Forum adverts like this one are shown to any user who is not logged in. Join us by filling out a tiny 3 field form and you will get your own, free, dakka user account which gives a good range of benefits to you: No adverts like this in the forums anymore. Times and dates in your local timezone. Full tracking of what you have read so you can skip to your first unread post, easily see what has changed since you last logged in, and easily see what is new at a glance. Email notifications for threads you want to watch closely. Being a part of the oldest wargaming community on the net. If you are already a member then feel free to login now.

 DarkLink wrote:
renting is a waste of money is stupid.

It's absolutely a waste of money if you can afford to responsibly purchase a home and then do so intelligently.

Going from living with the parental units straight to buying is probably a bad idea partly due to lack of life experience. Renting for a bit at least lets you learn how to run a household (which having a significant other who doesn't contribute complicates, trust me), and how to manage your finances for when emergencies pop up.

Edit: Me be dumb dum.

I think you're in the wrong thread.

It certainly would be a change of pace though.

Yes, yes I am.

That's the second time I've done that in as many days...

Housing is a great, long term investment. In time, the savings on rent and the growth in the property will give a great deal of wealth. But it needs time to happen. In the short term the cost of the broker, the settlement fees, the bank fees and any taxes will be major.

So my advice is that when you get to a point in your life when you're settled, where you know where you're going to be for the next decade or so, then buy a house.

 Haight wrote:
It's you. Especially right now its one of the most solid investments you can make. 8 years ago, not so much. Right now ? hell yes.

I walked into 40k worth of equity the day i signed the loan docs on my house. No 401k does that. Period.

Sort of. I mean, housing is a really solid investment, but the most important to remember is that it's a long term investment. Trying to win on trade, thinking about the equity (notionally) gained on purchase, well that's an invite for short term trading, and in the short term trading in housing will just kill you with transaction fees.


Automatically Appended Next Post:

 marv335 wrote:
My mortgage is less than the rent I was paying on my old place.
One of my few regrets in life is that I didn't buy a house in my 20's
rental money is wasted money.
You're paying someone else's mortgage when you rent.

If you're in a position to do so, buy.

True, though it's necessary to point out that position shouldn't just be financial, but lifestyle as well. If you don't know where you're going to be in a year or two, don't commit to a house. And when I say 'don't know', I mean geographically, professionally, a relationshipally.

And relationshipally is totally a word.

 cincydooley wrote:

 DarkLink wrote:
renting is a waste of money is stupid.

It's absolutely a waste of money if you can afford to responsibly purchase a home and then do so intelligently.

And my whole point was that not everyone can afford to responsibly purchase a home, and in that case it's a terrible, terrible investment. Or if the housing market crashes, in which case it's not so much an investment as an expensive place to sleep and store your stuff. I mean, I guess my point is, the OP asked if he should buy a house while he's living off $1,800 a month. He got a bunch of responses saying "buying a house is a great investment". For the OP, that's probably not the best advice at the moment, not unless he either finds a super-cheap house or gets a decent raise. Like I said earlier, hold off a bit and save up some money, pay off any debts, etc, until your better established and then take a look at owning a home.

 hotsauceman1 wrote:
How about giving me an example of why that is? And not just rehtoric.

Okay, these are some general numbers to describe how it works (the numbers will vary over time and from place to place, but not so much that the underlying strength of housing doesn't show through).

Let's say the house you want to live in costs $300k. With all the attendant costs it'll probably set you back about $315k in the end. That $315k loan, repaid over 30 years at 6% will cost you $1,889 a month.

In comparison, to rent that same house will probably cost you about $875 a month (house value to rental yield varies wildly, but a 3.5% yield is generally about right). That leaves you with an extra $1,014 in your pocket each month. Sounds great, but over time the situation will change.

Over time, your house will grow in value. Any given house will grow at different rates, and that rate will fluctuate wildly in the short term. But over the long term, on average your house will probably grow at about 4.5%. This means that after 30 years, when you've paid off your debt your house will probably be worth about $1.1 million. Which sounds mad, but that's how exponential functions worth - go look at what you could have bought a house for 30 years ago.

Now, over those 30 years you had another $1,014 in your pocket each month. What if instead of squandering that money, you invested it in a mutual fund? Forecasts (for what they're worth) peg future market returns at about 8%. Taken at face value, $1,014 over 30 years will grow to a little over $1.5 million so that sounds like a better deal but there's a catch - you won't always be paying $1,014 less for your rent than you would for a mortgage. While the mortgage payment is fixed, your rent will grow over time, long term they will grow at a rate slightly higher than inflation, about 3.5%. So what that means is that while in the first year you'll be paying $1,014 less for your rent than you would for a mortgage, in the second year your rent has grown 3.5% while your mortgage is still fixed at $1,889. By the end of the 30 year period you'll be paying more in rent than your fixed mortgage payment. This means that while in the short run you'll be able to invest $1,014 more than if you bought, over time you'll actually be paying more in rent, and either drawing down on your mutual to pay for it, or investing less by that stage than you would be if you owned. What this means over time is that by investing the difference, and drawing down when there's a shortfall, you end up with an investment a little over $750k. That's a pretty nice nest egg, but less than the $1.1 million house you'd have if you bought.


