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nightdesigns
Gone missing, back soon
Premium
join:2002-05-31
AZ
 ·Cox HSI
| Homeowners: Mortgage Interest, Property Tax & Uncle Sam We're starting to look at the housing market for our first place and we're now sorting through the finance area. From what I've been told and can find, thanks to the government we would be entitled to taking a tax deduction on the interest paid and on property taxes. According to my loan officer it's 90% of monthly mortgage.
Now for the real-life. Since we're all socalians, what is the actual return? Would I actually see a significant return every year, or is it not something to count on?
Thanks.
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No_Strings
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The OC
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| Re: Homeowners: Mortgage Interest, Property Tax & Uncle Sam The deduction is certainly real. How much it helps depends on your income, other deductions and that most evil of all taxes - the Alternative Minimum Tax. The more you make, the less your deductions count. You don't have to earn a lot to trip that bad boy (trust me) and it will offset much of your benefit. | |
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Jtmo
Premium
join:2001-05-20
Novato, CA
·Comcast
| It depends on your tax bracket brackets, where you are.
Google 2007 tax table for the IRS tables, CA will be 5-11% depending on income.
Part of car registration based on valuation, interest on the house, second home (or RV), all deductions from income, property taxes, which can put you in a lower tax bracket. That's the 'savings' a lower tax rate.
Say you were in a 33% bracket (max is 38), and you deduct standard per person deduction, plus all interest/property tax etc= some number, now you might be in a 15% bracket, saving 18% of the money over say $42,900 a year that you make.
Clear as mud? | |
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dogma
Premium
join:2002-08-15
Boulder City, NV
| said by nightdesigns  :We're starting to look at the housing market for our first place... All I can say is wait. Give it 12 Months at least. | |
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sholling
Premium
join:2002-02-13
Hemet, CA
| Re: Homeowners: Mortgage Interest, Property Tax & Uncle Sam I'm going to partly agree with Dogma, but only partly. If you're looking for a short-term (less than 5 years) investment then you need to run the numbers see how the possibility of a 5% drop in value (I don't think it will be that bad), plus the 6% it will cost you to sell compares to the straight out loss of a year of a year or two of rent. I doubt they results will be pretty even after you factor in the tax advantage of owning.
But at the same time you should be looking hard for bargains. Distress sales, panic sales etc, while avoiding any temtation to explore creative financing.
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"Government is the great fiction, through which everybody endeavors to live at the expense of everybody else."
--FREDERIC BASTIAT--
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| | | Lovehound
join:2005-08-18
Northridge, CA
| Re: Homeowners: Mortgage Interest, Property Tax & Uncle Sam said by sholling :I'm going to partly agree with Dogma, but only partly. If you're looking for a short-term (less than 5 years) investment then you need to run the numbers see how the possibility of a 5% drop in value (I don't think it will be that bad), plus the 6% it will cost you to sell compares to the straight out loss of a year of a year or two of rent. I doubt they results will be pretty even after you factor in the tax advantage of owning. But at the same time you should be looking hard for bargains. Distress sales, panic sales etc, while avoiding any temtation to explore creative financing. This is really good advice. However, I'd qualify that less than 5 years probably won't make financial sense. Considering a possible price decline, renting makes more sense in that time frame. Beyond 5 years, buying a home is probably still a good investment.
Regarding the down payment, the old (and sage) advice is to go 20 percent down. This will also give you full control of your insurance payments and property taxes, although perhaps in recent times they may have loosened those requirements. Of course you'll have to mind your business about paying the insurance and taxes, but at least you're in the catbird seat.
So look hard for bargains, plan on living there 5 years (minimum), and put 20 percent down payment. It may sound like hard advice but it's good advice. | |
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sholling
Premium
join:2002-02-13
Hemet, CA
| Re: Homeowners: Mortgage Interest, Property Tax & Uncle Sam said by Lovehound : I'd qualify that less than 5 years probably won't make financial sense. Considering a possible price decline, renting makes more sense in that time frame. Beyond 5 years, buying a home is probably still a good investment. That was my point about less than 5 year timeframes, but I think you put it more clearly. The exception is when one finds a distress or panic sale. This is where spreadsheets come in handy. Run the numbers.
