[quote]barker wrote:
Does anyone have any insight into the single family home versus townhouse decision? I’m a single guy, just turned 30. I imagine my situation will be likely changing significantly in the next 5 years or so. I’m thinking that a townhouse is the way to go. [/quote]
Well, the single family home will appreciate faster than the townhouse. It depends on your circumstances however. Do you plan on staying in the same geography for many years? Do you think you’ll get married and have kids in the next 3 to 5 years? If the answer is yes to both of those, you may want to think about getting the single family home with at least 3 rooms and setting yourself up now for a semi-permanent/permanent home now that your future family will be raised in.
If you can’t think that far out or the prices are just too high in your area or you may move somewhere else in the country or family is a long way off maybe you side with the townhouse to just start building equity in something. And then move to a home when circumstances change.
I could accused of being a serious forward thinker when it comes to the home situation because your mortgage is going to represent your single biggest expense in your life. My goal is to pay that expense off as soon as possible in my life because once you do that you have some serious freedom. You no longer have to shell out a few thousand dollars per month in rent. You own your placed outright. Your boss/job/career no longer has you by the short hairs. To me, that is freedom.
I too have been wondering about the whole 20% down problem. It seems ridiculous that someone could save this much (especially supporting the wife and kids at home, paying student & car loans, + other debt service).[/quote]
I bought my first house with an 5% FHA (right now FHA rules have changed and you can get a house with 0% down). After a year of being in my house, and the interest rates dropping about 2 points, I decided that I had to figure a way to get out of PMI. I called my broker and he told me about the HELOC (Home Equity Line of Credit). He did his magic and used the years worth of principle paid + the increase in the home’s value to justify a 80/20 (20% being a HELOC). This got me out from underneath PMI (fuckin’ insurance is just legalized mafia). Xuse my french.
I see that you’re in Missouri. If you’re anywhere close to the KC area, I can give you my broker’s name (just PM me).
I’ve heard (haven’t substatiated) that there is no evidence that the guy that wrote rich dad, poor dad was wealthy before writing that book, although he certainly is now. Not that he’s wrong about anything (I haven’t read it), but just a heads up. The real secret to getting rich is pretending you have a secret to getting rich, and making other people pay you to hear it.
You’ll need to start reading the first chapter just to see where the author is coming from. He didn’t start out rich. His Dad was a school teacher.[/quote]
I would tread lightly with Robert Kiyosaki. His books are thought-provoking, motivational, and are generally on the helpful side. He is also an excellent salesman. He is very good at selling you his books, seminars etc. There is a serious debate where most of his wealth comes from. Personally I think he overinflates his real estate holdings and he’s making a majority of his money from his “system” of books and seminars.
For a thorough analysis of Robert Kiyosaki’s books, check this out:
This guy is a reputable real estate investor who basically rips Kiyosaki a new one. Again, I’ve read some of his books and it did get me motivated about real estate but I also think he overinflates his success solely due to real estate. You be the judge.
Regarding PMI: You can actually get a PMI refund if you convert from an FHA to a traditional fixed-rate loan.
Regarding semi-monthly payments: I’m not a fan… now you’re responsible for making two payments per month instead of one. An easier way is to add an extra $50-$100 per payment, and at the end of the year, it’ll work out to an extra mortgage payment. You can use an amortization calculator to figure out the exact amount.
Regarding townhouse vs single family home: It depends on the area, the townhouse, and the single family home. I bought a townhouse, mostly because I don’t have the time to keep up a single family home. I also made sure to get a three floor townhouse, so I have plenty of room… if I were to get married, I could have two children without a problem, and have plenty of room. There are other advantages, as well.
I would tread lightly with Robert Kiyosaki. His books are thought-provoking, motivational, and are generally on the helpful side. He is also an excellent salesman. He is very good at selling you his books, seminars etc. There is a serious debate where most of his wealth comes from. Personally I think he overinflates his real estate holdings and he’s making a majority of his money from his “system” of books and seminars.
For a thorough analysis of Robert Kiyosaki’s books, check this out:
This guy is a reputable real estate investor who basically rips Kiyosaki a new one. Again, I’ve read some of his books and it did get me motivated about real estate but I also think he overinflates his success solely due to real estate. You be the judge.
[/quote]
Thanks for the advice. I’ll still read the book. As you mention, it’s motivational. Anything that will get a person to look at how they are making money and think creatively is a good thing.
The important thing to take from this is not all about the recommendation of any book. It’s more about taking a deeper look into how you’re investing and spending your money. Sometimes, books can “motivate” us to take a step that we would sometimes otherwise not take.
I think buying a home is FAR better than renting, and if a book or any other means encourages someone to take the step, then I think it’s good advice. Of course, that’s just my opinion.
I thought I would throw in my two cents on a variety of topics hit on in this thread. By way of background, I have owned 4 homes and have also invested in real estate (raw land and office buildings); although, real estate investing is not my primary profession. So, like one of the previous posters, I know a little (not a lot) about this. More honestly, I do have some very distinct opinions.
