I knew renting in our area was expensive, but now I realize how tough it really is. This brochure for an apartment complex outside the city has prices and sizes. The cheapest 1 bedroom is $1499/month. A 3bd/2ba smaller than our townhouse is running at $2500. So how does that compare to our mortgage?
Our mortgage is $2263 + $200 HOA + 400 Property Taxes. So we're paying $2863/month pre-tax, with ~$650 going to principal. This means after tax we are actually $1700/month to "rent" our place. Of course this does not account for maintence of our home.
So in our area it appears we got a decent deal. Something we were pretty sure about. Also because of the time frame (three years and counting), the longer we stay put, the more likely buying will have won out over renting.
Now this only happens when you buy in an area of high rent. But if you buy in an area of low rents, ie San Diego, then you run into trouble. For example, when we bought prices were relatively low, so we got lucky with home appreciation. However during our 3 year period of ownership, the rent of a 1 bedroom apartment did not change from $1200/month (what our neighbor renting paid). Our PITI before taxes was $1000/month. But our purchase price in those three years went from $150k to $300k.
But since then the price of the same condo in 2005 to 2008 went down nearly $100k to $200k instead of $300k. And who knows how long until it regains it's previous levels. So renting would have put someone in a better position.
So moral of the story? Buying versus renting is completely location dependent. You can't just read a blog or expert and decide buying is always better or renting is always better. The market is dramatically different from city to city. It is impossible to understand the nuances of each market.
That being said I think the most important rule of buying is how long do you plan on staying put? At least 5-7 years, then perhaps you'll come out ahead in a "normal" market. But nothing is set in stone.
Showing posts with label Real Estate. Show all posts
Showing posts with label Real Estate. Show all posts
Wednesday, March 12, 2008
Thursday, February 28, 2008
Smaller Living
MSN just had an article on smaller living. They stated that developers are selling 298 sq ft condos for $150k-$500k. Mostly in urban areas where land is a premium. Amazing huh?
They questioned who would live there? I know tons of people who live in such small spaces either as singles or couples. Personally I've lived in a 300 ft bachelor (studio without kitchen) in Los Angeles. It was cheap at $900 and close to the university. I picked it solely based on it's location.
I think many more younger professionals, broke twenty-somethings, or retirees will chose to live in tiny spaces. It makes for streamlined living. Yes you pay more for things, because you don't stockpile or storage stuff. But then you really simply your life. Often there isn't room for dustcatchers or excess purchases.
During the time I lived in the bachelor, my DH also lived with me and our dog. We found the space unbearably tiny, but livable. We realized that it was more than adequate because of the location. The main problem was lack of parking spot, which in LA, is a necessity.
But we really loved the fact it made us simplify our lives. It made us choose what was important and not shop as much. We cooked simply without an oven and a Foreman grill. I think this way of life will become more common even for retirees.
Do you think you could live like this? Would you?
They questioned who would live there? I know tons of people who live in such small spaces either as singles or couples. Personally I've lived in a 300 ft bachelor (studio without kitchen) in Los Angeles. It was cheap at $900 and close to the university. I picked it solely based on it's location.
I think many more younger professionals, broke twenty-somethings, or retirees will chose to live in tiny spaces. It makes for streamlined living. Yes you pay more for things, because you don't stockpile or storage stuff. But then you really simply your life. Often there isn't room for dustcatchers or excess purchases.
During the time I lived in the bachelor, my DH also lived with me and our dog. We found the space unbearably tiny, but livable. We realized that it was more than adequate because of the location. The main problem was lack of parking spot, which in LA, is a necessity.
But we really loved the fact it made us simplify our lives. It made us choose what was important and not shop as much. We cooked simply without an oven and a Foreman grill. I think this way of life will become more common even for retirees.
Do you think you could live like this? Would you?
Monday, February 18, 2008
Moving up in mortgages?
How do you handle moving up in mortgages? For example where you buy a home, then after a few years (5-7), you sell and move into a larger home with a bigger mortgage. Do you reset your mortgage to a new 15 or 30 year fixed product, or do you just continue with the years left on your current mortgage? Also do you increase the amount borrowed or keep it the same?
I think this question very applicable to people in their 20s. When you are starting out, often you have a lower income, no kids, and little needs. So the house you purchase could be a condo, townhouse, or smaller single family home. Hence after you increase your income and start a family your needs might change.
But should you do this? Or is this expecting too much?
I think that it's a hard to handle saving for retirement, children, and a mortgage in your 20s. Often times, the income isn't matching all your needs. But as you build up your experience and increase your income, you find the ability to comfortably a larger home, children, retirement, etc.
I don't think it's necessarily a bad idea to keep trading in a 30 year mortgage for another 30 year mortgage in your 20s. After all can many people who buy at 22 really afford a single family home? And if you live in an area where you can, was it large enough to fit the family you desire?
Plus if you bought a condo instead, and saved money by buying instead of renting for say 8 years from 22 to 30, perhaps you have significant equity. So is it a bad idea to trade your 22 year mortgage for a new 30 year mortgage to afford the SFH you've been waiting for and saving for by building equity?
This is the new trap of today. Before people like my parents and DH's parents bought one house. They never traded up or moved. But now with jobs in flux, people marrying later or getting divorced, the chances of staying in the same house is small.
So the dynamics of buying one and only one home less the norm, and more the aberration. But does it justify the restarting of a mortgage?
I think it can in some scenarios. Mostly those of people who bought RE in their early 20s. If you wait until your 30s or 40s, I think it makes less sense just because you have less time to finish paying off your mortgage. But in your 20s if you bought something affordable that might not be able to fit your family, then perhaps joining other 30 or 40 somethings in purchasing your final home and restarting your mortgage can make sense.
For us personally, we definitely will have to restart our mortgages. If we had continued on a 30 year fixed, we'd only have 27 years when we bought this current townhouse, and when we buy our next home, 25 years or less. This will be difficult to accomplish, because of prices in our area even if we save up cash for a larger DP and have grown some equity.
But as I write this, I'm also not sure where our incomes will go in the next 10 years so perhaps it's possible. Also we might have the opportunity to move to a lower COLA and that would make our dreams of homeownership a lot more possible. The only thing you can do is make the best decision at the time with regards to your potential income increase, savings, and number of children, etc.
I think this question very applicable to people in their 20s. When you are starting out, often you have a lower income, no kids, and little needs. So the house you purchase could be a condo, townhouse, or smaller single family home. Hence after you increase your income and start a family your needs might change.
But should you do this? Or is this expecting too much?
I think that it's a hard to handle saving for retirement, children, and a mortgage in your 20s. Often times, the income isn't matching all your needs. But as you build up your experience and increase your income, you find the ability to comfortably a larger home, children, retirement, etc.
I don't think it's necessarily a bad idea to keep trading in a 30 year mortgage for another 30 year mortgage in your 20s. After all can many people who buy at 22 really afford a single family home? And if you live in an area where you can, was it large enough to fit the family you desire?
Plus if you bought a condo instead, and saved money by buying instead of renting for say 8 years from 22 to 30, perhaps you have significant equity. So is it a bad idea to trade your 22 year mortgage for a new 30 year mortgage to afford the SFH you've been waiting for and saving for by building equity?
This is the new trap of today. Before people like my parents and DH's parents bought one house. They never traded up or moved. But now with jobs in flux, people marrying later or getting divorced, the chances of staying in the same house is small.
So the dynamics of buying one and only one home less the norm, and more the aberration. But does it justify the restarting of a mortgage?
I think it can in some scenarios. Mostly those of people who bought RE in their early 20s. If you wait until your 30s or 40s, I think it makes less sense just because you have less time to finish paying off your mortgage. But in your 20s if you bought something affordable that might not be able to fit your family, then perhaps joining other 30 or 40 somethings in purchasing your final home and restarting your mortgage can make sense.
For us personally, we definitely will have to restart our mortgages. If we had continued on a 30 year fixed, we'd only have 27 years when we bought this current townhouse, and when we buy our next home, 25 years or less. This will be difficult to accomplish, because of prices in our area even if we save up cash for a larger DP and have grown some equity.
But as I write this, I'm also not sure where our incomes will go in the next 10 years so perhaps it's possible. Also we might have the opportunity to move to a lower COLA and that would make our dreams of homeownership a lot more possible. The only thing you can do is make the best decision at the time with regards to your potential income increase, savings, and number of children, etc.
Tuesday, February 12, 2008
Spreading the Gospel?
I've noticed that Dave Ramsey followers fall into two categories. Those who use his words and try to live a new life without debt, and those who follow his words blindly and extremely.
I admire the first group, while despising the second. Why? Because usually those in the second are judgemental of anyone not following DR, pious about their new found "weirdness", and scathing about normal society. That is, until they fall in with the "sinners".
One such person is JimFPU from the LLNOE website. Now I usually don't highlight a person, but this guy is over the top. He is a Finanical Peace University (FPU) coordinator, DR disciple, and hard-core fanatic about following the gospel. He has even been on Dave Ramsey's FPU videos about being debt free.
Yet how he has fallen. He has moved 4 times in 4.5 years buying and selling homes. His most recent home purchase caused him to acquire new debt. He denies this, but however went from Baby Step 4 - saving for retirement, to BS 1 $1k Emergency Fund. What happened?
