HELP – Considering buying – Deal or No Deal???

[sdrealtor]

Maybe the landlord understands how challenging it can be to sell a house that shows less than perfectly and is dificult to show as there are tenants that have two small children and a pregnant woman living which requires 24 notice who dont really want to move and are not likely to make it nice or easy for the showing agents.

Sorry but it’s easier to show the 4 vacant houses around the corner.

[paranoid]

VC:
I don’t know how you did your math:

”
$2200-2300 for the mortgage.
$600 property taxes
$150 HOA
$150 insurance
$100 Gardner
Total = $3200-3300.
Tax savings is roughly $700-800/month.
$300/month to principle.

Net costs come out to roughly $2000ish. Rent cost $1800.

so i’m paying an extra $200.
”

Your total Net Cost should be:
Total Gross Cost – Tax Savings =
$3200/3300 – 700/800 = 2400/2600

So compare that to your rent of 1800, I get an extra $600 to 800, that’s much larger than the $200 in your math.
Am I missing something?

Also your tax savings is the highest in the first year, and decreases over the years (because the portion of interest in your overall payment decreases toward 0 over years). So you may be over estimating your tax saving.

[hipmatt]

23109VC I have been following this thread. You have said that you don't feel like you are talking yourself into buying this home, but it is exactly what you are doing.

as to the property taxes…. good luck finding ANY House up in this area, built nit eh last few years that doens' thave 1.8-2.0% property taxes. that's the norm up here.

Completely not true, while most newer homes in Temecula have high taxes, there are MANY areas of Temecula that have Taxes under 1.3% and more in Murrieta too.  BTW there are some NEW homes with low taxes.  I bought a new home in 2002 with a 1.1% tax in this valley and there are still more.  The entire communities of Temeku Hills, Chardonnay Hills, Meadowview, Starlight Ridge, Alta Murrieta, and MANY more all have taxes under 1.3% as well as small or no HOA fees.  Those are "older" but still great communities, and they have larger homes that would suit you better.   Why do you need a "newer home"?  You can granite-ify and stainless-ify out any kitchen, then add custom paint, molding, and shutters, and you will feel just like you were in Harveston, except you will be paying less taxes and you will actually have a decent lot.

the big question is what will this house be worth when the market finally stops falling and begins to rebound. will it have fallen to what i paid or will it have fallen so low that i'm $50-100k upside down.

This is dependent on the economy as a whole.  Temecula is a bedtime community that has little employment to offer that will sustain high end home prices alone.  You have to think, how will our economy be doing in 3-5 years, what will gas prices be then?  Will it always be practical to commute to SD or OC or LA from Temecula?  Personally, I feel our economy is very fragile and faces a lot of hurdles in the future.  We have high inflation, negative savings, tons of excess debt in all levels you can think of, rising commodity prices, weak dollar getting weaker, and a nation full of citizens that prefer to consume vs. work harder.  The only reason we consume, is because the money is loaned to us so cheap.  Other countries work way harder and spend less than us and it shows.  Throw is higher rates, the dems taking over, and geo political volatility, and anyone who is "banking" on smooth sailing has huge balls or really has a crystal ball.

IMO…Anyone doing 100% financing shouldn't be buying a home. Don't take this the wrong way, But you have 2 kids and pay $1400/month for rent and you have limited savings in your pocket. What makes you think that you can keep paying a mortgage comfortably at around 2700/month with a 3rd kid on the way.

Sorry, but I have to agree with this post.  It really doesn't matter how much money you make, you should be able to say, and now is a great time to save.

do you think temecula houses will fall to 2001-2002 prices?? ….in which case this house will sell for 250-275k max. i'd be bummed to be that much upside down.

I absolutely think they can go to those prices.  Thats only 5 years ago right after things started to get crazy.

if rates are up a lot – payment may not be much different. rents will be up..and the whole rent/buy thing may be the same.

