by "Wobbles the Mind" (wobblesthemind)
Published 01/06/2017 at 21:42
by "Wobbles the Mind" (wobblesthemind)
Published 01/06/2017 at 21:42
Tags: Advice for Adulting
STARS: 0
Whelp, 2017 marks year number 4 in my Five-Year Plan. Next year between February and May I’ll be changing my living arrangements. Currently I reside in a one bedroom apartment where the monthly base rent is $734 (total $844). Originally I wanted to buy a home on my own — I even setup a crazy plan to prepare me for it — however I’m beginning to wonder if all the info I’ve been reading severely downplays the cost of home ownership. What should I know before considering a home? Were there any surprises? Thanks in advance!!
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More insight into what I’m thinking:
My biggest concern is how home owning is an asset. Even with a $200,000 house appreciating at 4% annually over ten years, you end up with nearly $300,000 in house. That’s spectacular!
But if I financed that $200,000 at 4% APR over 15 years then I will have paid $58,000 in interest during those ten years. Even just five years of interest payments would come out around $35,000. The house would have gained around $43,000 at that 4% annual appreciation rate over that same 5 years, though!
It looks as if as long as I stay put for 5 years (assuming appreciation rate and interest rate are similar over 15 years) then the house covers the interest payments. After that, the longer I stay (or sooner I pay it off) the more the home covers the increased upkeep, updates, and just becomes a great thing financially! So the asset aspect I can see, but we are working with very large numbers and I’m wondering what kinds of problems that causes, especially during the first five years.
Thanks again, apologies for mind spluging on the monitor.
"jkm7680" (jkm7680)
01/06/2017 at 21:44, STARS: 10
Houses don’t necessarily increase in value, don’t count on it. Take Detroit in general as an example.
"Dr. Zoidberg - RIP Oppo" (thetomselleck)
01/06/2017 at 21:45, STARS: 3
Whatever you buy, make sure you can afford to live there and can stand living there longer if things go south.
"random001" (random001)
01/06/2017 at 21:49, STARS: 1
Buy a G90 5.0 HTRAC, live in it, ..., Profit!
"JQJ213- Now With An Extra Cylinder!" (jqj213)
01/06/2017 at 21:53, STARS: 4
The housing market though, just like any market, has extreme ups and downs.
In my area especially we are in a huge bubble right now and when it bursts home values are going to plummet leaving someone like you who just bought in totally screwed.
Just remember you also are giving up a lot of freedom. You can’t just move as quickly as you could if you were renting. It’s a really large commitment. You also become responsible for any and all repairs. And taxes.
"FTTOHG Has Moved to https://opposite-lock.com" (alphaass)
01/06/2017 at 21:59, STARS: 0
Are you planning to buy new or used? That changes the things you need to look for quite a bit.
"Wobbles the Mind" (wobblesthemind)
01/06/2017 at 22:00, STARS: 0
Ha! Well now that you mention it the G90 may be the same price as a down payment on a home by that time.
"Wobbles the Mind" (wobblesthemind)
01/06/2017 at 22:05, STARS: 0
New, I live in the American Southwest so new homes are abundantly built and relatively cheap to enter.
"Quadradeuce" (quadradeuce)
01/06/2017 at 22:06, STARS: 5
Buy less house than you can afford, especially because home ownership always cost more than you expect.
We were approved for$200k, but bought a house at $129k. It had allowed us a lot of financially freedom when other things came up.
Do not justify a home purchase as an investment. That MAY end up being a benefit, but not always, especially when you consider the cost of maintenance.
Also, do not rush this process. Take your time and look at as many homes as you can. Find the one that will make you happy long-term.
"ADabOfOppo; Gone Plaid (Instructables Can Be Confusable)" (adabofoppo)
01/06/2017 at 22:18, STARS: 7
There is ALWAYS something that needs attention. ALWAYS.
No, it doesn’t matter if your house is brand new, in fact I would be even more wary because it was just built. Contractors take shortcuts.
There is ALWAYS something that needs attention.
Budget for replacing at least two major items in the same year.
Choose your neighbors wisely because you’re stuck with them for a very long time.
Home warranties aren’t worth shit. See comment about budget.
