apartments are a scam

[Dru]

apartments

 

[ScottP]

I bought my first house in 1985 for $85,000. It sits in the Maple Leaf neighborhood just north of the U District. I couldn't really afford it, but I really didn't like the idea of paying for somebody elses wealth. I sold it 15 years later for $185,000. With the principal of $65,000 remaining when I sold it, I cleared about $120,000. A return of about $8,000 a year on the investment seems a better deal than the $7200 a year I figure I would have spent on rent in that same time.

 

How much do you think you paid in interest in that time? Let's say interest rates averaged 8% (just a guess) from '85 - '00 and your loan balance averaged $75k you probably paid around $6,000 per year in interest. You still came out ahead, just not as much as you were implying.

 

Still need to deduct maintenance and stuff.

 

The interest was deductible. Throughout the time I lived in that house, I was able to get back much of it in tax returns. The maintenance costs were pretty low. I never needed a new roof and any other work I did myself (Including a kitchen remodel), so the majority of maintenance expense (labor) wasn't an issue. There were some minor expenses I didn't factor in (which is why I included the 50% reduction provision you didn't include in the quote), but I still walked away with a considerable gain.

[MisterMo]

May I suggest the joy of home ownership...

Never has the phrase "now or never" been so appropriate.

Half of my friends have made 50-150K in equity in the last year alone.

The other half got priced right out of the market...

 

Right on. Everybody, save perhaps those who live at home or under bridges, is buying a home. The only variable is whether the deed is in their name...or their landlord's. The only reason I can see not to buy is if a person wants to be itinerant...probably not worth it if you don't want to be in the same spot for, say, 5-10 years.

Buying my place was one of the most (accidentally I might add)intelligent things I ever did. Gagged on the price...worried about the payment...but a few years of appreciation made both those concerns vanish. Now all I got to do is cough up for the tax man a couple of times a year...a nice feeling

[cj001f]

Right on. Everybody, save perhaps those who live at home or under bridges, is buying a home.

See earlier comments about the housing bubble.

[Blakej]

requirements for my house:

1)room for basement boulderwall

2)crawling distance from local brewhouse

3)mountain view

4)must have shagpad potential

[Trundle]

You guys are all wrong! You should rent. Then you can have extra cash every month. Buying a house is too expensive.

 

BTW, if you are looking for a small studio, I have one of my apartments coming open in North Bend for rent in Sept.

 

[Bronco]

I bought my first house in 1985 for $85,000. It sits in the Maple Leaf neighborhood just north of the U District. I couldn't really afford it, but I really didn't like the idea of paying for somebody elses wealth. I sold it 15 years later for $185,000. With the principal of $65,000 remaining when I sold it, I cleared about $120,000. A return of about $8,000 a year on the investment seems a better deal than the $7200 a year I figure I would have spent on rent in that same time.

 

How much do you think you paid in interest in that time? Let's say interest rates averaged 8% (just a guess) from '85 - '00 and your loan balance averaged $75k you probably paid around $6,000 per year in interest. You still came out ahead, just not as much as you were implying.

 

Still need to deduct maintenance and stuff.

 

The interest was deductible. Throughout the time I lived in that house, I was able to get back much of it in tax returns. The maintenance costs were pretty low. I never needed a new roof and any other work I did myself (Including a kitchen remodel), so the majority of maintenance expense (labor) wasn't an issue. There were some minor expenses I didn't factor in (which is why I included the 50% reduction provision you didn't include in the quote), but I still walked away with a considerable gain.

 

The other varialble you glazed over was that you paid the principal down $20,000 yet included that in your ROI.

 

I guess my point isn't to get into a battle cage with you, but, suggest that home buying is not as lucrative as some would imply. Most real estate agents are guilty of this as well.

 

In the early 90's it was understood that with the mortgage interest rates at 8-9%, you could rent, invest the difference between a mortgage payment and the rent payment ($300-400 per month) and come out ahead of where a home buyer would be in a few years considering a modest return. With rates headed back up in coming years, this may become a reality again. Problem with this theory is you have to be disiplined enough to invest the money instead of buying new ropes and boots and parkas and ice tools and...

[Jim]

Nothing wrong with renting if your not ready to make that kind of cash commitment - and maintenance issues are your landlord's issue not yours. But - there's no comparison of the economics. Your losing all your cash down a rat hole when renting. Even with a modest increase you end up winning or a least breaking even if you sell in a couple of years.

 

In Seattle and Puget Sound it's not even close. My little house in north Seattle has just about doubled in price in 6 years and with a refinanced 4.4% 15-year loan, the tax and interest write-offs, it's sweet. Wish I would have scraped together the down payment when I was younger and doing more climbing. Could have rented out a room to friends and made a good investment instead of paying rent.

[cj001f]

In Seattle and Puget Sound it's not even close.

