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Started By
Message
re: $300,000 home cash, or 50% down $600,000 home in a nicer neighborhood
Posted on 12/7/16 at 3:30 pm to crazycubes
Posted on 12/7/16 at 3:30 pm to crazycubes
Buy cash.
0
Posted on 12/7/16 at 3:38 pm to crazycubes
20% down on the 600k house which leaves you 180k to buy rental property. At least that is what I would do.
Posted on 12/7/16 at 3:41 pm to Jp1LSU
quote:
Who would pay $300k in cash for a house?
Someone who doesn't want to pay $1 million for that same house over 30 years.
quote:
Rates are still very cheap.
Yes, they are.
quote:
Call me crazy but I have multiple mortgages.
That's not crazy if you can make it, and that the money you didn't put out is making you more. But, I suspect for most folks with mortgagees, that isn't the case. Bully for you.
quote:
I don't get the extreme debt averse crowd.
I can't lose money on loans I don't sign and interest I don't pay. I get "leverage" - If I can buy a going concern that generates a solid profit of, say, $150k a year, and they will loan me most of the $500k purchase price at 3 or even 4 percent? Yeah - I take out that loan if it works for me.
But, even a little bit of interest for 30 years adds up. The min-maxers are technically correct - I essentially "borrow" money from myself by taking the mortage, and pocket the difference in my cash investments, plus get all the tax advantages of the mortgage and it is securing an (hypothetically) appreciating asset.
But, the asset class doesn't change, whether I pay cash or not. I have more choices for insurance if I buy cash. I can also invest my mortgage payment in the same assets you folks think I should buy and hold instead of buying the house and the net result - A versus B becomes a lot closer. But, without the mortgage, I definitely have a place to live, I don't have to pay any interest and I can "skip" those investment payments in hard times (or retirement) if I so choose.
So, as far as individual/consumer debt goes is a mortgage the end of the world? No. However, are the debt averse folks wrong? Absolutely not. Everybody has to make it work for his or her own situation.
What I find is that these min/maxers are using the rare exceptions to justify this debt behavior. What happens with a decent percentage of mortgage holders (particularly young families in their late 20s/early 30s) is that they either flat out overbuy a house, being house rich and poor otherwise, or, they fall victim to overly optimistic expectations about income growth and end up in a house that they thought they could afford, but life didn't work out like they originally planned.
At least that's my $0.02.
Posted on 12/7/16 at 4:48 pm to Ace Midnight
quote:
quote: Who would pay $300k in cash for a house?
Someone who doesn't want to pay $1 million for that same house over 30 years.
[/img] Weird. My mortgage calc on 300k with 20% down at 4% get payoff roughly 412,500, which is about 150k over 30 years NOT including writing off interest. (You're better than that post Ace)
I understand not having a mortgage, especially if older,but for younger buyers, do you honestly believe odds you cant make 150k over 30 years on an initial investment of 240k?
This post was edited on 12/7/16 at 5:19 pm
Posted on 12/7/16 at 5:34 pm to Ace Midnight
quote:
What I find is that these min/maxers are using the rare exceptions to justify this debt behavior. What happens with a decent percentage of mortgage holders (particularly young families in their late 20s/early 30s) is that they either flat out overbuy a house, being house rich and poor otherwise, or, they fall victim to overly optimistic expectations about income growth and end up in a house that they thought they could afford, but life didn't work out like they originally planned. At least that's my $0.02.
Lot of truth here, I am 62, have owned 8 houses, been a stock market investor for almost 40 years, dabbled in investment property a couple of times, and nothing has ever turned out has was projected. Sometimes it was better, sometimes worse, but trying to predict the future value or performance of any financial asset is pretty much just rolling the dice.
Posted on 12/7/16 at 5:45 pm to crazycubes
The location would play into the scenario more than anything IMO. I would probably go with the 600k house, though.
ETA: it also really depends on how much money your family makes, how old you are, and how stable your job is.
ETA: it also really depends on how much money your family makes, how old you are, and how stable your job is.
This post was edited on 12/7/16 at 5:47 pm
Posted on 12/7/16 at 5:48 pm to crazycubes
Property tax and insurance can be huge between a 300k and 600k house
Also maintenance costs. AC, roof, landscaping
I love having my house paid for with relatively reasonable taxes and insurance
Also maintenance costs. AC, roof, landscaping
I love having my house paid for with relatively reasonable taxes and insurance
Posted on 12/7/16 at 6:01 pm to ItNeverRains
quote:
I understand not having a mortgage, especially if older,but for younger buyers, do you honestly believe odds you cant make 150k over 30 years on an initial investment of 240k?
Ultimately there is no significant difference at the end of the 30 year period.
If I had the $240k up front, I could pay cash for the house and buy mutual funds with my $1,145.80 per month (instead of paying P&I). How much would I have at the end of 30 years if I did that?