I have to disagree with the rents situation.  Rents do seem pricier now, but there is SO much competition in the rental market right now due to speculators that are trying to "ride it out" via rentals and excess inventory that rent prices actually came back down a bit, and in many cases the price is negotiable.  I would never go look at a house, and sigh up for a lease without at least ASKING about flexibility, and playing hardball for a while.
  Many homeowners are desperate for a quality tenant, and after having their homes sit on craigslist for months, they are tired of loosing money on payments towards the empty home.  I bet you can rent a 4 nice bed home in Temecula for under 1900 which will still be considered chump change to your  100% financing  350k loan with 2% tax… ouch.

Here is a perfect example…. read the text..RENT NEGOTIABLE! NEW 4/3 HOUSE IN NEW COMMUNITY http://inlandempire.craigslist.org/apa/309691310.html

Rents are great in that they truly will reflect supply and demand, and there are only so many people living in Temecula that can pay a high rent amount. Normally rents don't go down, but call me crazy, in Temecula, in the future, I think it is possible.  Due to its crazy over-built-ness and lack of high end jobs, and with rising gas prices.. its possible.  I may be wrong, and that is fine, but I will still be renting here for at least 2 more years, if I stay here that long.

if prices fall…but not TOO MUCH…then buyign now before it's harder to get 100% financing is a decent idea.

I think the answer lies in the statement…if in the future it is "harder" to get 100% financing, then I guarantee prices will fall "very much" as that will eliminate nearly all first time buyers. 

if 100% financing is totally gone…i could be in trouble.

I disagree, this would be a good thing for you and all of us, as prices will revert to the norm again.  100% financing in greatly responsible for the current situation  , RE being way overvalued.  You need to get away from this mentality.  Personally,I don't think its right to buy a home with 0 down. 

I'm a believer in savings, and responsibility.  2 very important values our country is leaving behind.

Also, cowboy made excellent post as well. 

[4plexowner]

And when you assume $600-700/mo tax savings are you taking into account that you will LOSE the $10,000 standard deduction that you and your wife currently get (unless you already itemize)

That’s $833/month that YOU HAVE LOST in tax benefits

Again, I believe you are fooling yourself about the true cost of owning this house

[sdrealtor]

Paranoid
Yes you are missing something. $300/month to principle.

[23109VC]

let me first say WOW. i have received a LOT of advice…and I sincerely appreciate it from all of you. this website is great.

i do think my numbers were a bit off. If I crunch the numbers to buy they are:

$3100-3200 to buy. That includes everything. the mortgage, taxes, HOAs, insurance, the gardner….

I can rent a comparable house..in fact probably a slightly larger for functional house, in a comparable area, maybe even down the street for no more than $1800. with some negotiating..maybe even a bit less 1600-1700.

I calculated the tax savings by doing my taxes via turbo tax..then manipulating the deductions to either add or remove a housing deduction. I understand that i’d lose the standard deduction, and then itemize….the bottom line is that the net change in taxes I would owe for the calendar year is less if I own…i’d have a huge writeoff…but even wih the house as a writeoff.. i would only be saving about 600-700 / month in taxes. If I also factorin principle reduction of 200-300/month… my net “benefit” of buying is NO MORE than $1000. if you strictly look at cash flow… I savre only $700 at best vs renting.

So rent the same type house for $1700-1800.
Buy at a net cost of $2400. ($2200 if you factor in principle reduction).

1700 vs 2400 is quite a big spread. $700/month is a lot of money. Even though I lose the “tax deduction” I still pay more.

this is why when i would go to open houses and realtors would say “why are you renting, you’re throwing money away”..then I would explain the numbers to them,a nd they looked at me like i was crazy… renting = throwing money away. obviously that’s not the case.

as to whether the landlord is sincere in his offer to sell at $350k… i don’t know. i told him i thought a good deal for me was 300-325. he then called and said $350k. i told him to fax his proposal in writing and I would discuss with my wife and get back to him. 2 days and no fax is forthcoming..so maybe he’s not for real..who knows.

in my opinion, given the costs… if he would actually sell at 300k… or perhaps 325k and agree to covera ll my closing costs..the numbers would in fact be so close taht buying makes sense. at 350k…. i think i’m still better off renting. it’s certainly a huge price drop from where things were at a year ago…but by passing on what looks lke a good deal, i think i have a good chance to do better…and will more than likely be no worse off.

any one else care to chime in with another point of view???