So, all up buying the house means you're about $350k better off in 30 years than if you rented and invested the difference. That might look nice and neat, but there's a lot to keep in mind. FIrst is that the various rates used are historic averages, they aren't predictions of what those rates will be in the future, and even if they hold as long term averages then they may vary wildly anyway based on the specifics of the house etc. And it doesn't take much of a shift for the numbers to swing heavily - change the rental yield to 4% and you end up paying almost as much in rent over 30 years as you paid for the mortgage, but project a 10% return on the mutual fund and renting & investing becomes the better option. Honestly, the results are too close, and the numbers too speculative to decide the right course of action one way or the other.

But there are other, major factors that advantage home ownership;
Forced saving - it works on paper to say that you'll save the extra money after your rent. But whereas you will make sure you've got the money to make your mortgage payment, its a lot easier to let a monthly savings plan slide for a month, and the next month, and the month after that.
Ownership - if you rent, then you're always at the mercy of your landlord whenever your lease is up. A 12 month rental agreement means you know where you're living for the next 12 months, and not one day beyond that.
Hedging - You will need a place to live every day for the rest of your life. If you own a place and have a fixed mortgage then you know what that roof over your head will cost you. On the other hand, you have no control over what direction rent will go in, this means there's a risk that one day you might be priced out of the house you've come to see as your home.
Taxes - I didn't include these above but they advantage ownership heavily. Any investment you have will be taxed, at least it is when you cash it in. But a home appreciates in value tax free, and even when sold you keep the money. And in the US you actually claim a tax deduction on interest paid on your mortgage.


Automatically Appended Next Post:

 Haight wrote:
You get whatever equity you've built in the property back when you sell property that you have mortgaged. Sure, it can go up and down, but on an infinite timeline, properties recover from housing bubbles, and always gain value as long as they are maintained.

Not always. Some areas will decline in value for a host of reasons - local economic decline, for instance. I have an uncle who owns a holiday home, and about five years ago he rejected an offer of about $850k. Now he can't get a interest at $600k. And this wasn't a property bubble thing - it never popped here in WA. The problem was that the city kept growing North, and what used to be a simple holiday home with ocean views in a little weekend escape town became a very plain home on the outskirts of the city.

I agree with your point in general, I'm just really wary of that word 'always'.

Fair being Fair: I have no idea what the Australian / New Zealand housing market is like. I've heard that Aussie has even higher than American property values (I have an aussie friend from Queensland that refers to living outside Boston as "cheap", which i find hy-friggin-sterical). All my comments are from the lens of the American market.



As i said, on an infinite timeline, always. 15 years from now that property on the outskirts of the city growing north with ocean views will be a house with ocean views in a developing suburb of the city, and will probably be worth more than that 850k as inflation and housing avaialability put upward modality on the price of property. Patience is the key. Again, i did say on an infinite timeline. There are bubbles and nadirs, but with the long view, real estate ever only goes up.

While your uncle may not like that its going to take 15 or so years or maybe more to get that same 850k offer he turned down 4 years ago, it will go north of that again. It just might not meet his desired timeline.


I'm normally wary of absolutes too. Real estate appreciating on an infinite timeline is one you can pretty much bet on ; the only question is if it fits a nice tidy timeline we're hoping for.



To your earlier comment, though, I agree with you. I see it in my industry. A decade ago I was with a company that lived and died on 3 week spit polish renovation flips (hated this business model btw, .... go to learn a lot about construction and renovation and design, but MAN it just felt so whorey to buy a property at auction for like 80-100k, spend 3 weeks putting some surface level finishes / code upgrades into it, and then turn it for 300-350). Now ? House flipping really only works in hyper competitive real estate markets. There's still a lot of property reasonably priced out there, and its still very much a buyers market. It's less so than even just 2-3 years ago, but it's still very good for home buyers out there.

We'll see that speculative flipping again, but i think it'll have a longer gestation period than from the bubble of the 80's to the 90's and then the 2000's again. Partly because there's a bit more regulation on it now, partly because there's less free and easy money than there used to be... but more because the economy has taken a while to bounce back to some meager growth. But it'll happen again. When the money loosens up, and housing is in high demand because wages and job opportunities are going.... that's when you'll see another round of speculative flipping. Might take a decade from now (which would be a long gestation period, hell, we're only 7 years out of the last bubble burst), maybe a bit shorter or longer, but it'll happen. Hopefully it won't have such catastrophic ripple effects next time.

