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Its better to rent than buy - always: Arzaga of Cornerstone Wealth Management

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  • sishya
    replied
    Re: Shiller on Buy vs Rent

    Originally posted by sishya View Post
    Don: I did not know you are a female. your screen name and your frequent new posts (digging internet) , probably confused my brain
    I don't think so. I interpreted Don's words -"it's my daughter and husband" as "it's my daughter and (my)husband"
    instead of "it's my daughter and (her)husband" . see a small twist in words can confuse ?

    Leave a comment:


  • cjppjc
    replied
    Re: Shiller on Buy vs Rent

    Originally posted by sishya View Post
    Don: I did not know you are a female. your screen name and your frequent new posts (digging internet) , probably confused my brain
    No. It's now that you are confused.

    Leave a comment:


  • sishya
    replied
    Re: Shiller on Buy vs Rent

    Don: I did not know you are a female. your screen name and your frequent new posts (digging internet) , probably confused my brain

    Leave a comment:


  • jiimbergin
    replied
    Re: Shiller on Buy vs Rent

    Originally posted by don View Post
    A classic example of the pitfalls possible in first-time buying. Unfortunately it's my daughter and husband. Neither have any trade experience, engineering or design. He works for FIRE and she's in pharmaceuticals. They didn't consult Dad, with 30 years in construction, because they had to act fast. I'm sure pride was a factor as well. They signed on to a $800k + mortgage, with an "as is" proviso in title. Yawza.

    They could tell the fence was about to fall over. That was about it on their pre-buy look-around.

    To date (6 months):

    the prior owner and original buyer in '69 had been given sponge baths by an aid for at least a decade. She died at 102. When my guys ran the bath the long-standing Cali hard water had rusted through the drains. The noise in the attic was rats, who had worked all the insulation off the floor and duct work into giant rat nests. The flickering lights were bad and aged electrical connections. When we finally had rain in our warmest, driest winter in decades, they found out the roof leaked. A tile roof with long-shot paper underneath and subsequently rotten sheeting. The gutters and downspouts more or less disintegrated.

    They're saving up for the fence, which blew down in the next storm.

    iTulipers, don't go there. Some of the best money you can spend, if you're buying, is on your very own inspector - not the realtors. Get an engineering geek, if possible - from out of town. You should be able to negotiate whatever he finds if you're still interested. Leverage? All information brought to light in an inspection become the public record. No hiding!

    That can be a big help persuading the seller to work with you. Don't forget the seller's disclosures as well.
    I have also found in selling, that getting a good inspection before putting it on the market helps. I have found a few items that even I did not realize and either fixed them and/or made sure the potential buyers knew about them during the negotiations.

    Leave a comment:


  • don
    replied
    Re: Shiller on Buy vs Rent

    A classic example of the pitfalls possible in first-time buying. Unfortunately it's my daughter and husband. Neither have any trade experience, engineering or design. He works for FIRE and she's in pharmaceuticals. They didn't consult Dad, with 30 years in construction, because they had to act fast. I'm sure pride was a factor as well. They signed on to a $800k + mortgage, with an "as is" proviso in title. Yawza.

    They could tell the fence was about to fall over. That was about it on their pre-buy look-around.

    To date (6 months):

    the prior owner and original buyer in '69 had been given sponge baths by an aid for at least a decade. She died at 102. When my guys ran the bath the long-standing Cali hard water had rusted through the drains. The noise in the attic was rats, who had worked all the insulation off the floor and duct work into giant rat nests. The flickering lights were bad and aged electrical connections. When we finally had rain in our warmest, driest winter in decades, they found out the roof leaked. A tile roof with long-shot paper underneath and subsequently rotten sheeting. The gutters and downspouts more or less disintegrated.

    They're saving up for the fence, which blew down in the next storm.

    iTulipers, don't go there. Some of the best money you can spend, if you're buying, is on your very own inspector - not the realtors. Get an engineering geek, if possible - from out of town. You should be able to negotiate whatever he finds if you're still interested. Leverage? All information brought to light in an inspection become the public record. No hiding!

    That can be a big help persuading the seller to work with you. Don't forget the seller's disclosures as well.

    Leave a comment:


  • BK
    replied
    Re: Shiller on Buy vs Rent

    A few of my observations about Real Estate:
    I think ever one that issues a opinion about housing - own living situation affects their opinion.

