please weigh in -argument with husband regarding home buying/selling

[Anonymous]

A lot of the posters are used to a situation where house prices can increase very rapidly. but historically this is not the norm.

Suppose in a couple of years' time they decide to make serious inroads in cutting the deficit and lay off a lot of federal workers? this area could very well see a serious price decline.

[Anonymous]

I'm on the fence with this one. My parents really wanted me to hold on to my townhouse inside the beltway in Alexandria. Granted, this was the height of the market and in the two years since I sold it, the price ended up going up 100K. Even with the downturn, it is still a higher price than when I sold. We will never again have an investment where I can sell and have tax-free gains (if we had held on to it another two years). Now we had one of those conservative mortgage brokers even in the height of the 0 down mortgages AND the sellers were requesting financials in order to accept a bid. We HAD to qualify for the loan on the assumption we could pay the mortgage for both places. So in theory, we could have held on to the townhouse.

So why the regrets. Now that I look at saving for the kids college, I think if we had either held on for a few more years or rented it out, that property could have been the kids college fund. Also, if I look at investing in real estate now, it would be that much more expensive to buy - the prices have gone up (even with the downturn) from where it was when I purchased my townhouse and while the loan rates are low now if it isn't your primary home it is a more expensive interest rate. Really my best bet for being a property baron was to have held on to the townhouse in the desirable neighborhood and rented it out. Now I am not a risk taker my nature and was nervous about all the new things I would have to learn - dealing with rental income and depreciation for tax forms, getting a management company and/or having a cost effective network of people to fix things that may break since I am not a do-it-yourself person, all the things you have to know if someone doesn't pay rent on time and pre-qualifying tenants etc. So honestly, I didn't want to deal with the headaches but now with the kids 6 and 4 and I am trying to figure out how we will save for college. Even thinking about a private college - now something like 30-40K/yr now is not even in my realm of possible. Just thinking of the six figures it will probably be to completely cover public college for two kids - makes me break out in a sweat. So basically, the extra thinking,planning, investment strategy etc. will have to be done somewhere - I just put it off for a few years.

[Anonymous]

I think you have got a better chance of earning higher returns in the stock market over the next 5-15 years than the housing market.

[Anonymous]

Anonymous wrote:

Anonymous wrote:I agree about being a landlord--it sucks. I hate it and I even have a management company deal with my condo in Boston while I live in DC. But overall, after everything I have to pay, I probably only bring in about $15,000/yr from the rental. Mind you, the management company is only $75/mo but it's all the repairs/maintenance/condo fee/property taxes adding up. I can't wait till the market gets better and I can sell it well. Since it's still bringing us some income, we are not hard pressed for having it, but you'd think a rental would bring in more than that...

You're making $15,000 per year in profit (unless I'm reading this incorrectly), someone else is managing it, and you're COMPLAINING???

I know I could not believe it. I would be overjoyed.

[Anonymous]

Anonymous wrote:

Anonymous wrote:I've been a landlord and had a similar situation, BUT the market was hot.

We held onto our house as a rental when the market was on the up and bought a SFH with only 5% down. We sold the TH just before our capital gains excemption was about to expire (live in it 2 out of the last 5 years rule). We ended up making 215K and that was cash money....we had grown into our payment by then and used that 200k, plus the extra equity and purchased a bigger home and a vacation home.

The net is, I would only do it if I thought that I could sell the house in 3 years before the capital gains exemption expires. I would also have to think that the market would also improve in 3 years AND factor in the repairs I would have to make after the tenants. I do NOT think the market will improve much in 3 years, so I think you will be at the same place today as you are in 3 years.

Obama is changing the capital gains tax rule, I believe the tax is going up to 25%. SO, if you sell after your excemption expires, plan to lose 25% of it to uncle Sam. And given how hungry the government is to pillage taxpayers to fund their spending rampage, god knows how high that rate could climb.

It depends..if somebody is planning to hold onto a hot rental property for the next 15-30 years (like we plan to do with a NW rowhouse) a lot of the points made are moot.

Besides, I know several ppl that have moved back in prior to selling to avoid the capital gains (meet the legal requirement).

You are also making the assumption that the excemption will be in place a few decades from now. With our ballooning deficit and debt, the government is going to look under every nook and cranny to try to produce more revenue. there has even been talk by policy makers to eliminate the pre-tax deductions for health insurance and 401Ks. Who's to say they will not eliminate or greatly reduce the capital gains protections? As you know, people who make capital gains are lumped buck at the greedy rich who "don't pay their fair share of taxes". Times are very uncertain as to how or government is going react and grow during these economic uncertainities and the practical outcome of Keynesian economics.

I'm not saying it is a bad idea, but when you look at the numbers you need to figure out IF You are going to be subject to capital gains, HOW much does the home have to appreciate ON TOP of what you would have sold it under the excemption in order to net the same amount if you would have sold it under the protection of the excemption.

I know people do move back into hold homes after years, but as far as essentially downgrading your living situation, it really is not a pracical option for mose people/families when the time comes.

[Anonymous]

PP here. OH GOD, look at my typos! Sorry if you can't follow, I hardly can!

[Anonymous]

Stock market vs rental property in arlington? Please . Some of you reallr aren't very savvy.

