nesting young 4s Ranch experiences and puzzling questions

[SD Realtor]

Here is my problem with your calculations:

The cost of renting is your annual rental which I agree with. However, if you rent you also would earn 5% on the 140k correct? So shouldn’t you calculate a 7k windfall or credit to the rental calculation? Also you should be crediting another $7392 to your rental decision because you are applying that to your principal on the purchase calculation. (you sure you don’t work for a mortgage broker? heheheh… just kidding)

Also as Nancy posted you really should itemize property tax seperate from Mello Roos as you cannot deduct Mello Roos. Also are there any HOA’s for your home?

Okay so just looking at those factors I think I have pushed you to over 21K in savings. One thing that T really fell may help you and your wife out would be for you to have a look at the expireds, withdrawns, and cancelled listings for the 4s Ranch area this past year. Lemme know and I can send them over to you.

SD Realtor

[ocrenter]

nesting, you got to realize ARM’s, no money down loans, are really tools for the high income folks to maximize their tax deductions and redirect their cash money for properly thought out investments, real estate or otherwise.

these tools are supposed to be earned, thru high FICO’s and high earning power. these loans were not designed to be readily given out to joe q public making the median income. but in the last 5 years they became that way. did you read the 4Closure Ranch Part V? that guy’s ‘supersize my jumbo loan’ package allowed for any guy with a 600 FICO to get over a million dollar loan. this is what drove the bubble and this will also lead to the bust.

I’m very bullish on real estate. long term! but there is no reason to buy near the speculative top when the slide is just getting started.

[nestingcouple]

Hi SD Realtor,

We’d really appreciate if you can send the listings about 4S Ranch to my email [email protected].
Thanks for pointing out that we cannot deduct Mello Ross, and the HOA is $80/month, it was missed because the calculator does not have entries for them.
In the original calculation, the CD earning on 20% downpayment was indeeded included. With correction, it seems the difference between rent-buy would about $12K, not a determining factor by itself not to buy. The determining factor t boils down to how much depreciation we can see in next year.

[nestingcouple]

Hi ocrenter, I completely got your points! and you just explained what was puzzling me before. I’m so relieved that my wife is not going to push to buy this weekend, we’ll wait at least 4 months and we’ll invest the down payment to CD and mutual funds.

Wish every one on the forum a happy holiday!

[PerryChase]

Another minor point. The married filing jointly standard deduction is $10,300 for 2006. The income tax savings should be the delta between standard and itemized deductions times your tax rate (unless you’re itemizing already for other reasons).

In other words, add $3657 (10,300*.355) to the extra cost of buying/saving of renting.

[CardiffBaseball]

nestingcouple – 4Closure Ranch link:

Here is the series of articles. The first one you’ll see is Part V, but I recommend opening the blog, and going to the first post (4Closure Ranch part 1) and reading from there. Check the comments at each article before moving onto part 2, 3, etc.

Bubble Markets Inventory Tracking

[lostkitty]

nestingcouple-

This time last year I was watching the inventory very closely as we seriously considered moving back to CA from NY (changed our minds – new, better job here for my husband, and thanks to global warming, upstate NY is not so bad last year or this! : )

Anyway, I was keeping track and there was a marked uptick in inventory in those areas even a few days after the New Year. It continued increasing steadily until late February / early March when suddenly it exploded. I think if you are patient, you will see the same, and the builders will change their incentives and pricing yet again.

[surveyor]

Rental/Investment Properties

So now you have 3 properties, one the same SFR you are considering, and 2 rental properties to own long term.

Aside from ocrenter’s excellent advice, I would like to note that it is probably not a good idea to buy rental properties that cost more than $100k per unit. If you go to other locations, you can get more profitable properties that are in the range of $30k to $70k per unit, which is more reasonable and at least diversifies you away from southern california.

For $70k, you could get maybe up to 7 units.

Anyways, think of the possibilities.

[CAwireman]

Rent vs Buy Spreadsheet

 

            Link

 

Is this the spreadsheet you used?

[nestingcouple]

Yes. it’s. As SD Realtor and others have pointed out, we cannot deduct mello rose from income and HOA needs to be included as well.

[Anonymous]

Oh forget those silly rent vs owning calculators! All the ones I’ve tried are clearly skewed toward buying. I have to laugh at what those calculators project for me: “You should buy and your monthly mortgage payment will be $4200”. Well I’m sorry Mr. Mortgage Company Calculator but I cannot afford $4200/mo and your banker very well knows it but hopes I’ll take the bait anyway. The whole mortgage business is insane.

All you really need to know is what you can afford without going into debt and maintain some sort of sensible savings. If you can do that you’re at least thinking level headed.

[sdrealtor]

Nestingcouple,
Everyone deducts mello roos and to my knowledge the deductibility of them has never been contested by the IRS.

SDR

[JJGittes]

I looked into the deductability of MR pretty closely when I was considering (briefly) buying in a community with about $3500 a year of MR. The rules are complex, and come down to what the MR is paying for. HOWEVER, that said, I too have never come across anyone in SD who is not deducting their full MR, just like mort. interest, on their taxes. I also asked my tax guy and he just rolled his eyes and said he has never seen it not deducted, nor has he seen anyone given a hard time by the IRS over it. He said the reality is that the IRS probably could not figure out if a specific case actually qualified or not, and there are easier things to go after.

But all this is just my observations, so of course get professional advice and make up your own mind.

[mixxalot]

Here is what irks me about real estate prices and mortgage companies in San Diego:

Assuming an annual salary of 90k per year:

2 bedroom condo price between 200-400k in most places San Diego county
down payment of 40k

Mortgage would cost between 2-4k per month (tax, insurance, mortgage)

My take home pay would be 4600 per month.

How can anyone afford such insane mortgage? This for a condo and not the overpriced 900k homes in foreclosure ranch (4S) or San Elijo hills.

My rent is 1100/month and seems better to keep renting even if I throw money away on rent and not on a home.

[barnaby33]

Wow that irks you too? Here I thought I was all alone on that one. Unable to accurately describe my feelings and frustrated by the feeling that someone else out there must feel the same as me. Are you my soul mate?

Josh

[Author]

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