Question for the board: Would a house be a good investment?

[TarHeelNation11]

I was thinking about putting a payment down on a new car, but I decided against that because my car is working fine. My buddy's mom is selling her house and it got me to thinking maybe I should buy a house, to possibly live in, but also just as an investment. Is this a good idea? Let me briefly explain my situation. All opinions are welcome.

I'm 27 years old. I'm not married and won't be in the foreseeable future (several years). I'm still in the Metro Atlanta area (NW of the city, Cumberland/Smyrna/Marietta area) and work in Marietta. I have a steady, full-time job but it's for my family's business so I'm not making a lot of money at all. But it's just me, so it's not too bad. Hopefully, I'm going to get accepted into UNC's Masters of Accounting program, which would start July of this year. It's online, though, so I'd still be here in the area I'm in currently. That program would run til December of 2018, at which point I'd (again, hopefully) be recruited to a major accounting firm in Charlotte or Raleigh and move up there in the beginning of 2019.

So at a minimum, I'll be here for another 20 months. Should I buy a house? I really don't have a lot of major assets. All I have is a car. I've rented apartments/houses for the past 5 years. Now, I will have to pay a substantial amount of money for grad school, if I get in, but I'll take out a student loan for that. Does it make financial sense for me to buy a cheap, modest house? My thought process is I could live in it for the remainder of my time here and concurrently rent it out (if I desired), and then when/if I relocate to a new city, I could use it as a rental property as a meager boost to my income.

What do y'all think? Let me add the caveat that I have a very, very small amount I could use as a down-payment on a house (like, $10K), so I know my mortgage payment would be quite high. If I lived there and had a renter or two, it wouldn't be a problem though. Hell, I pay almost $800 a month for the tiny apartment I live in now.

Is it a good idea? Or is it premature and I should wait until I have a more established situation?

 

[nctransplant]

I was thinking about putting a payment down on a new car, but I decided against that because my car is working fine. My buddy's mom is selling her house and it got me to thinking maybe I should buy a house, to possibly live in, but also just as an investment. Is this a good idea? Let me briefly explain my situation. All opinions are welcome.

I'm 27 years old. I'm not married and won't be in the foreseeable future (several years). I'm still in the Metro Atlanta area (NW of the city, Cumberland/Smyrna/Marietta area) and work in Marietta. I have a steady, full-time job but it's for my family's business so I'm not making a lot of money at all. But it's just me, so it's not too bad. Hopefully, I'm going to get accepted into UNC's Masters of Accounting program, which would start July of this year. It's online, though, so I'd still be here in the area I'm in currently. That program would run til December of 2018, at which point I'd (again, hopefully) be recruited to a major accounting firm in Charlotte or Raleigh and move up there in the beginning of 2019.

So at a minimum, I'll be here for another 20 months. Should I buy a house? I really don't have a lot of major assets. All I have is a car. I've rented apartments/houses for the past 5 years. Now, I will have to pay a substantial amount of money for grad school, if I get in, but I'll take out a student loan for that. Does it make financial sense for me to buy a cheap, modest house? My thought process is I could live in it for the remainder of my time here and concurrently rent it out (if I desired), and then when/if I relocate to a new city, I could use it as a rental property as a meager boost to my income.

What do y'all think? Let me add the caveat that I have a very, very small amount I could use as a down-payment on a house (like, $10K), so I know my mortgage payment would be quite high. If I lived there and had a renter or two, it wouldn't be a problem though. Hell, I pay almost $800 a month for the tiny apartment I live in now.

Is it a good idea? Or is it premature and I should wait until I have a more established situation?

I've always believed I'd rather pay for something that I was going to own rather than give it to someone else. The only downside I can see would be maintenance and upkeep ie. AC/heat, waterheater, roof etc.

 

[TarHeelNation11]

I've always believed I'd rather pay for something that I was going to own rather than give it to someone else. The only downside I can see would be maintenance and upkeep ie. AC/heat, waterheater, roof etc.

Yeah that's something I meant to mention.....I'm dog tired of paying money toward something I'll never own. Plus, these days, and where I'm living, monthly rent is more than I'd pay on a mortgage.

Upkeep would be a bitch, I know, but I think it would be good for me and give me more of a sense of responsibility.

Another downside could be, if I move away, I've still got this property out of state that I have to keep up with. But I know there are property management companies that can take care of that kind of thing for you.

 

[nctransplant]

Yeah that's something I meant to mention.....I'm dog tired of paying money toward something I'll never own. Plus, these days, and where I'm living, monthly rent is more than I'd pay on a mortgage.

