Why you should buy a home as early as possible.

[P3HSB]

I bought my first home for $230k on a $65k salary at 8.25% interest.

Your an example of somebody who play your cards right and got in early

Todays market number look like this for a very modest home. And that is without Reno. So yes shag carpet lol

$500-650k home -> 6-7% interest -> Monthly cost est $4000+

 

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[jclean]

I advised my brother to buy something immediately with his girlfriend. they both still lived at home and then immediately bought a house in 2018 for 165,000 euros. has now paid off for 5 years. there is still 130,000 euros outstanding. this house is now being sold for 200,000 euros. = 70,000 euros that will be used to buy a bigger house.

I myself have rented for 6 years +- 800 euros per month = -57,600 euros.

you have to live somewhere you can buy your own house. if you still want to travel a lot you can rent it out.

Buying a home is a good way for many people to save money that they would otherwise spend on other junk

 

[socaldude]

Yeah it is tough in California. That's how I ended up in Phoenix. When I moved to Orange County in 2004 the prices were already high.

It's way worse today.

Areas that were newly developed and nice neighborhoods are now populated with homeless and junky cars and trashy RV's parked on the streets.

A lot of people close to me are slowlane millionaires just because they invested in real estate in CA back in 1995 or in 2005. They own 2-3 houses or a duplex. Worth 2-3X easily.

How does a young millennial even have a chance? A six figure salary doesn't even cut it anymore with inflation so high

We are just in a different economic environment. Not like 90 years ago when you had a Morgan silver dollar in your pocket and looked up at the empire state building being built.

The bankers and politicians have destroyed the value of college degrees, the US dollar and commoditized labor markets.

Hard assets all the way. Anything is better than cash at this point. LOL

Real Estate price look like they never go down due to limited supply. If a Banking crisis can't drop it, I don't know what will.

Real estate will never crash. It's a hard asset that holds more utility than most other assets. The only way out is hyperinflation and a reset with a central bank digital currency attached to a social credit score.

Money is a dialetheia with metaphysical properties, like paying a doctor for a life saving operation. It's why the political elites at the top think they are mortal gods that can levitate. LOL That's what happens when you put a small group in charge of money. What was supposed to streamline the economy is now abused by lying sociopaths. Like irredeemable drug addicts.

It's like the news. It was just supposed to be a "Utility" like turning on the faucet for water or flipping a switch for lighting is now controlled by laughing liars. That's why CNN was called "Cable News Network". News was supposed to be like a utility. Now it ain't.

 

[biophase]

BTW... I just looked up the city my friend purchased in and the program is still available.

Avondale First-Time Homebuyer Program

The City of Avondale currently operates a program to assist qualified households with the purchase of their first home in the City. In order to participate, households must be first-time buyers and meet certain income requirements provided by the US Department of Housing and Urban Development.

The City may provide up to $30,000 in down payment, closing cost and/or principal reduction assistance in the form of a non-interest bearing deferred, forgivable loan. The City will secure this loan with a Deed of Trust, Promissory Note and/or other approved lien instrument. The loan will become payable in full if the buyer sells or moves from the property within a certain period of time or does not maintain the property. If at the end of this period the buyer has complied with all requirements, the City will forgive the loan in full and release its lien.

Requirements

• The property must be located in the city limits of Avondale.
• You must attend an 8 hour homebuyer education course.
• Qualify for a first mortgage.
• The maximum sales price allowed is $300,000.
• Have a credit score of 580 or higher.

Unfortunately, I took a look in Avondale and there are no houses under $300,000 anymore. So this program is pretty much dead now unless they raise its limits. But what an awesome program. The city giving you $30k to jump start your savings and equity building.

A house like this one below would have qualified in 2020. Imagine getting this home for $295k, with $30k down. You have a $265k loan at 3%. You are paying $1500/mo including taxes and HOA for a 4br 2000sf home and have $130kish equity.

If you are young and haven't bought a home yet, I would look for opportunities like this. Especially if you are lower income and/or side walkers. I can't imagine not using this program when homes were $100k-$120k!

 

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[REV5028]

Thanks for this thread, @biophase . It gives me some hope.

My boyfriend and I mortgaged a lovely Santa Fe style, 2400 sq. ft., 13 year old house for $292k @ 5.99% fixed interest last August in a small college town about 1 - 1.5 hours from a larger city. As first time homeowners and just getting out of college, we put the minimum down (can't remember exactly, maybe 5%?). I know $292k and 5.99% aren't awful by today's standards, but looking at the amount of interest we'd be paying if we stuck to the standard monthly payment makes me physically ill.