In the past 6 years. Like most of the other posters advocating buying a home, your assuming a rise in house prices. This hasn't always been true - King County saw less than a 10% rise in home prices between 1990-95

http://www.metrokc.gov/budget/agr/agr03/03AGRCH4b.pdf

A home is a good investment - IF your willing to put in the effort for maintenance (most people don't accuratley account for either the time or money spent on home improvement projects) and you intend to stay for more than 3-5 years - there are large costs associated wiht buying/selling. It's also a change in lifestyle.

[Jim]

Dude - I notice you ignored the other 5 years in that chart. For the 10 years ending in 1990 the increase in the average King County house was 208%!!!!

 

But using your example of only a 10% rise in housing in 5 years - that's still quite a bit better than losing 100% of your money in rent! Plus you get the deduction of the interest and property taxes off you federal income tax, plus you can itemize your taxes and write off other items you can't when not itemizing.

 

But the lifesyle thing is an item to pay attention to. It is a commitment of time. My advice to anyone remotely interested in buy is to buy now - it's not going to get any cheaper around here and interest rates are sure to be headed up soon.

[cj001f]

Dude - I notice you ignored the other 5 years in that chart. For the 10 years ending in 1990 the increase in the average King County house was 208%!!!!

 

But using your example of only a 10% rise in housing in 5 years - that's still quite a bit better than losing 100% of your money in rent! Plus you get the deduction of the interest and property taxes off you federal income tax, plus you can itemize your taxes and write off other items you can't when not itemizing.

 

But the lifesyle thing is an item to pay attention to. It is a commitment of time. My advice to anyone remotely interested in buy is to buy now - it's not going to get any cheaper around here and interest rates are sure to be headed up soon.

Jim-

You've just shown most of the flaws into the buy a house now argument.

1)The attached charts shows what could be the beginning of a stabilizing in housing price increases. No, it won't get cheaper, but it won't necessarily get much more expensive

2)I chose those years to make a point. If you had bought a house in 1990, and sold it in 1995 - you'd have seen a 10% increase in your home price. I'd venture to say the early 80's in Seattle were similar to the early 90's in this regard. Not all eras are like the last 6 years, where housing prices have skyrocketed.

3)Yes you loose 100% of the money you spend in rent. You also don't pay property taxes, increased utilities (if you live in an apt now), maintenance (often not small), increased insurance. Yes you don't have deductible interest - you also don't have the longterm debt.

[Beck]

All you homeowning people proud of your investments make me sick- "Oh, better buy a house unless you're living under a bridge." FUCK YOU, there are plenty of working poor people in America who don't have the chance at home ownership. with the average price of a shack with a bad roof running $175,000 and up in the Seattle area, some people are priced right out of home ownership and are stuck paying the man. Apartments do suck, and so does being poor. Anyone read "Nicked and Dimed: On not getting by in America"? Not everyone is as lucky as you proud homeowners.

[Gordonb]

We bought our first house in '86 and it more than doubled by the time we sold it in '93. House prices in Seattle have gone through many increases over the last 25 to 30 years. the last 6 years are actually slower growth than other times.

[Jim]

I'm not trying to convince you to buy a house. I just know that over the last 10 years I would have poured something like $100k down the toilet in rent with no return.

 

In contrast to owning a house where with tax deductions for mortgage interest and property taxes I'm paying less out per year than what I would in rent! Plus what other invenstment has doubled in 6 years and is on the verge of trippling in 10 yrs? No regrets here. Gotta have a place to live so why not make some investment income while you're at it?

[Jim]

All you homeowning people proud of your investments make me sick- "Oh, better buy a house unless you're living under a bridge." FUCK YOU, there are plenty of working poor people in America who don't have the chance at home ownership. with the average price of a shack with a bad roof running $175,000 and up in the Seattle area, some people are priced right out of home ownership and are stuck paying the man. Apartments do suck, and so does being poor. Anyone read "Nicked and Dimed: On not getting by in America"? Not everyone is as lucky as you proud homeowners.

 

Whoa! Didn't know we were sliding into the social implications of high housing costs! Thought this was a simple rent vs buy discussion. And yes the disparity of upper mobility is something that needs more attention. But as an ecologist married to a public school teacher I'd say we're lucky to have a house in Seattle. It wasn't so easy as you make it sound.

[cracked]

All you homeowning people proud of your investments make me sick- "Oh, better buy a house unless you're living under a bridge." FUCK YOU, there are plenty of working poor people in America who don't have the chance at home ownership. with the average price of a shack with a bad roof running $175,000 and up in the Seattle area, some people are priced right out of home ownership and are stuck paying the man. Apartments do suck, and so does being poor. Anyone read "Nicked and Dimed: On not getting by in America"? Not everyone is as lucky as you proud homeowners.

Sounds like someboy touched a nerve!

