[Raybyrnes]

Why would you look at CD as opposed to byying Califonia tax free Muni Bond Funds. You Could buy Long short a Medium term funds which would help provide safety and income. If you aggregate your purchase with one Mutual Fund Compnay you can avaoid many of the Fees aswell. The American Funds has has a solid Track record as a Family of funds.

[Raybyrnes]

I stand corrected. The article comes from Businessweek Feb 5 2007 entitiled Pay Off the House? Not SO Fast Pg 96 Goes through many of the simulated calculations you are considering.

[Raybyrnes]

There is a pretty good article in newsweek that takes an opposing view to many on this trhread. It gives an example of paying cash vs using a loan. Not surprisingly the benefit of having cheap maney and investing the difference comes out far ahead. Additioanlly buy locking in cheap money now you gaurantee your future liquidity. I would hate to see that 7 to 10 years from now something unforseen happens and now you ahve to tap the equity in your hmae and rather and having 6 % money to go to as is the case now you are looking at a 8 10 or who knows what type of interest rate invirenments. I would try and give it a read. Gives you the other side of the coin argument.

[Raybyrnes]

PD

I agree. Not only would you not have kids. You would not give to charity, you wouldn’t tip a waiter. Education is not for every kid. My cousins from Ireland are all Master Carpenters who found there calling at a yourng age but they simultaneously came from a family of carpenter and have now moved on to become developers in a roaring Irish economy. For them to have spent time in school would have kept them form there what they loved. For the same reason I think that if someone is going to pay an athlete a gazillion dollars to play a professional sport there really is no reason to stay in school. But agian this is a very rare few.

[Raybyrnes]

This wasn’t cmeant to be a vine on education. We are all bringing our personal experiences to the forum. As an east coaster transplanted to San Diego I think I see things very differntly. My friends work for Bain, McKinsey, Goldman, Lehman, Boston consulting or are retired at this point after making millions trading Dot com.s from 1993 to 2000. What I can say is that all of these people were extremely intelligent to begin with so I am certain they did not need to go to top schools to acheive there level of success but I will also say that it certainly helped in the interview process. All of these people enjoy what they do and they are making 7 figures doing it. In addition there are many middle market companies that are constantly trying to get these guys to leave to take the reigns of their companies. They have extremly good quant skills and are very personable. They are also some of the most competitive people in the world. It is this combination of skills sets that has helped them be successful. Good schools and a formal educaiton helped to magnify these talents for these individuals. That is what education is suppose to do.

So I want to let others know that if my chilren find their passion in a business pursuit I will be equally supportive of their interests but statistically many small business fail so I want them to know how the deck is stacked. Work for an investment bank for 2 years and get an MBA and the deck is stacked in your favor.

[Raybyrnes]

Breeze

Re-read my passage. I am not advocating the tax deduction as a the reason to buy. From your passage it appears you are the one making decisions on emotion. Timing a market is fairly ridiculous. There are properties today that can be bough right now that will see very little or no depreciation. I don’t work in real estate so I am not devoting my every waking second looking for them but I am failrly confident that there are people who make a living doing it. As for working a spreadsheet you could equally say that if you did not buy 7 or 8 years ago and elected to rent it would have cost you a whole lot more than your example of 4%.

What I am suggesting is that there are reasons outside of these discussions boards that are factoring into buying decisions. Maybe with your situation not so much. either way I don’t go berating people or call them dumb for buying. Itend to think it more sound to simply asked what factored into their decision to buy.

[Raybyrnes]

Chance the Gardner.

I think you are right. Ther are not enough quality tradesman. This should be great for those who are in those ocupations as there trade becomes more valued. If you pick up the book The World is Flat you see that there is no way to outsource this type of skilled profession. But you seem to have a very negative impression of education. Me thinks you have envy for those who do have a degree.

Using cash to pay for an education when the government is going to write the check is foolish. Three years ago you could ahve borrowed money through the Stafford loan program at 2.77 % and turned around and fixed the rate for 2.875. With differnt lender incentives the rates got down to 1.625% Paying cash would have been foolish. Get a clue before you make such a ridiculous statement that one should take up a trade if they don’t have the cash.

[Raybyrnes]

Perry,

You are an extremely misguided soul if you think that teaching your kids is going to get them a scholarship. I graduated forma college where the average SAT was 1500. There are tons of smart kids out there are very few scholarships so the idea that I am going to cross my fingers and hope that they get scholarships is rediculous. With respect ot being cash poor I think you are writing your statement far too fast. Maybe you need to digest what I am saying and think a little harder about it. I don’t propose that you carry a huge mortage for financial aid purposes. Infact I would say quite the opposite. As the kids approach the college years I might be looking to accelerate my mortgage payments. Worst case scenario if I have planned accordingly I would have an equity line to withdraw form in an emergency situation. I hold nothinbg against against those who use creative mortgages but I am going to have something to put down when I buy.

With respect to kids having student loans I firmly believe that this is one of the best things in the world. They are exposed to financing at a young age. They get a sense of ownership in their own education. They get super low loan rates. They learn how to budget. Do I once again advocate this for everyone. NO. If you are looking to be a dental hygenist or a lower paying occupation then you need to way out the payoff. If you are thinking of being an Investment banker it might be worth stretching for.