Maybe we should have waited to build up more of a down payment, but maybe not for the reasons you've mentioned. We've also been paying an extra $100 per month and plan to start increasing that amount as our income increases and other debts get taken care of. When we bought the house our combined salary was ~$150k. Recently our combined salary increased to ~$203k. We both also have one toe on the fastlane, and I expect one day we'll both at least have a foot on it. And, if push comes to shove, we should be able to easily find renters. One of our 5-year goals (ideally 2 years) is to acquire rental properties here.

I would also like to acknowledge how lucky we were. It turns out that the family we bought the house from are really great friends with one of my friend's family. I don't know for sure, but I think this might have played a role in the sellers agreeing to replace the roof ($16k) and paying for a year-long home warranty even after our real estate agent forgot to include it in the deal... We are now going solar and have no roof issues to deal with first. Our tankless water heater also just bit the dust, so we'll only be paying ~$180 for a $3800 job thanks to the home warranty. And, now I don't have to argue with a stingy landlord about whether or not the water heater really needs to be replaced.

So, right now it feels like it could be better, but could definitely be worse. I'm hoping it will start feeling like a better and better investment as the years go on.

 

[Guest-5ty5s4]

This is hard thing for younger people to swallow. When I bought my first house in 1999, I thought, man in 2029 and the house will be all paid off, that is a long long time. But reality was that in 2004 I sold it and moved.

You can always sell your place. Paid it off faster. But there's a high chance you won't be in the house for 25 years. Just take it one month at a time.

Here's another perspective. Imagine you purchased this home in 2007 for $125k. Your payment would be $594. Today in 2023, you would be paying $600 to live in this exact home. Would you be happy with that purchase?

There's probably going to be someone posting in 2030, telling you that you got lucky and bought when the prices were low.

Exactly. And I will gripe about inflation being a huge scam to the people as much or more than anyone, but we have to remember that it's not just the prices that inflate, but also all of our incomes (and the prices we can charge for our businesses' products and services).

So those monthly payments are fixed, but what you are earning stays the same. It's a great deal.

And THEN when you get into long term rental mathematics, it's even better...

And then SBA loan and biz real estate... there are just a lot of options.

 

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[biophase]

Exactly. And I will gripe about inflation being a huge scam to the people as much or more than anyone, but we have to remember that it's not just the prices that inflate, but also all of our incomes (and the prices we can charge for our businesses' products and services).

Yes I think that’s the MAIN advantage with real estate. You can lock in your “rent” payment for 30 years if you want to. Yes taxes will go up but that is minimal. HOA is a different story though.

If I stayed in my house I bought in 1999 I would be paying $1200/mo right now for a 4br/3ba house.

Literally, every other expense in the world will go up except your fixed 30 year mortgage payment!

 

[Kak]

And you get to enjoy living in the big addition to your home before you trade up.

Indeed! We currently have a big downstairs and not much going on upstairs. We have a unique opportunity to more than double our square footage by putting on a carport and building over the entire downstairs.

In my position, this is WAY cheaper way to a million+ dollar home than actually buying one because I have a ridiculously low homesteaded property tax rate locked in. We also love the neighborhood. There's a bunch of multimillion dollar stuff in here.

 

[AmazingLarry]

Just visited my elderly great aunt who lives on Waikiki beach in Honolulu. We talked a bit about real estate and how huge of an impact it's had on her life. She split the cost of her first property in the 70s and bought (and sold) a bunch since then.

You can imagine what they're worth now in an amazing location within Hawaii. It was probably much easier back then, but she got in when she had the opportunity by splitting it with a partner and it's paid off massively. Made me feel better about the fixxer-upper I've been dumping my time into.

VIew from her apartment for proof.

 

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[WJK]

Like everything else, it depends...

 

[biophase]

Hi, the first question is whether this post was written for those who have benefits or support in purchasing their first home?

Not sure what you are asking here.

The second question I wanted to ask is whether this type of post is aimed at people who are in the process of creating their own business or have businesses already started?

This post was mainly aimed at people who started a business, or had a decent job, but decided to rent in order to not be tied down, or wanted to be digital nomads.

and the third question is whether a person should take out a mortgage for a house even without having necessarily started their own business, what percentage of income should be dedicated to the mortgage, in Italy for example they cannot give you installments higher than a third of the own salary, do you think it should be exposed less to ensure that you invest the rest of your savings in entrepreneurial activities?

