whatever you decide! ;-D


That's a good point. Hey thanks - I do appreciate the help/opinions. Take care.
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Re: "Owning" a home by way of a mortgage

Postby Pablo975 » Sun Jul 08, 2007 9:35 pm

Actually, yes. The cost to own in my area is low, whereas since Katrina, rentals are through the roof. I know people with payments in that range. Mine is 900 per month and my house isn't a dump. It's only 1650 sq ft., but it's only 7 years old and clean as a whistle when we got it. Houses comparable to mine rent for $1500+.

I know the big cities are great, but so are smaller cities like mine. My property taxes are $400 a year for instance. My best friend owns a condo in Jersey City he paid over a mil for....and has 900 or so sq ft. Ugh. For a million bucks, in my area, you could pay cash for a MASSIVE house on a nice bit of acreage and still have a nice chunk of change left over.

So, basically it's relative to a persons unique situation.
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