Regarding the down payment, the old (and sage) advice is to go 20 percent down. This will also give you full control of your insurance payments and property taxes, although perhaps in recent times they may have loosened those requirements. Of course you'll have to mind your business about paying the insurance and taxes, but at least you're in the catbird seat. You're dating yourself my friend.  In the good old days of our youth 20% was around $20k give or take. Today 20% is $80-120k. Almost impossible for first time home buyers to save while laying out $1000/mo in rent. The only penalty for a 5% FHA or GI loan is that you pay for morgage insurance (PMI) every month, and it's not all that expensive. They also protect you from stupidly creative financing and from signing contracts with prepayment penelties.
So look hard for bargains, plan on living there 5 years (minimum), Great advice. The best part about buying a home isn't the hoped for increase in value. That just gets eaten up when one upgrades. The best part is 30 years from now when you've got it paid off - is that it's paid off.
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"Government is the great fiction, through which everybody endeavors to live at the expense of everybody else."
--FREDERIC BASTIAT--
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Kibbles
Premium
join:1999-07-31
Mission Viejo, CA
| said by dogma :said by nightdesigns :We're starting to look at the housing market for our first place... All I can say is wait. Give it 12 Months at least. Hmm...have you read/seen any articles supporting that...and what do they think the house prices will be... 3-5 years from now ? | |
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dogma
Premium
join:2002-08-15
Boulder City, NV
| Re: Homeowners: Mortgage Interest, Property Tax & Uncle Sam I don't know what they will be 3-5 years from now, but I am satisfied the values will continue to decline for the next 24 Months. Look at this:
Orange County Inventory (Sales)
Tracking Orange County, California
Population 2006: 3.07 million
1/02/2006 Listing per population ratio 1:422
7/30/2006 Listing per population ratio 1:176
01/2006: 8,430 (2,868)____01/2005: (2,903)
02/2006: 10,420 (2,928)___02/2005: (2,890)
03/2006: 11,762 (4,203)___03/2005: (5,033)
04/2006: 13,268 (3,276)___04/2005: (4,547)
05/2006: 15,048 (3,113)___05/2005: (4,548)
06/2006: 16,692 (3,608)___06/2005: (4,898)
07/2006: 17,458 (2,779)___07/2005: 6,656 (4,341)
08/2006: 17,758 (3,203)___08/2005: 7,209 (4,708)
09/2006: 17,475 (2,664)___09/2005: 8,044 (4,072)
10/2006: 16,650 (2,715)___10/2005: 8,565 (3,614)
11/2006: 15,188 (2,475)___11/2005: 8,520 (3,503)
12/2006: 13,220 (2,719)___12/2005: 7,583 (3,826)
Population 2007:
01/01/2007 Listing per population ratio 1:244
01/01: 12,600
01/31: 13,302 (2,400)___01/2006: 8,430 (2,868)
02/28: 13,704 (2,449)___02/2006: 10,420 (2,928)
03/31: 15,324 (3,130)___03/2006: 11,762 (4,203)
04/30: 17,094
05/10: 17,612
-ziprealty resale inventory includes SFR/Condo/MFR/Land Parcels
-(sale figure) includes new and resale homes from Data Quick News
1.The number of new listings on the market in Orange County are more than twice what they were 17 Months ago. Plus, many of the homes listed in the interim have gone into foreclosure.(more inventory)
2. The mortgage rates are a full percentage higher now for borrowers with sterling credit. The higher the rate goes, the less potential buyers can afford to pay. (less buyers)
3. Credit quality is sneaking back in lending, so no more "exotic" loans to folks that really couldn't afford it in the first place. (Even less buyers)
4. The Default & foreclosures are steadily rising (more inventory)
5. The existing exotic loans that trigger automatic payment increases will come month after month now for at least another 5 years. Many borrowers who were hoping against hope that magically their "income" would rise, or there would be continued "appreciation" in the home market, allowing them to re-fi into yet another exotic loan will wind up in REO status as well. (more inventory and less buyers)
Law of supply and demand*.