Well he bought a house without a 20% DP, huge no-no not just in DR book, but MOST financial gurus. Second, yes he got a 15 year fixed mortgage, but turns out it's 41% of his income. Wowsa, can't believe he was approved, but why not? Again way above DR's approved 25% PITI guidelines and by "normal" standards above the 35% maximim PITI limit. The guy is drowning right now in being house poor.
Jim, however defends his position by saying that it was a lot of unexpected life expenses that caused him to drain his 4 month EF. Well HELLO! I hate to point out, but by overextending and purchasing a house he can't afford, it's pretty reasonable to assume he can't manage covering unexpected expenses.
But he doesn't see his Home Equity Loan as "new debt". I find that AMAZING. A man who is teaching DR principals, spreading the "gospel", is in reality a hypocrite. I thought MP Dunleavy was crazy, but she's got nothing on this guy. At least she doesn't try to pretend she's debt free.
Jim on the other hand, is actually guiding people to live debt free while plunging himself into debt. I forsee a hard life for the next year. Even if he works a second job (not ideal), he could easily fall deeper into debt with such a large house payment. Actually it's likely to happen because now he has a large home payment (41%), no EF, and he's pretty much starting to hit the peak of his earning power being in his 40s. He's hitting his peak earning years, so the potential is as high as in his 20s.
This story is a reason why I think DR and other people say buy a home with 20% DP, 3-6 month EF, and 25% PITI. Maybe 35% PITI is not a bad if you have no other debt and you are sure your income is going up.
But it is ironic how people can justify any purchase.
I admire the first group, while despising the second. Why? Because usually those in the second are judgemental of anyone not following DR, pious about their new found "weirdness", and scathing about normal society. That is, until they fall in with the "sinners".
One such person is JimFPU from the LLNOE website. Now I usually don't highlight a person, but this guy is over the top. He is a Finanical Peace University (FPU) coordinator, DR disciple, and hard-core fanatic about following the gospel. He has even been on Dave Ramsey's FPU videos about being debt free.
Yet how he has fallen. He has moved 4 times in 4.5 years buying and selling homes. His most recent home purchase caused him to acquire new debt. He denies this, but however went from Baby Step 4 - saving for retirement, to BS 1 $1k Emergency Fund. What happened?
Well he bought a house without a 20% DP, huge no-no not just in DR book, but MOST financial gurus. Second, yes he got a 15 year fixed mortgage, but turns out it's 41% of his income. Wowsa, can't believe he was approved, but why not? Again way above DR's approved 25% PITI guidelines and by "normal" standards above the 35% maximim PITI limit. The guy is drowning right now in being house poor.
Jim, however defends his position by saying that it was a lot of unexpected life expenses that caused him to drain his 4 month EF. Well HELLO! I hate to point out, but by overextending and purchasing a house he can't afford, it's pretty reasonable to assume he can't manage covering unexpected expenses.
But he doesn't see his Home Equity Loan as "new debt". I find that AMAZING. A man who is teaching DR principals, spreading the "gospel", is in reality a hypocrite. I thought MP Dunleavy was crazy, but she's got nothing on this guy. At least she doesn't try to pretend she's debt free.
Jim on the other hand, is actually guiding people to live debt free while plunging himself into debt. I forsee a hard life for the next year. Even if he works a second job (not ideal), he could easily fall deeper into debt with such a large house payment. Actually it's likely to happen because now he has a large home payment (41%), no EF, and he's pretty much starting to hit the peak of his earning power being in his 40s. He's hitting his peak earning years, so the potential is as high as in his 20s.
This story is a reason why I think DR and other people say buy a home with 20% DP, 3-6 month EF, and 25% PITI. Maybe 35% PITI is not a bad if you have no other debt and you are sure your income is going up.
But it is ironic how people can justify any purchase.
Friday, February 08, 2008
Riding out the storm?
Let's say you bought at the peak of the housing market, and since then home prices have dropped. What should you do? Panic and sell? Keep calm and wait?
I was contemplating today about our purchase of a home at close to the peak of the market. Because we moved cross country our housing purchase and sale was not within the same community. This makes debating whether our move was smart or not a hard decision to evaluate.
However I believe if we had not bought when we did, I don't think we would have bought during our time in MA, because we would not be assured of living there long enough to wait out the housing crisis.
When we purchased in 8/2005 we paid $575k for our home. I believe the peak had already passed in our new market, but was just falling in SD. Our neighbors had bought in 8/2004 for $609k an identical unit. Unfortunately they had lost one job and had to move to get another (personal decision because the woman was still working as an MD, but her husband wanted to move for a better opportunity for him). Because of this, their house was for sale in less than 6 months after they purchased.
They sold their house for $531.5k in 5/2006. Wow, we had just lost $43.5k in 9 months. But the whole numbers game wasn't over. The new owners had to pay $10k for the retaining wall, while ours were covered by our seller so add $10k to their purchase and $10k from ours = $23.5k in 9 months. Still a steep drop of 5% in less than one year. But desperate sellers = rock bottom prices (although our side of the house is nicer because the basement unit takes up less space under us so it's quiet). Ouch it hurt, but then we looked at our old condo in SD.
We had bought in 2002 for $150k, sold in 2005 for $275k, and current prices are $185-195k (this is for 500 sq ft one bd condo). Ouch, prices had tanked even more about 30%. And many people can't give away their condos.
So we were talking about our current home. Should we be worried? What if prices never come back? Are we stuck in a depreciating asset?
It really goes back to do you consider your house an asset? I don't. It's a nice place to live and I enjoy not moving. But any appreciation is gravy. Unfortunately many people bank on their homes to finance their retirement. Which gives the paper illusion of wealth. I'm sure many people never considered a home losing value. But the current situation shows it has.
So what can one do? Ride out the storm. Be prepared to live in your current place longer than you intended. I hope you genuinely love your house because you'll need to stay. Which is why people say don't buy unless you plan on living there at least 5 years and really love it. We actually love our place, intended on living here 6-7 years, and planned it to be large enough for our expanding family. So riding out this storm seems feasible.
I hope others reading this will have faith and keep on holding on. It's not an easy choice, but if you bought a house you liked and could live in, then it's easy. Buying a house solely for profit can lead to further financial pain.
One day when we move I'll write about whether it was a good financial decision. I think we'll be fine, especially because of extenuating circumstances.
I was contemplating today about our purchase of a home at close to the peak of the market. Because we moved cross country our housing purchase and sale was not within the same community. This makes debating whether our move was smart or not a hard decision to evaluate.
However I believe if we had not bought when we did, I don't think we would have bought during our time in MA, because we would not be assured of living there long enough to wait out the housing crisis.
When we purchased in 8/2005 we paid $575k for our home. I believe the peak had already passed in our new market, but was just falling in SD. Our neighbors had bought in 8/2004 for $609k an identical unit. Unfortunately they had lost one job and had to move to get another (personal decision because the woman was still working as an MD, but her husband wanted to move for a better opportunity for him). Because of this, their house was for sale in less than 6 months after they purchased.
They sold their house for $531.5k in 5/2006. Wow, we had just lost $43.5k in 9 months. But the whole numbers game wasn't over. The new owners had to pay $10k for the retaining wall, while ours were covered by our seller so add $10k to their purchase and $10k from ours = $23.5k in 9 months. Still a steep drop of 5% in less than one year. But desperate sellers = rock bottom prices (although our side of the house is nicer because the basement unit takes up less space under us so it's quiet). Ouch it hurt, but then we looked at our old condo in SD.
We had bought in 2002 for $150k, sold in 2005 for $275k, and current prices are $185-195k (this is for 500 sq ft one bd condo). Ouch, prices had tanked even more about 30%. And many people can't give away their condos.
So we were talking about our current home. Should we be worried? What if prices never come back? Are we stuck in a depreciating asset?
It really goes back to do you consider your house an asset? I don't. It's a nice place to live and I enjoy not moving. But any appreciation is gravy. Unfortunately many people bank on their homes to finance their retirement. Which gives the paper illusion of wealth. I'm sure many people never considered a home losing value. But the current situation shows it has.
So what can one do? Ride out the storm. Be prepared to live in your current place longer than you intended. I hope you genuinely love your house because you'll need to stay. Which is why people say don't buy unless you plan on living there at least 5 years and really love it. We actually love our place, intended on living here 6-7 years, and planned it to be large enough for our expanding family. So riding out this storm seems feasible.
I hope others reading this will have faith and keep on holding on. It's not an easy choice, but if you bought a house you liked and could live in, then it's easy. Buying a house solely for profit can lead to further financial pain.
One day when we move I'll write about whether it was a good financial decision. I think we'll be fine, especially because of extenuating circumstances.
Thursday, January 10, 2008
Property taxes..depressing
So we got our quarterly property tax bill, and the assessed value of our home dropped yet again. I thought it would decrease our property taxes, but instead they raised the rates of our property taxes so it turns out, it's a wash.
We used to pay $9.33/$1000 of assessed value. Now it's $9.70/$1000 assessed value. So basically if your house dropped more than $35k the taxes were lowered a bit, if not it's a wash.
Should I be worried about our house value dropping? Yes and no. We're not moving so everything right now is on paper. Until you realize the loss or gain, all home values are relative. This means that it's only on paper you are rich. If not it's lost opportunity cost. Whether you rent or own you still need a place to live.