[gold_dredger_phd]

Definitely buy. Buy stuff you can’t afford and then complain to the government when the owners try to take it back.

[csr_sd]

GARDENER!!!

You californians make me laugh! A gardener! How about buy 60 dollars worth of used tools (from someone who is under water), turn off your tv, get out of lounge chair, and take care of your yard!!

You will make 1200 a year (a 529 for your kid). Your waist will be smaller, you will show the value of owning and taking care of something to your plastic children, and you might have a few well earned calluses.

Additional savings, you can get up saturday morning and wash your car save a few dollars more (16 bucks a shot at delmar highlands), and maybe not have the caramel machiatto ($3.50).

Lets see that would 1200+16*26 (once every two weeks and starbucks) = 1681 yr + 20 lbs off your waist, (a bit more xse!!! with your wife or time away from her).

Ahh but screw that, wheres my maid for my mcmansion

;>

[(former)FormerSanDiegan]

csr_sd

Thanks for providing such enlightened insight on the situation and pointing out a way to help the children. I have to agree with you, but wouldn’t the world also be a better place if you spent your time volunteering for a charity or something instead of wasting it by spewing caustic stereotypes on this blog.

[23109VC]

you only have so much time on this Earth, and I’d rather not spend it doing lawns. To me, $80-100/month is well spent to save myself from doing it. It would take me 3 times as long, i’d make 3 times the mess. I’d rather spend my time playing with my kid. When he is older, maybe I will pay him to do it and give him a sense of responsibility, a way to earn a buck… but he’ll be 12, have 1/2 his days free, and he doesn’t have arthritis in one hip from a car crash…

my real question was whether it *makes financial sense* to buy the house. not get lectured about a gardner, or bashed for going 100%. there are a lot of people like me – professional people, who have a good hard working job, who have a family who depends on them, a large student loan debt…and to maintain a decent standard of living, can’t sock away large chunks of money by the time they are 34. I got out of school at 27, started working, started paying off my loan, wasn’t making a lot..and over the past 7-8 years, have doubled my salary..now make a nice living..but don’t have the years behind me to have put away a large nest egg. If I rented another 10 years, and lived the way I do now, yeah, I’d have a pile of dough in the bank, and I’d be 44… if i can get into ahouse now, doing 100%, and it makes sense, i’ll do it. if it doesn’ tmake sense, i won’t. i realize taht my payment will be higher b/c my rate will be higher, and i’ll be financing the whole thing.. but if the house is cheap enough… 100% or not..it *could* be a good deal.

I just want to know if it makes financial sense to do it. from an investment, rent vs. buy, where is the market going, point of view.

anyway…. i’m leaning toward NOT buying it simply b/c it’s still cheaper to rent, and prices are not going up. it’s not the hosue of my dreams. it’s nice, but if prices keep going down, i can probably do better for the same moeny. i f the landlord wants to come down on the price further to where it truly is as cheap to rent this thing, than maybe i’ll pull the trigger. right now, the price is still too high.

to those who provided sound advice, with good intentions, I sincerely appreciate your suggestions. i appreciate the time you took to respond to my post. I like to think I”m a smart guy who tries to make the best and most informed decisions, but by no means do I have all teh answers. if I thought i knew it all i wouldnt’ be posting here looking for other points of view. I value the opinions of a lot of the people here which is why I frequent this board.

thanks again!