Right now the supply of homes for sale is increasing, and the demand of people that are "qualified" to buy, and want to buy is decreasing. Therefore the prices will continue to drop IMO.
*For some unknown reason [/sarcasm], this "law" does not seem to apply to the Oil companies. | |
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Kibbles
Premium
join:1999-07-31
Mission Viejo, CA
| Re: Homeowners: Mortgage Interest, Property Tax & Uncle Sam said by dogma :I don't know what they will be 3-5 years from now, but I am satisfied the values will continue to decline for the next 24 Months. Look at this: Well next year is an election year..I wonder will that effect the market if say we get a multi-billion dollar national health care program...and/or the now defunct sub-prime lending companies still around next year get bailed out? | |
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dogma
Premium
join:2002-08-15
Boulder City, NV
| Re: Homeowners: Mortgage Interest, Property Tax & Uncle Sam said by Kibbles :Well next year is an election year..I wonder will that effect the market if say we get a multi-billion dollar national health care program...and/or the now defunct sub-prime lending companies still around next year get bailed out? Can't be much worse than the current Trillion $ Iraq oil program. | |
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Kibbles
Premium
join:1999-07-31
Mission Viejo, CA
1 edit | Re: Homeowners: Mortgage Interest, Property Tax & Uncle Sam China could sell off all their T-bills  all 200+ billion dollars worth. | |
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FutureMon
OW My Eyes
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join:2000-10-05
Colorado Springs, CO
clubs: 
1 edit | The company that handles the sale of much of the real estate in my area seems to think that over the next 24 months, based on their knowledge of the local market and their recent activity, it's either going to stay about where it is, or get worse. It will not get better.
Why couldn't we have something in place that could protect homeowners that aren't in default - or at least segregate them?
For instance. I'll assume most of you know how "comps" work. The appraisal value of a home is based on a number of factors such as lot size, # bedrooms, # bathrooms, square footage, etc.
Why don't foreclosures of a particular set of properties only affect properties of similar type? So a foreclosure of a 5 bedroom home doesn't affect the 3 bedroom homes, and vice-versa. Or for that matter, have it only affect the homes that are financed by that lender. If they lend to a risky borrower it could affect their whole portfolio - so it might have the same effect as what is happening to the lending rules today - only limited to the companies who took the risks in the first place.
It wouldn't solve the problem - but it might even the spread a little bit. Why should the foreclosure of a 2 bedroom bungalow affect the price of my 5 bedroom mansion?
Just a thought. I am just throwing it out there.
- FM
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Kibbles
Premium
join:1999-07-31
Mission Viejo, CA
4 edits | Re: Homeowners: Mortgage Interest, Property Tax & Uncle Sam said by FutureMon :The company that handles the sale of much of the real estate in my area seems to think that over the next 24 months, based on their knowledge of the local market and their recent activity, it's either going to stay about where it is, or get worse. It will not get better. Why couldn't we have something in place that could protect homeowners that aren't in default - or at least segregate A Realtor that specializes in this area e-mailed me the same opinion that prices will stay the same or even drop...I read that the prices are expected to drop a total of 7% over the next 2 years...yikes...there goes ~ 50k.
With the amount of Foreclosures,dropping prices,..you can use those as comps and ask for a reduced property assessment...thus reducing your property taxes.
The question I have is where the rental/lease prices will go...up or down?
I was thinking that a lot of Foreclosures could be avoided by leasing the house out...the owner could be taking a small loss per month..but they could be able to keep it long enough to sell it when the prices rise.
Too bad there is no state/federal program that could help a homeowner stay out of a Foreclosure. | |
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aztecnology
O Rly?
