Posted on 06/28/2010 7:07:58 AM PDT by Gordon Pym
After a very long search I have been offered a job in southern CT. I'm nowin the process of finding a place to live down there but I am arguing with members of my family about the merits of buying a large house from a distressed buyer at a discount price (more than we need but they argue "a good investment") or a smaller house for very short money perhaps even for cash to reduce housing cost as much as possible.
The argument seems to come down to the following:
a large house will sell for more than a small one 10 years down the road so the difference between purchase and sale prices will be much more so it will be a better investment.
A small house will reduce costs the most so it will be the most prudent use of money. The additional money that would be tied up in the big house could be put into another tax deferred investment and would be more accessable should it be needed in the future. Housing is a cost not an investment.
I keep hitting a wall of stories of people who bought a house forty years ago and sold for five times what they paid. My contention is that when the high property taxes are factored in any gains would be offset But that doesn't seem to have an effect and I aam out of ideas
Help.
I’d go short and find a home that I love with potential down the road per location. You will find some great deals. Good luck!
Those days are gone forever; lessons learned both economically and by politicians. Go small.
I think you are near a bottom in the housing market. An investment in real estate may prove to be a good investment.
However, your holdings should be diversified. You should get the smaller house, if the maintencace of the larger house will result in your not being able to save - i.e., diversify your investments.
Be sure to factor in larger taxes, maintenance and utilities for ten years into your math.
Good luck with the new job. As for the home purchase situation, since you are going to CT, I’d recommend renting for at least 6 months to get the lay of the real estate situation there. Property taxes are exorbitant, according to friends of mine who escaped CT to VA last year.
Further, I don’t know what city you’re going to, but extra care should be given to whether the property you buy is even remotely being considered for an eminent domain taking. As we all learned from the Kelo decision, your property is fair game for the locals.
Agreed. I am amazed at some people on FR including military types. The world changed in 2008. We may never see America circa 2007 and earlier again. People are talking about the F-22 and F-35 like it matters anymore. I guess they just live in TV dreamland. Keep paying for cable and sat TV because that money and your viewership support your slavery.
CT has $80 billion in unfunded liabilities (cushy pensions/benefits for state workers) and 3.5 million residents. Who is going to pay for that?
1. you left out cost of energy for a big house
2. more purchasers in future for small house than large house
3. why not look for rental house for short term?
4. IMHO, short term house prices down another 25%, then inflation like 70s will be used to resolve debt crisis.
Your statement assumes a real recovery. Even if the kenyan is defeated in 2012, it'll take awhile for the economy to recover, and that's assuming the GOP has the guts to repeal Obamanomics. From a neophite real estate owner from CT: Many of those Mcmansions built 5 years ago are now selling at 1/2 their initial price and the owners still can't unload them. Don't forget the property taxes. IMHO, purchace a well built starter home. They don't cost as much, taxes are lower and they'll always be a market for them.
Let me just ask one question.
Do you like working on and around your house ?
The bigger the house/property , the more work / cost to maintain it. For example , I just spent the WEEKEND trimming bushes around my home. Bigger houses also cost more to heat/cool , paint, roof, mow the lawn(I have a $3500 riding mower, a $350 chain saw, a $300 hedge trimmer, a $300 string trimmer, a $300 walk behind mower, two snow blowers, plus rakes, shovels,ladders, etc.)
Therefore, if you would rather play golf or go to your boat,go skiing in the winter, etc. Buy a smaller house.
The baby boom is over. This is particularly important in a high tax state that is a net looser in population. As they loose more taxpayers where will the get the money to keep services equal? If you feel that real estate is horribly undervalued, then proceed as stated; buy big, sell big. If real estate is not done adjusting down, then it would be best to wait. Note, new home sales were down 33% last month. This was caused by the tax credit for home buyers ending. My suggestion, given that 33% drop, would be to wait another 6 to 9 months before you buy anything. The subsidized home market ended 2 months ago, what does the un-subsidize housing market look like? We don’t know. Adopt a wait and see position, my recommendation.
The other thing I forgot to mention, I don’t know what business you’re in, but unless you work for the government, at some point you will almost certainly face a loss of income. Your taxes however will steadily go up. Another argument to go small.
People who talk about buying a home as an “investment” are stuck in the past, days that may never come back- and these are mostly the same people who voted for CHANGE- ha
Who IS going to be living in CT ten years from now and what are their incomes going to be and how will they be earning them? Demographics and marxist economics suggest a lot of wealthy corporate CT homeowners who are either boomers or moving into boomer years won't be around in 10 years, commuting to Wall Street from manicured tract mansions in CT.
And a lot more may be defaulting on their mortgages in the next 3 years when the tax-loving democrats get their hands on their bonuses, salaries, and 401K’s
The real estate market hasn't bottomed out yet- think 1990 prices or lower as a “good deal”
I'd be verry conservative and go with a smaller but quality home in the best school district and safest town you can afford- something you can rent out if you ever have to
We live in a townhome and pay $50/month for yard and common area maintenance, and it includes a pool. The enjoyment of yard work is way over-rated.
location, location, location. Buy the home that offers the best value for the price, and whichever one you can most comfortably afford. Do schools play a role in your decision? Also take into account, neighborhood stability and the amenities in proximity. I would check out the shopping areas and parks/recreation areas near both houses, and assess the clientele as well.