Upkeep would be a bitch, I know, but I think it would be good for me and give me more of a sense of responsibility.

Save the difference between your rent and mortgage and dedicate that to repairs because they will come up.

 

[gunslingerdick]

IMO, there is no better investment than property.

As far as payment, I don't know what kind of credit you have, but with exceptional credit, you could probably get an interest rate around 3%-4%. I didn't have that good of a rate when I bought my house, put nothing down and still only had about an $800 per month payment on a $130,000 house (30 year adjustable). Times have changed since the housing market crash so I'm not real sure about most of the loans out there now. I've been in my current house for about 9 years.

Again though, I've always felt that owning property is the best secret to acquiring wealth. But it has to be in the right spot. Location is far more important than the actual house. Just make sure to buy in a desirable place and try to get the worst house on the block. Let all your neighbors drive up the value of your home.

 

[UNC71-00]

Not if you are only going to be there 20 months.

 

[TarHeelNation11]

Not if you are only going to be there 20 months.

Why? Just wondering. Is it not a good asset to have if you're not physically living in it?

IMO, there is no better investment than property.

As far as payment, I don't know what kind of credit you have, but with exceptional credit, you could probably get an interest rate around 3%-4%. I didn't have that good of a rate when I bought my house, put nothing down and still only had about an $800 per month payment on a $130,000 house (30 year adjustable). Times have changed since the housing market crash so I'm not real sure about most of the loans out there now. I've been in my current house for about 9 years.

Again though, I've always felt that owning property is the best secret to acquiring wealth. But it has to be in the right spot. Location is far more important than the actual house. Just make sure to buy in a desirable place and try to get the worst house on the block. Let all your neighbors drive up the value of your home.

I have really good credit, fortunately. Touching 800

 

[UNC71-00]

Why? Just wondering. Is it not a good asset to have if you're not physically living in it?

Because you will have to pay a real estate agent 6% to sell your house when you move and it is highly unlikely it will appreciate that much. And even if it does, you would still have to go through the process of selling it, which is time consuming and fuks up your schedule. What if you got a job in Charlotte but couldn't sell your house in Atlanta? Or what if you get a job in Charlotte, put your house on the market and it sells the next day and you aren't supposed to move for 2 months.

Houses are a pain in the ass and the rule of thumb I have always heard is if you aren't going to be in it 3 years, don't bother.

 

[TarHeelNation11]

Because you will have to pay a real estate agent 6% to sell your house when you move and it is highly unlikely it will appreciate that much. And even if it does, you would still have to go through the process of selling it, which is time consuming and fuks up your schedule. What if you got a job in Charlotte but couldn't sell your house in Atlanta? Or what if you get a job in Charlotte, put your house on the market and it sells the next day and you aren't supposed to move for 2 months.

Houses are a pain in the ass and the rule of thumb I have always heard is if you aren't going to be in it 3 years, don't bother.

I think you may have misunderstood. If I did move, I'd plan to keep the house still and I'd just rent it out to enough tenants so that, after my mortgage payment, I'd still make money (a meager amount, I know). I'd then rent/buy somewhere cheap outside of Charlotte.

I wouldn't be looking to sell it if I move.

 

[coolwaterunc]

The main reason I bought a house was because of the whole sick of renting thing. When you're renting, you're literally throwing money away every month. I found buying a house to be awesome and relatively painless, but you have to make sure you're financially prepared for it, or else it will bite you in the ass. My situation is different from yours though. I plan on staying here for a good long time, while yours is about 20 months. I dont know anything about renting to someone else, but it sounds line a pain in the ass since ultimately, that place remains your responsibility. If I were in your situation, I'd stand pat and buy when you're ready to plant your roots. That's just me though.

 

[TarHeelNation11]

The main reason I bought a house was because of the whole sick of renting thing. When you're renting, you're literally throwing money away every month. I found buying a house to be awesome and relatively painless, but you have to make sure you're financially prepared for it, or else it will bite you in the ass. My situation is different from yours though. I plan on staying here for a good long time, while yours is about 20 months. I dont know anything about renting to someone else, but it sounds line a pain in the ass since ultimately, that place remains your responsibility. If I were in your situation, I'd stand pat and buy when you're ready to plant your roots. That's just me though.

Yeah I was gonna ask how painful the whole buying process was since I know you just bought one.

Yeah, I reckon y'all are right in saying I need to wait. I'm just kinda sick of waiting on stuff, you know? I'm 27. Not getting any younger.

