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You don't live in a starter home for the rest of your life. You don't even live in a starter home for 10 years. You shop for distressed properties with deferred maintenance, probably that no bank will loan on so the owner has to carry a contract. You spend your weekends painting it inside and out, fixing the broken windows and doors, and doing something with that weed patch they call a yard. Stay away from houses with rotten wood, rotten plumbing, or overhanging trees that will cost you thousands of dollars to remove. You sell it for a hefty profit, and use the profit for a down payment on a house you really want to live in.
Stay away from 30 year mortgages. The first 10 years of payments are almost all interest. The payments on a 15 year mortgage are not that much higher. The only justification for a 30 year mortgage is if you plan to sell again in the near future. Talk to an attorney before you buy on contract, because you lose many mortgage protections. Look for a trust deed and note rather than a purchase contract. Your attorney can explain this to you.
Don't think it's impossible. It's not. If you blindly follow the path of John Q. Consumer you will pay for it, but if you work the angles you can come out very well. Living paycheck to paycheck you think of money as something to spend, but when you have a big wad of money it becomes a tool to generate wealth. You don't spend it, you use it.
BTW, if you are negotiating a contract purchase, the seller might be firm on price but more flexible on interest rates. See what deal they are offering, and don't be afraid to walk if it doesn't meet your needs.
I don't completely agree with that statement. With a 30 year, it's like you have a lower "minimum payment". You can still still pay more on the loan to make a 30 year "feel" like a 15 year. With the lower payment, you have an extra buffer for potential rough times.
I don't completely agree with that statement. With a 30 year, it's like you have a lower "minimum payment". You can still still pay more on the loan to make a 30 year "feel" like a 15 year. With the lower payment, you have an extra buffer for potential rough times.
Plus the idea of every fixer-upper turning a huge profit within a few years, and making it worthwhile to take out of 10-15year mortgage coupled with home repairs (which are expensive even if you do-it-yourself) doesn't work with every market. Even in the suburbs of NYC there are towns which do not appreciate as fast as others (mostly due to the school district) so your starter/fixer-upper is probably not going to be worth the effort for the return. I actually know a few people who got burned doing this.
As for those starters in the hot towns. Yesh, best of luck because I have seen veritable dumps being sold as-is for $500K+ and they know people will plunk down the cash, eventually.
Research is showing that the millennial generation is forgoing the once cherished tradition of purchasing a home. For many of us 'Baby Boomers' our greatest asset is the equity we have built up over the years by buying rather than renting. In my case several hundred thousand thousand dollars. If I had chosen to rent through the years and perhaps taken the easy route (no maintenance, freedom to move at will, etc) I probably would have payed about the same in rent as I did in mortgage.
I can see singles or childless opting for urban rentals and walk to work and bars but I can't really understand why families would choose to rent.
Lots of very smart folks on this CD forum so I would appreciate insight. Maybe things have changed and I am looking at things totally wrong.
I haven't read all the posts, too tired tonight, but here's my take, and the ideas from watching/reading:
It is not everyone's goal to own a house, no matter how much it may "net them" when it comes time to cash in.
We lived for years in a paid-for mobile home and wasted money on lot rent. We fooled ourselves into thinking that "at least we aren't paying rent",, yet we WERE, AND had all the problems and headaches of home ownership in a building that would only decrease in value, and fall apart to literally nothing when we bought the house, we were going to HAVE to do something, it was falling apart around us.
For some, the renting and "no maintenance" is appealing, for others who adopt a lifestyle of city living, owning something MIGHT not be possible, though a condo or an apartment they can buy may be the answer.
I remember in my business math college class, the instructor would tell us to never calculate the full cost of a house based on mortgage, as he'd say "don't bother to calculate it, you will never want to buy a house when you see how much it will cost you in total" {usually 3 to 4 times the purchase price, more or less depending on interest rates}. One DOES have to factor in the total cost of the house when the analysis is all done, so the 'growth" is not all clear profit. Plus, unless you sell it you will never realize that growth unless you cash in on a reverse mortgage or the like. So, it's an asset, and tangible, but is it really??? And selling it means you either have to buy something else or rent again. A good financial adviser will tell that buying a home is not for everyone, regardless of "return on investment".
SOme just can't handle the maintenance. I am physically handicapped with a degerating spinal stenosis back and severe arthritis and get around with a cane, who takes quite a few strong {read controlled substances} medications and go through procedures like multiple epidural injections every 8 weeks or radio frequency ablation procedures {look it up please} jsut to find some relief.
Today I spent most of the sunny gorgeous 74 degree weather outside inthe back yard mulch/mowing the leftover leaves from last fall, digging them out of raised garden beds for vegetables, out of the privacy bushes "planters" and woodchips, cleaning along the fences, picking up dead fallen branches from the 9 huge trees in the back yard {which will get a professional hair cut hopefully soon when we "get on the calendar" for the trimmer- the cost for removal which is the ultimate goal is a little higher than we thought}, and other general spring cleanup processes. I am paying for it now in pain and will for a few days...and guess what? there still is a section to be done, and the front yard is next! SOme people just can't t handle that! either the physical labor requirement or the financial cost for paying someone to do it...and eventually the 9 trees are coming out at $600 a pop!