In the US, the amount is about 33% of your salary also. Yes, I would recommend taking out a mortgage vs paying cash. By paying cash, you probably waited too long to purchase your first home.

I'm loosely making up an example based on a generalization of people I've met in the past. Imagine you are a single guy 25 years old, making $150k a year. You want to live where the action is so you rent a nice downtown apartment in Austin $4,000/mo. What you should have done is buy a nice home for $500k a few miles outside of downtown and commute to the clubs and bars.

 

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[biophase]

Where I live, which was a crazy hot market two years ago - no inventory, tons of people trying to buy - houses are down 15% and falling everywhere. Tons of inventory sitting around now. I know several people who bought two years ago who are down $20-30K from their original price, not to mention the $10-20K they've "invested" in the house already. One of them needs to move for their job, and now they'll be paying for an apartment + a few hundred dollars since the rent their house can get is a good bit lower than their 2% IR mortage. Assuming they can find a tenant since tons of new apartments are coming online and there is lots of vacancy.

This is probably not the right time to buy. I mean I thought that way in 2008 until 2013. In hindsight, the right time to buy was 2013-2020. The window is usually huge. It's not like the right time to buy will be within a span of 6 months and you will have missed it. But you have to be monitoring it. It will be interesting to see how real estate does in the next 2-3 years.

But with that said, those people have purchased an "asset" with fixed payments, hopefully. I guess we can revisit this in 10 years and see how the several people that you know end up doing. We can compare 2033 home prices with today and 2033 rental prices with current mortgage payments. Only time will tell.

I think about buying a house a lot, since it would be nice to have more space and be able to make it my own. But since I'm just starting on FL, it just doesn't make sense to me. Mortgages are 50% higher for a house the same size as a 2br apartment. Renting eliminates the risk of major maintenance/repair, which seems to come up every year or two with a house. I've known several people who had to take our more debt on their modest house because of things like that. I can also downgrade my apartment if I need to get leaner as I'm starting out, but downgrading a house is extremely expensive with all the fees and time.

If you can't afford a house today. Don't get a house. My post was directed at people that can afford a house and choose to rent for the freedom.

But buying a house to live in "as early as possible" regardless of market conditions

Well yes, you have to look at market conditions.

I'm glad it's on your radar now, because you will be much better informed when the time comes to buy.

 

[biophase]

I'm finding this topic so interesting from two angles: First, I took the opposite approach in my 20s, so it's interesting to consider whether that was the right call. Financially, almost certainly not - I could've bought in that prime window in cities that blew up the last few years. But for overall life choice, I'm glad I didn't because I wouldn't trade the opportunities and experiences that being mobile opened for me. I think buying a house would've made all that a lot more difficult

You could have bought a home and then rented it out. Then you could still had the same freedoms.

 

[Hello_World1]

My experience might be wholly anecdotal, but I feel like owning a home has helped with the control aspect of my life. When me and the husband moved from our parents' homes in 2019, an apartment in AZ was $1000. Then $1500, then $2000, then $2300. We realized we were playing catch up and it was digging into our time and energy to keep renting. (our original $1200 rent was $2600 when we bought our house and jumped ship for a $1800 mortgage.)

I am a science type, so I feel like the more variables that keep shifting around, the harder it will be to gain any kind of clarity on what your next step should be. It's like shooting a moving target from a moving platform. For us, hopping off the "rental increase cycle" was pivotal for us to STOP focusing so much of our energy on constantly increasing our intrinsic value every 12 months to keep our budget financially sound.

I'm sure this area of Pinal County will explode and blossom in the next 5-10 years, and the value of our home will go up. But value gained aside, we just needed a solid foundation where we could exercise control of as many variables as possible as we climb.

 

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[AmazingLarry]

I got forced out of a rental last year because the landlord was selling the house. Wasn't planning on buying a house, but it was cheaper to buy than continue renting, and at this point I'm glad it worked out that way.

Got a somewhat rundown house from 1820 for under asking, which is unheard of in my area for the past couple years. I'm fixing it up and it's gonna be super nice when it's done and worth a hell of a lot more.

Just the fact that I'm not throwing money away on rent feels great.

 

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[jdm667]

Well sh!t, I went down the rabbit hole and googled '$50,000 down payment assistance program" and found a bunch. So they are out there. I've never looked for them.