Premium
join:2003-02-12
Murrieta, CA
 ·Verizon FIOS
| Re: Homeowners: Mortgage Interest, Property Tax & Uncle Sam said by Kibbles :said by FutureMon :The company that handles the sale of much of the real estate in my area seems to think that over the next 24 months, based on their knowledge of the local market and their recent activity, it's either going to stay about where it is, or get worse. It will not get better. Why couldn't we have something in place that could protect homeowners that aren't in default - or at least segregate A Realtor that specializes in this area e-mailed me the same opinion that prices will stay the same or even drop...I read that the prices are expected to drop a total of 7% over the next 2 years...yikes...there goes ~ 50k. With the amount of Foreclosures,dropping prices,..you can use those as comps and ask for a reduced property assessment...thus reducing your property taxes. The question I have is where the rental/lease prices will go...up or down? I was thinking that a lot of Foreclosures could be avoided by leasing the house out...the owner could be taking a small loss per month..but they could be able to keep it long enough to sell it when the prices rise. Too bad there is no state/federal program that could help a homeowner stay out of a Foreclosure. In a declining market, rents typically go down, because of the increased supply in rental units. Secondly most people don't have enough money to carry a second residence without relying on MEW, and most rentals don't cash flow above $200/sqft
I'd expect a lot of market areas to decrease 3%-7% per year for the next 3 years, or about 15%-20%. What will trigger the snowball effect will be banks and their non-performing assets.
There used to be a program that did a decent job of preventing foreclosures, they use to call it Traditional Lending Standards
You know, where you could comfortably afford a home that was 3x-4x your income - When the median income for most of SoCal is in the $50k-$75k range, it's easy to do the math.
For housing to get back to a normal equilibrium, prices have to fall further than the 15-20% I'm predicting. We'll just have to wait and see...
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| goddfather40
join:2000-12-16
Aliso Viejo, CA | I'll just say that I make $50K-$100K a year and I own a condo with a $380,000 loan on it. My tax refund was about 7K. I claim '1' on my W-4. | |
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coxta
Ultramundane
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join:2000-07-15
LALALALALALA
 ·Pacific Bell - SBC
| If you don't amortize the points over the life of the loan, they are deductible the first year in full. The interest is deductible, and taxes are deductible. I couldn't say whether or not you would get a refund. I never have. I don't think owning a home is a great deal, tax-wise, there is some subsidy by the government, but it's not as much you most make it out to be. The benefit is having some control over your life by having some autonomy and by building equity. It can be either a place of your own, or an investment.
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coxta
Ultramundane
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LALALALALALA
·Pacific Bell - SBC
| In the stocks vs real estate returns, stocks have always won, hands down. For a five year investment, stocks will probably win out too. I agree, look for a good deal. Perhaps a fixer-upper, if your handy. You could get paid for appreciation, equity building and for your labor. In the short run, if you do it yourself, you just make a profit on labor. A home that is just updated, doesn't really gain much in value and in fact the investment in the updates are a loss of a few percent.
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Experience is the knowledge that enables you to recognize a mistake when you make it again. | |
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jig
join:2001-01-05
Hacienda Heights, CA
| Re: Homeowners: Mortgage Interest, Property Tax & Uncle Sam said by coxta :In the stocks vs real estate returns, stocks have always won, hands down. For a five year investment, stocks will probably win out too. that's not true. you can only come to that conclusion by looking at a very superficial market value while neglecting other real, tangible economic benefits. not to mention that most of the growth stocks don't offer dividends so your risk stays high. further, if you leverage your way in with stocks you run a huge economic risk, but with real estate you have a much more secure safety net, and at least one way to generate wealth is to manage debt safely and productively.
the only problem with real property is that it takes a reasonably large stake to get in.