"Rico" (ricorich)
01/06/2017 at 22:19, STARS: 1
Besides finances also consider things like what new developments are nearby and how that can affect values in the area. If you’re planning on having a big family (15 years is a long time) you should take that into consideration.
If your willing to pay for some repairs or DIY you can get a house maybe one owned by the bank for cheap and renovate it you can go that route.
You can check zillow, trulia etc to check the houses in a neighborhood you’re considering to see when they were last sold and for how long and an estimate of what they’re worth. It can give you a sense of the type of neighborhood.
You can consider a 2 family house, rent it out to help cover the mortgage. That can help you put money towards you’re rainy day fund for maintenance and random repairs: You can live there for a few years and maybe if you decide to move you can then rent out both sides of the house and possibly generate some income. Not all areas allow this so find out in advance.
Eventually you’ll be able to sell the house when you’re older and if housing values are in your favor - you might make a lot of money. This is not always the case though as others have mentioned.
"FTTOHG Has Moved to https://opposite-lock.com" (alphaass)
01/06/2017 at 22:21, STARS: 3
Gotcha. Same here, though I bought a used one. Main thing would be to do some research on the builder. Personally, I would avoid KB Home. Don’t buy the lowest $/sq ft you can find, even if it is a promotion. I’ve seen plenty of 5-10 year old $200k houses around here that need $10k+ in repairs already, because they were poorly built. They look nice from the street, but they have major hidden issues. Also, one thing that I’ve learned from friends and acquaintances that have bought new is that is good if possible to wait until the subdivision is nearly built-out (or at least most lots sold). The obvious reason is that you don’t have to deal with the construction, but also the values don’t really go anywhere as long as new homes are still going up. It also decreases the chances that the originally developer will sell to another and screw over everyone who already bought a home there. A coworker bought one of the first new homes in a $250k neighborhood, but when it was about half full, sales slowed and the developer sold to another one that tossed up a bunch of $150k homes to finish out the neighborhood that hurt the values of the ones already there.
"John Norris (AngryDrifter)" (angrydrifter)
01/06/2017 at 22:33, STARS: 3
I vote yes, buy a house.
If inflation kicks in, and it might, your calculations are way off. You will do far better. Inflation devalues the dollar. Everything goes up, groceries, insurance, cars, your wages. But the size of your mortgage stays put. You make out and the lender takes the hit.
A couple of rules I have for buying a house. Sometimes I follow them. When I don’t I regret.
- flat driveway
- short path, same level, and not on carpet, from garage to kitchen
- short path from kitchen to main TV area
- master bedroom on main floor
My current house meets the first three. My last house met 2 -4. Both great houses but I would like all 4.
A few other features to think about:
- You can’t have too big of a garage
- You can have too long of a driveway, you do need to take the trash out and you do need to get the mail, sometimes in bare feet, in the rain, in January.
- You can also have too big of a lawn, it can be a pain to mow a lot of grass.
- I think I saw you are in the southwest. You can have too short of a driveway. And I’ve seen some short ones, particularly in the southwest. If you don’t have room to wash your car or have friends and family park in it, that can be a pain.
Good luck! It’s an exciting and expensive time of your life. But very rewarding.
"wafflesnfalafel" (wafflesnfalafel1)
01/06/2017 at 22:42, STARS: 2
Don’t over spend even if your agent or finance person says you can afford something. The neighborhood is as important as the individual house you choose. New is not always better (both for the house and neighborhood.) Have a slush fund for repairs/unexpected costs. Ask for a copy of the HOA rules (if the house is in an HOA) before signing on the dotted line, and make sure you can live with them. Enjoy the search - you gonna be a real-estate mogul!
"My citroen won't start" (lucasboechat)
01/06/2017 at 22:52, STARS: 1
Get a bigger apartment. No good ever comes from living in a house.
Source: The person who lived in 5 apartments ranging from 5400 sq.ft to 2150sq.ft and never in a house.
"FTTOHG Has Moved to https://opposite-lock.com" (alphaass)
01/06/2017 at 23:15, STARS: 4
Yes never buy near the max of what oh get approved for. You’ll need that money for something else that will come up. Along those same lines, a bigger down payment isn’t always better. My realtor talked me out of putting pretty much my entire savings into the down payment and just paying the minimum I needed to. Yes that means higher monthly payments and less equity to start, but when I needed $5,000 for a new AC system the second summer I owned, it was nice to just have the cash on hand for that.
