Home › Forums › Closed Forums › Buying and Selling RE › Should we take the money??
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svelte.
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March 13, 2015 at 10:06 PM #783654March 13, 2015 at 10:12 PM #783656
FlyerInHi
Guest[quote=spdrun]Assuming no kids (schools), living in a “poor” area isn’t necessarily much worse. Most crime isn’t random. As long as you don’t involve yourself in things that you shouldn’t be involved in anyway (hard drugs, gangs, hookers), the likelihood of being messed with is low.
I knew a nice lily-white Jewish girl who lived in Spanish Harlem in the early 2000s — she said the only time she was robbed was after visiting a friend in a nice part of the West Side.[/quote]
I agree about the “poor” area.
But the facts are most people don’t feel the same way. They like stepford suburbia with fake town-centers. I’ve heard countless people tell me that certain areas are NOT safe. I’ve ignored them and went with my own instincts and it’s worked out fine for me. My cap rates are better.
My brother’s girlfriend lives in North Park. She says it’s not safe. She runs home quickly.
People watch local news and they are paranoid about child abductions, rapes and the like, even though crime is going down.
Go ahead, post links to some $200k condos. The OP will stay put and not move anywhere, unless it’s to Colorado!!
March 13, 2015 at 10:16 PM #783657Reality
Participant[quote=EconProf]
And you would be throwing away a terrific 30-year loan. By owning this house for only four years, your net worth has increased by $170,000. Let it ride and it will probably keep growing.
[/quote]Because prices don’t go down, right?
The OP has been given a gift (and an out). Time to take the profit.
March 13, 2015 at 10:48 PM #783663scaredyclassic
Participant[quote=JohnAlt91941][quote=EconProf]
And you would be throwing away a terrific 30-year loan. By owning this house for only four years, your net worth has increased by $170,000. Let it ride and it will probably keep growing.
[/quote]Because prices don’t go down, right?
The OP has been given a gift (and an out). Time to take the profit.[/quote]
no. Prices go down, but wiser people know they have no ability to know when where why how or even if it’ll happen in their lifetime.
to say prices go down is as useful as saying b the sun will burn out.
yeah…and…so…
March 13, 2015 at 10:59 PM #783664Participant[quote=scaredyclassic]
no. Prices go down, but wiser people know they have no ability to know when where why how or even if it’ll happen in their lifetime.
to say prices go down is as useful as saying b the sun will burn out.
yeah…and…so…[/quote]
Perceptive people recognize bubbles, unlike sheep (who inflate bubbles).
March 13, 2015 at 11:01 PM #783665GuestI do like spd’s suggestion of a condo, but realistically I doubt most people would go for that because they want to buy the nicest possible house they can afford. Realtors and loan officers encourage that also.
Buy a modest condo as a place to live. keep it as rental when you move up. Prices do go up and down and you can arbitrage and return to your low-cost/paid-off condo to live if necessary.
Generally, the problem is that when you sell high, you’ll likely end up renting high after you sell, thereby obviating your savings.
Another alternative is to move in with relatives and save money while you wait out the market. It could be a very long wait!
March 13, 2015 at 11:04 PM #783666Guest[quote=JohnAlt91941]
Perceptive people recognize bubbles, unlike sheep (who inflate bubbles).[/quote]And where are they are going to live for less than their current mortgage payments? Remember, they bought at the bottom.
March 13, 2015 at 11:29 PM #783667Participant[quote=FlyerInHi][quote=JohnAlt91941]
Perceptive people recognize bubbles, unlike sheep (who inflate bubbles).[/quote]And where are they are going to live for less than their current mortgage payments? Remember, they bought at the bottom.[/quote]
Hence, $170k in gain. Do you really think that will be eaten up by the difference in their mortgage vs renting?
They may find something to rent CHEAPER than their current monthly nut depending on what they are comfortable with.
Myself, I haven’t seen rents skyrocket the last few years.
March 14, 2015 at 1:30 AM #783669CA renter
ParticipantLots of good advice from the other Piggs here.
Personally, I think you should consider either option #1 or option #3. Agree with the others that #2 (HELOC and pay off debts/upgrade house) would not necessarily be the wisest decision **unless you are incredibly disciplined about your finances.** We don’t know what caused your current debts (medical emergency, school debt, etc.), so we can’t really judge how well you manage your money.
Your second option would be wise ONLY IF you pay off debt with much higher interest rates AND if you cut your expenses rather drastically…hopefully, you could increase earnings/income, as well. By paying off ~15-20%+ credit card debt with a HELOC that is capped at a very low rate, you can deduct the interest paid on this loan, which you can’t do with credit card or most other consumer debt, and you can pay your debts faster, and dramatically lower your interest expenses.
See details for deductibility here:
http://www.irs.gov/publications/p936/ar02.html
Additionally, the lower rate will enable you to pay off your debts more quickly, and pay less in interest IF you stick to a very disciplined payoff plan.
As flu noted above, you first need to think hard about why you’re currently in debt, and be honest about your ability to get out of debt and stay out of debt. If you’re in any way inclined to pay off some debt, but then spend any “extra,” or if you think you’re likely to go further into consumer debt because your habits or spending/income don’t change, do not go with option #2.
Option #3 is tempting if you don’t have a family and would be willing to downsize or move to another, less expensive location. That’s certainly a viable option, IMHO.
If you had said that you don’t like the house and want to move to a different location or type of house, etc., I’d tell you to go with option #3, but rent instead of buy something else, as things are very bubble-like right now. If you could stay with family for a very long time (rent-free or low rent), then it would make that option even more compelling. But since you’ve said that you wouldn’t move if not for the equity, I’d have to agree with the other Piggs who say that you should stay put and work on clearing your debts and building up some more savings the hard way (increasing your income and/or cutting spending).