Here's a link to one in Massachussets. Up to $50k in down payment assistance, no payments, no interest. You pay back when you sell your home.

Income limits and eligibility requirements for MassHousing Mortgage Loans

Am I eligible for a MassHousing Mortgage Loan with Down Payment Assistance?

www.masshousing.com

Here is one in Cali from the city of Yorba Linda:

The City of Yorba Linda has recently reinstated the Mortgage Assistance Program (MAP) to assist a limited number of low and moderate income households in purchasing a home in our community.

The MAP loan is in the form of a “silent second” and is considered a second mortgage on the home. The MAP participant borrows a prescribed amount from the City, in addition to the amount borrowed from the lender providing the first mortgage loan. The maximum loan amount is $50,000. The loan is interest free and is considered payable when the home is sold or no longer considered a primary residence.

Mortgage/down payment assistance programs push prices higher. The politicians who create those programs know it - but they already own plenty of real estate, so they are happy with the result.

@biophase I agree with your premise in this thread - especially for anyone willing to house hack (there are good threads on the forum for those who want to look into it).

For anyone who doubts you and thinks residential real estate has to crash eventually: it might ... but it could also go much higher. Just look at South Korea as one example.

Business INSIDERS had an article this week: the average millennial in South Korea makes $27K to $38K, but the average home price is $876k: a price to income ratio of anywhere from 23 to 32.

Meet the typical South Korean millennial: educated, overqualified for the job market, and part of the 'kangaroo tribe' that can't afford to leave their parents' homes

At 28, Kwon Joonyeop is the kind of guy most Korean teenagers want to become: He went to a top school, swam varsity, and has a good job.

www.businessinsider.com

Also, remember that a large group of people (mortgage brokers, banks, realtors, cities & towns that live off of property taxes, homeowners, etc.) have a vested interest in ever-higher home prices.

 

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[ygtrhos]

What most people do not understand is that, most real estates are, in fact, businesses.

It brings rent (which you can increase, like product price), appreciates with inflation (which you can increase, like equity price).

It covers a need, which is practically always going to be there (shelter).

MJ defines it as wealth 1.0. and I completely agree as a homeowner.

If you pay rent, it just goes away to another person. If you pay mortgage, every cent you pay back after the interest, goes into your net worth.

Given the fact that 2-3% inflation is a healthy thing, it will almost always appreciate. (as long as you buy an acceptable location without any catastrophes)

In US, choosing a good location is probably more difficult, because of the economic structure (see what happened to Detroit) but it is still a very much doable thing.

 

[Kevin88660]

My fiancé is from Singapore and I’m currently on the fence as to whether we should buy there or in the US first - because Singapore will cost a lot more upfront.

I’m 27 now and am definitely starting to see the effect that the lifestyle of traveling and renting places is having on my net worth. Your post definitely hit home for me there.

It’s really the current interest rates in the US that are pushing me towards Singapore. The main problem on the Singapore side is the legal situation with renting it out if we go with an HDB property. We’d have to wait 5 years or do it under the table - which many people do ‍

Even though my numbers have grown over time and my “Net Worth” is solid if you factor in the value of business (which I don’t think is a fair thing to do).. I can’t shake the uneasy feeling that I have. I’ve always been confident, but we’re talking about having a family at this point - and that has me really scared of failing her and our future children.

Lots of big think lately.

Singapore central bank policy is that the rates here tend to follow U.S. rates.

HDB is a lower risk bet because things cannot go too wrong with an investment that comes with a lot of state subsidy.

Real estate ownership and investing is like a national religion in Singapore.

 

[biophase]

As an American, you have the power to clear $250K tax free every 2 years.

Think about that.

The government will NOT tax you! When does that ever happen?

If there was ever a lazy Slowlane strategy this is it:

If you move 10 times in 20 years with an average $100K gain, that's $1M tax free. You'd have to earn $1.5M to net the same amount. If you put those gains into the stock market and earn 8% annually, in 20 years you'll have around $1.3M, for simply DOING NOTHING other than moving every 2 years.

Not to mention this isn't even taxed at the state level. Save another 4%-10%!

Yes, this is Slowlane, but it is still a powerful weapon for wealth creation, especially if you fail at 100 businesses.

Since I started my business in 2007, I've encouraged all my friends to start one too. 16 years later, I've learned that most people are just not cut out to start or run a business. A good chunk of our population likes a 9-5 no stress job. For them, this is absolutely their highest EV in life.