So should we be worried? I think if we were going to sell maybe. But the longer you stay put, the better the odds of breaking even. Now the likelyhood of us losing money is NIL. I know we're in a unique scenario, but one of the job perks is not losing money in real estate
We used to pay $9.33/$1000 of assessed value. Now it's $9.70/$1000 assessed value. So basically if your house dropped more than $35k the taxes were lowered a bit, if not it's a wash.
Should I be worried about our house value dropping? Yes and no. We're not moving so everything right now is on paper. Until you realize the loss or gain, all home values are relative. This means that it's only on paper you are rich. If not it's lost opportunity cost. Whether you rent or own you still need a place to live.
So should we be worried? I think if we were going to sell maybe. But the longer you stay put, the better the odds of breaking even. Now the likelyhood of us losing money is NIL. I know we're in a unique scenario, but one of the job perks is not losing money in real estate
Wednesday, December 12, 2007
Renting in Retirement
Does renting in retirement make sense? In some cases it does. In others it does not. However, from a purely financial standpoint, I think it does. But of course no financial decisions devoid of emotional value. So why does renting make sense?
Well for example a $300k home, would allow the owners assuming they pay cash for closing a $300k nest egg. Sure, they could live there and pay approximately $3k/year maintenance, $1500/year insurance, $3k/year insurance. So monthly they would be paying about $625. However there is lost opportunity cost on the $300k sitting in home equity. Assuming a very conservative 6%, that is $18k/year or $1500/month. So in actuality owning a home is costing the homeowners $2125/month.
But why sell? Well let's assume they invest the $300k in a Bond index fund. And only harvest 4%/year leaving 2-4% reinvested annually. They'd still have $1k/month to rent with. Now assuming they could rent a 2 bd/2ba apartment for that they'd come out ahead. But you're moving from a single family home to an apartment!
Well the truth is as you age, you will become unable to do home repairs yourself. You will rely more on hired help. It will be harder to mow the grass, weed, paint, repair shingles, etc. Things you might have done yourself a decade ago. So your maintenance costs on your house might easily double. Especially if you haven't been properly maintaining the house for 30 years and left a lot of it deferred. Hence it won't just cost you $625/month, it could be more like $1500/month to live in a house.
When you rent, as an elderly person you don't have to worry if the sink breaks, toilet floods, etc. You call the landlord and they deal with it. As an owner, you have to afford these repairs. So renting can make sense, especially for people who are disabled and unable to do any projects themselves.
But $1k/month isn't enough to live on. Well then why not harvest 8%? Assuming you invest it in a balanced fund at Vanguard getting 8% returns isn't hard. This would allow$2k of expenses month. Could you rent a place for that much? Likely yes.
The problem is the attachement people have to their home. It doesn't actually make financial sense to own as we age. Also if you forced into a care home/nursing facility, it's a lot easier to move out of a rented apartment versus trying to sell an ancient home.
As I write this, I think about how I'm still trying to convince my parents to stop taking our mortgages and buying home at 56 and 76. They have bought into this notion that real estate is wealth. When the truth is they are spending more buying than if they would just rent.
But growing older I wonder if we aren't more stuck in our ways due to habit rather than looking at the best financial options?
Well for example a $300k home, would allow the owners assuming they pay cash for closing a $300k nest egg. Sure, they could live there and pay approximately $3k/year maintenance, $1500/year insurance, $3k/year insurance. So monthly they would be paying about $625. However there is lost opportunity cost on the $300k sitting in home equity. Assuming a very conservative 6%, that is $18k/year or $1500/month. So in actuality owning a home is costing the homeowners $2125/month.
But why sell? Well let's assume they invest the $300k in a Bond index fund. And only harvest 4%/year leaving 2-4% reinvested annually. They'd still have $1k/month to rent with. Now assuming they could rent a 2 bd/2ba apartment for that they'd come out ahead. But you're moving from a single family home to an apartment!
Well the truth is as you age, you will become unable to do home repairs yourself. You will rely more on hired help. It will be harder to mow the grass, weed, paint, repair shingles, etc. Things you might have done yourself a decade ago. So your maintenance costs on your house might easily double. Especially if you haven't been properly maintaining the house for 30 years and left a lot of it deferred. Hence it won't just cost you $625/month, it could be more like $1500/month to live in a house.
When you rent, as an elderly person you don't have to worry if the sink breaks, toilet floods, etc. You call the landlord and they deal with it. As an owner, you have to afford these repairs. So renting can make sense, especially for people who are disabled and unable to do any projects themselves.
But $1k/month isn't enough to live on. Well then why not harvest 8%? Assuming you invest it in a balanced fund at Vanguard getting 8% returns isn't hard. This would allow$2k of expenses month. Could you rent a place for that much? Likely yes.
The problem is the attachement people have to their home. It doesn't actually make financial sense to own as we age. Also if you forced into a care home/nursing facility, it's a lot easier to move out of a rented apartment versus trying to sell an ancient home.
As I write this, I think about how I'm still trying to convince my parents to stop taking our mortgages and buying home at 56 and 76. They have bought into this notion that real estate is wealth. When the truth is they are spending more buying than if they would just rent.
But growing older I wonder if we aren't more stuck in our ways due to habit rather than looking at the best financial options?
Saturday, December 08, 2007
MP Dunleavey, why oh why?
If you read MP Dunleavey on MSN, well she's also taken to writing for the NY Times. I like reading the message board hosted by MP called the Women In Red. There is a lot discussion about money from a female perspective. Anyway this week Mia writes about her decision to purchase a new home.
This does not sound like a bad idea at first. Great time to buy with lower interest rates recently, prices of homes dropping meaning good deals to be had. However, reading the article it sounds like a clear cut case of the GIMMES, and I WANT IT NOW!
Mia chose to make a full price offer on the house. Because location is everything, no one knows if this is a good or bad deal. However a day after their offer a second competiting offer in cash came in. She felt she had NO CHOICE but upping their offer to match the deal or lose the house.
What's the problem? First, her initial offer was already at the edge of her price range, because the counter offer was SOLIDLY out of their price range. But they went and offered it anyway. What? Well MP DUNLEAVEY literally said they "Bid first and did calculations later."
That is the worse possible financial advice or dribble ever written. I nearly spewed my drink reading her justifications about why they needed this "dream home". That if they missed this home they would only have regrets. She says they moved forward against her better judgement and logic because it felt right.
Of course not having all the numbers she isn't even worried. Well neither would I, because MP Dunleavey probably has NO IDEA how much debt she just took on. Do you think she calculated how much the Principal, Interest, Taxes, and Insurance (PITI) for each house is individually and how much of her gross income it is? How much the two mortgage would be of her sole income? Nope.
Instead they are flying by the seat of their pants. They have no cash reserves in case they are unable to sell their old home, find a tenant, or if a major repair comes up. They cannot afford a new washer and dryer! They can't handle if anything breaks in the new house.
How is this in any way, shape, or form a good idea? This is a roadmap to bankruptcy. I hate to say it, but she's quickly travelling down the path of no return. One misstep and they will fall into a deep abyss of debt. But hey, writing this makes it seem all the more real. The mortgage mess we're in as a society, here's another contributor!
This does not sound like a bad idea at first. Great time to buy with lower interest rates recently, prices of homes dropping meaning good deals to be had. However, reading the article it sounds like a clear cut case of the GIMMES, and I WANT IT NOW!
Mia chose to make a full price offer on the house. Because location is everything, no one knows if this is a good or bad deal. However a day after their offer a second competiting offer in cash came in. She felt she had NO CHOICE but upping their offer to match the deal or lose the house.
What's the problem? First, her initial offer was already at the edge of her price range, because the counter offer was SOLIDLY out of their price range. But they went and offered it anyway. What? Well MP DUNLEAVEY literally said they "Bid first and did calculations later."
That is the worse possible financial advice or dribble ever written. I nearly spewed my drink reading her justifications about why they needed this "dream home". That if they missed this home they would only have regrets. She says they moved forward against her better judgement and logic because it felt right.
Of course not having all the numbers she isn't even worried. Well neither would I, because MP Dunleavey probably has NO IDEA how much debt she just took on. Do you think she calculated how much the Principal, Interest, Taxes, and Insurance (PITI) for each house is individually and how much of her gross income it is? How much the two mortgage would be of her sole income? Nope.
Instead they are flying by the seat of their pants. They have no cash reserves in case they are unable to sell their old home, find a tenant, or if a major repair comes up. They cannot afford a new washer and dryer! They can't handle if anything breaks in the new house.
How is this in any way, shape, or form a good idea? This is a roadmap to bankruptcy. I hate to say it, but she's quickly travelling down the path of no return. One misstep and they will fall into a deep abyss of debt. But hey, writing this makes it seem all the more real. The mortgage mess we're in as a society, here's another contributor!
Wednesday, October 24, 2007
Pros and Cons of Landlording...
What are the pros and cons of being a landlord? I think there are many. On any financial board there is always someone asking the question of whether it's worth it being a landlord. And there are those who say it's great and those who say it's not. However the reality is that even landlords will tell you it's not an easy job.
The obvious pros of landlording, is having someone else pay your mortgage. If you buy a house in an area where rents are high and mortgages are low you'll come out ahead. Along with an enforced savings by paying off the mortgage, a landlord is able to reap the benefits of home appreciation. They are able to diversify their portfolio with investments other than stocks. Also in retirement, after the mortgage is paid off it a rental property can provide an alternative stream of income.
