The saga continues - earnest money for a house

Brando · Brando's Garage

Continuing on previous tracks, my wife and I are now in the plan-making phase. We're saving up money for a down paymen on a house in Weld county. For 250-300k there are plenty nice homes. We have a bit more to save and I am contemplating emptying the garage to get us there.

My 2010 Kawasaki Vulcan 900 Custom will be first on the block. Mine is a special edition black and silver stripes. Paid 10,500 out the door and I can probably get 6000-7000 cash for it. It just needs a little polish on the mirrors and maybe clean the wind shield.

After that comes my mom's 911 SC. It currently doesn't run. It needs a battery and the CIS system needs some help. I'm thinking with some work on it over a few weeks I might get it back on the road and running strong. I'm not sure what a "good" condition, running, 1981 911 SC sells for. I guess I could put a feeler ad out on the board?

Anyhow - am I making the right choice? I still want a bike to enjoy but I really, really want a house. I have been renting for 12 years and I'm tired of throwing money away and having nothing to show of it.

Thoughts?

Bugsinrugs · 03-10-2014, 07:32 PM

Go for it.....the good feeling you get when you've made your final payment..but ya still got insurance and property tax until you sell and decide to rent again.

Bill Douglas · 03-10-2014, 07:50 PM

I personally (disclaimer personally) think now is a great time to buy a house. Buy something really nice that makes YOU happy.

look 171 · 03-10-2014, 07:53 PM

Brando,

When I was 28, still wet behind the ears, a real estate Attorney sat me down at his home with beer in hand said to me, "Look kid, all wealthy folks own real estate. Now go get yours." I bought 8 months after that. Best decision I ever made.

matt f · 03-10-2014, 07:59 PM

Read the "Good Earth" by Pearl S. Buck if you haven't already.
Land, once owned, is never replaced, physically nor emotionally.

Matt

look 171 · 03-10-2014, 08:01 PM

You ARE making the right choice. Interest is still very low and housing is going up but so is rent. If you don't like it, you can always rent it out to someone.

Buying the first house is always difficult, but it will all come around and you guys will be comfortable and be spending money enjoying yourselves again. Just be careful of what your agent tells you about what you can afford. Some will sell you a house know how much you can afford based on paper but it will leave you with no beer money. My younger sister and I both bought our first home within 4 months of each other but her agent would show her more house she wanted to pay knowing what her income was. More commission, easier sell base on how nice a bigger house is I suppose? I pulled him aside and had a chit chat and almost beat his ass with a 2x4 for doing that.

nostatic · nostatic's Garage

under 40 and have a down payment - no brainer, buy.

over 50 and have a down payment - unless it is about 50% of the purchase price, much less attractive.

aigel · aigel's Garage

I have mixed feelings on home ownership. Especially if you really really stretch into it.

After 12 years of renting, you should really have 20% without selling toys. If you now stretch into this and have zero savings after the sale, will you have the discipline to quickly save up enough emergency funds to keep paying the mortgage, even during a bad job or health situation? Are you okay with losing your flexibility to move and work whenever and wherever you please? The county you mention does not strike me as a hotbed for jobs, but maybe you are in a profession that has plenty to do up there or it is a family location that you will remain in no matter what?

All questions to ask yourself.

Just wanted to paint a picture that doesn't glorify home ownership, as so many do here (which is fine!). I have done both - owned and rented. I hate having to look for a house with my pets and end up in some overpriced *****hole. But I also don't like the inflexibility and the ball and chain of a home, especially when things change in life. When I lose my job I take off for the next one and even if I break the lease, I may be out a few grand. If I do the same thing on a house I own, I can lose my shirt ... and from all I gather, it isn't as easy as mailing back the keys to the bank any more these days either.

Good Luck!

G

look 171 · 03-10-2014, 11:52 PM

You are right, George. buying a house means you are growing roots. With renting, it is really as easy as pick up and leave in a week. Ready to settle down is really the question.

Gogar · 03-11-2014, 07:11 AM

You'll find another bike that you will enjoy just as much. Do it!

MRM · 03-11-2014, 08:21 AM

It makes a lot of sense to buy a house right now. Prices are still relatively low and interest rates are in the 4% range. The trend in the market is both house prices and interest rates to increase.

The housing supply will continue to tighten because the banks are finally working through the foreclosure glut and institutional investors are buying up the good deals. There is a lot of pent up demand from individuals. Total home ownership is at the same number as it was in 1995 but we have 20% more households, so obviously the home ownership rate is way down. The market isn't going to catch fire overnight, but it is coming back and you're likely to see price increases for many years. Maybe modest increases, but certainly steady.

