dad bod wrote:
2) Home loan interest and taxes are tax deductible
Uhhh ... what? A particular tax is tax-deductible? That doesn't make any sense.
dad bod wrote:
2) Home loan interest and taxes are tax deductible
Uhhh ... what? A particular tax is tax-deductible? That doesn't make any sense.
plog wrote:
I think they can see through the home-ownership BS older people latch on to and have realized it isn't that great of investment that everyone thinks it is.
https://www.moneyunder30.com/why-your-house-is-not-an-investment
I've never owned a "house" so I guess I can't speak to whether it is a worthwhile investment, however, investing in real estate can be very lucrative if you know what you're doing. I have bought and sold three condo properties in the past four years and have netted ~$140k. There are a handful of markets within the US where housing prices have been increasing by 5%+ annually since 2012. Purchasing an undervalued property in these areas and doing a little cosmetic work is a great investment as long as you look at it as such. I don't consider these places as my ideal long term home; they are just investments with little emotional attachment and I am prepared to move every couple years.
The ideal situation is actually owning a property that you can lease out to cover mortgage payments. I currently own a two bedroom and my tenant covers mortgage plus $200 each month.
jamin wrote:
dad bod wrote:2) Home loan interest and taxes are tax deductible
Uhhh ... what? A particular tax is tax-deductible? That doesn't make any sense.
State and local taxes are deductible on your Federal return, as are property taxes.
benn wrote:
jamin wrote:Uhhh ... what? A particular tax is tax-deductible? That doesn't make any sense.
State and local taxes are deductible on your Federal return, as are property taxes.
Technically yes, state and real estate taxes are deductible eligible for federal taxes. Practically, not really since most middle and upper income folks get nailed by AMT. Trump says he'll do away with AMT. MAG!!!
The ideal situation is actually owning a property that you can lease out to cover mortgage payments. I currently own a two bedroom and my tenant covers mortgage plus $200 each month.
Dude, you're losing money then. Let's assume you meant mortgage & taxes & insurance. And let's be even more nice and assume the tenant mows the grass. Netting $200 after that is still losing you money.
In 1 year if you lose the hot water heater, call a plumber twice and have to replace a broken window--you've paid out of pocket in maintenance. And that's not even taking into account normal wear and tear on carpet, painting, roofing and all the hundres of little things that will cost your profit.
Netting $200 on a rental home is not profitable.
Bib #1 wrote:
benn wrote:State and local taxes are deductible on your Federal return, as are property taxes.
Technically yes, state and real estate taxes are deductible eligible for federal taxes. Practically, not really since most middle and upper income folks get nailed by AMT. Trump says he'll do away with AMT. MAG!!!
We definitely need to get rid of the AMT but there has been talk for years, so we will see. Congress has avoided the issue - it does bring in substantial revenue and residents in a few states like CA and NY pay most of the AMT taxes.
Big junk wrote:
You have no idea what a house like that represents to some people.
Actually, I do have an idea. The city has a glut of 20-something males making around 6 figures, wearing rectangular glasses and North Face jackets. The neighborhood that house is in has a farmer's market and a ton of breweries in between abandoned warehouses and homeless people sleeping under bridges. The 20-somethings want to get hitched and with their combined income they can take out a loan on that house and be within walking distance of micro-breweries that allow strollers inside (I see it all the time lol). I doubt that they honestly believe that lifestyle will still be "cool" after the 30 years it takes to pay down the house, so what they're planning to do is live in it for a couple years and sell it for a higher enough price that they basically got to live in it rent-free while having the social status of saying they own a house in Ballard.
plog wrote:
The ideal situation is actually owning a property that you can lease out to cover mortgage payments. I currently own a two bedroom and my tenant covers mortgage plus $200 each month.Dude, you're losing money then. Let's assume you meant mortgage & taxes & insurance. And let's be even more nice and assume the tenant mows the grass. Netting $200 after that is still losing you money.
In 1 year if you lose the hot water heater, call a plumber twice and have to replace a broken window--you've paid out of pocket in maintenance. And that's not even taking into account normal wear and tear on carpet, painting, roofing and all the hundres of little things that will cost your profit.
Netting $200 on a rental home is not profitable.
This is correct. When you are calculating the value of real estate as an investment you need to think about reserve for replacement. Write down the cost to replace all the big ticket items, furnace, air conditioning, water heater, roof ect. Then divide each one those numbers by the average life expectancy of that item and add them all together. For instance, say the roof costs $15,000 to replace and it will last 25 years. That is $600 a year. Furnace and air conditioning $6000 and will last 20 years. That is $300 more. You already are at $900 a year you need to set aside for items that are depreciating.
You may not see these as a cost from year to year but they are.
If I could invest my $40k at 8% interest for 10 years, it would be worth $86k. Looks like a wash, but that is also not the whole story.
1) The advantage of ownership vs. renting balloons over time, especially if there is a growing family in the equation
2) Home loan interest and taxes are tax deductible
If we calculated it out, owning a house for 30 years is better by far.
Depending on the market, a 50% gain in 10yrs may be optimistic. I keep hearing, on average, 2-4% per year.
Where are you getting an 8% return? (if true, then I'd get more opportunity cost from investing the down payment at 8% than about 2% in the real estate.
Also, need to factor in sales costs (listing fees eat into gains).