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A man compounded of law and gospel is able to cheat a whole country with his religion and then destroy them under color of law. -Ben Franklin | |
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jig
join:2001-01-05
Hacienda Heights, CA
1 edit | Re: Homeowners: Mortgage Interest, Property Tax & Uncle Sam like i said earlier, most of the stocks that make up those indexes don't pay you dividends. so, even if you choose correctly on the stock side, the most you have is the value of the stock.
if you invest in the real estate, you (can) get recurring income and tax breaks on the mere owning of the property.
oh, and you can't buy insurance to cover losses in stocks... | |
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coxta
Ultramundane
Premium
join:2000-07-15
LALALALALALA
·Pacific Bell - SBC
| Cash isn't an ideal investment scheme, you want wealth. Wealth is a material or resource. With stocks, you can sell some off and purchase newer investments that will increase in value. Real estate isn't a bad investment, it's just more problematic. You can buy insurance, but it only covers some of the cost of reimbursement. Maintenance is continual, it only earns a dividend if you have tenants, it has to be managed and if you don't manage it yourself, then you pay a good portion of that income to someone else manage it.
Stocks are portable and you can control them remotely very easily; you can get in and out; you can take a trip for a year and not worry about your investment vehicle. It's more like gambling, but if you set parameters to follow, then you can hedge your bets. Overall, the net value of stocks increases more than real estate.
There are times to be invested in real estate and you should be invested in stocks and bonds all the time. Real estate has it's own unique business cycle. I've had a lot of friends whose families initially invested in real estate and they eventually sold off most of the holdings to buy stocks. It's just so much easier and the gain was better.
There are a few real estate investments that can potentially be ideal, such as owning a piece of property and having a long term lease. One of my friends families owns land that some McDonald's sit on. Now that, is just a pretty stable investment and return, but it's more serendipity than plan.
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Experience is the knowledge that enables you to recognize a mistake when you make it again. | |
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jig
join:2001-01-05
Hacienda Heights, CA
| Re: Homeowners: Mortgage Interest, Property Tax & Uncle Sam said by coxta :Cash isn't an ideal investment scheme, you want wealth. Wealth is a material or resource. With stocks, you can sell some off and purchase newer investments that will increase in value. Real estate isn't a bad investment, it's just more problematic. You can buy insurance, but it only covers some of the cost of reimbursement. Maintenance is continual, it only earns a dividend if you have tenants, it has to be managed and if you don't manage it yourself, then you pay a good portion of that income to someone else manage it. Stocks are portable and you can control them remotely very easily; you can get in and out; you can take a trip for a year and not worry about your investment vehicle. It's more like gambling, but if you set parameters to follow, then you can hedge your bets. Overall, the net value of stocks increases more than real estate. wealth is not stocks, they are as close to cash as anything can possibly be. and the insurance doesn't cover "some", it covers "most", management doesn't cost a "good portion", and maintenance is deductible.
stocks are volatile, or, if you are in a mutual fund, you don't make the "value" of the stock and have to continually pay fees and taxes that bring you down below the "net" value of owning a rental property.
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A man compounded of law and gospel is able to cheat a whole country with his religion and then destroy them under color of law. -Ben Franklin | |
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sholling
Premium
join:2002-02-13
Hemet, CA | Re: Homeowners: Mortgage Interest, Property Tax & Uncle Sam You also can't sleep in stock. | |
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jig
join:2001-01-05
Hacienda Heights, CA | Re: Homeowners: Mortgage Interest, Property Tax & Uncle Sam (presumably, you wouldn't sleep in an investment property either, you'd want someone else to) | |
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Bloominite
Premium
join:2004-04-17
clubs:
·DSL EXTREME
| Re: Homeowners: Mortgage Interest, Property Tax & Uncle Sam said by jig :(presumably, you wouldn't sleep in an investment property either, you'd want someone else to) You could be banging the tenant. | |
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coxta
Ultramundane
Premium
join:2000-07-15
LALALALALALA
·Pacific Bell - SBC
1 edit | Actually stocks are wealth. You own a portion of a company and there are corresponding certificates that validate the ownership. Fund deposited in a bank aren't true wealth, since the bank holds the investment vehicles, but there is minimal coverage in the form of FDIC.
If you own a home, the value appreciates, but your money is tied to your home and is only available with a refinance or equity loan, but it is a loan and you continue to pay. Rental property can be income generating, but it requires more work and constant surveillance. If you really want income property, think of a REIT.