At the same time interest rates are going to go up. 4% is an anomaly created artificially to prop up the economy. As the Fed reduces quantitative easing, rates will go up. Everyone expects some inflation to start kicking in someday, and the Fed will raise rates even more in response. We won't see rates this low again in our lifetime. I'd encourage you to buy this season if you're going to buy a house.

The caveat is that it costs money to move into a house, including points, etc. The rule of thumb is that it takes about five years to break even on buying a house, considering that you're saving the cost of rent but paying a lot in interest, the cost of moving, and some modest appreciation in home value. So if you're likely to move in less than five years, you're probably better off renting. Otherwise, this year is almost certainly the last best chance to buy a house for a long time to come.

BeyGon · 03-11-2014, 08:27 AM

Quote:

Originally Posted by Bugsinrugs

Go for it.....the good feeling you get when you've made your final payment..but ya still got insurance and property tax until you sell and decide to rent again.

at least Property Tax is deductible, so far. along with the interest on the loan. you don't get that as a renter.

aigel · aigel's Garage

Quote:

Originally Posted by BeyGon

at least Property Tax is deductible, so far. along with the interest on the loan. you don't get that as a renter.

But you get your standard deduction.

I find the tax advantage of owning a home become a wash with the added tax burden of property taxes, at least here in CA.

Especially at a loan for $250k, the interest will barely exceed the standard deduction of $12,200 for married couples.

I am sorry, but I am NOT buying it that this is the last good year to buy a house. IMHO when interest rates go up, home prices will no further go up. I'd rather owe less principal at a higher rate than vice versa.

G

911boost · 911boost's Garage

Any reason why you chose Weld County? Any particular part of Weld?

If we are talking Weld County Colorado, which I think you are from earlier posts, look what decent SC's are selling for here versus CA. It might be worth it to bring the car out here and then sell it.

+1 on being able to buy another bike if it helps you get to your down payment.

Bill

BeyGon · 03-11-2014, 09:59 AM

Quote:

Originally Posted by aigel

But you get your standard deduction.

I find the tax advantage of owning a home become a wash with the added tax burden of property taxes, at least here in CA.

Especially at a loan for $250k, the interest will barely exceed the standard deduction of $12,200 for married couples.

I am sorry, but I am NOT buying it that this is the last good year to buy a house. IMHO when interest rates go up, home prices will no further go up. I'd rather owe less principal at a higher rate than vice versa.

G

I believe you know more about this than me but it seems taxes on a 250k house in Colorado couldn't 200 a month and the loan would probably be at 5%, the appreciation would be 2 to 4%? if you rent you get nothing. We have been looking to buy another house and we have been looking everyplace it doesn't snow, at least not much. We are going to Prescott next week for a look.

Brando · Brando's Garage

Hey everyone,
Thanks for the great info and opinions. I totally understand that getting a house is not a small investment. My wife and I are looking to put some roots in the ground. CA just isn't for us long-term. Many people rent-for-life here and that's A-OK. But we would like some equity and afford to build a life for ourselves, save for fun trips and have our toys before kids come along and we have to worry about expenses like day-care, after-school activities, college, etc.

With some recent changes at my wife's work, she's looking to either work at another spa/clinic or just take a part-time gig to get more savings. Right now, we're paying almost $1900 per month for a nice apartment in Irvine, CA. We're able to set an OK amount of cash aside for savings on a monthly basis ($500-$1000). If we can get into a mortgage at the same point or a little lower, we'll be plenty fine. That allows us cash for toys, fun, and travel. Factor in the lower cost-of-living, lower income-taxes and we win on most angles. The only down-side is family is farther away. But that's where a house comes in...

We're looking at properties in the $250k-$300k range and they are beautimous. 4-5 bedrooms, 2200-3000 square feet, 0.2-0.25 acre plots. We've been looking at Frederick and Firestone. We're thinking of looking further into Dacono, Eerie and maybe Meade. Even if we don't use all the rooms ourselves we have plenty of space for family to come stay with us. Especially... My parents are looking to move to AZ soon. That brings up the question of where my sister is going for college. My parents have the idea that she's staying with us and going to a CO-state school. I'm cool with that, but my wife doesn't know yet.