"fintail" (fintail)
01/06/2017 at 23:31, STARS: 2
A 200K house lol I can’t imagine, I’d have to go back in time 25 years here, and even then it would be an old box.
Definitely spend less than your approval, and keep an emergency fund - it’s not a matter of if, but when something happens. I don’t feel comfortable having a mortgage more than 3.5x income, and 3x is all I would personally do right now, less if possible - as I like cars and vacations and toys. Also don’t forget the down payment and fees. Shop carefully, the quality of modern construction varies insanely, and there’s a lot of shoddy stuff out there. Sometimes I think the renting Euros have the right idea.
"shop-teacher" (shop-teacher)
01/06/2017 at 23:32, STARS: 2
Houses are nearly all built like garbage by largely unemployable idiots. They are a gigantic never ending money pit. Figure at least $1000 a year for light repairs, maintenance and very small upgrades. Projects of any significance cost at least $5k, with $10k and up being VERY easy to do.
Some examples:
I had to do some work on my garage to keep it able to keep vehicles dry and not fall down. New facias and soffits, new garage door (old opener, which is just now going on the fritz), new roof, repaired door opening and front wall. All that was $5k, and the floor is still cracked, spalled garbage, the man-door is still rotten and doesn’t work in the winter, the electrical is still hot garbage, and still haven’t painted the new facias and soffits.
New roof for the house because the 11 year old roof was defective,but the shingle company denied the warranty claim, $10k.
Fridge shit the bed, wanted a decent stainless one, middle of the road type fridge, $2k.
Water heater started leaking, luckily slowly, $500 if you can do it yourself. Sounds like a fun Sunday evening, right?
It never fucking ends. I’m going to stop listing examples before I start crying. I’ve only owned the house 6-1/2 years, and that isn’t half what I’ve spent on it ... no wonder I’m broke.
"Shour, Aloof and Obnoxious" (shour)
01/06/2017 at 23:44, STARS: 0
Remind me roughly where you are again? (Bought a house in El Paso just a year ago.)
"Wobbles the Mind" (wobblesthemind)
01/06/2017 at 23:54, STARS: 0
Up in Albuquerque.
"Shour, Aloof and Obnoxious" (shour)
01/07/2017 at 00:14, STARS: 1
Yeah, when you threw out those housing prices, that was my first guess; that or Phoenix. (Typical Cruces prices aren’t that high yet, but they been significantly higher than EP housing prices for a good two decades.)
I’mma have to meet up with you the next time I’m up there for the Asian groceries. (It’s seriously the closest city with a real Asian grocery...and there’s actually 2 or 3, so my mother goes nuts whenever I drive her up there from Alamo.)
"TheRealBicycleBuck" (therealbicyclebuck)
01/07/2017 at 05:48, STARS: 3
There’s a lot of good information in the other posts, so I’ll try not to rehash what they said and add a couple of other things not mentioned yet.
Remember that a house has to be furnished. With the maintenance that other people mentioned comes tools you will need to buy. Think about lawn equipment, hand tools, a ladder, etc. Factor these in when you are considering how much to spend.
My wife and I hate open floor plans because the noise in the kitchen always screws up the entertainment in the living room. It may not be an issue when you are alone, but if you get married and have kids, it can be a big problem. Our next house will have a separate media room where we can close the door and block out the noise from the rest of the house.
Don’t get anything with a flat roof. It may not rain much where you live, but when it does, you want that water to flow away from the house. When looking at property, try to imagine where water will go. Make sure that everything slopes away from the house. If the driveway slopes downhill into the house, pick a different one. If that one doesn’t get water in it, it will always be at risk from a car with an improperly set parking brake. pay attention to the drainage around the house and in the neighborhood. If it looks like the neighborhood drains through that property, it probably does.
Also avoid roofs where two slopes meet over or near the front door or front walkway. This will create a nice waterfall where you have to walk. Get a house with gutters or plan to add them. They are really worth the expense.
Icicles might look neat, but they are an indication of an insulation problem. If there are spots on the roof with snow and others that are bare, it’s easy to find the areas that need more insulation! Windows are another problem. Look for double-panes that are filled with an inert gas. If there are any windows with moisture or haziness between the panes, it will need windows repaired or replaced.
