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Started By
Message
Help me convince family members not to buy a house right now
Posted on 2/2/09 at 9:23 am
Posted on 2/2/09 at 9:23 am
Sister-in-law and her husband have decided they want to take advantage of low interest rates to "trade up" to a larger house with a pool.
Most likely can sell their existing place for a small profit (20-35k) and finance a house in the price range that they are considering without much change in their monthly payment.
My advice so far has been :
1. I don't oppose them selling their house now and realizing a profit. I don't envision the area where they live suffering a disproportionate decline in value, but I am sure it is not going to go up either.
2. If you want to sell now, do so and then rent for a while. Be patient.
3. If you don't want to sell then rent, refinance your existing mortgage and stay put.
4. Don't think of your house as a monthly payment. I know the payments for a more expensive house will not impact your monthly cash flow due to lower interest, but think in terms of any other investment. Sell now = sell high, wait = rent for a while, buy later = buy low. Sell high & buy low = make money, right?
Please feed me some more ammunition. It is their life and their money but I hate to see them f*ck up.
Most likely can sell their existing place for a small profit (20-35k) and finance a house in the price range that they are considering without much change in their monthly payment.
My advice so far has been :
1. I don't oppose them selling their house now and realizing a profit. I don't envision the area where they live suffering a disproportionate decline in value, but I am sure it is not going to go up either.
2. If you want to sell now, do so and then rent for a while. Be patient.
3. If you don't want to sell then rent, refinance your existing mortgage and stay put.
4. Don't think of your house as a monthly payment. I know the payments for a more expensive house will not impact your monthly cash flow due to lower interest, but think in terms of any other investment. Sell now = sell high, wait = rent for a while, buy later = buy low. Sell high & buy low = make money, right?
Please feed me some more ammunition. It is their life and their money but I hate to see them f*ck up.
6
Posted on 2/2/09 at 9:33 am to reverendotis
1) Transaction costs, (movers, real estate agents, furniture, ect) will eat your lunch.
2) Your monthly payment won't change, but your terms will (I assume).
3) Will your taxes be higher?
4) If you have a pool, your utility bills will be higher.
5) Unless you are living off of a trust fund, you have to be concerned about your job. If you take a 25% pay cut, can you still pay your bills?
6) You look like a dickhead upgrading when all your friends and family are struggling.
2) Your monthly payment won't change, but your terms will (I assume).
3) Will your taxes be higher?
4) If you have a pool, your utility bills will be higher.
5) Unless you are living off of a trust fund, you have to be concerned about your job. If you take a 25% pay cut, can you still pay your bills?
6) You look like a dickhead upgrading when all your friends and family are struggling.
This post was edited on 2/2/09 at 9:36 am
Posted on 2/2/09 at 9:40 am to Parliament
Their terms won't change. Fixed rate 30 year loan in both cases. Profit from the sale of the first house would more than reimburse their out of pocket expenses associated with the purchase of the second house.
The short term transaction doesn't bother me, they can afford it both up front and in terms of a monthly payment.
What bothers me is them passing up the opportunity to save a sh*tload of money on the second house because they think they are missing an opportunity with interst rates. If they are determined to sell their current property, I want them to do it as soon as possible to beat declining value. At the same time, I really want to present them with as many compelling reasons as possible to wait on purchasing another house.
The short term transaction doesn't bother me, they can afford it both up front and in terms of a monthly payment.
What bothers me is them passing up the opportunity to save a sh*tload of money on the second house because they think they are missing an opportunity with interst rates. If they are determined to sell their current property, I want them to do it as soon as possible to beat declining value. At the same time, I really want to present them with as many compelling reasons as possible to wait on purchasing another house.
Posted on 2/2/09 at 9:44 am to Parliament
quote:
6) You look like a dickhead upgrading when all your friends and family are struggling.
i agree with all your points except this one. it's not their fault if others are struggling nor should they have to sacrafice their quality of life to make up for other's hurt feelings
Posted on 2/2/09 at 9:49 am to LSUZombie
I completely disagree with this. Why not buy a house right now?? There aren't many times that you can lock in a 4.5 interest rate. Also, if your monthly note is not going to change, then they should be able to afford it.
I would NEVER encourage anyone to rent. You just as soon have a bon fire with your money b/c that is all you are doing is throwing your money in the garbage.
The only thing that I would discourage is the house with a pool. As the other person said, the utilities are sky high along with the homeowner's insurance. Also, a pool does not make the house worth any more. It can actually hurt when trying to sell the house.
I would NEVER encourage anyone to rent. You just as soon have a bon fire with your money b/c that is all you are doing is throwing your money in the garbage.
The only thing that I would discourage is the house with a pool. As the other person said, the utilities are sky high along with the homeowner's insurance. Also, a pool does not make the house worth any more. It can actually hurt when trying to sell the house.
Posted on 2/2/09 at 9:53 am to LSU1018
this is what is wrong with some people. why in the HELL would you worry about what your sister-n-law and brother-n-law do with their money? are you financing them or something?