 

[coolwaterunc]

Yeah I was gonna ask how painful the whole buying process was since I know you just bought one.

Yeah, I reckon y'all are right in saying I need to wait. I'm just kinda sick of waiting on stuff, you know? I'm 27. Not getting any younger.

I feel ya. I didn't buy mine until right before I turned 30. I wanted to do it so badly, but I knew I wasn't ready, so I stayed in an apartment in Gastonia for a few years until I was. You have plenty of time, there's no need to rush things that don't need to be rushed, especially something as important as buying a house.

 

[Hark_The_Sound_2010]

Another downside could be, if I move away, I've still got this property out of state that I have to keep up with. But I know there are property management companies that can take care of that kind of thing for you.

If I were in your situation, I would not buy. The rule of thumb is that you shouldn't buy unless you plan on owning the property for a minimum of 7 years. Less than 7 years, and the closing costs/attorney fees/agent fees/etc eat up more than any value appreciation you can reasonably expect to have.

A property management company would be great to use if it was a house you already had and needed to move away from and were fine with essentially breaking even on it. But I wouldn't buy the house with the intention of passing it off to the management company not long afterwards - they'll take the vast majority of any profit you'd make there.

Renting it out would be fine if you lived there as well, or were renting to a buddy/family that would give you a good amount of flexibility - but being a landlord to someone you don't know can really suck.

I'm not sure what the housing market is like in the greater Atlanta area, so maybe there are some great deals to be had there that I'm not aware of. But the housing market in greater Boston is f'ing absurd right now. My GF wants to buy ASAP and I'm doing all I can to delay that process.

Just make sure to buy in a desirable place and try to get the worst house on the block. Let all your neighbors drive up the value of your home.

If you do buy - absolutely heed this advice. Buying the nicest house in the neighborhood is a terrible idea (financially).

 

[TarHeelNation11]

If I were in your situation, I would not buy. The rule of thumb is that you shouldn't buy unless you plan on owning the property for a minimum of 7 years. Less than 7 years, and the closing costs/attorney fees/agent fees/etc eat up more than any value appreciation you can reasonably expect to have.

A property management company would be great to use if it was a house you already had and needed to move away from and were fine with essentially breaking even on it. But I wouldn't buy the house with the intention of passing it off to the management company not long afterwards - they'll take the vast majority of any profit you'd make there.

Renting it out would be fine if you lived there as well, or were renting to a buddy/family that would give you a good amount of flexibility - but being a landlord to someone you don't know can really suck.

I'm not sure what the housing market is like in the greater Atlanta area, so maybe there are some great deals to be had there that I'm not aware of. But the housing market in greater Boston is f'ing absurd right now. My GF wants to buy ASAP and I'm doing all I can to delay that process.



If you do buy - absolutely heed this advice. Buying the nicest house in the neighborhood is a terrible idea (financially).

Thanks for the insight! And yes lol, don't worry, if I do buy a house, it will certainly be the shittiest house in a nice neighborhood. Y'all rich motherfukkers make me feel poor af.

Also gotdamn dude, put a ring on that girl's finger. Then move South

 

[Hark_The_Sound_2010]

If you're looking for a good investment, max out your IRA/401k (not sure if you have a 401k at a small family owned business) and invest in some low cost indexed mutual funds. If you'd like advice on that, message me and I can point you in the right direction on that.

 

[TarHeelNation11]

If you're looking for a good investment, max out your IRA/401k (not sure if you have a 401k at a small family owned business) and invest in some low cost indexed mutual funds. If you'd like advice on that, message me and I can point you in the right direction on that.

Don't downtalk me like I'm homeless, Yank I've got a Simple IRA and I put quite a decent amount into it per month.

Well.....my idea of "decent amount" is less than most of y'alls lol

 

[Hark_The_Sound_2010]

Also gotdamn dude, put a ring on that girl's finger. Then move South

I'm getting the full court press put on me right now in regards to this. I'm going to need to cave on either the house or the ring soon enough, and I'd put the ring at a -800 favorite.

Moving south will be another battle entirely, which I may use as a compromise point for giving her the ring and house*

* I say giving her the house, but in reality it'd be the majority her money that goes to pay for it. I like to think I do pretty well for myself in terms of income at my age, but she's definitely the bread winner of the relationship.

 

[Hark_The_Sound_2010]

Don't downtalk me like I'm homeless, Yank I've got a Simple IRA and I put quite a decent amount into it per month.

Well.....my idea of "decent amount" is less than most of y'alls lol

This is the "secret" to accumulating wealth. Keep contributing to that as much as you can - your future self with thank you.