    Job/occupation and conditions of Real Estate in your area are the only way you can make a good decision about housing.

    Doctors/Dentists/Undertaker/Federal Government employee may be in the best position to feel confident enough to by a home with a Mortgage.

    Some of the folks that did the best on a Return on their Real Estate - purchased their homes when Interest Rates were very high. Kind of like buying a 30 year T-Bond in 1979- or 1980 the generally falling interest rates put the Wind at their back, sprinkle in some good demographics, and add in lots of government intervention = Bull Market of a Lifetime. Can this be repeated???
    Location is Number one factor and local job prospects:
    Its a hell of a lot easier to consider buying a home now if you live in Dallas-TX or Charleston-SC VS buying in Palo Alto or Cambridge-MA in 2012.

    Leave a comment:


  • Polish_Silver
    replied
    Shiller on Buy vs Rent

    Robert Shiller's "Irrational exuberance" takes up the question of renting vs. buying.

    Given that you occupy the house for several years, and other caveats, he says buying is slightly better than renting. But it is a highly qualified recommendation. The main reason is that owning the house has a lot less moral hazards than renting. As a renter, you are paying the risk for all the other renters who may trash the place, not pay three months rent, etc. As an owner, you use the improvements and also sell them to the next guy.

    Having said that, buying a house, especially an older one, is like duct tapeing a vacuum to your wallet.
    The maintenance is very significant. A new house has little maintenance, but lots of depreciation.


    A house is the only leveraged inflation hedge most people can get near.

    In "tough times" you can rent rooms out. Although this is "unthinkable" to many people, it will gain popularity as wages stagnate and people realize they do not need all this space.

    In 1950, the average family home was about 1100 square feet, and the family had 3 children.
    Now it is no children in a 2000 sq foot house.



    I-tulipers are not typical people. Typical people need to be forced into a real estate piggy bank to save anything.

    Many of my parents cohorts did quite well by buying the house: the 70's inflation turned thier mortgage into a free house, and the long lasting bull in CA real estate gave them an excellent retirement nest egg. They burned the mortgage when they retired, and were set for life.

    I'd say buying a non-bubble house at today's rates is a deal ! Maintain liquidity, though--keep a years living costs in gold or liquid assets. (Forget this 6 month stuff--look at the unemployement data!)

    Leave a comment:


  • don
    replied
    Re: Its better to rent than buy - always: Arzaga of Cornerstone Wealth Management

    Robert Shiller on Equity Gain vs 'Housing Services Provider'

    http://www.fool.com/investing/genera...all-for-s.aspx

    Leave a comment:


  • c1ue
    replied
    Re: Its better to rent than buy - always: Arzaga of Cornerstone Wealth Management

    At the end of the day, if you want to buy a house, do so.

    The point of the original article was simply that buying a house is not a slam dunk as far as an investment choice.

    It never said that you shouldn't ever buy a house.

    As for inflation - the 'hedge' aspect is real, but so is the liquidity aspect as you are undergoing the inflation.

    If you are like jk - where his house was fully paid off but he made a choice to leverage the cash out via a mortgage - then you'd have both the flexibility of ending the 'hedge' at any time while still being positioned to take advantage of inflation, though you do add the risk of ensuring your cash taken out grows at or above the rate of inflation plus interest rate.

    The flexibility is what makes renting good - you will always be able to trade up or down, but the price for the flexibility is price increases and decreases - though rents are a function of income and not credit.

    If, on the other hand, you're buying a house where you are unable to pay it off should circumstances change, then you've just made a double down bet both that inflation is coming and that you'll be able to make it past the liquidity squeeze.

    If so, good luck.

    Leave a comment:


  • BK
    replied
    Re: Its better to rent than buy - always: Arzaga of Cornerstone Wealth Management

    Might your salary go up???
    Look at what salaries have done in the last ten years - salaries are flat, while costs of living are increasing:
    Milk has doubled, Property taxes doubled, Butter doubled, cost of lunchtime sandwich doubled, gasoline has doubled.
    Inflation does not impact everything equally!

