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Her latest advice is "rent, don't buy". Real estate is not a good investment, she says. That's great....after people went out and bought homes based on earlier advice that renting was throwing money away. I recall a real estate advice column in the 80's where we were told to mortgage as much as possible rather than tying up cash in a down payment. Definitely don't pay off the house, that would be silly. In the 2000's, we were told to "get in any way you can", with respected financial institutions offering and approving zero-down mortgages. The average Joe trying to live the American dream believes these must be OK, else why would the bank approve them? Now that the damage is done and we've all bought real estate, we're told don't buy real estate -- not a good investment. So I guess I should've just continued to rent rather than buy a house last year like I did...now I feel like I made a bad decision.
The advice should have been all along to just pay off your house as soon as possible. It just ticks me off that people like me assume that people like Suze Orman and other financial "experts" are giving sound advice for now as well as the long haul. Their advice changes like the wind, while we're still dealing with the 30-year mortgage we got based on their advice 10 or 20 years ago.
i learned to just watch the can i afford it section and dis-reagard everything else. in her defense though the world changes,people change and situations change. nothing stays as is forever. so what may have been good advice at one time can be not so good advice as things change. renting is the better value now in most areas .she is right. no one has a crystal ball to the future including her.
renting and investing in other asset classes is the winning ticket from a financial point. buy a home for all the things other then financial reasons that a home gives you. a home is an expense ,it represents your cost of housing. at times renting may cost less and at times owning may cost less. nothing stays the same forever.
the problem is most renters dont have the discipline to invest elsewhere so while a home may not be an "investment " it does offer you a consolation prize so for most of suzies audiance of financial failures that she caters to that was good advice in fact it still may be in their best interest to buy something with a residual value.
the fact is now renting has gotten so much cheaper in many areas a home can be a lead weight.
we bought a 2nd home to retire to 4 years ago. we are 2nd guessing our choice now and are thinking about selling it in the spring and renting elsewhere when we retire .. we payed cash and without even living there it costs us over 1k a month to maintain with all expenses,maintaince and taxes... its not worth holding on to at this stage
Last edited by mathjak107; 03-28-2011 at 03:19 AM..
I really don't follow S. Orman nor probably anyone else either.
That said, I do have a house which is paid off. Never had a regular mtg. just a construction mtg. paid off rather than converting it to reg. mtg. This was the best decision at that time for me as I had the extra $$$. I do not care if my house has lost value right now because I am not looking to sell it. I never considered it as an investment when I had it built as it does not generate any income.
I think that one has to do their own thing concerning the rent vs. buy decision. I see it more as a decision about the way you want to live. Not everyone wants the responsibilities of being a home owner so those people probably should be renters. Others may prefer maintaining a property as a residence & the privacy that home ownership affords.
im the least handy guy in the world. this is the 2nd time i bought a home and the 2nd time im not so sure i want to own one. the up keep and maintaince are just to much work and all the big expenses and those little expenses that fly under the radar really add up very quietly...our 2nd home is in the pocono mountains of pa. the winters are harsh and long and there is alot of maintaince that has to be done because of the harsh winters.
by investing in other assets and renting ,that income will generate way more then the typical 3% average rent increases a year most see.
my first house i bought in 1987 for 169k. sold it in the early 2,000's for mid 300's. not bad until you figure that the same amount in the portfolio i have been using from fidelity insight was worth well over 1 million. thats enough to subtract out all the rent i would have paid and buy multiple homes today.
if anything we may end up buying in a nice high rise condo with a "man" to fix and maintain the building.
the bottom line is there is no, whats best for everyone.
generally it works out if you buy a home your housing costs turn out to be less over the long term but because that money was spent on the house the investment income from other money invested can be much less.
renting and investing elsewhere is higher cost of housing long term but much much higher potential for income from investments to pay those extra expenses.
either way its all about covering your housing costs and having money to live on. how you do it is up to what you want.
Last edited by mathjak107; 03-28-2011 at 04:06 AM..
by investing in other assets and renting ,that income will generate way more then the typical 3% average rent increases a year most see...
generally it works out if you buy a home your housing costs turn out to be less over the long term but because that money was spent on the house the investment income from other money invested can be much less.
renting and investing elsewhere is higher cost of housing long term but much much higher potential for income from investments to pay those extra expenses.
either way its all about covering your housing costs and having money to live on. how you do it is up to what you want.
This is kind of how I'm thinking these days as I mull it all over. I was all psyched up to buy a condo in Florida (second home) to use during the winters and at other times of the year. My neighbors upstairs (co-op building) also have a condo in Florida that they're now upside down on the mortgage on. But they're keeping the place, so they have these two places that they pay bills on every month. Even when they're not down there, they have to maintain insurance coverage, air conditioning, monthly fees, and whatever else comes up. They've been trying to talk me into doing the same thing, as the prices are low now.
I used to think, okay, sink the money into real estate quickly, take advantage of these bargains. But now I'm thinking, invest the money elsewhere and pay a few months rent each year to get the heck out of the cold winters. At least, that's what I'm going to try doing, and we'll see how it works.
I may kick myself later, of course, but on the other hand I might be glad.
I'm actually getting ready (on my brother's advice again) to invest in a Roth IRA, which will add to my mix of future income streams.
Her latest advice is "rent, don't buy". Real estate is not a good investment, she says. That's great....after people went out and bought homes based on earlier advice that renting was throwing money away. I recall a real estate advice column in the 80's where we were told to mortgage as much as possible rather than tying up cash in a down payment. Definitely don't pay off the house, that would be silly. In the 2000's, we were told to "get in any way you can", with respected financial institutions offering and approving zero-down mortgages. The average Joe trying to live the American dream believes these must be OK, else why would the bank approve them? Now that the damage is done and we've all bought real estate, we're told don't buy real estate -- not a good investment. So I guess I should've just continued to rent rather than buy a house last year like I did...now I feel like I made a bad decision.
The advice should have been all along to just pay off your house as soon as possible. It just ticks me off that people like me assume that people like Suze Orman and other financial "experts" are giving sound advice for now as well as the long haul. Their advice changes like the wind, while we're still dealing with the 30-year mortgage we got based on their advice 10 or 20 years ago.
There is always a myriad of advice. You have to decide which advice to listen to and than weigh your alternatives. Did Suzi Orman say buy in previous years? Has she changed? The average Joe needs to make sure his finanacial awareness is above average or they could find themselves with lots of money challenges in life.
Many people make their money by getting their hands on your money!
Do what's right for you and screw Suzy. We personally are not comfortable renting so we buy. We bought in Florida in 2005 which was the height of the boom and sold in 2010. We were lucky enough to break even, maybe even made a thousand or two. And best part, we had a hell of an adventure in those 5 years! Now we're building a home in the northeast and looking forward to our 2nd adventure. I'll be darn if I'm going to let Suzy Orman tell me what to do!
Rent/Buy is a personal decision and involves more than financial variables. If it rocks your boat there are few things more special than your own backyard landscaped and oriented as you pictured it. If you find your house style and lot of choice that can make buying the best decision.
I'm pretty sure Suze's advice wasn't a generic across-the-board statement. I've only heard her give that advice to people who really can't afford to buy at this time. I've heard her give this advice to people who (a) aren't going to be in the house for 5 years minimum, (b) don't have an acceptable emergency fund on top of down payment, and (c) don't have 20% down payment. What's wrong with THAT advice?
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