I get 40k of SOMEBODY else's $ put into my property each year. R
with your approach it would be your OWN $ into the stock market. I can still invest in the market.

Stocks are very volatile...a property bought in 2004 is going to be worth more in 20-30 hrs. My parents bought in the 70s and even with the recession and downturn their home is stiilnworth $600k more than when they bought it... Now imagine somebody else paid the mortgage those 30 years. This is why a good rental home in a desirable area is a fantastic idea.

[Anonymous]

Anonymous wrote:Stock market vs rental property in arlington? Please . Some of you reallr aren't very savvy.

I get 40k of SOMEBODY else's $ put into my property each year. R
with your approach it would be your OWN $ into the stock market. I can still invest in the market.

Stocks are very volatile...a property bought in 2004 is going to be worth more in 20-30 hrs. My parents bought in the 70s and even with the recession and downturn their home is stiilnworth $600k more than when they bought it... Now imagine somebody else paid the mortgage those 30 years. This is why a good rental home in a desirable area is a fantastic idea.

YES! I think a lot of pp have 'long term investment property' confused with 'flip that house'. The latter being completely market dependent and risky/short-term- while the former is one of the most cited ways to gain and acquire wealth.

Truthfully, I completely forgot we even have the rental home. It has been on long-term leases and we seldom hear from tenants...only very, very minor issues over the last 6 years. The only work is when there is a tenant switch-over..and it is about a month of work to get it ready, list it and show it..touch-ups, etc.

It is one of many facets of our long-term investment---along with IRAs, 401ks, stocks/bonds, etc...not to mention kid's 529s. We recently re-fi'd the property down to 4.2% and will hang onto it..having somebody else pay the mortgage on it is fantastic.

[Anonymous]

Anonymous wrote:Stock market vs rental property in arlington? Please . Some of you reallr aren't very savvy.

I get 40k of SOMEBODY else's $ put into my property each year. R
with your approach it would be your OWN $ into the stock market. I can still invest in the market.

Stocks are very volatile...a property bought in 2004 is going to be worth more in 20-30 hrs. My parents bought in the 70s and even with the recession and downturn their home is stiilnworth $600k more than when they bought it... Now imagine somebody else paid the mortgage those 30 years. This is why a good rental home in a desirable area is a fantastic idea.

Uh, savvy is understanding that real estate is a leveraged investment, and that leverage carries with it outsized risk. That's not to say that it can't work, but when it doesn't, it fails spectacularly.

[Anonymous]

Anonymous wrote:Stock market vs rental property in arlington? Please . Some of you reallr aren't very savvy.

I get 40k of SOMEBODY else's $ put into my property each year. R
with your approach it would be your OWN $ into the stock market. I can still invest in the market.

Stocks are very volatile...a property bought in 2004 is going to be worth more in 20-30 hrs. My parents bought in the 70s and even with the recession and downturn their home is stiilnworth $600k more than when they bought it... Now imagine somebody else paid the mortgage those 30 years. This is why a good rental home in a desirable area is a fantastic idea.

You shouldn't confuse being lucky with being savvy.

Property is a leveraged investment. So while house prices are much more stable than share prices, it is easier for your entire equity to be wiped out, as many people are discovering.


On what basis are you assuming that property is going to be worth more than the equivalent amount invested in stocks in 20-30 years time? The historical evidence would suggest otherwise:
http://www.forbes.com/2005/05/26/cx_sc_0527homeslide.html?thisSpeed=65000&boxes=custom

[Anonymous]

Anonymous wrote:

Anonymous wrote:Stock market vs rental property in arlington? Please . Some of you reallr aren't very savvy.

I get 40k of SOMEBODY else's $ put into my property each year. R
with your approach it would be your OWN $ into the stock market. I can still invest in the market.

Stocks are very volatile...a property bought in 2004 is going to be worth more in 20-30 hrs. My parents bought in the 70s and even with the recession and downturn their home is stiilnworth $600k more than when they bought it... Now imagine somebody else paid the mortgage those 30 years. This is why a good rental home in a desirable area is a fantastic idea.

You shouldn't confuse being lucky with being savvy.

Property is a leveraged investment. So while house prices are much more stable than share prices, it is easier for your entire equity to be wiped out, as many people are discovering.


On what basis are you assuming that property is going to be worth more than the equivalent amount invested in stocks in 20-30 years time? The historical evidence would suggest otherwise:
http://www.forbes.com/2005/05/26/cx_sc_0527homeslide.html?thisSpeed=65000&boxes=custom

AGAIN--- I am obviously investing in stocks. I don't know WTH I ever suggested otherwise. No outside, unknown individual is going to give me their hard-earned $ over the next 40 years to invest in stocks. However, in addition to investing in stocks...I have a great rowhouse in the heart of Georgetown with 10% down bought many years ago. The amount of $ paying down that mortgage (we only lived there 2 years) has been a stranger's...not my own. If you can find strangers to give you $500K over the course of the next 15 years by all means take the $....you still have your own $ to invest in the stocks. Our place will be paid off long before for my kids hit college through the generosity of those I call 'tenants'.

I don't think it is so much luck...as sound investment re. location and hard-worked that allowed for the initial downpayment.