Also, as you level-up in home, the amount of the gain tends to also correlate with the cost of the home. My tax-free RE gains were bigger the more expensive the house.

Absolutely. As home prices get higher, a 20% jump has much more magnitude. Unfortunately, I'm blowing past the $250k limit on all my REI these days. It's a good problem to have.

 

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[MitchC]

Public housing price range here : 1M and below
Private housing here 1.2M and above typically.

So 1M is dividing line.

You are the person who is also saying to have 300k saved up.

300k is a 25% deposit on a 1.2m house.

How much was a public house when you were 25? How much is it now?

 

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[circleme]

Hi @biophase,

thank you very much for your post, it really made me think a lot. I think I do not fall exactly into the target group you described, but I have some similarites (except the part regarding the successful running copany... ouch). I am currently in my late 20's and (still) living for rent. I've been thinking about home ownership for a while now, but primarily from a pure slowlaner point of view. Here I have to say right up front that it would be 100% fixed for me as a Slowlaner to buy a house or an apartment. BUT...

After all, this is the Fastlane forum and I don't follow the Slowlane, I follow the Fastlane. For a few weeks already full time. Of course, with rent prices going up, the topic still catches up with me from time to time and that begs the question for me:

Should I buy a home despite the Fastlane or "hope" to succeed with my FL business in the foreseeable future (next 5-7 years)?

From a purely statistical point of view, the path as a slowlaner is probably more promising if it is purely a matter of purchasing and "safely" paying off the real estate loan. But if I want to buy a property as a Fastlaner anyway AND would need a loan for it, I think several problems arise at once:

1. The bank does not give a loan to a self-employed person or a young entrepreneur, because the creditworthiness is not guaranteed. It is also not with a job, but from the bank's point of view a job stands for more security. (I speak here for the situation in Europe).
2. I could switch to the Slowlane with one foot (part-time), strengthen my credit rating and thus get the loan for my house, and continue to pursue my Fastlane business with the other foot.

Should I pursue point 2, this has potentially serious effects on my Fastlane Journey, as:

1. I am already limited in time, as I have to spend XY hours per week NOT on my Fastlane business, but on my job.
2. I am mentally not fully with my cause (my Fastlane venture).
3. I am now a CREDIT PAYER. I will reluctantly take what may be essential risks for the Fastlane Business and jeopardize my ability to pay for the loan. I will probably fall into the "I'd rather play it safe until my property is paid off" mindset.
4. The time until I get results with my fastlane business (no matter if positive or negative) is significantly higher, since I still have to work a job on the side. If I would pursue the Fastlane Full-Time, I would have more time to fail or a possible success would occur earlier.

I don't mean to belittle your post by any stretch of the imagination. Even now in the course of writing my response, it still makes me think, because somewhere inside me (Slowlaner upbringing probably) I still feel that with every year that goes by I pay one more year into the void, being a tenant. On the other hand, the points I listed and my intention complicate the process of buying a property immensely for me.

Why I am interested in this topic has very little to do with asset accumulation, but rather with the fact that a paid-off apartment is a kind of backup plan. You can F*ck up as hard as you want, at least you have a roof over your head and the running costs are many times lower than with a similar sized rental apartment or house. I also think that the topic of owning a home is part of the process of achieving financial independence for many.

At the end of the day, it represents a sort of "mini-gamble" for me. It can turn out insanely well for me, but it can also turn out insanely bad. The worst-case would be that in 10 years I'm still standing there as a tenant with countless failed fastlane businesses and huge opportunity costs. The best case: Well, I think we all know the best case. =)

 

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[biophase]

This is one of "those threads".

Housing doesn't only go up $100k/yr for 20 years. Sell your house every 2 years? In what universe is that "the right move" for a slowlaner who lacks expertise in real estate?

If you live in a crappy area, I'd argue it is better to move to an area with more opportunity and rent there than it is to buy a house right now in your crappy area. There's a reason your real estate is more affordable. Move.

My dad bought a condo in a decent area of eastern PA in 1990 for $120k. It's worth $180k now. Maybe $200. Nice quiet neighborhood. His place is very well maintained. That's 33 years appreciation. He loves it, but I outpaced that appreciation on my home in 2021 alone. My house is only 350 sq ft bigger. And my neighborhood is noticeably worse than his. That's the difference between eastern PA and Phoenix AZ. When I first moved to Phoenix I was priced out of the market. I bought at the bottom of the last crash. Today my house is worth more than twice what my Dad's is.