I live in a State much like CT (NY).
My house is not an investment. It is a joint-venture with the Gov’t.
We have very high property and school taxes. We have little price appreciation over the last 10 years. Upstate NY is losing people steadily as there are few new jobs in the area. Add in maintenence and repairs, and its a money-loser.
You guys replying to the right FReeper?
I’m for the smaller house.
With lots of land. ;-)
It'll workout fine, don't listen to the naysayers.
Disclaimer:This comment is based on my guess that you probably won't listen to any of the other good advice given anyway.
Sadly you cannot make any assumptions about appreciation or a normal economy or the world we knew before 2008. He now has control to shut down the Internet.
I'm not handy at all so I have to hire people to work on the house. I have a 30 something year old house and I have had to have a lot of work done both to maintain the house and improve it. Makes sense that a smaller home will have lower costs.
Buy the smaller house to live in.
Then, Buy a rental house and depreciate it to help
alleviate taxes on passive income. The first house probably will not increase in value like in the past. May take 5 years for us to see any gains.
I don't think the market has hit bottom yet and it will be a LONG time before a recovery happens, if in the foreseeable future. If the fed starts printing money (very likely) the resulting inflation will force mortgage rates up and further depress the market.
I'm selling my own home ASAP, in an area that has not been hit as hard as others due to a decent location. If I had sold a few years ago before the market started tanking I could have sold it in weekend for $750K. I'll be lucky to get $600K for it now and it may take several months or longer.
Well. I’m glad there are many more out there that think like I do. I’m starting to feel like an old testament prophet of doom around here.
Does anyone have any written articles debunking the “use your house as a gold mine” argument. That would help greatly
I have to agree with everything you have said. I would only add that I would rent now instead of buying.
Location location location! I’d buy the smallest house in the best location I could afford. Older neighborhoods sometimes go trashy, sometimes they get better.
Old testament prophet..........hummmmmm. Sounds good to me. Managing wealth, homeownership and the like have gone through a sea change since my folks did it. My philosophy is to have the money in the bank when you need repairs. Buying a home is a decision to be made with future expenses in mind, not resale value.
I live in CT and can give you some help from a FReeper/conservative perspective.
Homes in CT vary greatly in value and future worth. Unless you have scads of money find a rural town and a moderate house with some land. CT has a GOP governor now but I fear in Nov. the idiots here will elect a dem and with a dem controlled congress all bets are off as to where the economy will go.
A moderate house will retain its value over a large one. One with at least 3 acres will help.
If you buy into a city look out for a massive tax increase if the have a good job. Anyone working will get hit with state and local taxes to pay for the coming crash if the dems get complete control.
We built our house ten years ago ourselves. We will probably not lose any money but you never know. Our taxes have doubled in that time. A new property valuation is coming and when the property values drop the mill rates will either have to go up or the spending will have to go down. Guess which it will be if a dem wins governor?
Private e-mail me if you want some more info.
Ray
Not paying interest on a mortgage is a brilliant move. Go smaller.
You should also take into account the taxes and insurance on the large vs. small house, not to mention the maintenance (roof, HVAC, etc.) Buy the house that feels more like home and that will let you get a good night’s sleep.
Which house will best fit your needs? Proximity to schools, neighborhood, quality of life etc.
Will the larger home offer enough more comfort?
Also how much of your income would go into the larger home?
Rent don’t buy. Wait for a year and a half to two years when the worst of the housing/mortgage fiasco should have run its course. In the meantime look for short sales and familiarize yourself with the market - each one is different. If you have housing equity in your current home make sure you put it in some inflation proof investment.
selling for 650k?
I hope you are willing to wait out 2 years to sell.
I’m hoping for 600K-625K. That’s actually in the range of houses like ours that are already selling in the area. These same homes sold for $750K plus 3 years ago, and to your point, there are some wishful thinkers out there who have had their homes on the market for 12-18 months because they still think they can get $700K. We haven’t been hit as hard because we’re located in PA just north of the PA/DE border. We have neighbors that work in Philadelphia, Wilmington, Baltimore, and Manhattan, as all are within commuting distance by road or rail. Wilmington is home to several large banks, DuPont, and several large pharma companies so there is a steady pool of buyers for executive type homes in the area.
I hope it works out for you. That particular area isn’t doing all that well.
And now they complain that all of the wonderful old family farms have gone out of business.
Is there any wonder why the founders were opposed to direct taxation.
I live in a van down by the river.
Hello, Gordon Pym.
Do you have an update for this thread?
I just recently read that some experts predict that soon there will be a glut of large houses and mansions on the market.
They base their prediction on the babyboomers all wanting to downsize, and those who do not opt for a condo or townhouse, for those who wish to avoid HOAs, that they’ll want to downsize into smallish houses.
Not necessarily microhouses, but there’s a big difference between the huge sprawling homes they raised families in, and what they’d prefer to maintain during retirement.
It will be interesting to watch, to see what happens over the next decade, and if this prediction turns out to hold water.
Agree. Location, location, location.
CT will never loose it's liberals.
Conneticut?
Taxes Taxes TAXES! (And more taxes.)
Actually I have an offer in on a foreclosed house in a low milrate town about 20 minutes from work that I can purchase for cash. It will take a good bit of work to get the place finished but it's a good deal for now.
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