[Raybyrnes]

There is a fairly easy way to come up with an estimate. Ask an insurance agent what the replacement cost value is going to be in a given area. A 750000 might only have a replacement cost of 250K. The difference obviouly being land costs. From there you can begin to make estimates. Insurance companies are usually pretty good with actuarial tables. I would begin there.

[Raybyrnes]

Your argument about the income tax deduction being over rated is the same old garbage that every other person on this forum has already stated. What if I have 3 kids getting ready to go to college smarty pants. That mound of cash gets fully incorporated into the Financial Aid formula and I get little or no assistance. Real estate on the other hand does not . So I can be house rich and cash poor and now my educational costs get cut in half. Combine this benefit with the tax deduction and things start to make more sense. I have yet to see enyone mention this as a benefit. Oh I guess that everyone has just been super planners of the world and fully paid for there kids college tuition by funding the 350 a month in their kids 529 account and have been fortunate enought to get 10% year over year rate of returns. The tax deduction being overrated is garbage. It is a component that is extremely important. It is like saying that taxes are unimportant when buying and selling stocks. Is it the only variable to consider. Of course not. Is it important. Over time you bet.

There is something new for you. Now tell me financial aid is overrated and start complaining about how your kids are being deprived because you are doing well.

[Raybyrnes]

one_muggle

I 100% agree with everything you are saying here. Where I tend to disagree with the general audience is on this presumption that the market will bear fruit in 1 year or 2 years or whatever arbitrary timeline they are predicting. There are plenty of circumstances that buying today make sense for many people. They found the right house, they plan on staying, the spouse went back to work, the seller wants out and has cut prices. To arbitrarily say that you should buy or not buy and apply this to an entire audience is just nonsnese. Each specific situation needs to be evaluated on it’s own merits.

That is why I posted the reccomendation that money be borrowed against a home for MY FATHER 6 months ago and invested in the stock market. With good credit money could be borrowed for 5% on a 15 year mortgage. There was more upside in the market than his home, the tax deduction provided a margin of safety and if the market went in the opposite direct he had a huge reserve that allowed him to sleep at night. Posters lambasted this idea. It was not right for everyone but it was right for him. Market had a great return, leverage enhanced returns, and he now has a tax deduction to boot.

There are a lot of good posts wher people bring a lot of logic to the table and back it up. There are alos a lot of opinion that get thrown out as if they were facts and this is the arrogance that I speak of.

[Raybyrnes]

So wise and witty. You must obviously be the oracle that everyone approaches for advice on real estate and finance.
I’ll pass.

I am just pointing out a very basic principle of supply and demand. You are never going to time a market. Can’t time it on the upside and can’t time it on the downside. With respect to Temecula. I’ll buy wherever and whenever there is value. If there is a home in Temecula that generates free cash flow that produces 12% Return on Investment and carries a 25% margin of safety then great.

[Raybyrnes]

How are they able to do this without getting around Boot Income that they would have to pay in the event that it was not a like kind exchange. Additionally is it acceptable to undervalue a property to improve the Adjusted Cost Basis. Seems to me that this is similar to me selling a used car for a dollar and accepting a envelope full of cash for my administrative fee. In the end it would appear to be an illegal transaction as it misrepresents actual value for the purposes of avoiding taxes.

[Raybyrnes]

A final piece of informaiton

I believe that the affordable housing program pegs all prices to the monthly payment. This means that HOA, Interest Rates and Housing Price are fairly meaningless on their own because if one lever goes up the other levers go down. For instance if inrerest rates jumped up before you closing the price of the unit would be reduces and you monthly payment would be unchanged.

Where does this work against you. If you are on the sales side and interest rates spike up then you stand to lose money at that point in time. I was ready to buy a unit in Carmel Valley when the seller insisted that I pay her realtor fees. This was a ridiculous request as I knew I was going to ahve to pay realator fees when I sell so in essence she was asking that I double pay.

What she did not realize at the time is that finding a qualified buyer was not that simple. I found her more than she found me because I was educated on these programs. Additionally interest rates were extremely low giving her a profit on her unit. She balked and interest rates went up about a point before she found another buyer. I am fairly certain she looked back and regrets not signing the papers that day and paying the sales commission.

I still believe that there is very little risk to these programs. If you can qualify I would not overthink it. It is a better deal than renting and while you technically can not use it as a rental property who is to know if a friend moves in. Possession is 9/10 the law.

Best of Luck

[Raybyrnes]

I looked into the affordable housing programs in Carlsbad, Carmel Valley, and downtown and the bottom line is that if you qualify it is a great deal. The only downside as I saw it was exiting the unit. You will have to find a qualified applicant to purchase the unit. This can be a challenge. Additioinlly you will lose your first time buyer status which can be useful if you are using Cal FHA loasn to get into rate housing. All in all when you net out the fact that you are building equity, improving credit, getting a tax deduction and living in a brand new development you can’t go wrong. The price of these things leave you very little downside and a very good margin of safety.

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