Home buying thread

Gravel

Gravel

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No, no kids, and we have enough assets that life insurance doesn't make sense.

We've got probably $100-120k in equity in our house. My thought is that we liquidate some of our investments, build the house, and then use the proceeds of our current house's sale to put money back into investments. We'd have a house with no mortgage, which means we're also saving about $12k a year of expenses (current house payment is about $1300/month, but that's with tax and insurance). Using the 4% rule, that's equivalent of about $300k (12k * 25) in investments.

I can't imagine we'd spend $400k (or really, $370k when you account for the early withdrawal penalty on $300k) on building a house, so overall we'd likely even come out ahead.
 
Nija

Nija

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Deathwing said:
I want to say our home insurance is ~20% of yours. Are you electing for significant optional coverage? Or is there something I should be covering and might bite me in the ass?
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The policy is huge, but I think these are the important parts. Deductible is at 1%, earthquake is at 5%. Earthquake is something like $100/yr, and I know the possibility is remote.
Limit of Liability - Section 1
$524,500 Dwelling
$393,375 Personal Property
Limit of Liability - Section 2
$300,000 Personal Liability
$5,000 Medical Payments to Others
Policy Type Homeowners
A1 - Replacement Cost - Similar Construction
Increased Dwelling Up to $104,900 - Option ID
HW-2104 Homeowners Policy Amendatory Endorsement
Earthquake Endorsement Back-Up of Sewer Or Drain
 
Khane

Khane

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If you guys were neighbors comparing notes would be worthwhile. Otherwise....
 
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Control

Control

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Gravel said:
So let's say you still owe $150k on it. You can sell it for $400k and net $230k (6% realtor fees plus a little extra for misc costs).

You invest all of that money into an S&P 500 or total market index fund. Which have averaged about 10% per year. That $230k is throwing off $23k a year ($1900/month), and you don't have to worry about tenants, repairs, or vacancies.

That's why I took a look at landlording and immediately said fuck no.
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The real landlording game would be to leverage the fuck out of that 230 into as many additional doors as possible and hope that you have enough hedging to weather the inevitable bad tenants and down-turns. And rinse/repeat as cashflow/appreciation allows. Sounds pretty horrifying in the current environment though. On the other hand, it's not like it's getting any easier for noobs to buy their own homes though...
 
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fris

fris

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before my divorce, house hacking was our plan. keep this house, save up a down payment and move into a bigger, keep & rent the old. rinse repeat. my neighbor did it. he just had his 1 home when we moved into this neighborhood about 15 years ago. last time i saw him, he stops by every time someone moves out/in, he was up 4 or 5 properties including a small apt complex that he and some friends got together. he offered to buy my home on the spot. now that he rents, there's a new neighbor every 1-3 years. he seems to turn it over quick, paints and refreshes the inside and gets a new tenant in less than 30 days.

there's probably tons of stories like his, and a few of the horrors above. a single fucker and wreck your plan and kill you financially if it's your first rental.

the cash on cash for owning rentals is typically less than typical 401k returns, but you get the added benefit of the increased value of the home.
 
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Sanrith Descartes

Sanrith Descartes

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fris said:
before my divorce, house hacking was our plan. keep this house, save up a down payment and move into a bigger, keep & rent the old. rinse repeat. my neighbor did it. he just had his 1 home when we moved into this neighborhood about 15 years ago. last time i saw him, he stops by every time someone moves out/in, he was up 4 or 5 properties including a small apt complex that he and some friends got together. he offered to buy my home on the spot. now that he rents, there's a new neighbor every 1-3 years. he seems to turn it over quick, paints and refreshes the inside and gets a new tenant in less than 30 days.

there's probably tons of stories like his, and a few of the horrors above. a single fucker and wreck your plan and kill you financially if it's your first rental.

the cash on cash for owning rentals is typically less than typical 401k returns, but you get the added benefit of the increased value of the home.
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It doesn't get mentioned much, but no one really factors in the capital gain once you decide to retire and get out of the rental game (assuming you aren't leaving them to the kids). Its not exorbitant since its a long term gain, but it is a cost that eventually is gonna need to be paid and not something most small landlords think about until the accountant tells them about it after they sell. It could effectively wipe out an entire year's worth of rent depending on the price appreciation of the house over time.
 
Tmac

Tmac

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Nija said:
I was just informed that my home insurance is increasing from $2660/yr to $3280/yr. No claims or anything, of course...
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My girlfriends property tax just went up 200% in metro Atlanta, so she’s selling her house.
 
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TJT

TJT

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Tmac said:
My girlfriends property tax just went up 200% in metro Atlanta, so she’s selling her house.
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Is this kind of shit that makes me wonder how people survive. I make extremely good money and even we are feeling the belt tighten some. In Texas between my two properties its ~$25k+ just in property tax now. In addition to a ~27% Fed income tax.
 
Khane

Khane

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Sounds like some county jurisdictions aren't as unscrupulous as mine. Mine changed the rules from assessment every 10 years to every 5 years with curious timing... in 2022.

So I got the new tax bill early!!! Hurrah! Wasn't 3x though. Did her property really go up 3x in that time? It's actually possible and that's a real question.
 
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OU Ariakas

OU Ariakas

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Khane said:
What are your thoughts on this "house hacking" OU Ariakas OU Ariakas ?
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I am biased because we now own 9 rental properties and I want to own 20 by the time we retire. I think that real estate is truly diversifying your portfolio outside of stocks/bonds. I posted some numbers about how great the deals were on the 4 we purchased in October '23 in the real estate thread. I would do this House Hack if you were able to do it after your 401k was fully funded and you are dedicated to living well below your means. I would also immeidately save 6 months of emergency rent on each house and only do it on houses that are roughly 1/2 to 1/3 of what you could afford on your own payment because there is a chance that you have no renters and that could bury you if you are not prepared.