However, there are many cons against owning rental properties and becoming a landlord. First, renters do not care for the place like an owner. Thus, typically most rentals are trashed and require more $$ for upkeep. What sort of upkeep? Well if a water heater breaks on a weekend you can't tell the renter to wait, you need to fix it asap. Unlike being frugal at home, with a rental you have to fix the house immediately, not wait for a good deal.
Second, the possibility of a renter not paying and needing to be evicted. Or being unable to find a renter and having a property sit vacant. This means needing to have amount of cashflow to carry the property during times when the mortgage isn't being paid by the renter.
Third, landlords often have to carry extra insurance in case their renters get hurt or have someone visiting who is injured on the property. They should also form an LLC and protect their other assets in case any renter/visitor sues them.
But overall I think the pros and cons balance out. The main thing is finding a property which will have a return on investment of at least 8% annually by having a strong positive cash flow. I would never be a landlord if the rent generated by the property did not cover the mortgage, insurance, and 10% maintenance costs. If not I think the money and time would be better spent invested in index mutual funds.
Another factor is being a landlord takes time. If you hire a management company they will take 10% of the rent which increases the amount needed to generate a positive cashflow on the property. Hence it could be a good retirement or job for a stay at home parent. But it might be too time consuming for people working full-time.
The obvious pros of landlording, is having someone else pay your mortgage. If you buy a house in an area where rents are high and mortgages are low you'll come out ahead. Along with an enforced savings by paying off the mortgage, a landlord is able to reap the benefits of home appreciation. They are able to diversify their portfolio with investments other than stocks. Also in retirement, after the mortgage is paid off it a rental property can provide an alternative stream of income.
However, there are many cons against owning rental properties and becoming a landlord. First, renters do not care for the place like an owner. Thus, typically most rentals are trashed and require more $$ for upkeep. What sort of upkeep? Well if a water heater breaks on a weekend you can't tell the renter to wait, you need to fix it asap. Unlike being frugal at home, with a rental you have to fix the house immediately, not wait for a good deal.
Second, the possibility of a renter not paying and needing to be evicted. Or being unable to find a renter and having a property sit vacant. This means needing to have amount of cashflow to carry the property during times when the mortgage isn't being paid by the renter.
Third, landlords often have to carry extra insurance in case their renters get hurt or have someone visiting who is injured on the property. They should also form an LLC and protect their other assets in case any renter/visitor sues them.
But overall I think the pros and cons balance out. The main thing is finding a property which will have a return on investment of at least 8% annually by having a strong positive cash flow. I would never be a landlord if the rent generated by the property did not cover the mortgage, insurance, and 10% maintenance costs. If not I think the money and time would be better spent invested in index mutual funds.
Another factor is being a landlord takes time. If you hire a management company they will take 10% of the rent which increases the amount needed to generate a positive cashflow on the property. Hence it could be a good retirement or job for a stay at home parent. But it might be too time consuming for people working full-time.
Saturday, September 01, 2007
Mortgage Mess?
The mortgage industry is in shambles. In a story they feature 4 families in mortgage trouble. Are they really victims? Or do they have a case of wantitis? Where they want the better things in life NOW!
Are the lender predatory? Yes. But is it entirely their faults? No way. These people probably need to take a look in the mirror and acknowledge their desire for new cars, larger homes, etc. The first family refi their home to pay off two new SUVs. The second family wanted a home but didn't care to sell their trailer first. The third family were renting but the landlord selling the home caused them to rush to buy anything. Thus all three families knew they were getting Adjustable Rate Mortgages (ARM) but none cared. They only cared about getting into the house, then once they were in, suddenly the payments were unaffordable. The fourth family was the only one which claimed they thought they were getting a fixed rate mortgage but it was switched on them at the close.
Um, hello? If you know you are getting an ARM, how can you be a victim? If you know what your payment is and you accept it, and are told it will change why do these people move forward with buying the home anyway? Is it because they just have to have a house now???
I have to admit the first time we bought a house in 2002, we were wet behind the ears. We did it behind our parents back and without telling anyone so we had no advice, no experience, no wisdom given to us. We were fortunate to have a wonderful RE agent who guided us to buying a house within our means. She agreed with our "parameters" for purchasing. She even guided us to a 30 year fixed loan, discussed with us about putting a 10% down payment, and closing costs. I realize looking back we didn't get the best rate or best closing costs because we used a mortgage broker she reccomended instead of a bank, but he was honest.
I wasn't happy with the mortgage we ended up with I think it was 6.25%, 30 year fixed, with no points but it was decent. After that I learned how much cheaper banks/credit unions are. And with our credit scores we could have used either. However we did have a problem with DH's visa status, hence a mortgage broker was willing to put us with a subprimer lender get circumvent the J-1 Status. We weren't married (yes another stupid mistake) so our loan was difficult to push through. When we refinanced with Washington Mutual we took DH's name off the loan.
Anyway we knew what rate we were getting and though it wasn't perfect we ended up better than expected. Thus I feel these people are unfairly crying "victim". How can they really claim to be victims when they chose to purchase homes they knew were expensive? Or were refinancing a house they could afford into something unaffordable?
We've become a nation of wantitis. We want to constantly keep up with the Jonese, without ever considering we don't have the means to.
Are the lender predatory? Yes. But is it entirely their faults? No way. These people probably need to take a look in the mirror and acknowledge their desire for new cars, larger homes, etc. The first family refi their home to pay off two new SUVs. The second family wanted a home but didn't care to sell their trailer first. The third family were renting but the landlord selling the home caused them to rush to buy anything. Thus all three families knew they were getting Adjustable Rate Mortgages (ARM) but none cared. They only cared about getting into the house, then once they were in, suddenly the payments were unaffordable. The fourth family was the only one which claimed they thought they were getting a fixed rate mortgage but it was switched on them at the close.
Um, hello? If you know you are getting an ARM, how can you be a victim? If you know what your payment is and you accept it, and are told it will change why do these people move forward with buying the home anyway? Is it because they just have to have a house now???
I have to admit the first time we bought a house in 2002, we were wet behind the ears. We did it behind our parents back and without telling anyone so we had no advice, no experience, no wisdom given to us. We were fortunate to have a wonderful RE agent who guided us to buying a house within our means. She agreed with our "parameters" for purchasing. She even guided us to a 30 year fixed loan, discussed with us about putting a 10% down payment, and closing costs. I realize looking back we didn't get the best rate or best closing costs because we used a mortgage broker she reccomended instead of a bank, but he was honest.
I wasn't happy with the mortgage we ended up with I think it was 6.25%, 30 year fixed, with no points but it was decent. After that I learned how much cheaper banks/credit unions are. And with our credit scores we could have used either. However we did have a problem with DH's visa status, hence a mortgage broker was willing to put us with a subprimer lender get circumvent the J-1 Status. We weren't married (yes another stupid mistake) so our loan was difficult to push through. When we refinanced with Washington Mutual we took DH's name off the loan.
Anyway we knew what rate we were getting and though it wasn't perfect we ended up better than expected. Thus I feel these people are unfairly crying "victim". How can they really claim to be victims when they chose to purchase homes they knew were expensive? Or were refinancing a house they could afford into something unaffordable?
We've become a nation of wantitis. We want to constantly keep up with the Jonese, without ever considering we don't have the means to.
Monday, August 27, 2007
Comparing Housing Costs
I'm going to check out my sibling's homes these next few weekends. One lives in OH, the other in VA, and the last one lives in HI. So our lives vary and our homes vary as well.
I decided for fun to put our homes into Zillow to get an estimated price and find some details about the homes. I think it's neat to see what you get depending on where you live. So 2 of us live in townhouses, and the other two have single family homes. Of course the younger two are the ones in townhouses. Also my older two siblings have 3 kids each and live in the single family homes, while I have none and my brother only has one child. So it appears lifestyle plays a role in housing choice.
Starting out west in Hawaii, my sibling has a 5 bd/3 ba, 2801 sq ft house with a 7637 sq ft lot (.18 acre). It is estimated to be valued at $968,976. It is worth $346/sq ft. Pretty good deal when you consider that it's a single family home. By the way my sibling got it for substantially less because he worked for the builder.
The second sib's home in OH has a huge single family home with 4 bd/2.5 ba. It is 4514 sq ft with a 49057 sq ft lot (1.1 acres). The house is estimated to be worth $447,373, making it worth $99/sq ft. Of course having seen the location and the neighborhood, I'd have to say it's a much more beautiful home than the HI home.
My other sibling's townhouse in VA is 3bd/2.5ba and 1400 sq ft. There is no yard and it is estimated to be worth $399,642. This works out to $286/sq ft. The house is cute, but not well laid out it's a split-level townhouse with psuedo three stories. However this particular sibling bought 10 years ago for less than 1/3 the price and almost a paid for home. Unfortunately they've been trying to sell it for 2 years now and no bites. The market is terrible unfortunately, but they haven't leap into a single family and tried to sell while already buying another place is a smart move.
This is a pretty nice comparison of the different places to live in the US. Would I live in OH? No but I'd considered in VA. Definitely HI. I wonder what would happen if I picked more places to examine. Of course there are many other factors such as school district, lot size, etc that should be built into a regression model to determine price of the houses, but that would take more time and analysis. So if you are thinking of moving there are many variables which cannot be measured like proximity to family, lifestyle, jobs, etc.
