Rethink Every Assumption

You think you own a house? Try to skip paying utilities, or taxes or the mortgage. You will soon see that you own your home only as long as you pay somebody each month for that privilege, and you live by the rules governing the land that the house sits on. (does that sound like very expensive renting, while assuming all the responsibilities?) Your name on the deed isn't unconditional. You need permits to install or add on. The house is an arrangement of sticks and bricks and stones. The value is in the land. But in the case of eminent domain, if someone else wants your land, …… plan to stand across the road and wave 'your' kingdom goodbye. Who in their right mind would give up $200,000 for a place to sleep, watch TV and take a shower? Remember, YOU mow the lawn, wash the windows, shovel the walks and plow the driveway. That house incurs many other expenses that you can't imagine. Buying a home now for investment or family is only sound if the prices fall significantly and ones income is a sure thing.
“”So, a home as a simple residence isn’t exactly a great investment these days.”" I agree with that statement, Chris.

IMExperiencedHO the second bad bad use of money is …..that shiny commercialized new car you think you need. (usually you think you need two) The depreciation on that begins the day it leaves the dealership. The payments always add up to more than the negotiated sticker price. The insurance is deadly in the cities, as is upkeep. Oh and if you own a home, a Garage to house it…. ahhh yes that 800 square feet so your car can have a room of its own that you are paying for On Your Mortgage. Thats more room than one gives to their children. And after all the hoopla, in 12 months it’s just another used car.
I give my opinion with respect for those who think differently.

We've been trying to sell our family home, in the UK, for six months, in order to relocate. The market's dead.

It would be great to have a rental arrangement that allowed us to relocate when we wanted to, without our future being so closely tied to the market. Okay, so there's a market in rental as well, but there's also more flexibility.

We've been taught that buying is good, and now that large chunks of the mortgage will soon be settled through savings plans, we'll feel richer. Of course, the wealth is still going to be tied up in bricks and mortar!

So what next – rent or buy? This post adds an interesting perspective but I'm yet to be convinced more rental is the way forward.

Heh, I meant to say greatest nation in the world, not work. Also, that the four legs good, two legs bad line comes out of Animal Farm by Orwell.

Sorry, you get me fired up..lol

I wish I had the option of public transportation. I drive to the homes of the sick and infirm, to provide medically necessary services for those that have mobility limitations. Sometimes the drives are long. But there is no other way to reach them except by car.

Home ownership is no longer part of this American's dream. I spent 6 years in the mortgage business and considered real estate an excellent investment. I purchased several properties and am now desperately trying to shed two of the three I own (the third is a house I bought for Mom to live in, so I'm not selling that anytime soon). I purchased at good times, but have watched my equity all but evaporate. Now that baby #2 is just weeks away I need at the very least to sell the home my family lives in and find something more suitable for us and I no longer want to be a landlord.

As much as I don't want to own a home anymore, the problem with long term renting situation is that you are never in control of where you are living. Landlords change hands, lease rates can change over time and the last thing I want to do is have to move my family every few years. So, once we are able to discharge ourselves of the two we currently have up for sale (we live in the heart of the city, btw), we will more than likely purchase a considerably larger home for significantly less than the neighborhoods own in now a few miles away, or even right over the border into South Carolina. And the only reason we will most likely purchase that home is so we can establish ourselves in a good school district.

I am not operating under any assumption that this property will be an “investment” for my family or their future. The reality is that I will pay more than double the purchase price assuming I run the course on a 30 year amortization schedule. And at the end all I'm going to be left with in 30 years, is a house that will have needed additional investment in wear and tear items that won't add any value. Even if I aggressively paid down the mortgage by making one extra payment a year, and thereby shaving 6-7 years off the amortization schedule and in effect lowering the effective interest rate on my mortgage, I know based on the last decade of boom and bust in real estate I can't rely on market appreciation.

Even the assumption that I make it through my original mortgage is a stretch. Long gone are the days where people purchase a home and live in it through their full amortization schedules. We have become a transient society and between job relocation or changes in financial situation (good or bad) the average length of time most people hold their mortgages are only 4-5 years.