I max out my 401k and IRA every year, I'll be able to retire fairly early as a result.

 

[nctransplant]

Thanks for the insight! And yes lol, don't worry, if I do buy a house, it will certainly be the shittiest house in a nice neighborhood. Y'all rich motherfukkers make me feel poor af.

Also gotdamn dude, put a ring on that girl's finger. Then move South

Yeah we school teachers are making bank!

 

[TarHeelNation11]

I'm getting the full court press put on me right now in regards to this. I'm going to need to cave on either the house or the ring soon enough, and I'd put the ring at a -800 favorite.

Moving south will be another battle entirely, which I may use as a compromise point for giving her the ring and house*

* I say giving her the house, but in reality it'd be the majority her money that goes to pay for it. I like to think I do pretty well for myself in terms of income at my age, but she's definitely the bread winner of the relationship.

That's the dream right there (having your significant other pulling in even more than you). If you can get you and her transferred to jobs in Charlotte, you will be absolutely floored at how far your money will go in that market. I just looked for literally 15 seconds, so don't like expect this house to be a winner, but here's a 4 bed, 2.5 bath house for $140,000 in "Charotte" (really, it's in Mt. Holly.... I have friends who live in Mt. Holly) that's a 25 minute drive to Uptown Charlotte.

Obviously, y'all might want closer to town, less bedrooms, etc., but you get my point. I bet that same house 25 minutes from Boston is, what, $700K?

 

[UNC '92]

Someone said to buy the worst home in a nice neighborhood, from an investment standpoint that is good advice. Just make sure it's not such a piece of shit you have to sink a lot of cash into it. You are going to go broke buying stuff for your house in the beginning anyway, don't kill yourself.

Also, when getting a mortgage, you will likely notice it is an owner-occupied mortgage. If you don't tell the bank you are renting it when that time comes, they could penalize the mortgage. Although it's likely they never find out, telling them keeps you in a good relationship and usually mortgage companies don't change the mortgage if the revenue stream is still there.

The last thing I can think of right now is to ensure you change your home insurance policy to a landlord/fire policy (safest for you but more expensive) or a non-owner occupied policy. This at least ensures you don't get handed a bill if some catastrophic loss of your renters property happens at your place and covers damage renters do to your property.

 

[Hark_The_Sound_2010]

That's the dream right there (having your significant other pulling in even more than you). If you can get you and her transferred to jobs in Charlotte, you will be absolutely floored at how far your money will go in that market. I just looked for literally 15 seconds, so don't like expect this house to be a winner, but here's a 4 bed, 2.5 bath house for $140,000 in "Charotte" (really, it's in Mt. Holly.... I have friends who live in Mt. Holly) that's a 25 minute drive to Uptown Charlotte.

Obviously, y'all might want closer to town, less bedrooms, etc., but you get my point. I bet that same house 25 minutes from Boston is, what, $700K?

Oh I know, and I've mentioned that several times. I do think we'll move down to NC/SC at some point, but I'd imagine it'll be after future kids are at schooling age (free daycare in MA with our two sets of parents).

You're probably about right on the price estimation. If/when we buy around here it will be at least a half hour outside the city. That's where the prices are only mildly absurd instead of pants-on-head stupid. One of our friends bought a place in actual Boston. A one bedroom townhouse that's probably 700 sq feet or so. Very nice place, but also very small - and 750K. Way overpriced, IMO.

 

[UNC71-00]

I think you may have misunderstood. If I did move, I'd plan to keep the house still and I'd just rent it out to enough tenants so that, after my mortgage payment, I'd still make money (a meager amount, I know). I'd then rent/buy somewhere cheap outside of Charlotte.

I wouldn't be looking to sell it if I move.

Renting just one house while living in another town is a pain in the ass. My wife and I are doing it now and it's not worth it. Good tenants are hard to fine and its a pain when something breaks. Highly discourage.

 

[Blue2010]

If you're looking at it from an investment standpoint and not necessarily a place you plan on living for the long term, then I would study the market and find a place you could buy cheap and sell for a profit later on.

And timing is everything. My wife used to hound me about not wanting to rent, but I was very firm on us waiting till we found the right opportunity -- we found a place that had a ton of potential but the owners had moved out, tried to rent it, but ultimately it sat vacant. We jsut kept watching it and it just kept sitting there. So, we wound up buying it for $80,000 less than they were asking...we lived in it for 5 years, fixed it up, got a home warranty on it, so when the AC units began dying...we paid the $75 deductible and got them to install brand new ones...etc, things like that. And we would up selling it for close to what the original owners were trying to get.