As I mentioned before, there is a business cycle and a real estate cycle. If you look at investment as a hedge against inflation, equities provide a historically more predictable and constant return that surpasses real estate.
Here is another way to think about it. What causes a home price to increase? Inflation. There is no change in the home, just the underlying value of the land. In reality, there is plenty of land. Investing in a company is true growth. Products and services are increased and they increase over inflation. Price increases in real estate are like price increases in milk. It's purely inflation.
Rhetoric versus fact? If you have no data, you just have an opinion.
»graphics10.nytimes.com/images/20···arge.gif
»infoproc.blogspot.com/2005/08/eq···ate.html
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jig
join:2001-01-05
Hacienda Heights, CA
| Re: Homeowners: Mortgage Interest, Property Tax & Uncle Sam inflation is not the reason why home prices go up, it's demand. the same thing with milk. and, generally, the same thing with stocks.
and i guess i'll say it one last time, every single graph/statistic/data that i've seen does not compare apples to apples when comparing the value of real estate to the value of, for instance, the dow. every single one is just comparing the sale price, and misses out on a much better number, ROI. even the graphs that SAY they are comparing ROI always just compare the DOW and/or the s&p. it's idiotic.
i'm sure there is a home grown index that's entirely made up of stocks that give dividends. comparing that, and the dividend payments, to the value of a house AND it's earning potential, would be an interesting graph.
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A man compounded of law and gospel is able to cheat a whole country with his religion and then destroy them under color of law. -Ben Franklin | |
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dogma
Premium
join:2002-08-15
Boulder City, NV
| OK, this is a good Off-Topic topic, but I think it needs qualification. At least for my 2¢ input.
First, a home (that one lives in) is not really an "investment". It is a necessary expense, however, once the mortgage is paid off, it can lower the overall cost of living for the owner. Lowering expenses is a better benefit than increasing income, and could be looked at as a "type" of investment.
So, lets make sure we are not clouding the issue between investments. A stock/equity is usually an "appreciating" asset over time. Investment real estate can be both an "appreciating" asset and a "performing" asset. Stocks only "perform" if they happen to pay dividends. Generally these dividends are re-invested. About 66% of the S&P index companies pay dividends. But the reality is an investor would need to invest in each dividend paying company individually, vs. a S&P fund.
Now, Equities vs. investment real estate. I would not include REIT's as investment real estate at all, as a REIT is a company, usually traded publicly, that manages a portfolio of real estate to earn profits for shareholders. Therefor another equity.
Let's also be realistic about individual "investment windows" and "management time". The days of Buy-and-forget stocks like AT&T, IBM, GM are long gone. To minimize the management time, and equity investor would need to invest in a managed portfolio, such as one based on the S&P.
said by wikipedia--> »en.wikipedia.org/wiki/Passive_management :
Mutual fund investors
Dalbar Inc., a market research company, found that during the 20 years from 1984 to 2004, the average stock fund investor earned returns of only 3.7% per year, while the S&P 500 returned 13.2%. On an inflation adjusted return, the average equity fund investor earned $13,835 on a $100,000 investment made in 1985, while the inflation adjusted return of the S&P 500 would have been $591,337 or 43 times greater.
If one is seeking the type of return coxta is speaking about, I would think it only fair to say "management time" would be equal between an equity investment and an income real estate investment. With respect to "investment window"; we all would like to have $100K to invest, and have that sit untouched for 50 or 75 years, where it becomes $10 Million. But that isn't reality either. Most of us have an investment window of 20-30 years. From the time at dawns on us that one day we will be old, and may not be able to work, or want to work, to that day. I will use a 25 year timeframe. Moreover, we need to equalize the investment for a better apples-to-apples comparison.
So, lets look at 2 investments, with 16-year Horizons. One in S&P individual stocks, which must be managed, and the other in income real-estate, that must be managed as well.
Investment A: S&P stocks, amount: $100,000
Over 16 years @ 10.6% (with dividends reinvested) based on--> »www.financial-planning.com/pubs/···007.html )= In 16 years, the investment appreciation" will be worth $541,165.