 Haight wrote:
Fair being Fair: I have no idea what the Australian / New Zealand housing market is like. I've heard that Aussie has even higher than American property values (I have an aussie friend from Queensland that refers to living outside Boston as "cheap", which i find hy-friggin-sterical). All my comments are from the lens of the American market.

When I was New York my wife and I had lots of fun looking at the houses for sale in Manhattan, they were on par or maybe even a little cheaper than houses here in Perth. That was 2012 though, and the Aussie dollar has moved a lot in that time, so it isn't as crazy as it was, but still. Basically, we never had the property crash you guys did. At worst property levelled off for a few years, while here in Perth it kept growing throughout the GFC, and is only now levelling off.

I'm not sure New Zealand has many houses. Hobbit holes are pretty affordable, though.

As i said, on an infinite timeline, always. 15 years from now that property on the outskirts of the city growing north with ocean views will be a house with ocean views in a developing suburb of the city, and will probably be worth more than that 850k as inflation and housing avaialability put upward modality on the price of property. Patience is the key. Again, i did say on an infinite timeline. There are bubbles and nadirs, but with the long view, real estate ever only goes up.

Across the whole real estate grows, for sure. But consider buying up prime real estate in a railway town at the turn of the century, only to see trade disappear as people started travelling by car instead. Hell, consider someone who bought in to Detroit a few decades ago.

I don't believe such examples are common enough as to warn people away from real estate, not at all, but they do make me wary of saying 'always'. Other than that, I think you're advice is spot on, I was just nitpicking really.

To your earlier comment, though, I agree with you. I see it in my industry. A decade ago I was with a company that lived and died on 3 week spit polish renovation flips (hated this business model btw, .... go to learn a lot about construction and renovation and design, but MAN it just felt so whorey to buy a property at auction for like 80-100k, spend 3 weeks putting some surface level finishes / code upgrades into it, and then turn it for 300-350). Now ? House flipping really only works in hyper competitive real estate markets. There's still a lot of property reasonably priced out there, and its still very much a buyers market. It's less so than even just 2-3 years ago, but it's still very good for home buyers out there.

Definitely. I think one big issue is when the market is really competitive and prices are increasing quickly people confuse that market growth for profit. So they buy a place for $300k, do up the kitchen and the bathroom and flog it a year later for $400k... not really thinking about the fact that property in that time had moved 25% and just sitting on the property would have netted them $75k... the renovation was probably a money loser on the deal. Most of the drive here was amateurs, so it was a little different (and a lot less successful) than the operation you were engaged in, but underneath it all the issue is the same - people confusing cash on trade with the real profit of long term asset appreciation.

We'll see that speculative flipping again, but i think it'll have a longer gestation period than from the bubble of the 80's to the 90's and then the 2000's again. Partly because there's a bit more regulation on it now, partly because there's less free and easy money than there used to be... but more because the economy has taken a while to bounce back to some meager growth. But it'll happen again. When the money loosens up, and housing is in high demand because wages and job opportunities are going.... that's when you'll see another round of speculative flipping.

Yeah, I'd think it will take another decade at least. We basically need a new generation of suckers who don't remember the bubble to think that somehow this new bubble is something totally different. In the meantime we'll probably have a couple of other bubbles. Since 2008 we've already had a gold bubble... so maybe next time we'll go back to tulips?

 Squidmanlolz wrote:
Hey, Dakka, I'm currently 20 years old and living with my parents. I work two jobs and make about 1800 a month while taking classes on the side. My girlfriend will be going to university in fall and while she would live with me if we had our own place, couldn't contribute financially. Should I even be considering looking for a house, or should I be waiting for better financial stability? I'm really a bit lost when it comes to what it takes to buy a house.

I'm surprised no one brought this up but:

If you move in with your girlfriend and one of you is not contributing financially, expect friction.

Good point, reiner. Also: you should be suspicious of someone who is not willing to contribute financially. That's a red flag.

 sebster wrote:
When I was New York my wife and I had lots of fun looking at the houses for sale in Manhattan, they were on par or maybe even a little cheaper than houses here in Perth. That was 2012 though, and the Aussie dollar has moved a lot in that time, so it isn't as crazy as it was, but still. Basically, we never had the property crash you guys did. At worst property levelled off for a few years, while here in Perth it kept growing throughout the GFC, and is only now levelling off.

You were shopping in the northern districts right? Cause if you can afford the prices in the southern districts, then whatever your career is...you should take me on as your apprentice.