The last two points are key, but require not going anywhere (moving for a new job, caring for family)
The deduction is the greatest subsidy to the working man.
1. They had their own rooms growing up.
2. They won't have a good job enough job in a few years to buy a house.
It's not just millenials. People in general want what they want NOW. This is why rent to own places stay open. It's easier to pay $20 a month for 12 months for something that retails at $150 than to actually save up that $150.
For the record I rent a 5bd/2ba 2400sq/ft house built in 2011, formal and informal living and dining rooms, granite countertops, all stainless steel appliances, giant back yard, privacy fence. I would buy in a heartbeat if I was actually going to be here for more than 3 years.
Alan
Millennials are terrible with the Maths and investing as a whole.
I'll toss out another example, which will no doubt fall on deaf ears...
Bought my house in '99 for $230K. It's now worth about 440-450K. Was worth a little more at the height of the housing craze. I probably put $100K into remodeling projects over the years.
You may debate about whether I could have broken even by renting instead, but my mortgage will be paid off in 22 more payments at which point we'll compare our monthly housing payments when mine drops down to about $400 for taxes and insurance. Yes, I'll have a few more utility and maintenance payments than a renter, but do you really think you've got a winner with the other side of the argument?
Location and flexibility. No one wants to live in the suburbs when they're single in their 20s, or be tied down to one can location when there's no job security. Plus it takes like 4-5 years to save enough of a down payment and have enough for insurance, emergency fund, furniture, etc. Housing prices are stupidly expensive compared to median income levels.
MagnumPMI wrote:
Depending on the market, a 50% gain in 10yrs may be optimistic. I keep hearing, on average, 2-4% per year.
Where are you getting an 8% return? (if true, then I'd get more opportunity cost from investing the down payment at 8% than about 2% in the real estate.
Also, need to factor in sales costs (listing fees eat into gains).
The last two points are key, but require not going anywhere (moving for a new job, caring for family)
The deduction is the greatest subsidy to the working man.
4%/yr compounded annually for 10 yrs is actually about 50% ($200k to $296). But I was just using the article's example.
I'm assuming 8% from a low cost mutual fund in a tax-advantaged account. Pretty reasonable.
Obviously a person's situation will dictate whether or not buying is right, but the posted article gave really terrible advice and ignored or misrepresented several key points.
Finally, real estate may appreciate 2-4%, but your real return has to include the opportunity vs renting. Over 30 yrs the advantage is enormous. Hell, you really have to consider 40-60 yrs as ownership will benefit you through retirement.
80s kid wrote:
Housing prices are stupidly expensive compared to median income levels.
+1
There will be another crash/correction soon. At least here in California.
Do as I do wrote:
Millennials are terrible with the Maths and investing as a whole.
I'll toss out another example, which will no doubt fall on deaf ears...
Bought my house in '99 for $230K. It's now worth about 440-450K. Was worth a little more at the height of the housing craze. I probably put $100K into remodeling projects over the years.
You may debate about whether I could have broken even by renting instead, but my mortgage will be paid off in 22 more payments at which point we'll compare our monthly housing payments when mine drops down to about $400 for taxes and insurance. Yes, I'll have a few more utility and maintenance payments than a renter, but do you really think you've got a winner with the other side of the argument?
This. Exactly this. This guy will continue to realize "returns" vs renting for the rest of his life.
If the house is worth $450k, I'm guessing you have 3 or 4 bedrooms? A similar apt might run $2000/mo? So he'll be pocketing that $1600/mo in perpetuity. That's an additional 4% return on top of whatever the house appreciates.
That's killer.
Owning a house means it owns you.
A house used to be just a place you lived. Now it's an investment opportunity.
My grandparents lived in the same house for 50 years.
I don't want to buy a house just to plan on selling it a few years down the road with the housing market always suspect.
I know a number of soldiers with at least one house (a couple with 2-3) that they have bought and currently rent out. I also know soldiers who have bought a house, PCS'd and had loads of trouble trying to rent it out. Not worth the trouble for me right now.
If I did buy a house while in the military it would only be near large bases with high renting opportunity.
Alan
dad bod wrote:
Finally, real estate may appreciate 2-4%, but your real return has to include the opportunity vs renting. Over 30 yrs the advantage is enormous. Hell, you really have to consider 40-60 yrs as ownership will benefit you through retirement.
Indeed. Over the life of the mortgage it's huge. Especially if you pay off a 30 year loan several years early, then it's bigly huge...if you're going to be there. If you need to be mobile in about 5yrs, then it's not so clear (presumably the job benefits far outweigh the costs of buying and selling, although it becomes more about the hassle factor).
Granite Jizz 🤗🤓 wrote:
Why would Millennials rather rent a $1500+ studio w granite countertops/super fancy loft than live w roommates 1st &save for a downPMT?
Just doesn't make sense to me. Why not rent with roommates temporarily and buy within a few years?
Why would you assume millennials in general don't live with roommates? You seem out of touch.
RIP: D3 All-American Frank Csorba - who ran 13:56 in March - dead
RENATO can you talk about the preparation of Emile Cairess 2:06
Running for Bowerman Track Club used to be cool now its embarrassing
Hats off to my dad. He just ran a 1:42 Half Marathon and turns 75 in 2 months!
Great interview with Steve Cram - says Jakob has no chance of WRs this year
Rest in Peace Adrian Lehmann - 2:11 Swiss marathoner. Dies of heart attack.