An earlier commenter made the point about a client that bought a house for $26K 30+ years ago and it's worth $300K+ today. I remember my grandfather telling me stories about how he purchased his home (in Peabody) for around $18K in 1959 and how by the late 80's the bank was begging for him to pay off his mortgage because his rate/balance was actually costing the bank money on his loan. My family still owns that house and it is worth more than 20 times what he paid for it. Quite frankly any home I purchase today in 2010 is not going to be worth 20 times what I paid for in 30, 40 or even 50 years no matter how “scarce” real estate may be.

And as far as cars goes, I am very thankful to have a mechanic in the family. My wife's car was creeping up in mileage, so I had my brother look for something that was in good condition but needed work because the previous owner did something stupid. That search netted us a car five years newer than the one my wife was driving with half the number of miles. The car had a warped block because the previous owner drove it for months with a broken water pump.

For whatever reason they didn't want to fix it, so we offered to buy it off them for a super low ball price. After a little back and forth we got still got the car for a song, my brother dropped a new motor in it and I paid him slightly more than his hourly rate at work for his time. $5K later my wife had a great “new to us car”. We then sold her other car for $5,500 on Craigslist.

I can honestly say I won't ever buy a brand new car again unless I win the lottery.

Chris, your title caught my eye because God is dealing with misassumptions and errors that are in all places.

The Lord woke me several times last night with a “word” which upon waking, I reseached fully intending and believing it would mean a certain thing that I'd been conditioned to believe. I was shocked at what my study showed me. Not only me but an entire society had been deceived and led astray by errors and not just in that 'word” but all places!

The Lord was gracious and patient and reconfirmed several words that He has been bringing to my attention and revealing His Truth in these situations.

The bottom line in LIFE:

1 Timothy 6:17, “Charge them that are rich in this world, that they be not highminded, nor trust in uncertain riches, but in the living God, who giveth us richly all things to enjoy;”

Wow, lots of great comments, this post really gets a lot of people thinking.

I've owned 3 houses in 3 different continents and looking back sometimes it may have been better to rent.

I have a simple 5 year rule for cars and houses.

If I only look at the finances (take out the consideration of the joy of owning and improving our own property) if you are going to stay in a place for less than 5 years I would rent. If you plan to stay 5 years and potentially more I would buy.

I can't imagine not owning a house once I retire, owning a house outright when you retire just sounds like the right thing to do. You remove a huge chunk of monthly expense and have an asset should you wish to move to a smaller house.

Regarding cars, if you plan to keep a car more than 5 years then it makes sense to buy, but if you think you'll want to change every 3, 4 & 5 years leasing is the way to go.

For myself personally – any any real estate decision I make in the future will be based strictly on personal likes and needs. In the past, I have made decisions based not only on whether the home met my personal criteria, but on whether or not it was a good investment. The good investment criteria tripped me up at times, particularly when the market took a dive. I bought a place I later realized I wasn't crazy about and then it once the market crashed, my options were challenging – stay? (yes!) go? (where?) rent?(can't sell my existing home) Eventually, I decided to rent it out and I found a lovely rental – it was an even swap so all is good. Yet it was difficult early on, deciding what on earth to do. My 'good investment' is still good, but nothing like what I expected. Moral – Live where you love – whether you rent or own. Both have value – but are not always easy to measure.

I'm amazed that you can fit in 955 SF for four people and 2 cats, which not much of a space. A while back I visited the house where Pres. Harry Truman was born. It's not even a squad. So tiny. How about the house where Elvis was born? That's the same thing. Small. The notion that we have to live in a big house, like McMansion, just doesn't sound right. Think about the energy use. Not counting if – one spouse got laid off. And that much space for 2 people? With time and money sensibility, think living in smaller space, will become the norm.

Glad you brought it up about cars. That it depreciates the moment you leave the dealership. I wish there are more affordable walkable communities in my area. Maybe some day..