[cj001f]

We bought our first house in '86 and it more than doubled by the time we sold it in '93. House prices in Seattle have gone through many increases over the last 25 to 30 years. the last 6 years are actually slower growth than other times.

Uh - wrong. Average KingCounty House Sale Price from above link:

1980 - $81511

1990 - $169202 (108% increase)

1995 - $183700 (9% increase)

2000 - $315300 (72% increase - in five years!)

2002 - $339200 (8% increase)

 

I'm not saying a home isn't a good investment. It can be. It's just not the surefire investment that everyone seems to think they are nowadays - and when everyone thinks something is a really good investment, odds are it isn't.

[Bronco]

Part of the "facade" of owning your own home is perpetuated by the mortgage and real estate industries which each have purdy active lobbys in both the state and federal levels.

 

Bankers too.

 

That being said, if anyone is interested in a 1,750 sf, 3 bed 2.5 bath near Monroe on 2.3 acres with a trout stream running through it, send me a PM. Seriously, I need to sell this place.

[Jim]

Location, location. If you were going to be around here for five years at least, and you could afford to, and you didn't mind doing some house maintenance, then it would be economicly wise to purchase. Even if house prices went up modestly and you only covered the expenses of selling transactions (likely greater than this) you would still come out substantially ahead of renting.

[Gordonb]

We bought our first house in '86 and it more than doubled by the time we sold it in '93. House prices in Seattle have gone through many increases over the last 25 to 30 years. the last 6 years are actually slower growth than other times.

Uh - wrong. Average KingCounty House Sale Price from above link:

1980 - $81511

1990 - $169202 (108% increase)

1995 - $183700 (9% increase)

2000 - $315300 (72% increase - in five years!)

2002 - $339200 (8% increase)

 

I'm not saying a home isn't a good investment. It can be. It's just not the surefire investment that everyone seems to think they are nowadays - and when everyone thinks something is a really good investment, odds are it isn't.

 

Are you being just dense on purpose? What that doesn't show is that house prices were fairly flat from 1980 to 1985 so that 108% is closer to 100% in 5 years. I remember the bidding wars of the late 80's. That is why the '90 to '95 growth is flat. House prices had gone up so much that they had to make a correction.

 

Yes there are times when home ownership is less profitable than others, but if you can afford the entry price, it almost always beats renting.

[cj001f]

Location, location. If you were going to be around here for five years at least, and you could afford to, and you didn't mind doing some house maintenance, then it would be economicly wise to purchase. Even if house prices went up modestly and you only covered the expenses of selling transactions (likely greater than this) you would still come out substantially ahead of renting.

I pay $9k a year in rent + expenses. With taxes, increased insurance, utilities, etc. I doubt I would see much of a difference in monthly norecoverable expenses. Not to mention a decrease in my quality of life moving to a more afforable location.

 

If you believe housing prices will continue to go up, not a bad deal. I don't.

[cj001f]

Are you being just dense on purpose? What that doesn't show is that house prices were fairly flat from 1980 to 1985 so that 108% is closer to 100% in 5 years. I remember the bidding wars of the late 80's. That is why the '90 to '95 growth is flat. House prices had gone up so much that they had to make a correction.

I'm trying to make the point that there are quite a few periods where if you bought a house, it wouldn't have gone up much at all. By your own admission, about 50% of the last 2 decades. And we are probably heading to another period of housing price stagnation.

[Jim]

Location, location. If you were going to be around here for five years at least, and you could afford to, and you didn't mind doing some house maintenance, then it would be economicly wise to purchase. Even if house prices went up modestly and you only covered the expenses of selling transactions (likely greater than this) you would still come out substantially ahead of renting.

I pay $9k a year in rent + expenses. With taxes, increased insurance, utilities, etc. I doubt I would see much of a difference in monthly norecoverable expenses. Not to mention a decrease in my quality of life moving to a more afforable location.

 

If you believe housing prices will continue to go up, not a bad deal. I don't.

 

Well I'm paying about the same you are, after factoring in my deductions. Given the long term trends I see in the area I see no reason to sell and go back to renting and wasting 10k a year. Housing prices sure haven't dropped anytime and I bet if we came back and visited the issue in a year, 5, or 10 we would come to the same conclusion.

[cj001f]

Well I'm paying about the same you are, after factoring in my deductions. Given the long term trends I see in the area I see no reason to sell and go back to renting and wasting 10k a year. Housing prices sure haven't dropped anytime and I bet if we came back and visited the issue in a year, 5, or 10 we would come to the same conclusion.

How much do you spend a month of insurance/upkeep/maintenance? Property taxes?

[Jim]

Insurance is pretty minimal, about $300 a year or so. The taxes and interest are fully deductible. Upkeep? Mostly sweat equity - mow the grass, tend the garden, clean the gutters and crap like that. I did paint several rooms recently so there's a couple of hundred in paint. And the value of the house went up around $50k this year. Not a bad balance.