Is buying a home a scam? (Houston, Dallas: apartment, for rent, home owners insurance)

[chris_ut]

Originally Posted by cheryjohns

In the long run, real estate always appreciates.

Tell this to someone in the Rustbelt trying to sell their house. Nothing in life is certain.

[houstonfan]

For a single person who makes avg income and wants a low maintenance recent construction home, often it doesn't make sense to buy a house in houston unless you have spare money, are certain you don't want to move for a long time, or have a lot of tax deduction to benefit from. Why? Typically, avg Joe only needs 1bdrm and maybe a study -say 900sqft. If he was to buy real est, often it has to be 2 or preferably 3 bdrm for resale-ability. And if you want recent construction, of the nice quality you can get for you $1000/mth apt, in good safe neighborhood that is close to downtown, then you'd have to spend considerably more for your monthly PITI note b/c such townhomes are usu more than $350k. The taxes and insurance alone are almost equal your rent. There's market fluctuation, realestate transaction cost, etc that need to be factored in. Don't forget trash, water, larger electricity bill for the larger home, lawn service, security alarms etc. SO, if you ahve the money and want a bigger residence, buying may make sense, but if you're trying to minimize your budget for lodging, renting is 'often' the better option in Houston where most places don't appreciate alot and may depreciate. Briargrove may be an expample of 100% appreciation, but search around and many subdiv also depreciated. When you look at appreciation, dont' forget to factor in inflation -the reason why that loaf of bread costs more today than it did 10yrs ago. ie, if house appreciated 100% in 10 yrs and inflation increased 40% in those years, you're not as far ahead as you thought. NOt discouraging you from buying, just saying that the american dream of home ownership is not for everyone. Ofcourse, a townhome/house is more spacious and may provide a better quality of life, but if you're single and don't care to have more than 900sqft, don't need a yard to mow, don't want the hassle of repairs, then it may not make sense to buy larger space. Don't forget that the money tied up in the deposit on the home (ie, 70k for a 350k home) could be better invested/used elsewhere, ie pay of credit cards, student loans, etc. You could buy a 1bdrm condo/townhome, but then maintenance fee often are high and they sometimes depreciate alot when it comes time to resell. I think buying makes alot of sense if you have a family and need to rent at least 2 bdrms; it also makes sense if you bought at a bargain and are walking into immediate equity, or if you have the money and enjoy living in a home being ok with the fact that it may or may not appreciate.
I guess i'm just saying, IT ALL DEPENDS on what lifestyle you want, how much you have to spend, are you willing to risk losing some of it?

[cheryjohns]

Originally Posted by chris_ut

Tell this to someone in the Rustbelt trying to sell their house. Nothing in life is certain.

In the long run, I still believe it will. Remember that other things influence. How long ago did the Rust Belt have the handwriting on the wall that they needed to adapt to a changing world and that area refused to do it? Unfortunately, it will be a long time before it does go back up there, but that had more to do with the world passing the area by.

California will be quicker because the people are different and the reasons were different.

[Malvie]

Originally Posted by Texascrude

Home ownership isn't a scam... but it's definitely not for everyone in every stage of their life. If I were single I would opt to rent, as there's no way I could afford a house in the type of area I'd want to live in and I wouldn't want to spend half of my weekend doing housework.

Now this has merit.

I will admit: I am tired of spending all day Saturday just maintaining the house. When I bought it, I could afford the yard crew and all I had to do was sweep up/keep it moderately clean. Now, though, I've got to maintain the yard myself, and it takes 2 hours to mow, edge, weed-eat and pick up the front. The back is another story; I'm having to have a whole new yard put in back there (for a variety of reasons).

I'm out of town this weekend (Dad's napping and I'm piddling on the internets), and when I get back, I still have the yard to do. No fun.

I'm figuring my situation this way (your mileage may vary, see dealer for details): I'm 53. In 7 years I'll be 60. My border collies (I love them, but they're large-ish, hairy dogs who need a back yard to run in) will most likely be gone by then (they're 7 now). Hopefully this economic nightmare will be over and Houston will be booming again. At that point, I'll cash out, retire, and buy the motor home. I can still deduct the interest, and I'll just go where the wind blows me and pick up whatever job I can get wherever I go (doesn't matter; I've had a nice professional career; now, whatever Wal-Mart needs a greeter....). If I'm tired of the weather in Florida, I can go to Denver or Seattle or Maine.