Pay attention to the wiring. Having a house that is pre-wired for Ethernet is really handy. Wireless works, but may require multiple access points if the house is large or if you have lots of neighbors with their own networks. Streaming works best over Ethernet cable, so look for wiring that goes to the places you need it - the same locations where you will mount your tv(s). Speaking of that, if you don’t want wires running down the wall, look for pre-wired power and cable high on the living room/den wall. If it isn’t there and you want it, plan on installing it when you move in.
When looking at homes, check your cellphone for adequate signal, especially if you don’t intend to get a landline. Also ask about the utility providers - gas, water, electric, etc. make sure there are at least two options for an internet service provider.
Take the time to visit the house during the day, in the evening, and over the weekend. This will give you some idea of how noisy the neighborhood is. We thought we bought far enough away from the tracks, but we can still hear the 3:00am train, even though the tracks are over a mile away. The neighbors will know these things, so before you buy anything, talk to the neighbors!
If your area uses pump stations or package sewage treatment plants, pay close attention to where those are located and the direction of the prevailing winds. It seems silly, but those things make noise and produce some nasty smells. This is one of the reasons we don’t like north Baton Rouge. There are chemical plants in the area and they don’t emit any pleasant smells. It’s not an issue in the summer when the prevailing winds are from the south, but it sure stinks when the north winds blow during the winter.
Buy some books on home repair. Just like Chiltons makes manuals for your car, the right book will show you the basics for repairing just about anything in your home.
When it comes to financing, pay close attention to your mortgage terms. Ours was sold to a lender that didn’t allow biweekly payments. They took the second payment and put it into an escrow account, then didn’t apply it to the mortgage when we sent in the rest of the payment. Next the we knew, they came after us for non-payment even though they had a couple of months worth of payments sitting in the escrow account that they created. Boy was I mad about that one!
Also watch for penalties for paying off the mortgage early.
I guess that’s enough for now do your homework there’s plenty more to watch out for
"yamahog" (yamahog)
01/07/2017 at 08:21, STARS: 0
Besides the 08 dip, they’ve been on the rise here: http://detroit.curbed.com/platform/amp/2016/4/26/11510354/detroit-real-estate-prices-neighborhood-comparisons
"random001" (random001)
01/07/2017 at 08:28, STARS: 0
I have great ideas.
"Quadradeuce" (quadradeuce)
01/07/2017 at 09:39, STARS: 1
Great point. Especially if you own a home, have a CASH nest egg for unexpected expenses. You also need to be putting money aside for capital expenses such as a new roof or siding down the road.
"jkm7680" (jkm7680)
01/07/2017 at 10:42, STARS: 0
That’s good to hear. I’ll take this one.
It’s still a shame that Detroit has so many beautiful abandoned houses though. But renovating one house doesn’t renovate the neighborhood.
"shop-teacher" (shop-teacher)
01/07/2017 at 10:47, STARS: 1
I took a look through the comments, and there’s one thing everyone left out. School districts. Even if you never intended on having kids, they make a HUGE impact on the value of the home. Do some research, make sure you buy in a good one.
"Frenchlicker" (frenchlicker)
01/07/2017 at 12:31, STARS: 1
There are many smaller places like this. I think it sets them up for a good comeback in the long run though.
"Frenchlicker" (frenchlicker)
01/07/2017 at 12:37, STARS: 1
I’ve learned one thing from watching others on things like that. Even if you think you can do a “small” project yourself price what it would be to have another to do it. It’s insane how long people leave projects unfinished that a contractor could have knocked out in no time.
"shop-teacher" (shop-teacher)
01/07/2017 at 13:10, STARS: 1
Truth. There are also some things that are not worth doing yourself. Drywall jobs can usually be done for marginally more by a pro, in a fraction of the time, without going through the utter torture of hauling, hanging it, taping, it and sanding it. I gutted the second floor of my house to the studs and remodeled it largely myself. I paid someone else to do the drywall. Cost me very little beyond what it would’ve cost to do it myself, and I saved untold hours of torture. Best check I ever wrote.
"CaptDale - is secretly British" (captdale)
01/07/2017 at 13:31, STARS: 1
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