Where would you live?
I decided for fun to put our homes into Zillow to get an estimated price and find some details about the homes. I think it's neat to see what you get depending on where you live. So 2 of us live in townhouses, and the other two have single family homes. Of course the younger two are the ones in townhouses. Also my older two siblings have 3 kids each and live in the single family homes, while I have none and my brother only has one child. So it appears lifestyle plays a role in housing choice.
Starting out west in Hawaii, my sibling has a 5 bd/3 ba, 2801 sq ft house with a 7637 sq ft lot (.18 acre). It is estimated to be valued at $968,976. It is worth $346/sq ft. Pretty good deal when you consider that it's a single family home. By the way my sibling got it for substantially less because he worked for the builder.
The second sib's home in OH has a huge single family home with 4 bd/2.5 ba. It is 4514 sq ft with a 49057 sq ft lot (1.1 acres). The house is estimated to be worth $447,373, making it worth $99/sq ft. Of course having seen the location and the neighborhood, I'd have to say it's a much more beautiful home than the HI home.
My other sibling's townhouse in VA is 3bd/2.5ba and 1400 sq ft. There is no yard and it is estimated to be worth $399,642. This works out to $286/sq ft. The house is cute, but not well laid out it's a split-level townhouse with psuedo three stories. However this particular sibling bought 10 years ago for less than 1/3 the price and almost a paid for home. Unfortunately they've been trying to sell it for 2 years now and no bites. The market is terrible unfortunately, but they haven't leap into a single family and tried to sell while already buying another place is a smart move.
This is a pretty nice comparison of the different places to live in the US. Would I live in OH? No but I'd considered in VA. Definitely HI. I wonder what would happen if I picked more places to examine. Of course there are many other factors such as school district, lot size, etc that should be built into a regression model to determine price of the houses, but that would take more time and analysis. So if you are thinking of moving there are many variables which cannot be measured like proximity to family, lifestyle, jobs, etc.
Where would you live?
Monday, August 20, 2007
Parental Condo Update...
I'm a little nervous because my parents are buying another condo. Yes this is without selling either of their other homes. It makes me nervous because they are taking out a mortgage at their age. I'm really frustrated and banging my head on the table.
I just don't get it, they don't like the house I grew up in because they let it rot. So it needs a lot of work and my parents hate doing home maintanence. So they just would prefer to sort of leave it behind and move into something new and worry about it later.
It's just financial decisions like this that worry me. Poor financial planning. One example the condo they almost purchased in Februaryof this year was $377k for a 1 bedroom on the 30th floor. Now they are purchasing a 31st floor 1 bd for $349k. I was constantly yelled at over the phone by my mom (she's going through late menopause), about how much they wanted to buy that condo.
Now when I bring up they almost paid $30k more for a condo 1 floor below she says "Oh the market's coming down." And yet they still are interested in buying. She says things with a serious disconnect that if they had to flip it they could sell it breaking even. Also that she had to rent for 8 months at $1500/month so she lost money renting. Nevermind that the condo lost almost that much in value.
I haven't quite figured my parents out yet but one day...by the way after talking with my mom I nearly reached through the phone because she said "well the housing market can't go down, all the realtors say it's an island. When does RE go down?" Well I hope things work out.
I just don't get it, they don't like the house I grew up in because they let it rot. So it needs a lot of work and my parents hate doing home maintanence. So they just would prefer to sort of leave it behind and move into something new and worry about it later.
It's just financial decisions like this that worry me. Poor financial planning. One example the condo they almost purchased in Februaryof this year was $377k for a 1 bedroom on the 30th floor. Now they are purchasing a 31st floor 1 bd for $349k. I was constantly yelled at over the phone by my mom (she's going through late menopause), about how much they wanted to buy that condo.
Now when I bring up they almost paid $30k more for a condo 1 floor below she says "Oh the market's coming down." And yet they still are interested in buying. She says things with a serious disconnect that if they had to flip it they could sell it breaking even. Also that she had to rent for 8 months at $1500/month so she lost money renting. Nevermind that the condo lost almost that much in value.
I haven't quite figured my parents out yet but one day...by the way after talking with my mom I nearly reached through the phone because she said "well the housing market can't go down, all the realtors say it's an island. When does RE go down?" Well I hope things work out.
Saturday, August 18, 2007
House Payoff versus Large Savings???
OMG. My best friend from childhood lost her job yesterday. Of course she was in the mortgage industry and did sub-prime loans. So these past 5-6 years she has been rolling in the money. Fortunately my nagging did some good. We're like sisters, she's an only and well I'm closer to her than my own siblings. We've known each other pretty much since birth.
What you say? In college my best bud use to be deeply in CC debt and ran up a ton of bills. However since she meet her boyfriend 3rd year in college, he cut up her CC and made her pay them all off. Since then she never abused CC again. I also nagged her about savings, starting her retirement, and putting money aside. So I told her how to invest her retirement money and stuff and got her turned onto coupons for makeup.
Anyway I was a bit worried but my nagging worked. She can live for 3 years at least at her current spending habits without changing a thing because of her money in the bank. A nice $100k. Yes! So while she'd rather not touch her savings, she can not work if she chooses.
I'm hoping she instead chooses to go back to school and retool her career. Right now what would have happened if she had followed Dave Ramsey's advice and put that $100k on her mortgage and only had 6 months of living expenses? Well she'd be desperate to find a job and her mortgage payment would still be there because her mortgage would not be paid off, only the amount of time shortened. Right now she's in the position of choosing a job. And pretty much any job she works at will supplement her savings, and she's getting unemployment. Plus her BF is picking up some slack on the household bills.
But what would most people do? Do they really pay off their homes? I realize we're in unique situation of buying $500k townhouses, but still money in the bank buys time to choose a job without stressing as much. I'd personally rather have 3 years of potential job hunting and retooling than going back to work within 6 months. Plus it's longer if you trim the budget.
How long could we live 6-12 months depending on how frugal we are. I'd really like to have more cash, but we keep spending our "savings" right now on school. It's eating up $30k/year which we would be saving otherwise.
Moral of the story? Stockpile cash until you can pay your mortgage in full, otherwise you tie up too my liquidity in the house. I guess overall it's personal choice. Will you choose to tap an EF for something like home repair or would you have saved cash and touch that and leave an EF basically for sacred things like death and job loss?
What you say? In college my best bud use to be deeply in CC debt and ran up a ton of bills. However since she meet her boyfriend 3rd year in college, he cut up her CC and made her pay them all off. Since then she never abused CC again. I also nagged her about savings, starting her retirement, and putting money aside. So I told her how to invest her retirement money and stuff and got her turned onto coupons for makeup.
Anyway I was a bit worried but my nagging worked. She can live for 3 years at least at her current spending habits without changing a thing because of her money in the bank. A nice $100k. Yes! So while she'd rather not touch her savings, she can not work if she chooses.
I'm hoping she instead chooses to go back to school and retool her career. Right now what would have happened if she had followed Dave Ramsey's advice and put that $100k on her mortgage and only had 6 months of living expenses? Well she'd be desperate to find a job and her mortgage payment would still be there because her mortgage would not be paid off, only the amount of time shortened. Right now she's in the position of choosing a job. And pretty much any job she works at will supplement her savings, and she's getting unemployment. Plus her BF is picking up some slack on the household bills.
But what would most people do? Do they really pay off their homes? I realize we're in unique situation of buying $500k townhouses, but still money in the bank buys time to choose a job without stressing as much. I'd personally rather have 3 years of potential job hunting and retooling than going back to work within 6 months. Plus it's longer if you trim the budget.
How long could we live 6-12 months depending on how frugal we are. I'd really like to have more cash, but we keep spending our "savings" right now on school. It's eating up $30k/year which we would be saving otherwise.
Moral of the story? Stockpile cash until you can pay your mortgage in full, otherwise you tie up too my liquidity in the house. I guess overall it's personal choice. Will you choose to tap an EF for something like home repair or would you have saved cash and touch that and leave an EF basically for sacred things like death and job loss?
Friday, August 17, 2007
Fortunate in Housing???
I realized the other day we really got lucky in our housing. We have a really exceptionally cheap mortgage, and with 20% DP we bought way more house than we could have afforded without a DP. The downpayment is really important I realize because it gives you the choice of selling if you need be and taking a loss if you must.
Many people are being forced to refinance or short sell but are unable to come up the cash to do so. By having equity present we can do either without too much worries. Why am I bringing this up?
Well our two neighbors had a complete meltdown Wednesday night, where a screaming match ensued betwween them. Fortunately we were not present although we received irate phone calls late at night from them about the other one. But they are no longer talking with each other. They are only communicating through us and they are becoming very nitpicky.
So DH says to me, let's move. Eat the loss and leave. We're losing control of our situation fast. Our neighbors are just making our lives misery, but our house is nice. When you buy a condo you never know who your neighbors will be. In a house at least you can avoid them and threaten to shoot if they step into your yard. In condo well there's no escape.
I don't think we can afford to move however. We will have a terrible time renting with two dogs and buying another place would again have to be a condo. So my vote is no we're not moving, we're sticking it out no matter how miserable they make us. I may have to grouse about it for the next two years. This is my only outlet for venting because I can't yell at my neighbors about how stupid they are.