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This is 2010 and we are in uncertain economic times. Every investment decision made by those of us without unlimited funds should be questioned and thoroughly researched and not be an “emotional buy”. Buying a home is an “emotional buy” no question about it and is not to be confused with an investment. Buy a home knowing why you have decided to put your money into a property and not because you expect a return on it as an investment, because that might not happen. In some areas, however, like Massachusetts renting isn't always an option for young families with children and pets because of the limitations placed on rental properties by landlords and Mass lead paint laws, so they are forced to buy, a home, not an investment. Some folks buy knowing the possible financial risk, because they want to have a property that is theirs to live in and out as they please. Just know why you're buying and do the best you can in looking to future expenses that come with home ownership: closing costs, monthly taxes, maintenance, upgrades, renovations etc. all needing to be added to cost of buying and owning a home. Theses are not expenses that occur with renting and one could even argue that taking a savings of $60,000 that was earmarked for a downpayment and putting it into bonds that have a guarantee yearly return could make you more money after 5 years than owning a home for 5 years.
There have been some interesting articles on this very subject Rent vs. Buy and some base the decision on particular areas of the country. Here are two I have read recently that I think are very interesting.
From the NYT: http://www.nytimes.com/2010/04/21/business/econ…
and from CNN Money: http://money.cnn.com/galleries/2010/real_estate…

I have been a Realtor for over 20 years and have been guided homeowners in the height of the Boston market in the 80's, the low of the early 90's highest interest rates, the recent slump to the slower but steady market of today. My job still has the same requirements to give the Buyer and Seller the information that they need to make the best decision in a real estate transaction today, I cannot predict the future no Realtor can.

My advise to a potential buyer who is concerned about ROI: 1. If you think you may be in the home for less than 5 years buy something that doesn't need improvement or updates so you're not spending additional money.
2. Buy less than you can actually afford/ don't over extend. We're seen what happens with that.
3.Buy location. Check out the locations in the community that you are looking in that have stayed strong throughout the years, no matter the market.

Just my 2 cents on the topic.

You can't own just one home. You get a starter home, then a larger home, then after the kids finish college you get a smaller home. Then, move into a retirement community, nursing home, and finally, your final resting place.

You accumulate stuff. Store stuff in offsite storage units. Give it to the kids. Prune, prune, prune–you can't take it with you.

Your career will also conspire against ownership of a home, a car, or stuff in general. You'll get laid off at the point where we were supposed to have it made, then a long string of losses will rip your stuff from you. The age of ageism gets younger and younger.

Regardless of your answers, you will be touched by these processes sooner or later.

There are many, many advantages of home ownership over a long term home lease.

1 – If you purchase a home with a 30 year fixed mortgage and stay there until the mortgage is paid off, even if the house loses substantial value it's still worth more than a stack of 360 rent receipts.

2 – If you finance your home with a fixed rate mortgage, your payments remain the same over the term of the loan. Your rent will increase, probably yearly. The cost to maintain the same lifestyle increases over time.

3 – Home ownership over the long term has ALWAYS increased personal wealth. There is nothing to indicate that the future will bring anything different. Sure, we've had a few tough years. Everyone has to live somewhere.You might as well get some financial benefit from your inevitable housing costs.

4 – My Dad and Mom purchased their home 54 years ago. My mother still lives there. The only way she'll leave that house is in a box. They came from a very humble place, their home is my Mom's retirement investment. She lives there very happily subsidized by the enormous equity accumulated in that home. Of course, that is where I grew up – very important to me.

5 – You have many more options to expand and change your home to suit your needs. You have no options other then moving to a new rental unit if your lifestyle changes.

6 – Any modifications or changes you do make, if approved by your landlord, benefit the landlord over the long run.

7 – For me, home ownership gives me a sense of peace and security. It is my domain, my private place where I am not obligated to the whims of a property investor/landlord.

8 – It is where my life is. It is where my happiness is.

So, if you are in a place where you expect to stay for the long term, stop worrying, buy a house, provide a safe and warm place for you and your family to live, and reap the future benefits as things get back to normal.

Very touching
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