OP ... you are young yet, finish your education and enjoy life a bit. Buying a house is a big debt. Renting is not a bad option. If you are content with your situation as it is, ride it out for a little bit. I swore I would never buy a house as it does tie you to the community. I did not go for the education as you did, I went into the military and traveled the world. After my stint in the forces, I was back in my home state for 14 days before I up and moved halfway across the country to Colorado, on a whim.

If you have bought a house you can not just up and leave if there is no work in your chosen career field. Renting is the better option if you are not sure how things are going to be in a few years. Renting is great for that. It does give you some stability and an understanding of how to manage your money, without the hassle of having to fix things when they break. You are more vested with the purchase of a house, but I would caution you to be within your means.

When I got into a serious relationship with my future wife we decided to buy a house after renting for 3 years. I was offered a loan of upwards of $350,000 ... I just laughed at the bank guy and walked out. I knew where I wanted my payment to be and that was WELL above that. Good guidelines that I am comfortable with is this: House payment should not be more than 25% of your monthly income. I get paid weekly and my house payment is just under a 40 hour check. It makes it easier to be less concerned when I get laid off, which happens in the winter as I am a Construction Worker. Keep your bills under control, this is a problem that arises often when people are being given credit and little things just pile up.

I should be mentioned that if you are going to rent, renting an apartment will usually be cheaper than renting a full house.

That's not a bad idea if you want to use the money to save up for a downpayment on a house. And to buy time while you solidify your career.

Just remember that the sooner you do buy a house the sooner you'll have the mortgage paid off and the more equity you'll have, its never too soon to be planning for retirement and a house is a good long term investment to have for it. As others have said, its a pretty safe long term investment outside of freak accidents like Detroit.

 reiner wrote:

 Squidmanlolz wrote:
Hey, Dakka, I'm currently 20 years old and living with my parents. I work two jobs and make about 1800 a month while taking classes on the side. My girlfriend will be going to university in fall and while she would live with me if we had our own place, couldn't contribute financially. Should I even be considering looking for a house, or should I be waiting for better financial stability? I'm really a bit lost when it comes to what it takes to buy a house.

I'm surprised no one brought this up but:

If you move in with your girlfriend and one of you is not contributing financially, expect friction.

Yeah, i wasn't going to touch it as relationship advice wasn't really the OP's main motivation, but absolutely fething spot on.

Even if you are the nicest, most caring person in the world, who just fething lives and dies for altruism ; 6-18 months into paying for someone else living situation wholesale, you will have a gakky day, come home, want nothing more than just a few moments peace, there will be a small momentary friction that will rub you wrong, and will end up with "Well i don't give a feth you freeloader, you don't like your cost free lifestyle, pack your gak and gtfo."


Maybe not that dramatic, but inequity in supporting the household only leaves to issues. My girlfriend and I own our home and raise our son together. We pay everything 50/50. We both have very well paying jobs, but She makes about 20% more than I do (which 1) i have no issue with at all, make as much as you can babe!, and 2) if the tables were turned I would insist on the same thing, that we share the load equally).


The friction may not even come from the payer of everything : it may come from the person not monetarily contributing as a result of guilt.

 LumenPraebeo wrote:
You were shopping in the northern districts right? Cause if you can afford the prices in the southern districts, then whatever your career is...you should take me on as your apprentice.

We weren't shopping, just having fun looking at the ads in the window when we walked past a real estate agent. And it was in the Southern end, but it had nothing to do with how much I earn - I'm just a middle management public servant. It's just funny that after the GFC, through a combination of US housing prices at their bottom, Perth prices being more or less at their peak*, and a really abnormal exchange rate, that a townhouse in prime real estate in New York was as much, or even less than a pretty standard home in Perth.

I mean, I'm not talking the crazypants multiple million dollar apartments, but more the decent townhouses, which were listed around $750k to a million. In Perth that's what we pay for a decent home that will fit a family that isn't in the boonies.



*They haven't crashed since, but are in the middle of a long plateau.

The thing we went through when looking to price-up a joint house purchase was to factor in either of the following:
Could you live on just 1 income, and still afford the payments?
If the economy went back to the worst it had in the past x years, what would happen to those payments? If interest rates went back to the worst in recent years, what would happen?

For a couple looking to get a home together, compare the joint living costs against living separately. Most bills would merge, whether utility or taxes.
In the UK, local council tax gives a 25% discount to a sole occupant, meaning that 2 people paying 75% each end up paying a total of 100% when living together. That's a 'saving' of 50%, just in monthly taxes. (I'm sure I could word that better, and is probably irrelevant, but it's what we did).

Make sure you can start off by saving up an amount as a buffer. We try to keep 6-months of outgoings aside. It came in handy after I was made redundant.