Posted on 2/2/09 at 9:57 am to reverendotis
The best advice I can give you is to say to them, "This may not be the best time to do that."
Then STFU! You could be wrong and this is exactly the best time for them to upgrade, FWIW.
Then STFU! You could be wrong and this is exactly the best time for them to upgrade, FWIW.
Posted on 2/2/09 at 9:59 am to reverendotis
People by a house for reasons OTHER than making money. I own a house because I like living in a nicer place and not dealing with a landlord. Could I make money somewhere else . . . sure, but home ownership is worth the opportunity cost (to me).
Posted on 2/2/09 at 10:15 am to reverendotis
economy is going to get worse and show them the foreclosures in the paper from people who had similar homes.
Posted on 2/2/09 at 10:36 am to LSU1018
quote:
I would NEVER encourage anyone to rent. You just as soon have a bon fire with your money b/c that is all you are doing is throwing your money in the garbage.
At the very least, just make sure they don't listen to garbage like this.
Posted on 2/2/09 at 10:42 am to Tiger JJ
I'm curious if someone can really type a post like that with a straight face anymore, or even if they could ever.
NEVER????
NEVER????
Posted on 2/2/09 at 10:44 am to LSU1018
quote:
Why not buy a house right now??
B/C they are also planning to SELL in order to be able to buy one. If they were renting, this wouldn't be an issue, but that isn't the situation for these people.
quote:
I would NEVER encourage anyone to rent.
No offense, but you no business giving anyone financial advice. Renting is financially the best option in many situations.
I would recommend to her that she take advantage of the low interest rates right now by simply refinancing her current house.... show them how much money they are going to save over the life of the new loan.
Also, show them how buying this new house with a pool will affect their 'personal balance sheet'. My guess is they will have less net worth after this transaction.
It's hard to argue with people once they have their mind set on doing something, but hopefully the cold hard facts of this being a money LOSING deal for them will make them come to their senses.
This post was edited on 2/2/09 at 10:55 am
Posted on 2/2/09 at 10:57 am to Y.A. Tittle
quote:
I'm curious if someone can really type a post like that with a straight face anymore, or even if they could ever.
NEVER????
Somehow, a swath of Americans has decided that price is never relevant in the equation. Like if you could rent a place for $1000/month OR you could buy it with a monthly note of $5000/month, then renting is STILL "throwing your money away".
Posted on 2/2/09 at 11:08 am to Tiger JJ
depends on the market. in my region rents are higher than decent houses so guess what? Makes more sense to buy here. Especially since there hasn't been any depreciation or if it has, its been under 5% total or its for houses over 200,000 dollars.
Posted on 2/2/09 at 11:15 am to reverendotis
There are pros and cons to buying at any time, now included. I'd say they should go for it, paying 4.5% interest for 30 years pays off a lot. They will regret not buying if interest goes up by not very much, even if prices stay down for awhile.
That said, it's their money, they can do what they want. Don't worry about it.
That said, it's their money, they can do what they want. Don't worry about it.
Posted on 2/2/09 at 11:16 am to LSU1018
quote:
I completely disagree with this. Why not buy a house right now?? There aren't many times that you can lock in a 4.5 interest rate. Also, if your monthly note is not going to change, then they should be able to afford it.
The monthly note not changing sounds great if the home continually increases in value but today's reality is that home prices are going down and will go down further. Not having your note change doesn't sound so great anymore, does it.
Posted on 2/2/09 at 11:19 am to LSU1018
quote:
I would NEVER encourage anyone to rent. You just as soon have a bon fire with your money b/c that is all you are doing is throwing your money in the garbage.
You obviously have never done a rent/own cost analysis. There are many markets in which renting is a better financial decision; especially in today's real estate market.
Posted on 2/2/09 at 11:27 am to arrakis
Actually I have done plenty. A 30 year mortgage on a 130,000 loan in todays market will run your note about 800 or so a month. You can buy a 3 bedroom 2 bath house for that price. Now how many 3 bedroom 2 bath houses can you rent for that price? Are you gaining any equity by renting? Also, you are able to deduct your interest on your tax return.
What exactly are you gaining by renting a place?
What exactly are you gaining by renting a place?
This post was edited on 2/2/09 at 11:31 am
Posted on 2/2/09 at 11:30 am to LSU1018
quote:
Actually I have done plenty. A 30 year mortgage on a 130,000 loan in todays market will run your note about 800 or so a month. You can buy a 3 bedroom 2 bath house for that price. Now how many 3 bedroom 2 bath houses can you rent for that price?
What exactly are you gaining by renting a place?
Flexibility, the opportunity cost of the interest rate. You're assuming people stay in the same house forever.
Posted on 2/2/09 at 11:32 am to LSUtoOmaha
Flexibility, are you serious?? How many places can you rent without signing at least a 1 year contract. Yea I am assuming that you are not moving once a year.
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