Interest rates, at least in the US, are going to go up. Looking at the falling home sales figures, it is just a matter of time before prices start to come down. Telling people to buy a house now feels a bit like saying that in '07. The writing is on the wall and those who bought in '07 didn't recover from their decision for 10ish years.

Kinda like how people are already giving their overpriced cars back to the dealers (or getting repoed) rather than pay their inflated loan/lease amounts.

Even if I'm wrong, even if a crash isn't coming, it doesn't look like any surge in pricing is coming anytime soon. So it doesn't actually hurt you to wait another year or two and see which way the wind is blowing. And a lot of places it is cheaper to rent than own right now. There's nothing wrong with keeping your powder dry.

My point is this...

There is good advice here that is generally true. Generally.

But like anything, or everything in life, you have to be smart enough to take a look at the specific factors of your life and decide if this advice is truly good advice for you specifically.

Yes I agree with you that this isn’t, go run out and buy anything right away.

This is more for the people who are relatively stable and choose to rent instead of buy for lifestyle choices.

And yes location matters immensely. In 2000 Chicago was more expensive than Phoenix. Chicago and Cali were kind of close. Cali had a huge run up. Phoenix didn’t do anything until 2005 to 2008. Today Phoenix is getting close to Cali prices. Chicago didn’t go anywhere from 2000 to 2023. It’s hard to predict real estate.

I always thought Phoenix was underpriced the whole time I lived there until 2023. Now it feels overpriced. Vegas feels underpriced to me now still.

 

[Guest-5ty5s4]

I agree with that 100%.

Right now, the apartment I live in, makes absolutely NO sense to buy.

I'm renting it for $2,200/month, while the buying price for the apartment is $1,2m. In this case, it's not good being the landlord, and I'm renting it dirt cheap comparing the price of the apartment.

But, I do believe in buying a home. It won't be this one.

I'll probably buy a smaller, $500K apartment that I'm able to rent at a higher relative cost and use that as a stepping stone.

In that case, the landlord probably bought it a long time ago and has fixed rate debt. His/her cost basis is likely low enough to cash flow with what you are currently paying in rent. And today's prices make your rent more affordable compared to buying a similar property today, so your logical decision is to pay him/her to rent their place while he/her profits from the wise decision they made years ago.

But you could buy something today and in some amount of time, rents will likely go up unless there is a huge market crash, an Andrew Jackson style populist in office who ends the Fed, or you screw up with some crazy ARM, etc.

Real estate investing!

 

[BizyDad]

Woah. What???

@biophase is married with kids?!?!

And here I thought you were some bike riding, dog loving, e-commerce store owning, real estate investing, travelling monk who dated infrequently. Lol.

 

[23Infinity]

Although your advice is well-intentioned I feel it may be invalid for folks living in certain regions/markets, especially in over-priced markets. In Canada the two major cities (Toronto / Vancouver) are ridiculously over-inflated and the govt wants to keep it that way as RE is their golden goose. Even nearby cities have inflated price with less value due to being further away from the main city.

A decent 1bd+den condo is C$650K ($488K USD), and detached houses are ~$1.1 mil. Now add the increased interest rates to that (we don't have 30 year fixed mortgages here, most are either variable for 5 year renewals I believe).

The time frame mention in your original post (around 2000-2008 till now) saw a ton of money printing / near zero interest and huge inflation of asset prices across the West.

At least in Canada, I think we are in a mega-bubble that might be popped if the US Fed (and hence Bank of Canada) continues to keep and hold rates high (or goes higher). I think a lot of people are discounting the reality that interest rates could stay high or go slightly higher for the coming few years (unless some black swan geopolitical event).

Might be a good idea to wait to see how things go for at least another 12-18 months before buying RE, especially as primary residence.

I don't disagree with the intent of your advice though, if I reach certain biz goals, I'd probably buy a primary residence but outside of North America. A friend bought a condo in the Dominican for something like $80K USD in the recent past.

 

[biophase]

In your Chicago residence example if you lived in that house as a primary residence during that period you still made quite a bit of money. Going off the assumption that you either needed to rent or buy and you couldn't live somewhere free you would have spend substantially more than you did renting than your mortgage payments. Unless your interest was crazy high anyways.