Posted on 12/7/16 at 7:10 pm to Old Sarge
quote:
Property tax and insurance can be huge between a 300k and 600k house
Also maintenance costs. AC, roof, landscaping
I love having my house paid for with relatively reasonable taxes and insurance
The $300k house also has a much bigger resale market than the $600k house. There are many more shoppers looking for houses in the $300k area than the $600k range.
This post was edited on 12/7/16 at 7:11 pm
Posted on 12/7/16 at 7:15 pm to crazycubes
Just had a similar situation arise.
Just got married and had a 350k house paid off when a great deal came up for a 900k house.
I decided to go with the bigger house because of a good deal and I knew I'd be upgrading soon when we have kids.
Be prepared because your expenses for the home increase at pretty much the same rate as the value of the home. Make sure analyze all the expenses so you don't end up house poor.
Just got married and had a 350k house paid off when a great deal came up for a 900k house.
I decided to go with the bigger house because of a good deal and I knew I'd be upgrading soon when we have kids.
Be prepared because your expenses for the home increase at pretty much the same rate as the value of the home. Make sure analyze all the expenses so you don't end up house poor.
Posted on 12/7/16 at 7:35 pm to momentoftruth87
Why are you exempt from property tax?
Posted on 12/7/16 at 7:41 pm to patnuh
He is a disabled vet.
Posted on 12/7/16 at 7:50 pm to Ace Midnight
quote:
Ultimately there is no significant difference at the end of the 30 year period.
If I had the $240k up front, I could pay cash for the house and buy mutual funds with my $1,145.80 per month (instead of paying P&I). How much would I have at the end of 30 years if I did that?
At avg 6.5% return, your looking at about 250k loss your way over 30 years. Not including tax break for interest deduction.
This post was edited on 12/7/16 at 8:22 pm
Posted on 12/7/16 at 8:26 pm to ItNeverRains
quote:
avg 6.5% return
Questionable and the return would be fully taxable
Posted on 12/7/16 at 10:45 pm to Old Sarge
With all the opinions, one thing is clear.
One shoe does not fit all.
One shoe does not fit all.
Posted on 12/8/16 at 4:19 am to Old Sarge
quote:
Questionable
LINK
I don't pull numbers out of thin air. It's 1.6 vs 1.2, minus the 150k interest on a 30 year loan at 4%. At avg 6.5 interest over 30 years, which is .5 less than the historical average return.
It's ok if this is not your cup of tea. But data is data.
Posted on 12/8/16 at 5:43 am to TigerSaints318
At the 3% rate I've got on my house, it'd be pretty dumb to just pay cash. Hell, I can get 2% returns in my checking account, so there's definitely going to be some places to park that cash and do better than the interest you're paying. I mean it's nice to not have a note, but all you're doing is saving yourself from remembering to pay it each month. Or possibly if you want to skip out on some insurance coverage which wouldn't be advisable.
As far as 300k vs 600k, I don't think it's all about how much cash you have. Still going to be about cash flow. Property taxes double and where I am, that's 10k more per year for the 600k. Furnishing, HOA fees, lawn and garden maintenance, etc. It could be hundreds to thousands more per month for the bigger house not even looking at the house note itself.
As far as 300k vs 600k, I don't think it's all about how much cash you have. Still going to be about cash flow. Property taxes double and where I am, that's 10k more per year for the 600k. Furnishing, HOA fees, lawn and garden maintenance, etc. It could be hundreds to thousands more per month for the bigger house not even looking at the house note itself.
Posted on 12/8/16 at 7:01 am to KG6
Damn you pay $10k a year in property taxes? That's high. It's what family members of mine in NJ pay, but I thought that was limited to a few states.
A lot of assumptions being made about the difference between $300k and $600k houses that include size, utilities, and other issues. Where I live and other places I'm involved in property double the price might just mean an extra bathroom and some waterfront. Offstreet parking, sewer connections. I can move 2 blocks from the house I live in, downsize the square footage by almost half, lose the pool and its associated costs, and pay twice as much for the home.
A lot of assumptions being made about the difference between $300k and $600k houses that include size, utilities, and other issues. Where I live and other places I'm involved in property double the price might just mean an extra bathroom and some waterfront. Offstreet parking, sewer connections. I can move 2 blocks from the house I live in, downsize the square footage by almost half, lose the pool and its associated costs, and pay twice as much for the home.
Posted on 12/8/16 at 7:42 am to Jp1LSU
I'm in the Houston area. 310k house is about 9k in property tax. And that includes a certain amount exemption for a certain amount. So doubling it would at least be 9k plus a little more so roughly 10k.
And you are right that double the price doesn't mean double the size. But in general everything costs more. If the cost of a similar house is double, the cost of living in general in the area is going to be higher.
And you are right that double the price doesn't mean double the size. But in general everything costs more. If the cost of a similar house is double, the cost of living in general in the area is going to be higher.
Posted on 12/8/16 at 7:52 am to ItNeverRains
Go Williamson county. Now. The schools are great and you aren't paying for the Titans, Predators, etc in Davidson. Davidson is fine but you are going to have to send your kids to private which most of them are $15k-22k per year once you get to high school. Privates are great schools but those prices are absurd.
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