    Leave a comment:


  • Milton Kuo
    replied
    Re: Its better to rent than buy - always: Arzaga of Cornerstone Wealth Management

    Originally posted by aaron View Post
    What about a house as a hedge against the (coming) inflation? I am really torn. I am certainly not looking to gain money by buying a house as an 'investment', but I sure would not like to pay top dollar either.
    Real estate will protect against inflation to a certain extent but there are better hedges against inflation than real estate. The fact that a lot of real estate in the U.S. is still overpriced and real estate has carrying costs that typically rise (property taxes) further detracts from real estate's attractiveness as an inflation hedge.

    Originally posted by aaron View Post
    If inflation continues to average about 4% (real), then a 4% mortgage, with tax deduction, almost might make sense. And, if there is a big POOM, might not my salary go up with the increase in inflation? Won't that loan be easier to pay off?
    Your salary may not necessarily increase at the same rate of inflation. Almost certainly, salary inflation will lag general price inflation. This is just another way of saying that there are better inflation hedges than real estate.

    The only people who really benefit from the current low mortgage rates (other than FIRE economy players) are people who bought a house before the housing bubble and are now able to refinance (or take out a mortgage if they've already paid off their homes) at negative real rates. Everyone else is screwed.

    Originally posted by aaron View Post
    I keep waiting and waiting for home prices to drop. I want them to crash! It is taking so long, however.

    I finally feel like I have reached "acceptance"; the only way to beat the system is to get one of those cheap loans and leverage myself up. Plus the wife really wants our own place again.
    I definitely feel your pain. I have decided that barring another housing bubble, I will buy in 2015 or 2016 and give up on waiting for better prices. By that time, I will have suffered a personal lost decade thanks to Greenspan and Bernanke's housing bubble games.

    If you live in a true no-recourse state like California, it might be worthwhile to speculate as Bernanke wants. Get an FHA loan, play some funny games so that you don't even have to put up the entire 3.5% down payment, and let the big, bad Bernanke huff and puff and blow the housing bubble back up. If he succeeds in reflating the housing bubble, enjoy your capital gains and low mortgage rate. If he fails and you go deeply underwater, default.

    Leave a comment:


  • aaron
    replied
    Re: Its better to rent than buy - always: Arzaga of Cornerstone Wealth Management

    What about a house as a hedge against the (coming) inflation? I am really torn. I am certainly not looking to gain money by buying a house as an 'investment', but I sure would not like to pay top dollar either.

    If inflation continues to average about 4% (real), then a 4% mortgage, with tax deduction, almost might make sense. And, if there is a big POOM, might not my salary go up with the increase in inflation? Won't that loan be easier to pay off?

    I keep waiting and waiting for home prices to drop. I want them to crash! It is taking so long, however.

    I finally feel like I have reached "acceptance"; the only way to beat the system is to get one of those cheap loans and leverage myself up. Plus the wife really wants our own place again.

    Leave a comment:


  • charliebrown
    replied
    Re: Its better to rent than buy - always: Arzaga of Cornerstone Wealth Management

    house as a place to live +1
    house as an investment -1

    Leave a comment:


  • Kadriana
    replied
    Re: Its better to rent than buy - always: Arzaga of Cornerstone Wealth Management

    Originally posted by jiimbergin View Post
    both my home and my mother's condo are also paid for. I also have a large vegetable garden, fruit trees, and a fruit garden with several kinds of berries and kiwi and a very large always full creek for water so I too feel we have a plan. Also we have a very large extended family with many resources available.
    '
    That is similar to us although we have chickens and soon, will have some ducks on our property. I can't imagine not owning a house. It will be paid off by the time we're 37 so I think it was the right chice fr us although it isn't for everyone.

    Leave a comment:


  • jiimbergin
    replied
    Re: Its better to rent than buy - always: Arzaga of Cornerstone Wealth Management

    Originally posted by jpatter666 View Post
    We have a modest townhome (and not so modest taxes given we live in the DC area....) but it's paid for. Knowing we don't have to worry about mortgage or rent payments and thus could live at a substantially reduced income if needed has given us the flexibility to do things we might not have. Everything is a trade-off -- for us, it's worth it, but that was the plan. And that's the critical point -- have a plan, don't just do something because that's what you were expected to do.
    both my home and my mother's condo are also paid for. I also have a large vegetable garden, fruit trees, and a fruit garden with several kinds of berries and kiwi and a very large always full creek for water so I too feel we have a plan. Also we have a very large extended family with many resources available.
    '

    Leave a comment:

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