Even at 1K per month rent which was probably light for the Chicago market even in '05 it would have cost you over 200K over that 17 years in just rent. A 20K dollar hit is a tenth of what renting would have cost.

Despite selling it for a loss I made money on this investment. This property was rented for positive cash flow for the 17 years I’ve owned it. It was only vacant 12 months and this was due to Covid in 2020.

 

[NervesOfSteel]

Ok, if it is not about personal home ownership but rather real estate as an investment, why not use a simple index fund investment strategy (besides the business), starting in your 20's? @fastlane_dad wrote a great thread about that.
Of course you need discipline for that, but you mentioned that the real estate owner also needs that (to safe up the down payment rather than blowing the money).

Especially for those who earn very little (and don't have other investments) a financed house is a huge "cluster risk". There is zero diversification.

Lastly, people often forget to add up all the hours they spent on all the stuff that comes with home ownership or being a landlord.

Buying a home is 100% a slave move if your not doing it as an investment vehicle. With debt taxes and expenses your paying for the house at bare minimum twice. The borrow is a slave to a lender, don’t make this 30 yr mistake

I was not comfortable of taking a debt on a house and then paying an interest upon that. It would have tied me to my job and I would have never been able to take any risk at a young age!
Whatever I saved, I invested in Gold.

After 20 years, I have a comfortable business, a store, a house and enough assets to buy a new house any day.

When you're young, you have ability to take risks. Buying a house will cost you those years apart from the installments you put in.

Those energetic years, basic installments, the interest upon it, the maintenance etc etc .. always seemed to be an expensive deal to me!

 

[WJK]

No one can solve the riddle of buying vs renting a house as this is more of a "economical life" vs "quality life" question. Some might enjoy living decades behind the store in a small compartment while others may prefer to raise a family in a warm comfortable house.

"One must sacrifice the quality of life in order to be rich" - Its a myth !

Your right. Raising a family in a "warm comfortable house" is nicer. I've been in RE for 47 years, so I look at it differently from you. It is a business for me. But I also like to be personally comfortable.

I'm a retired RE appraiser. In commercial and residential situations, I have seen about every living situation a human can have. I have been able to ask the question -- why -- so I have a lot of the reasons that people do what they do. It's not binary -- renting vs. buying a home.

And the concept of "rich" is relative to the person's perspective. When I was a kid, I just wanted a house with heat and an indoor bathroom. Dad had a talent for buying houses that had neither. He was always going to build something someday. The indoor bathroom in our last family home came a few years after we moved in. They got a furnace for heat after I left home.

 

[NervesOfSteel]

This is probably not the right time to buy. I mean I thought that way in 2008 until 2013. In hindsight, the right time to buy was 2013-2020. The window is usually huge. It's not like the right time to buy will be within a span of 6 months and you will have missed it. But you have to be monitoring it. It will be interesting to see how real estate does in the next 2-3 years.

But with that said, those people have purchased an "asset" with fixed payments, hopefully. I guess we can revisit this in 10 years and see how the several people that you know end up doing. We can compare 2033 home prices with today and 2033 rental prices with current mortgage payments. Only time will tell.


If you can't afford a house today. Don't get a house. My post was directed at people that can afford a house and choose to rent for the freedom.


Well yes, you have to look at market conditions.

I'm glad it's on your radar now, because you will be much better informed when the time comes to buy.

The best time to buy is when one can afford a house without breaking one's back !
The Peak time to buy a house is when you can actually afford it and the world is undergoing a financial meltdown!

Most people who do too much mathematics are usually the ones with missed opportunities. I have been a victim of 'Mathematics and overthinking' combo and missed some massive opportunities almost a decade ago!

 

[Timmy C]

I live in a medium-size city in Canada. "Average" home price here is still hovering around 1m.

Even if you put 200k down, interest alone is about $4,000 on the mortgage. With principal, insurance, and taxes in you're about $7,000/mo. That's $84,000/year in house payments for someone to live in an "average" home here if they buy right now. Not very sustainable with these elevated rates, and if they don't see a sharp reversal going to be some further issues this year IMO.

I live 40 minutes from the CBD of Melbourne, Australia.

Average home prices here are between $600,000 to one million dollars.

For years people have said prices would crash here, for decades they have said this. Yet it never happens.

Add to that a government propping it up with record levels of immigration, restricted supply, and government programs to prop up the scam I don't see it stopping.

It won't crash, they'll never let it happen.

They always intervene and prop it up with some new scheme.