Investment B: Investment real estate, (20%)down payment: $100,000
Over 16 years @4.4% this investment "appreciation" will be worth $215,215.
However, Investment B has a "performing" component that should be added. Rents will rise 5% every year, so this investment will kick off an additional $222,185 in gross profit, therefore putting Investment B at $437,000
If we move our investment window's out to 25 years, when Investment B's mortgage is fully paid off, we have:
Investment A: Over 25 years @ 10.6% will be worth $1,399,030.
Investment B: Over 25 years @ 4.4% will be $299,813 + the original principal value (now retired debt) $400K = $699,813 + Performance over 25 years of $348,129 = $1,047,942.
Additionally, Investment B now performs to the tune of $108,000 in gross profit per year.
Investment A can become performing now by raking off the interest every year; kicking off $148,297 per year.
Obviously, there are a ton of assumptions here. But I would say the equity investment is much more risky (and therefore a greater return overall). The best thing to do is take your $200,000 and invest in both? | |
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jig
join:2001-01-05
Hacienda Heights, CA
| Re: Homeowners: Mortgage Interest, Property Tax & Uncle Sam there are larger tax benefits to investing in the property, especially when you sell, and i think if you could get 10% a year for 16 years, off of investments, you'd be a superstar/it would be 100% of your time. and i don't think you'd need to be anything special to get the return on the property.
but, getting the full rent out of the property might be the mitigating comparison factor.
stocks are much better if you can invest in them with some kind of retirement fund that won't charge you tax once you retire, but of course those are limited as to investment.
i think we're missing something in the calculation, but i can't put my finger on it right now. i do like the analysis.
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A man compounded of law and gospel is able to cheat a whole country with his religion and then destroy them under color of law. -Ben Franklin | |
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coxta
Ultramundane
Premium
join:2000-07-15
LALALALALALA | Almost everyone who owns a home, owns stocks. Not everyone who owns stocks, owns a home. | |
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coxta
Ultramundane
Premium
join:2000-07-15
LALALALALALA
·Pacific Bell - SBC
| All that sounds well and good, but in practice it happens this way.
You save money and acquire a down payment and then obtain a long term mortgage. On average 30 years (although now I'm seeing 40 years mortgages). When your house is paid off, all your money is in your home. You may be able to take some of this equity out, but you still have to pay back the loan amount. So your house rich and cash poor.
Having a home isn't bad, it's just not a terrific investment and it's probably best not to think of it as an investment - it's a place to live.
If you want to sell you home when you retire and move to another location with a lower cost of living then it makes a great investment. You can cash out and live well. If you lease it out, then you've got all your principle tied up or you can take out a 2nd mortgage and have a bolus of cash, but pay it off with the lease. However, you have to always have a renter, because the mortgage is always due every month.
I can have equities that pay dividends or I can cash out a portion each time I want cash. You can't sell part of your house each time you want cash. Also, when you buy real estate, you purchase something real and unless you're involved in some special investment scheme, you purchase the entire house, not a portion of it. That is to say, you can buy 1 single stock or 10,000 stocks, but you can only buy a multiple of one house each time.
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Experience is the knowledge that enables you to recognize a mistake when you make it again. | |
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coxta
Ultramundane
Premium
join:2000-07-15
LALALALALALA
·Pacific Bell - SBC
| Rent's don't always decrease. As housing prices increased, the rental prices stayed close to the same, the had already increased. Now, as fewer people are able to purchase homes, rental prices increase. It seems a bit counter-intuitive, but that's the way it seems to have worked here in L.A.
Where do I come about this information? I have connections with a group that does all types of real estate ventures, residential and commercial property sales, and property management.
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Experience is the knowledge that enables you to recognize a mistake when you make it again. | |
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See 33 replies to this post | |
| cmaenginsb
Premium,MVM
join:2001-03-19
Palmdale, CA
| Hmmm, having less money is going to allow me to eat better? That's a rich one. The reality is it will force people to buy the less expensive, less healthy and more environmentally devasting mass produced crap that is sold in the markets.