Plus we have a phenomenal deal on our condo. We pay $2263/month mortgage with $650 going to principal. So $1600 is interest, with 25% being tax deductible because of our bracket. So in essence we're renting for $1200. Then add in our property taxes, HOA, and insurance and we're paying $425 property taxes, $25 insurance, $200 HOA. So every month were renting our place for $2250, with $500/month tax break for PITI. That means we're renting it for $1750 for a 3 bedroom townhouse. This does not include repair and maintenance of course.
However DH best friend has looked recently at renting 2 bd apartments for $1600-2000/month so I think we're ahead of the deal. Our rent for a 3 bd that we can have two dogs in is $1750. It's not apples to apples because we have to upkeep the condo. But a lot of places he's looked at are older and their furnances are inefficient so the heating bills cost more than ours for a smaller 2 bd apartment instead of a 3 bedroom townhouse Also their windows are older, and in general the appliances are older. Also most places don't have an in apartment washer/dryer/dishwasher. So we have a lot of bonus comforts.
I don't count principal paydown because hypothetically we should be saving that money even if we were renting, not using it to eat out and stuff. But $1750/month to "rent" our place is too good to pass up. Hence I feel super fortunate in housing. DH is just going to have to play mediator and we're going to try to hide from our neighbors. One day we're going to be kings of our kingdom and no one will ever bother us again.
Also as a sidenote, DH's friend might be living with us indefinitely. But I feel it's okay and good karma. He's helped us out in the past and now we're returning the favor. Plus it's good karma to return the favor. He's paying rent and helping out around the house, and very clean. He does the dishes, does his bathroom, vaccums, and will help reseal the deck, finish the backyard, and work on the painting. In exchange he was thrown over by the girl he was moving in with so now he's considering buying a condo. But the catch is it's a wait-list till next year and by living with us he's not trapped in a lease. And we feel we're going to help him get ahead so he can buy a place.
When we first bought a condo in 2002, he loaned us money because we needed more than we expected, $2k actually because our earnest money check cleared but the mortgage company lost it, and the money was already gone from our checking account to cyberspace. Good karma and now I hope he can buy a place too. I feel better because he's paying rent and at the same time potentially going to be able to buy with our help and has a plan! Plus we don't require a deposit or lease and the money he gives us is just a bonus. It's below market value but whatever. He's a good person and if he buys this place it will be an awesome way for him to get a foothold in the housing market.
Many people are being forced to refinance or short sell but are unable to come up the cash to do so. By having equity present we can do either without too much worries. Why am I bringing this up?
Well our two neighbors had a complete meltdown Wednesday night, where a screaming match ensued betwween them. Fortunately we were not present although we received irate phone calls late at night from them about the other one. But they are no longer talking with each other. They are only communicating through us and they are becoming very nitpicky.
So DH says to me, let's move. Eat the loss and leave. We're losing control of our situation fast. Our neighbors are just making our lives misery, but our house is nice. When you buy a condo you never know who your neighbors will be. In a house at least you can avoid them and threaten to shoot if they step into your yard. In condo well there's no escape.
I don't think we can afford to move however. We will have a terrible time renting with two dogs and buying another place would again have to be a condo. So my vote is no we're not moving, we're sticking it out no matter how miserable they make us. I may have to grouse about it for the next two years. This is my only outlet for venting because I can't yell at my neighbors about how stupid they are.
Plus we have a phenomenal deal on our condo. We pay $2263/month mortgage with $650 going to principal. So $1600 is interest, with 25% being tax deductible because of our bracket. So in essence we're renting for $1200. Then add in our property taxes, HOA, and insurance and we're paying $425 property taxes, $25 insurance, $200 HOA. So every month were renting our place for $2250, with $500/month tax break for PITI. That means we're renting it for $1750 for a 3 bedroom townhouse. This does not include repair and maintenance of course.
However DH best friend has looked recently at renting 2 bd apartments for $1600-2000/month so I think we're ahead of the deal. Our rent for a 3 bd that we can have two dogs in is $1750. It's not apples to apples because we have to upkeep the condo. But a lot of places he's looked at are older and their furnances are inefficient so the heating bills cost more than ours for a smaller 2 bd apartment instead of a 3 bedroom townhouse Also their windows are older, and in general the appliances are older. Also most places don't have an in apartment washer/dryer/dishwasher. So we have a lot of bonus comforts.
I don't count principal paydown because hypothetically we should be saving that money even if we were renting, not using it to eat out and stuff. But $1750/month to "rent" our place is too good to pass up. Hence I feel super fortunate in housing. DH is just going to have to play mediator and we're going to try to hide from our neighbors. One day we're going to be kings of our kingdom and no one will ever bother us again.
Also as a sidenote, DH's friend might be living with us indefinitely. But I feel it's okay and good karma. He's helped us out in the past and now we're returning the favor. Plus it's good karma to return the favor. He's paying rent and helping out around the house, and very clean. He does the dishes, does his bathroom, vaccums, and will help reseal the deck, finish the backyard, and work on the painting. In exchange he was thrown over by the girl he was moving in with so now he's considering buying a condo. But the catch is it's a wait-list till next year and by living with us he's not trapped in a lease. And we feel we're going to help him get ahead so he can buy a place.
When we first bought a condo in 2002, he loaned us money because we needed more than we expected, $2k actually because our earnest money check cleared but the mortgage company lost it, and the money was already gone from our checking account to cyberspace. Good karma and now I hope he can buy a place too. I feel better because he's paying rent and at the same time potentially going to be able to buy with our help and has a plan! Plus we don't require a deposit or lease and the money he gives us is just a bonus. It's below market value but whatever. He's a good person and if he buys this place it will be an awesome way for him to get a foothold in the housing market.
Wednesday, July 18, 2007
Condo Hell Update #3
Okay I am right now fed-up completely with my neighbors. I hate living in my townhouse. I absolutely think it's a great house and love living here, but I cannot stand having to share my expenses and agree with everyone.
I want to the King and Queen of our Kingdom. Right now we're Senators not accomplishing anything. So we bickered and argued more about money. I'm tired of liars, cheats, and con-artists.
Basically the 3rd unit owner is all of those things. I am not fabricating anything. We're willing to pay up our portion of the retaining wall but he is refusing. What are we going to do? My DH again is being very compromising and decided to negotiate part of the money collected from the developer to be for the unit. This way we can move forward. I hate them and I do not want to give them any money period. I might have been more amenable earlier this year but not any more.
Why? Well they refuse to submit and itemized invoice for repairs done to their unit from the insurance settlement. So last night we ended up in a bitter fight with them saying "the contractor was too busy to supply a reciept." My mom always say if it smells like a rat, sounds like a rat, it is a rat! And the 3rd unit owner is a RAT! Something fishy is going on, but he is being a jerk.
So I'm becoming unforunately more irritable with each passing day. I've realized that I hate the 3rd unit owners and despise their lies. The 3rd unit owners lied about the gutters/downspouts. They lied about the electrical wiring. They lied about the money paid by the developer. My DH has compromised on pretty much everything, why? Because he just wants to move forward.
He says that we need to keep good relations with these unit owners. So tell me readers how can owning a single family home cost more and be more hassle than this? I have had to pay more money for damages to my house NOT caused by myself but by idiot owners. We have had to compromise, compromise, compromise.
This is it. I am tired of compromise. I even hate the word. And for what? What did it really save me? Nothing. This townhouse has cost us more emotionally and financially than any single family purely because we have to repair damages done by idiots. You have to have gutters and downspouts, but when the jerks won't pay for it, what choice do you have? Or electrical wiring damaged by those same jerks.
There is no way to get money from a unit owner easily and by "compromising" and allowing the association to pay half of it, the work at least gets done. But these jerks cause the whole problem which by the way they never ask permission from the condo, so the problem happens after the fact.
Thus living in a condo is a nightmare. It is pure hell. There is no escape. And without leverage and constantly trying to negotiate the house would fall apart to crap. There are citations for fire hazards. There is more damage done without a downspout/gutter. So what would you do?
Condos are too stressful.
I want to the King and Queen of our Kingdom. Right now we're Senators not accomplishing anything. So we bickered and argued more about money. I'm tired of liars, cheats, and con-artists.
Basically the 3rd unit owner is all of those things. I am not fabricating anything. We're willing to pay up our portion of the retaining wall but he is refusing. What are we going to do? My DH again is being very compromising and decided to negotiate part of the money collected from the developer to be for the unit. This way we can move forward. I hate them and I do not want to give them any money period. I might have been more amenable earlier this year but not any more.
Why? Well they refuse to submit and itemized invoice for repairs done to their unit from the insurance settlement. So last night we ended up in a bitter fight with them saying "the contractor was too busy to supply a reciept." My mom always say if it smells like a rat, sounds like a rat, it is a rat! And the 3rd unit owner is a RAT! Something fishy is going on, but he is being a jerk.
So I'm becoming unforunately more irritable with each passing day. I've realized that I hate the 3rd unit owners and despise their lies. The 3rd unit owners lied about the gutters/downspouts. They lied about the electrical wiring. They lied about the money paid by the developer. My DH has compromised on pretty much everything, why? Because he just wants to move forward.