[recordsclerk]

You should at some point buy a home. If you’re lucky enough to buy at the bottom, that would be great. But without a crystal ball (one that actually works) we are all just guessing what the bottom is. Is it 3 years from now or next year or ten years? Will the bottom for a 1900 sq ft Harveston home be 400k or 200K? Most of us are hoping for 200K. The fundamentals are leaning towards some kind of drop, not sure how much, but some kind of drop. Everyone thinks they own a crystal ball, including myself (I’ve made many predictions).
You’ve presented us with enough information about your finanial situation and I definately think you can afford this purchase. I have been wondering why you haven’t been saving for a down payment, and this makes your monthly ability to pay a little sketchy. It is good practice to try and put away the difference between what you are currently paying and what you would be paying if you purchased a home. A six month period is advisable.
I’ve seen a lot of rent vs buy annalysis on this post and they are very accurate. At the begining you will always or most of the time pay more when buying vs renting. There will be a time during your mortgage when it is cheaper to buy then rent. Rents will always increase and if you have a fixed rate your mortgage will remain the same. It may be true that rents may drop in the near future, but in the long term rents will always go up. And if you ever pay off you mortgage you will be able to live rent free, and you would only have to pay taxes, insurance, and HOA. And if you move before paying off your home you should have some equity to trade in for a larger/better home (at some point maybe in the far future). There are also many other cost to renting and buying (too many to list).

[temeculaguy]

I think analysts are reading this post. Today, some group came out with a study that said the Inland Empire is the most overvalued place in California based on the rental/purchase price ratios and they expect it to decline faster than other areas.

http://www.dailybulletin.com/news/ci_5647599

Personally I am shopping for a specific area of South Temecula (Redhawk/Wolfcreek) and there is nothing below 390k similar to your house or under $1650 to rent so I would be tempted if that was down here for 325K.

I am with you on the gardner. There are no cardio benefits to pushing a gas powered mower and the gym has better scenery. Some of us have jobs or lives that don’t allow for one day a week during daylight hours to mow a lawn in order to keep the HOA from getting mad. I also started to pay for that pre sliced bread and the butter you don’t have to churn.

[hipmatt]

23109VC

You are a cool guy and take constructive criticism well. You are a smart person from what I’ve seen. I hope you and your family do well. Even if you don’t mow your own lawn 😉 I have a dog, and thus I do mow my own yard, even the yard that I rent in Harveston… anyways…

I feel your pressure about owning a home before you get to old, and let me tell you not to worry about that. You went to school, and now you have a good job. Most Temeculans would be lucky to make half of what you make. I make about 1/3 of what you do and I’m not happy with my job, I will be making a career change as soon as my wife is done w/ school and gets her job going.. less than 18 months. My advice to you would be to live below your means ans work on SAVING, that way you won’t need a 100% loan, and you will have instant equity when you buy your home… and also, about the time frame, you can get a nice 15 year mortgage when housing is cheaper…. and what do you know… you will actually have a paid off house…and relatively soon in your lifetime vs. the average American… that is something that many recent buyers may NEVER have, especially with their current poor spending/lack of savings habits/ridiculous loans/insane prices they paid/the fact that everyone refies to take out money every time their home goes up in value.. etc

[patb]

think about it, he bought the place for 350K.

you’ve been paying rent for 2 years, maybe he should give you a
rent credit of say half rent

so he gives you that as a rent credit, so that’s 20K, or
you buy the place for $300K, that’s aout $150/SF, which is
a fair price for new construction.

Now if you wait another year or two, you could save up,
and wait until there is blood on the street, and you can
get even better deals.

[avidsaver]

23,

I’m glad to hear that you’re leaning toward not buying. Your landlord sounds a bit desperate (despite the fact that the fax has yet to arrive). It’s a bit of a sign of things to come. In the meantime, I’d agree with the sentiment that you should save the overage over the next few years so that you have something to put down (or at least an emergency fund).

While I would agree with some about the fact that we don’t know when the bottom will come, I think that when the right time to buy does come, it will be obvious — like it was in 1996.

[Author]

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