I am definitely going to put the bike up for sale. I have made a few customizations:

2" handlebar risers
Spitfire tinted windshield
Airbox snorkel mod
Partial exhaust de-baffle
Passenger Backrest included

I've perused craigslist and the Vulcan forums, looks like I can get anywhere from $6,000-$7,500 for it with 10k miles. Not bad! I only lost 25% to depreciation. There's a scuff on the gas tank I want touched up first, so I may be able to sell right as summer rolls in.

My mom's car, however, needs some help, still. It hasn't been running in almost 5 years but was covered/washed regularly before I put it away in my garage. Since we need more cash up front and my parents are pushing to sell, it may end up going as a non-runner. I don't know the full extent of what it needs - for sure the fuel system to be flushed out and the distributor checked out. Last time it was running 'well' was before Kravig Engineering in downtown Riverside f'd it up. Somehow they got it to pass CA Smog without a catalytic converter??? Hasn't run since then (surprising). I need help in this department as I don't know what "good" condition running and "good" non-running SC Targas go for.

Last but not least... Lending. I went to Quicken loans and talked with a CO agent. They actually found a red flag on my credit (fraudulent collection?) so first thing I did was reach out to an attorney that deals with credit repair. It should be gone within 1-2 months they said. Since we're looking to move in August/September he recommended re-pulling our credit closer to purchase. Mine was 690, my wife's was 760. If mine was higher we could definitely get a lower interest rate - less than 4.55%. We just need to get $10-$15k in the bank. They also recommended checking with other local lenders. They may know of local or state programs that we can qualify for as first-time buyers or by income.

We're definitely excited and looking at various houses has been enjoyable. Now we are going to put together a list of NEEDS and WANTS. For instance: She needs a floor-level room for massage clients. I NEED a 3-car garage with a lift

There's more work to be done and no-doubt it's going to be an adventure in the coming months. Any help we can get along the way would be fantastic. Even if we end up not wanting to live in this place for the rest of our lives we want it to be great. At least we could always rent it out...

Cajundaddy · Cajundaddy's Garage

If you spend $500 getting the SC running it will probably return $5k at time of sale. A worthwhile investment.

Good luck with the house. I am still bullish on real estate bought well within our means as a long term investment even after the recent meltdown and deep recession. If you stay in the house for more than 5 years it is nearly always a sure financial win. Buying RE beyond our means gets us in deep guano quickly.

john70t · 03-11-2014, 06:30 PM

Weld County CO Houses For Sale & Single Family Homes - Zillow
I'm seeing at least 5 pages of foreclosures. Probably a glut.
Are they selling, and at what prices? High/normal or extremely low?
That market might be a better value.

Also, decent looking homes starting in the mid-90's.
Owning a less expensive property 'free and clear' will free up your money a decade earlier.
Buy the cheapest house in the best neighborhood.

"The median home value in Colorado is $233,200. Colorado home values have gone up 7.0% over the past year and Zillow predicts they will rise 2.2% within the next year. The median list price per square foot in Colorado is $156. The median price of homes currently listed in Colorado is $285,000 while the median price of homes that sold is $234,910. The median rent price in Colorado is $1,248."

aigel · aigel's Garage

Where is the SC? I wouldn't mind a stock Targa that needs reviving. If you are ready to sell, let me know.

For loans, see if you can't go through a credit union. They are non-profit and often more favorable to your specific situation, even if they get the loan from their larger CU network.

Finally, I would advise to move to the new location first for a few months. Check it out. Do you like it? What are the good areas and the bad ones? (This becomes more obvious if you had some time there). If you ever plan on a family, make sure the schools are decent. This will be even good if you don't have kids, as neighborhoods always scale with the quality of the school and vice versa.

Cheers,

G

look 171 · 03-11-2014, 06:52 PM

Quote:

Originally Posted by aigel

But you get your standard deduction.

I find the tax advantage of owning a home become a wash with the added tax burden of property taxes, at least here in CA.

Especially at a loan for $250k, the interest will barely exceed the standard deduction of $12,200 for married couples.

I am sorry, but I am NOT buying it that this is the last good year to buy a house. IMHO when interest rates go up, home prices will no further go up. I'd rather owe less principal at a higher rate than vice versa.

G

Just argue the other side and it a point often missed. Sales may go up once the interest starts to move upward. Panic buying sometimes take place driving the market. Its happened in the past and it will happen again. today, people are fighting to buy but inventory is still very low. My agent and I predict there will be more homes coming on the market once come summer.