He says that we need to keep good relations with these unit owners. So tell me readers how can owning a single family home cost more and be more hassle than this? I have had to pay more money for damages to my house NOT caused by myself but by idiot owners. We have had to compromise, compromise, compromise.
This is it. I am tired of compromise. I even hate the word. And for what? What did it really save me? Nothing. This townhouse has cost us more emotionally and financially than any single family purely because we have to repair damages done by idiots. You have to have gutters and downspouts, but when the jerks won't pay for it, what choice do you have? Or electrical wiring damaged by those same jerks.
There is no way to get money from a unit owner easily and by "compromising" and allowing the association to pay half of it, the work at least gets done. But these jerks cause the whole problem which by the way they never ask permission from the condo, so the problem happens after the fact.
Thus living in a condo is a nightmare. It is pure hell. There is no escape. And without leverage and constantly trying to negotiate the house would fall apart to crap. There are citations for fire hazards. There is more damage done without a downspout/gutter. So what would you do?
Condos are too stressful.
Thursday, June 21, 2007
Condos burn in hell!
Well I guess you can see I need to do a small rant about my condo. So our retaining wall issue is still unresolved. One of the other owner's is trying to argue that the MONEY, DH and I collected through our ATTORNEY from the developer is 20% his! Though he didn't even own the condo when she gave us the money. Also she was trying to say it was for both Unit 1 and 2. We never agreed to that! In fact we sent a letter stating exactly opposite.
The reason we took the money is there were three different engineers, with HER engineer stating the retaining wall could be done for $5700. Two other engineers said $18k and $20k. We also have statements from the two engineers explaining why her engineering quote would not solve the problem.
The developer is a shady, horrible woman. If you don't believe me she's had multiple lawsuits from contractors. Including a neighbor who was a contractor who worked for her. He showed me his lawsuit against her for $40k of work she didn't want to pay for, but he sued her and she was forced to pay. By the way she's a millionaire who doesn't even need the money, a radiologist that lives in a million dollar home. Arrgh. And she tries to not pay ANYONE. Including her engineer that drew up her plans, he came to us and tried to get paid, we said "NO! We did not sign a contract with you, the association did not sign a contract with you. PERIOD." So he went after her in court for his fees. And again she had to pay.
Right now it's not worth suing her because the amount is not much. She owes about $1k more for us, which we are willing to let slide. HOWEVER, with the other unit owner wanting another $1k we're not willing to budge.
We went after the jugular and tore him a new one. This unit owner DOES NOT pay his monthly dues on time, only once every 6 months. HE tore down the gutter drain pipes, but refuses to pay to replace them. He SAYS he put them up, BUT he didn't. He couldn't have put it up properly because he didn't put up the house siding until this summer! 1 year later. So the gutters even when he put them up were improperly put up! That jerk refuses to acknowledge that he's the one who caused the damage and should pay for it. So my wonderful DH got tired of the arguing and said he he would agree to allow the condo to pay 50% of the damages this piece of work caused.
You wonder why I curse and degenerate CONDOS! Well come and live in my hell-hole and tell me it's easy to deal with neighbors. Tell me it's easy to get anything done when you constantly can't make a decision. Please tell me that living in a house is harder? Really? Try getting 3 different couples to agree to a ONE project. Try getting 3 different couples to agree that ONE couple caused damage and the others shouldn't pay. Try getting one couple to pay up Home Owner's fees?
Last time I wrote, someone said that homes were expensive. Well condos are more so when you have to constantly go to a lawyer. When you constantly have to pay for DAMAGES done by a jerk who won't admit it. And if the repair isn't done well the house will rot. And you need to sue him otherwise. Try to constantly be chasing someone for money for insurance. Or would you just fork over the money like living in a house? But wait, you can't even just fork over the money and pay a repair person because still EVERYONE has to agree before work can be done!
That's the kicker of living in a condo. Why it's pure hell, and why only idiots like myself do it. I wish I had never bought this condo. I hate it, hate it, hate it. I pray everyday that we quickly finish our degrees, get a relocation package and move away from this hell-hole. I'm renting next time if we can't afford a single family home. I do not care what it costs, I'm never going to buy another condo. I'm printing this article up and I'm going to paste it to my wall as a reminder "Single Family Home, Single Family Home".
The reason we took the money is there were three different engineers, with HER engineer stating the retaining wall could be done for $5700. Two other engineers said $18k and $20k. We also have statements from the two engineers explaining why her engineering quote would not solve the problem.
The developer is a shady, horrible woman. If you don't believe me she's had multiple lawsuits from contractors. Including a neighbor who was a contractor who worked for her. He showed me his lawsuit against her for $40k of work she didn't want to pay for, but he sued her and she was forced to pay. By the way she's a millionaire who doesn't even need the money, a radiologist that lives in a million dollar home. Arrgh. And she tries to not pay ANYONE. Including her engineer that drew up her plans, he came to us and tried to get paid, we said "NO! We did not sign a contract with you, the association did not sign a contract with you. PERIOD." So he went after her in court for his fees. And again she had to pay.
Right now it's not worth suing her because the amount is not much. She owes about $1k more for us, which we are willing to let slide. HOWEVER, with the other unit owner wanting another $1k we're not willing to budge.
We went after the jugular and tore him a new one. This unit owner DOES NOT pay his monthly dues on time, only once every 6 months. HE tore down the gutter drain pipes, but refuses to pay to replace them. He SAYS he put them up, BUT he didn't. He couldn't have put it up properly because he didn't put up the house siding until this summer! 1 year later. So the gutters even when he put them up were improperly put up! That jerk refuses to acknowledge that he's the one who caused the damage and should pay for it. So my wonderful DH got tired of the arguing and said he he would agree to allow the condo to pay 50% of the damages this piece of work caused.
You wonder why I curse and degenerate CONDOS! Well come and live in my hell-hole and tell me it's easy to deal with neighbors. Tell me it's easy to get anything done when you constantly can't make a decision. Please tell me that living in a house is harder? Really? Try getting 3 different couples to agree to a ONE project. Try getting 3 different couples to agree that ONE couple caused damage and the others shouldn't pay. Try getting one couple to pay up Home Owner's fees?
Last time I wrote, someone said that homes were expensive. Well condos are more so when you have to constantly go to a lawyer. When you constantly have to pay for DAMAGES done by a jerk who won't admit it. And if the repair isn't done well the house will rot. And you need to sue him otherwise. Try to constantly be chasing someone for money for insurance. Or would you just fork over the money like living in a house? But wait, you can't even just fork over the money and pay a repair person because still EVERYONE has to agree before work can be done!
That's the kicker of living in a condo. Why it's pure hell, and why only idiots like myself do it. I wish I had never bought this condo. I hate it, hate it, hate it. I pray everyday that we quickly finish our degrees, get a relocation package and move away from this hell-hole. I'm renting next time if we can't afford a single family home. I do not care what it costs, I'm never going to buy another condo. I'm printing this article up and I'm going to paste it to my wall as a reminder "Single Family Home, Single Family Home".
Sunday, April 08, 2007
Condo Living Update
So turns out one of the neighbors couldn' t meet on Wednesday. So we only meet with the "coupled" neighbors. They were very nice, but couldn't help but complain about the downstairs unit. Complain about what? The noise mainly. This is the reason why we chose to live on this side of the house, because our unit is over their bedrooms/basement. The other townhouse is over the living room, dining room, and kitchen. They have their entrances on the same side.
Of course on Friday night as we were heading out to dinner, we were caught by the second set of neighbors. Also a nice set of brothers, but they were complaining about the upstairs neighbors. The were complaining about money and pickiness, etc.
So here we are the couple in the middle. We're more reasonable and tolerant for sure about the noise (we can't hear it at all). We're also more easy going about money (the couple are accountants). The brothers are very young and immature 22 and 25. So we have to play mediator.
My DH just wants to sell our place and move. Sometimes I do too. I wonder if it's worth all this headache?
Of course on Friday night as we were heading out to dinner, we were caught by the second set of neighbors. Also a nice set of brothers, but they were complaining about the upstairs neighbors. The were complaining about money and pickiness, etc.
So here we are the couple in the middle. We're more reasonable and tolerant for sure about the noise (we can't hear it at all). We're also more easy going about money (the couple are accountants). The brothers are very young and immature 22 and 25. So we have to play mediator.
My DH just wants to sell our place and move. Sometimes I do too. I wonder if it's worth all this headache?
Friday, April 06, 2007
Facing Foreclosure?
There is a blog called "I am facing foreclosure" started in September of 2006 by Casey Serin. He is a 24 year old "would be real estate mogul". He bought 8 houses in 8 months in 4 different states. Unfortunately he bought at the peak of the market and has been unable to sell these homes.
This blog is following every single mistake and attempt to rectify his mistakes. He has currently had 4 homes foreclosed, sold 2 homes, and 2 are trying to sell. He is trying to even just "short sale" the homes for less money than he bought it for. He was $2.2 million in real estate debt.
This guy even if he sells everything will end up deeply in debt from this mishap. Is it a mishap? I don't know. Is he to blame? Yes. Is the mortgage company also to blame? Probably, he admits to using stated income loans, as he calls them liar loans, to try and finance the homes. This meant on his application he lied about his income.
I can't help but wonder how could he do this? Didn't he worry at all? Probably not, he really bought into the Kiyosaki mindset. That you make income by generating passive streams of income like RE. To be honest there probably are many more people out there in the same situation as Casey Serin.