The same would be true of other choices as well. You would see less new cars on the road as people can't afford the loans to buy them further increasing pollution. Since housing costs would remain out of whack more and more people would be stuck commuting from the suburbs further increasing the problem.
You idea of a reccession is just as utopian as the one you want to take the clue bat to. | |
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jig
join:2001-01-05
Hacienda Heights, CA
| not true.
having less money might require people to buy groceries and eat "made" food rather than fast food. less fast food all the way around would be great for everyone. starbucks would drop franchises, etc.
any new car, even a prius, causes more harm to the environment in it's manufacture than almost any reasonably well upkept economy car puts out in it's lifetime of use. people buying less new cars is overall a good thing. people using cars less is much better.
rather than people commuting from the suburbs, they would either have to rent closer in to town (how are they going to afford the gas and the mortgage?), take public transport and drop the second car, or get a job closer to home. the squeeze would get them to change one way or another. those that won't would go bankrupt by ignoring the signs.
i can see where you're coming from, but i don't think you're thinking about as deep a recession as i am. we're talking about something on the scale of a Katrina, but in the financial markets (though possibly only in housing and those markets immediately adjacent, like residence construction, loans, etc).
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A man compounded of law and gospel is able to cheat a whole country with his religion and then destroy them under color of law. -Ben Franklin | |
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sholling
Premium
join:2002-02-13
Hemet, CA
1 edit | Re: Homeowners: Mortgage Interest, Property Tax & Uncle Sam I've been sitting back and watching where this conversation is going and I can't hold my tongue anymore. I'm getting a little nauseous. Next thing you will be telling us is we just need a strong leader to create your little utopia. Someone to force people to do the things they don't want to do, but that you in your infinite wisdom KNOW are the right things. Maybe we could call our new leader Uncle Joe or chairman something, or something equally colorful. The important thing is to force people kicking and screaming into lifestyles that meet your idea of utopia no matter how much they hate it.
You usually make a lot more sense than this.
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"Government is the great fiction, through which everybody endeavors to live at the expense of everybody else."
--FREDERIC BASTIAT--
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aztecnology
O Rly?
Premium
join:2003-02-12
Murrieta, CA | Re: Homeowners: Mortgage Interest, Property Tax & Uncle Sam Yeah, what he ^ said. Plus Starschmucks dosen't franchise... | |
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jig
join:2001-01-05
Hacienda Heights, CA
| that's not quite what i think i'm advocating. and i don't see some righteous moral authority figure playing a role in this: it would probably just be another inefficiency. you guys might be right in that a deep recession would harm too many responsible livelihoods to ever end up resulting in something "better", but i guess i'm getting very pessimistic about the slow change approach. not enough people care, because they think (correctly, so far) they can get by without caring. how do you change that without affecting almost everyone?
i wonder how many houses in NO are being rebuilt with studs every 3ft instead of every 16in.
anyway, i understand your problems with my idea. what better ways are there to teach people about long term affects of short term rationalizations? (not rhetorical)
i'm not personally spread eagled to the winds of change, financially, but i'm not very insulated either. a deep recession would probably mean i'd have to move to find work, which would mean taking a huge hit on the sale price of our house. that, or a career change (on the scale of blue collar to white collar).
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A man compounded of law and gospel is able to cheat a whole country with his religion and then destroy them under color of law. -Ben Franklin | |
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sholling
Premium
join:2002-02-13
Hemet, CA
| Re: Homeowners: Mortgage Interest, Property Tax & Uncle Sam The inefficiency of rebuilding NO is yet another government fiasco. How many people and business do you think would choose to rebuild on land that sits below sea level if this wasn't a government bailout with a promise of endless future bailouts? Darn few! I don't have a huge problem with helping out with a 10 cents on the dollar (land value only) deal for those that will walk away and move to higher ground. Those with insurance won't be that badly hurt and those without really shouldn't get anything. Let the flooded areas go back to being wetlands.
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"Government is the great fiction, through which everybody endeavors to live at the expense of everybody else."
--FREDERIC BASTIAT--
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is paying.