The thing is, most of the views I hold about housing comes from the rental properties we own. We buy what would be considered true starter homes; 2/3 bedrooms 1, 1 or 1&1/2 bath or less. All of them are located in a medium sized metro area and all would be affordable to a household taking home $4500/month at 25% or less of their take home even with 8% rates. Most of the people we rent to make enough money to pay 1.5x or 2x what they pay us for housing....but they are fucking awful with their money. Housing should be priority 1, but it is far down the list after cars, entertainment, and other shit.
 
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C

Captain Suave

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Tmac said:
My girlfriends property tax just went up 200% in metro Atlanta, so she’s selling her house.
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They tried to fuck me like that too when I was in Atlanta. A bunch of neighbors and I got together and complained and they ended up reducing to like a 4% increase. Don't take that shit lying down. It sucks but the assessors have incentives to throw out bullshit and see what sticks due to owner apathy.
 
Control

Control

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Khane said:
What are your thoughts on this "house hacking" OU Ariakas OU Ariakas ?
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As a random anecdote, I almost bought a 4plex pre-covid and decided against it. I just checked the rents for that area, and now each unit's rent would likely more than cover the mortgage. Probably would have been a good idea, but on the downside, I'd have been living in a 4plex next to 3 tenants. So my recommendation is to plan to buy right before a historic increase in rents lol.
 
Khane

Khane

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OU Ariakas said:
I am biased because we now own 9 rental properties and I want to own 20 by the time we retire. I think that real estate is truly diversifying your portfolio outside of stocks/bonds. I posted some numbers about how great the deals were on the 4 we purchased in October '23 in the real estate thread. I would do this House Hack if you were able to do it after your 401k was fully funded and you are dedicated to living well below your means. I would also immeidately save 6 months of emergency rent on each house and only do it on houses that are roughly 1/2 to 1/3 of what you could afford on your own payment because there is a chance that you have no renters and that could bury you if you are not prepared.

The thing is, most of the views I hold about housing comes from the rental properties we own. We buy what would be considered true starter homes; 2/3 bedrooms 1, 1 or 1&1/2 bath or less. All of them are located in a medium sized metro area and all would be affordable to a household taking home $4500/month at 25% or less of their take home even with 8% rates. Most of the people we rent to make enough money to pay 1.5x or 2x what they pay us for housing....but they are fucking awful with their money. Housing should be priority 1, but it is far down the list after cars, entertainment, and other shit.
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I hope you can appreciate the reality, and irony, of this post combined with the previous discussion.

And my debt averse, fiscal policy stance is far more documented on this forum than any relationship stance from years ago in a dead thread, for what it's worth.

Anyway, to make sure it doesn't go off the rails. I'm not "throwing shade" here. I'm a landlord too. But people like us contribute to younger generations idea of homeownership, by buying it for ourselves and laughing at them. Just maybe don't preach about the ideals tied to owning a home in the era of "everyone can be a real estate investor, as seen on TV"
 
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OU Ariakas

OU Ariakas

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Khane said:
I hope you can appreciate the reality, and irony, of this post combined with the previous discussion.

And my debt averse, fiscal policy stance is far more documented on this forum than any relationship stance from years ago in a dead thread, for what it's worth.

Anyway, to make sure it doesn't go off the rails. I'm not "throwing shade" here. I'm a landlord too. But people like us contribute to younger generations idea of homeownership, by buying it for ourselves and laughing at them. Just maybe don't preach about the ideals tied to owning a home in the era of "everyone can be a real estate investor, as seen on TV"
Click to expand...

I get where you are coming from, but where I think we disagree is someone stating that the "dream of homeownership is dead for Gen Z and on." It most assuredly is not, and I put the blame on their parents for shielding them from the realities of what life is like when you start out on your own. I try to educate new/young people gently on those realities with varying levels of success, but it is usually subsumed by their disgust/horror at the idea of having to live around "poor" people (i.e. - middle aged blue collar families). No one I knew lived alone unless it was in a tiny ass one bedroom apartment that they spent over half their take home on because "they just couldn't stand living with other people." The first house I bought (3 bed, 2 bath) was co-purchased with LiquidDeath LiquidDeath and we had roommates the entire time we lived there until we both got married.
 
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Lanx

Lanx

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OU Ariakas said:
No one I knew lived alone unless it was in a tiny ass one bedroom apartment that they spent over half their take home on because "they just couldn't stand living with other people." The first house I bought (3 bed, 2 bath) was co-purchased with LiquidDeath LiquidDeath and we had roommates the entire time we lived there until we both got married.
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that experience has been replaced w/

i live in mommys basement b/c fuck you boomers that bought this house for 18 banannas and 4 grapefruits!!!
 
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Khane

Khane

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Lanx said:
that experience has been replaced w/

i live in mommys basement b/c fuck you boomers that bought this house for 18 banannas and 4 grapefruits!!!
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Nope, that experience got replaced by parents from our generation (kids of boomers) realizing shit really ain't all American Dream, and raising jaded children.

It's hilarious that people on this forum, acting the way they act and saying the things they say in the depths of the internet, are pretending they aren't raising the kids who are cynical from the outset.

We (I'm 41) are the generation that changed the mold. Experiencing, heavily, both sides of the coin
 
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