Maybe not on the same scale, just one home they live in, but possibly there are a ton of other "flippers" in the same boat as him, just not blogging about it. The truth is I bet a lot of people bought into making easy money in RE. Which is not true.
If making money in RE was easy, everyone would do it. Also not true is that RE is a guaranteed investment. Um, guess Casey Serin is case and point that there is no "sure" investment, or else it wouldn't be an investment if there was no risk. Want no risk, buy a CD or money market. Don't touch RE or stocks.
I am not against using RE for investment purposes, but I really wonder if people fully understand the risks involved? Well this blog gives so many details about everything which can go wrong, that I am HIGHLY reccomending it to ANYONE thinking about investing in RE outside of their primary residence. If you are going to be a landlord or flip houses, you need to read this entire blog first.
Everyone should read it and understand his explanations for how he's losing money. There is money lost on closing costs, money on rehabbing homes, money lost on selling a home/staging, money lost on carrying a home for any length of time because of the mortgage involved. Thus RE is not a sure money maker, nor is it easy.
I think what he did is terrible, but I have to say it's one of the most insightful/truthful blogs about RE. He's laying it out on what the real issues and problems are with RE investing. So before you jump I'd read this blog.
This blog is following every single mistake and attempt to rectify his mistakes. He has currently had 4 homes foreclosed, sold 2 homes, and 2 are trying to sell. He is trying to even just "short sale" the homes for less money than he bought it for. He was $2.2 million in real estate debt.
This guy even if he sells everything will end up deeply in debt from this mishap. Is it a mishap? I don't know. Is he to blame? Yes. Is the mortgage company also to blame? Probably, he admits to using stated income loans, as he calls them liar loans, to try and finance the homes. This meant on his application he lied about his income.
I can't help but wonder how could he do this? Didn't he worry at all? Probably not, he really bought into the Kiyosaki mindset. That you make income by generating passive streams of income like RE. To be honest there probably are many more people out there in the same situation as Casey Serin.
Maybe not on the same scale, just one home they live in, but possibly there are a ton of other "flippers" in the same boat as him, just not blogging about it. The truth is I bet a lot of people bought into making easy money in RE. Which is not true.
If making money in RE was easy, everyone would do it. Also not true is that RE is a guaranteed investment. Um, guess Casey Serin is case and point that there is no "sure" investment, or else it wouldn't be an investment if there was no risk. Want no risk, buy a CD or money market. Don't touch RE or stocks.
I am not against using RE for investment purposes, but I really wonder if people fully understand the risks involved? Well this blog gives so many details about everything which can go wrong, that I am HIGHLY reccomending it to ANYONE thinking about investing in RE outside of their primary residence. If you are going to be a landlord or flip houses, you need to read this entire blog first.
Everyone should read it and understand his explanations for how he's losing money. There is money lost on closing costs, money on rehabbing homes, money lost on selling a home/staging, money lost on carrying a home for any length of time because of the mortgage involved. Thus RE is not a sure money maker, nor is it easy.
I think what he did is terrible, but I have to say it's one of the most insightful/truthful blogs about RE. He's laying it out on what the real issues and problems are with RE investing. So before you jump I'd read this blog.
Tuesday, April 03, 2007
Why I hate living in a condo...
Living in a condo/townhouse sucks. I'm glad for the anonymity of this blog because I can say what I really think. We bought this townhouse because we were tired of condo living and this was the next step up. We could not afford a single family home anywhere near the city, and this was a compromise.
But anyway, we need to repair the retaining wall holding up the parking pad of our townhouse. We don't park there, the neighbors do, but it's association business. The problem is that everyone has different financial situations and different ideas about how to handle this project. So tomorrow night we are meeting to discuss two different options and the costs. Also we need to decide when should people pay. This will not be a pretty discussion.
A second topic under discussion is the fact DH and I flooded the lower unit with a pipe burst in January. We were gone to my grandfather's funeral and though the heat was on, it got really cold and a pipe burst. So we submitted it to insurance and turns out instead of our personal insurance being charged, the master condo insurance is having to take the claim because of our condo by-laws. Yep it won't be on our record so when we move we'll be claim free. Also we only pay 40% of the deductible instead of the entire thing, not exactly fair, but I'm not sure what we'll end up doing. So another issue to argue about tomorrow.
Third we have to discuss the fees for our 3 home association. Part of the problem is one of the tenants hasn't paid his dues since August. This confrontation about paying it will again be horrible. Arm-twisting someone for money is never fun.
All these issues combined along with many other issues have caused us to hate living in our townhouse. This is the 5th year we've lived in a townhouse/condo and we're ready for a single family home. Of course that probably is another 3-5 years out from now so we'll have to deal until them.
My advice live somewhere cheap, such that you can afford a single family home. We have lived in 2 out of the 5 most expensive RE markets in the US and it's not fun. But hopefully we're on track to get into a single family because we're building equity by paying down the mortgage and slow appreciation.
But anyway, we need to repair the retaining wall holding up the parking pad of our townhouse. We don't park there, the neighbors do, but it's association business. The problem is that everyone has different financial situations and different ideas about how to handle this project. So tomorrow night we are meeting to discuss two different options and the costs. Also we need to decide when should people pay. This will not be a pretty discussion.
A second topic under discussion is the fact DH and I flooded the lower unit with a pipe burst in January. We were gone to my grandfather's funeral and though the heat was on, it got really cold and a pipe burst. So we submitted it to insurance and turns out instead of our personal insurance being charged, the master condo insurance is having to take the claim because of our condo by-laws. Yep it won't be on our record so when we move we'll be claim free. Also we only pay 40% of the deductible instead of the entire thing, not exactly fair, but I'm not sure what we'll end up doing. So another issue to argue about tomorrow.
Third we have to discuss the fees for our 3 home association. Part of the problem is one of the tenants hasn't paid his dues since August. This confrontation about paying it will again be horrible. Arm-twisting someone for money is never fun.
All these issues combined along with many other issues have caused us to hate living in our townhouse. This is the 5th year we've lived in a townhouse/condo and we're ready for a single family home. Of course that probably is another 3-5 years out from now so we'll have to deal until them.
My advice live somewhere cheap, such that you can afford a single family home. We have lived in 2 out of the 5 most expensive RE markets in the US and it's not fun. But hopefully we're on track to get into a single family because we're building equity by paying down the mortgage and slow appreciation.
Sunday, March 25, 2007
Trusting Trust deeds?
What are trust deeds? They are deeds which are basically mortgages. However these deeds do not transfer the property to a buyer. Instead the trust deed transfers the title of a piece of property to a "trustee", usually a title company or trust. This deed is held as security for the loan by the borrower. When the loan is paid, the deed is transferred back to the borrower. However if the borrower defaults the trustee can sell the property.
Sounds great? And people who get these sort of loans often are paying you the "trustee" 10-15% interest for a specified amount of time say 5-10 years. This sounds like a good deal with minimal risks right?
Wrong. With every investment, there is not guaranteed return. Much less something not well advertised or publisized.
One major issue with these types of loans is that people who get these loans usually are unable to finance properties through a normal bank. They have bad credit, poor risk, etc. Also these loans are locked in for a set amount of time, and often these borrowers are more likely to default during this period. So the risk is that you won't be paid back.
Of course you'd respond but you have a property deed in security. But the property when sold is only worth what someone else is willing to pay you. If you sell the property, typically it's run down or raw land, and the borrower was using the money to develop the property. That means it can be very difficult to sell the property for what you "mortgaged" it for.
So even selling the property may not net you back what you loaned out. Is it a legitimate way to make money? Yes. Does it have high returns? Yes. Should it be in a person's portfolio? Maybe, afterall diversification is important. But should it be the only thing in a person's portfolio? No. This is just perhaps one component of the Real Estate portion of a person's portfolio.
My post though negative sounding is not meant to be. I'm considering trust deeds, but realize it will only happen after I have substantial assets and are able to should the loss of the money. And that it is only a small fraction of our overall net worth, and not a large portion of the basis.
Sounds great? And people who get these sort of loans often are paying you the "trustee" 10-15% interest for a specified amount of time say 5-10 years. This sounds like a good deal with minimal risks right?
Wrong. With every investment, there is not guaranteed return. Much less something not well advertised or publisized.
One major issue with these types of loans is that people who get these loans usually are unable to finance properties through a normal bank. They have bad credit, poor risk, etc. Also these loans are locked in for a set amount of time, and often these borrowers are more likely to default during this period. So the risk is that you won't be paid back.
Of course you'd respond but you have a property deed in security. But the property when sold is only worth what someone else is willing to pay you. If you sell the property, typically it's run down or raw land, and the borrower was using the money to develop the property. That means it can be very difficult to sell the property for what you "mortgaged" it for.
So even selling the property may not net you back what you loaned out. Is it a legitimate way to make money? Yes. Does it have high returns? Yes. Should it be in a person's portfolio? Maybe, afterall diversification is important. But should it be the only thing in a person's portfolio? No. This is just perhaps one component of the Real Estate portion of a person's portfolio.
My post though negative sounding is not meant to be. I'm considering trust deeds, but realize it will only happen after I have substantial assets and are able to should the loss of the money. And that it is only a small fraction of our overall net worth, and not a large portion of the basis.
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