When I'm tired of all that, I can get me a little apartment somewhere back in Houston.

[Oildog]

I bought a townhome because I hate yard work, but I can afford to live in a 'decent area'. When I see people spending North of $1200 a month rent I ask why not buy a townhome nearby, at least you'll gain some equity. Still some maintenance seems to need to be done...lights, dust/vacuum, painting, mold/mildew spray. Not a bad investment for tax purposes if your single. Beside if you move, your employer will pay closing costs and help with a point on your next home. If you live in an apartment your moving benefit substantially decreases.

[Supermac34]

When people talk about the cost of home ownership, they usually leave out the cost of rent as the alternative.

If you live in a house for 10 years and pay property taxes, maybe you sell it for a gain, maybe you sell it for a loss, and maybe you break even, but you have to calculate that you would have spent rent over 10 years as well.

It is certainly a personal decision as well. It has pros and cons. I tend to think the pros outweight the cons, but it may not for you in your situation.

It certainly isn't a scam.

[Maytagman]

Nice townhome = 300K


Yearly property taxes = 8K
Homeowners insurance = 2K
Maintenance outside of normal bills (elec, water) = 1 K
Monthly maintenance fee = 100 per month average lets say
Monthly payment = 1,300 or so

Total annual cost not including downpayment = 27,800

Tax benefits may reduce you total taxable income by say 20K best case, which only amounts to 3-4 K of tax benefit.

Total equity built = 4K

Total cost of home ownership = 19,500

Yearly rental cost at 1,200 per month = 14,400


5 K cheaper to rent. This is all assuming 20% down and 4.5% interest rates. So I am assuming zero interest rates lost on the 60K you sink in to your downpayment, which is a fair assumtion in today's envioronment.

[Texascrude]

Originally Posted by Maytagman

Nice townhome = 300K


Yearly property taxes = 8K
Homeowners insurance = 2K
Maintenance outside of normal bills (elec, water) = 1 K
Monthly maintenance fee = 100 per month average lets say
Monthly payment = 1,300 or so

Total annual cost not including downpayment = 27,800

Tax benefits may reduce you total taxable income by say 20K best case, which only amounts to 3-4 K of tax benefit.

Total equity built = 4K

Total cost of home ownership = 19,500

Yearly rental cost at 1,200 per month = 14,400


5 K cheaper to rent. This is all assuming 20% down and 4.5% interest rates. So I am assuming zero interest rates lost on the 60K you sink in to your downpayment, which is a fair assumtion in today's envioronment.

I don't know what properties you've been looking at, but the townhomes I've seen for rent at 1,200 are not 300k properties. guess it depends on your example - like I said previously, my mortgage + insurance + taxes is $2200 a month and similar properties are renting at $2,000 per month.

[Bily Lovec]

Originally Posted by cheryjohns

You just have to be careful as to location. I have a couple that I help that moves every 2 years - bigger and bigger. They have made money on every house, but we were careful each time as to resale potential - location, floorplan, subdivision, etc.

I would have to see the numbers, making money in two years is even harder, twice in a row, is border criminal...

[Malvie]

Originally Posted by Maytagman

Nice townhome = 300K


Yearly property taxes = 8K
Homeowners insurance = 2K
Maintenance outside of normal bills (elec, water) = 1 K
Monthly maintenance fee = 100 per month average lets say
Monthly payment = 1,300 or so

Total annual cost not including downpayment = 27,800

Tax benefits may reduce you total taxable income by say 20K best case, which only amounts to 3-4 K of tax benefit.

Total equity built = 4K

Total cost of home ownership = 19,500

Yearly rental cost at 1,200 per month = 14,400


5 K cheaper to rent. This is all assuming 20% down and 4.5% interest rates. So I am assuming zero interest rates lost on the 60K you sink in to your downpayment, which is a fair assumtion in today's envioronment.

You left out one critical assumption (that you've inherently made above): that in 10 years, your rent will not increase---at all.

Any tenant will tell you this is wishful thinking. Plus, the way apartments tend to decline and turn ugly, you'd need to figure in some moving costs there. Average apartment tenant changes apartments every 2 years.