Final opinion: Go with Option #1.
March 14, 2015 at 8:13 AM #783672
CoronitaParticipant[quote=JohnAlt91941][quote=FlyerInHi][quote=JohnAlt91941]
Perceptive people recognize bubbles, unlike sheep (who inflate bubbles).[/quote]And where are they are going to live for less than their current mortgage payments? Remember, they bought at the bottom.[/quote]
Hence, $170k in gain. Do you really think that will be eaten up by the difference in their mortgage vs renting?
They may find something to rent CHEAPER than their current monthly nut depending on what they are comfortable with.
Myself, I haven’t seen rents skyrocket the last few years.[/quote]
That $170 in gain really is closer to $120k in gain after selling costs.
Personally, I think it’s a bad idea to play russian roulette with your primary residence, especially that the OP bought at such a ridiculously low price with probably a ridiculously low fixed rate mortgage, and without knowsing how OP will manage that $120k . What would be worse if is that $120k is tapped and used to pay off debt and then spent on other things, leaving the OP back to square one with no savings and now no house.
By not tapping the equity and continuing to pay down the house, the person is essentially “saving”. Eventually, when the person owns the home free and clear, the person has minimized his living expenses, and if he/she want to retire in their sixties, sell and buy something smaller or move into a retirement home. I don’t think we’ll ever see mortgage interest rates as low as they were. And the OP also bought at a historically low price, it’s unlikely we’ll ever see both low rates and low price in the forseeable future. Very unlikely the OP’s primary home will see $330k prices again. So for practical purposes, it is his savings account.
March 14, 2015 at 8:42 AM #783673spdrun
Participant1. A primary residence isn’t sacred. It’s an investment like anything else. Nothing wrong with selling it and downgrading.
2. You save $30,000 right there if you don’t use a broker. Go with a discount agent, let the title agency handle the sale. Done. I don’t see why closing costs should exceed $10,000 without a broker involved.
3. Who says there’s only $170k of equity? I’m assuming the OP has paid some principle and also had a down payment on the residence. He should get that back as well.
4. If he buys a 2/1 outright or nearly outright, he can live for $1000 per month. Maybe $500 per month if he’s lucky. Then he’ll have a whole lot of money to pay off debts and a condo that can be paid off in 10 years, if not immediately.
5. Paid off debts + small housing nut will mean that he’ll be able to save to buy another investment soon. Or just work less and travel a lot. Living below one’s means rocks.March 14, 2015 at 9:44 AM #783675CoronitaParticipant[quote=spdrun]1. A primary residence isn’t sacred. It’s an investment like anything else. Nothing wrong with selling it and downgrading.
[/quote]No it’s not, it doesn’t generate income And you’re not even going to find something comparable ever so slightly less unless you sacrifice the area you live or if sacrifice significant square footage.
[quote]
2. You save $30,000 right there if you don’t use a broker. Go with a discount agent, let the title agency handle the sale. Done. I don’t see why closing costs should exceed $10,000 without a broker involved.
[/quote]Oh please stop with this “if you don’t use a broker nonsense”. While you might be a genius when it comes to real estate, the average person does not or cannot deal with not using a broker.
[quote]
3. Who says there’s only $170k of equity? I’m assuming the OP has paid some principle and also had a down payment on the residence. He should get that back as well.
[/quote]Because the first few years of a 30 year mortgage goes mostly towards interest. Total principal pay down will be roughly $15k on a $300k borrowed at @ 3.5%. It will be less, if he/she borrowed more or borrowed at a higher rate.
[quote]
4. If he buys a 2/1 outright or nearly outright, he can live for $1000 per month. Maybe $500 per month if he’s lucky. Then he’ll have a whole lot of money to pay off debts and a condo that can be paid off in 10 years, if not immediately.
[/quote]Good luck with that one….Unless you want to live an a crack area.
For reference a 1/1 in mira mesa, people are starting to ask $200k for it, and some have sold pretty close to that.[quote]
5. Paid off debts + small housing nut will mean that he’ll be able to save to buy another investment soon. Or just work less and travel a lot. Living below one’s means rocks.[/quote]Person is saving by paying of their home’s principal loan anyway.
March 14, 2015 at 9:53 AM #783676CoronitaParticipant.
March 14, 2015 at 9:56 AM #783677CoronitaParticipant[quote=JohnAlt91941][quote=scaredyclassic]
no. Prices go down, but wiser people know they have no ability to know when where why how or even if it’ll happen in their lifetime.
to say prices go down is as useful as saying b the sun will burn out.
yeah…and…so…[/quote]
Perceptive people recognize bubbles, unlike sheep (who inflate bubbles).[/quote]
People are good at believing what they believe, whether that really is what is happening or not. If they are correct, it tends to be a coincidence or just they were lucky.
Afterall, aren’t there a lot of people perceptive people who jumped on the housing is going to crash bandwagon in 2004-2006 still on the sideline waiting for home prices to crash even further and hence still renting even after home prices have already corrected 30-50+% in some areas here…still holding out for the next real estate crash?
March 14, 2015 at 10:27 AM #783683Participant[quote=JohnAlt91941][quote=scaredyclassic]
no. Prices go down, but wiser people know they have no ability to know when where why how or even if it’ll happen in their lifetime.
to say prices go down is as useful as saying b the sun will burn out.
yeah…and…so…[/quote]
Perceptive people recognize bubbles, unlike sheep (who inflate bubbles).[/quote]
timing is everything. Without knowing when you know nothing. Without knowing how low is low you know nothing.
Indeed we all operate blind in the dark.
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