You just have to pick you spots.

 

[Blue2010]

Renting just one house while living in another town is a pain in the ass. My wife and I are doing it now and it's not worth it. Good tenants are hard to fine and its a pain when something breaks. Highly discourage.

Completely agree.

 

[WhatTheHeel?]

A $160,000 house for 30 years at 4.5% would be $810 per month, roughly what you're paying in rent.

You'd be paying a couple thousand in closing costs to purchase (say $1500) unless you are able to roll them in to the loan and you could be expected to put something down unless there is equity in the house (you're buying a $200,000 house for $160K.)

After two years, you'll have paid the note down to about $154,500 and will have paid about $15,000 in mortgage interest (which as of now is still tax deductible.)

As someone mentioned, if you tried to sell in two years and there was no appreciation in the house, you're going to pay almost $10,000 to the realtor in commission assuming you get $160,000 for it.

You'll have paid taxes on two years at maybe $1600 each year if you are in a corporate limits (just basing it off my area.)
You'll possibly incur some repairs, but ignore that for now.
I'll assume your rent does not cover utilities.

So, you spend $19,200 in rent for two years.

or

$ 1,500 - closing costs on purchase
$ 3,200 - property taxes for two years
$15,000 - mortgage interest
$ 4,500 - loss on sale (since you owed $154,500 and netted $150,000 after commissions)
-----------
$24,200 - Cost of buying/selling in two year period.

Your financial situation would dictate how much the mortgage interest deduction would save you on your taxes. What really kills you is amortization and how a loan is front-loaded with interest. A realtor could probably offer better insight.

One option would be to buy a decent house that needs work, maybe a bank foreclosure, and spend the two years fixing it up (yourself wherever possible) and possibly make a little profit on it when you sell. You'd want to get a contractor or some plumbers and electricians to at least check it over before you buy, though. We've done a bunch of flips and you never know what you'll find.

If I made any mistakes with my numbers, someone will probably catch them.

 

[bleeduncblue]

This is the "secret" to accumulating wealth. Keep contributing to that as much as you can - your future self with thank you.

I max out my 401k and IRA every year, I'll be able to retire fairly early as a result.

Yup!

Our BFF: C O M P O U N D I N T E R E S T

 

[TarHeelNation11]

A $160,000 house for 30 years at 4.5% would be $810 per month, roughly what you're paying in rent.

You'd be paying a couple thousand in closing costs to purchase (say $1500) unless you are able to roll them in to the loan and you could be expected to put something down unless there is equity in the house (you're buying a $200,000 house for $160K.)

After two years, you'll have paid the note down to about $154,500 and will have paid about $15,000 in mortgage interest (which as of now is still tax deductible.)

As someone mentioned, if you tried to sell in two years and there was no appreciation in the house, you're going to pay almost $10,000 to the realtor in commission assuming you get $160,000 for it.

You'll have paid taxes on two years at maybe $1600 each year if you are in a corporate limits (just basing it off my area.)
You'll possibly incur some repairs, but ignore that for now.
I'll assume your rent does not cover utilities.

So, you spend $19,200 in rent for two years.

or

$ 1,500 - closing costs on purchase
$ 3,200 - property taxes for two years
$15,000 - mortgage interest
$ 4,500 - loss on sale (since you owed $154,500 and netted $150,000 after commissions)
-----------
$24,200 - Cost of buying/selling in two year period.

Your financial situation would dictate how much the mortgage interest deduction would save you on your taxes. What really kills you is amortization and how a loan is front-loaded with interest. A realtor could probably offer better insight.

One option would be to buy a decent house that needs work, maybe a bank foreclosure, and spend the two years fixing it up (yourself wherever possible) and possibly make a little profit on it when you sell. You'd want to get a contractor or some plumbers and electricians to at least check it over before you buy, though. We've done a bunch of flips and you never know what you'll find.

If I made any mistakes with my numbers, someone will probably catch them.

Wow thanks. Gonna read this poast again later with a dictionary in hand. Good info guys!

 

[Grayhead]

Best to not rent if your are in a mortgage. Spinning your wheels really. No one will take care of your home like you do. Also, you pay bulk interest up front. So if you do sell a few years down the road, all you have achieved is to pay interest(rent) to the bank.

Do you have reliable people to tend to the property in your absence? Imagine if the renter's never change the air filters or neglect to tell you about that leaking kitchen or bathroom sink. I vote pass on buying for now. Use any extra money you have to pay your current bills. Buy only when you can handle it efficiently