We are rapidly paying it off as I don't want to pay a ridiculous amount for the house,and want nothing but taxes to pay, that will crimp our retirement but not by much as we are on target to pay it off in just 2.5 years, 3 at the most. But the money saved and to have to invest for retirement will be greatly increased by NOT paying all that interest.
I think another thing that may kill the homeownership idea for them is that fact...they see how much student loans will cost them and are shy about a mortgage. Along with that comes the fact that student loans...the heavy ones...take the place of a mortgage in their minds, and they can't afford both..even when buying is cheaper than renting. They say the new age means young people have to choose between three things...1] student loans for college, 2] buying a home, 3] having kids. It seems they can do one or two, but generally not all three..at least not all at once. They also won't be able to 4] help their kids with college and 5]save for retirement...something of those 5 things has to gives, they can no longer "have it all". The mere idea of choking down a monthly payment for them to give YOU the "valuable asset" you as a baby boomer has accumulated. YOur $750k house, for example {not that your is, it may be more or less} will cost them a small fortune of over a million or two $ just so you can cash in on the equity! A college education USED to "guarantee" you COULD do all 5 of those things, but no more...in some cases it's the equivalent of "minimum wage" necessary just to live in some cities.
I enjoy my home now, and will for as long as I can take care of it, or be able to afford to pay someone to do it for me or help me take care of it. Already snow removal {especially after a storm dropped 3 FEET of snow in LESS than a 24 hour period last month on us} is a hassle until MOH turns 62 before me when we can finally get services to do it for us for free. I can't get help even though I am physically disabled! Snow removal has become bigger business than the local teen on a closed school day off doing it for $5 like it was when I used to as a teen.
NO, homeownership ISN'T for everybody. The millenials and other age groups around them, like all age groups usually want something different than their parents had, or something different from what they grew up with. The return to cities, and rental life seems to suit them,and if they are happy who are we to say it's "not of value or right"?
Research is showing that the millennial generation is forgoing the once cherished tradition of purchasing a home. For many of us 'Baby Boomers' our greatest asset is the equity we have built up over the years by buying rather than renting. In my case several hundred thousand thousand dollars. If I had chosen to rent through the years and perhaps taken the easy route (no maintenance, freedom to move at will, etc) I probably would have payed about the same in rent as I did in mortgage.
I can see singles or childless opting for urban rentals and walk to work and bars but I can't really understand why families would choose to rent.
Lots of very smart folks on this CD forum so I would appreciate insight. Maybe things have changed and I am looking at things totally wrong.
False pretenses. You think they simply don't want to own or that they CAN'T own?
Don't blame your children's generation for your generation jacking up property prices, saddling the nation with debt, and letting the economy get to a point that it only benefits asset holders while locking millions out of reach of those assets.
Think about it. That's exactly what the (((federal reserve))) has done and your generation allowed it to get to that point.
Edit: I thought some numbers might help, because I have realized in talking to the older generations that they don't really realize just how much more expensive our education was compared to their's. I dug up the old UNC tuition numbers. In 1985, the oldest number I could find, tuition and fees for an in-state student was $794. Plugging this in to the CPI inflation calculator says this is the equivalent to $1,797 in 2017 dollars. Today, tuition and fees for an in-state student at UNC is $8,834. That's just tuition and fees, not counting housing and books, etc.
Here's some numbers for you: Work full time in college like I did and you won't have any student loans if your tuition is only $8800.
I attended private school where tuition, room and board, fees, and books was approximately $50,000 per year in 1995. I worked hard in high school and was awarded a half ride. I graduated with $35,000 in student loan debt. I worked in a horrendous job in a mill during the summers (making great money for an uneducated kid) and worked full time during the school year while out of state at school.
Why are millenials so afraid of hard work?
We had a safety stand down at my job last year. Every employee in my line of work was required to attend a full day class on our day off. The gist of the class was how to effectively work with others. It was directed at the Boomers and Gen Xers. It focused on teaching us how to work safely with millenials. This isn't just the typical generational bashing. Millenials behave differently due to being born into a high tech and connected world. Their perceptions are different enough from precipitous generations that it's become an actual safety issue in certain industries.
Why not buy a 4 unit building then. You can rent to other millennials and let them pay the mortgage.
Shopping for a mortgage on a 4-plex is different from a mortgage on a single family home. Banks know that if you have a vacancy problem the loan will go sour, so they may require a bigger down or other assets to cover it. Fannie Mae won't buy the mortgage, so the bank will get stuck holding the paper for a long time.
Here's some numbers for you: Work full time in college like I did and you won't have any student loans if your tuition is only $8800.
Even assuming tuition is that low, the idea of working full-time while in college will likely end up in today's world of being an example of robbing Peter to pay Paul. If you aspire to something more than a Starbucks barista or assistant manager at the Gap, merely getting a 4-year degree isn't going to do much for you. You're going to need to have stellar grades and/or get into one of the more competitive majors and/or go to graduate school and/or accept unpaid internships over the summer and/or be involved in extracurriculars while in college. If you work full-time, there is just no way you're going to be able to compete. Everyone has a story of so-and-so's cousin fourth removed who worked full-time and is now wildly successful, but I just don't think that sort of situation is very realistic in today's cutthroat world where the value of a college degree in and of itself is limited. Yes, it will take a lot of hard work to be successful but it may be a while before that work starts to be paid work.
Last edited by airjay75; 04-10-2017 at 06:29 AM..
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