Home vs townhome - This is a tough one to answer. Under most circumstances, I would suggest a stand alone home. However, if your financial situation is such that you can only afford a townhome, you have to take that into consideration. Also, if you are in an area that is going to be attractive to retirees, a townhome may actually end up being a better investment (a lot of retirees are going to want to downsize and simplify their lives).
Timing - if you are planning to live in your home for 5+ years, I don’t think you should worry about the timing. There has been a lot of discussion of a real estate bubble. In my opinion, there are pockets throughout the country that have gotten a little frothy (where you have rampant speculation and condo flipping); however, most of the markets have simply been beneficiaries of an easy money environment (low interest rates, reduced lending standards). Now, I don’t want to suggest that prices in your area won’t go down, but if your time horizon is long enough, you should at least be able to get your money out.
Financing - Personally, I hate debt. However, if I take on debt, I want the terms to be as easy as possible on me (more on this in a sec). To that end, I agree with the person (or people) who recommended the 30 year over the 15 year mortgage. The person who spoke about the huge interest differential between the two missed the point. He was correct that OVER THE LIFE OF THE LOANS, the differential might be large, but the main point was simply that the 30 year offers you a lower MINIMUM payment. You are always allowed to pay more than the required payment - if you do, you will pay down your loan earlier. So, assume you can get a $100k 30-year mortgage at 5.5% and a 15-year at 5.0% (these aren’t actual quotes - I am just trying to work an example). The payment on the 30 year would be $568 (principal & interest only) and the payment on the 15 year would be $790. So, the 15 year would cost you an extra $92 per month. Of course, you could pay $92 extra on the 30 year. If you did that, you would pay off the loan in 189 months, or 15 years 9 months. So, since you are paying the loan for an extra 9 months (versus the 15 year), the “cost” of the 30-year is actually 9*790, or about $7100. What you get for this “cost” is the flexibility to be able to reduce your payments back to $568 if your financial situation deteriorates. Once again, I love flexibility even though I hate debt.
Robert Kiyosoki - I have read some of his books. The are VERY elementary, but my opinion is that if they can help you conceptualize things and influence your behavior, then they aren’t all bad. Nonetheless, I am not a huge fan.
I just caught up with this thread (it’s grown quickly!). Good feedback and good points.
I’m going to pay my credit card down more and then save some money up to cover closing costs (or up to 3-5% of the loan) and go in as a first-time home buyer. Unfortunately, I can’t afford much based on my salary (prices have skyrocketed in the past year).
I’m hoping I’ll find a new job soon (since I’ve been looking for the past six months - my current one is what I took as a temporary job until I found something that suits me and pays me what I’m worth). This way, I’ll be able to afford more and get a townhome or patio home. I want very little to take care of as far as maintenance and yardwork goes, so I prefer places where much of that is included. I just don’t have the time, money or patience to deal with that stuff.
And I don’t plan on getting married or having children for at least five or more years. All I want is my own place and a room or garage for my home gym!
[quote]Nate Dogg wrote:
I just caught up with this thread (it’s grown quickly!). Good feedback and good points.
I’m going to pay my credit card down more and then save some money up to cover closing costs (or up to 3-5% of the loan) and go in as a first-time home buyer. Unfortunately, I can’t afford much based on my salary (prices have skyrocketed in the past year).
I’m hoping I’ll find a new job soon (since I’ve been looking for the past six months - my current one is what I took as a temporary job until I found something that suits me and pays me what I’m worth). This way, I’ll be able to afford more and get a townhome or patio home. I want very little to take care of as far as maintenance and yardwork goes, so I prefer places where much of that is included. I just don’t have the time, money or patience to deal with that stuff.
And I don’t plan on getting married or having children for at least five or more years. All I want is my own place and a room or garage for my home gym![/quote]
I’m not familiar with Florida, but perhaps you can find a duplex/quadplex and rent the other unit(s) out? You could rent for enough money to cover your mortgage.
I typically do not participate in discussions on T-Nation because I know that I my knowledge of bodybuilding and nutrition is not to the level of many of the regulars. I do feel that I can help with this discussion.
I make and have made my living for some time working in the mortgage world. Here are a couple things to keep in mind:
If you live in CT, home values are expected to continue to increase. Buy now while rates are still low. Even if your home would lose value you would probably have a lower monthly payment by getting a low rate now then you would if you paid less for the home at a higher rate.
Don’t worry about 20%, most lenders have programs that will cover the down payment without charging you PMI
Some times you can save more by paying PMI then by taking out a HELOC or a 2nd mortgage. Look at both options.
On average homeowners in the US refi every 3 years. Try to get an ARM product. If you get an ARM get a three or a five year with a limited prepay. This will lock your rate in at the lowest rate possible.
Make sure your mortgage company is a lender and not a broker. If you use a mortgage broker often times they will charge you additional fees to set you up with a lender.
Don’t work with a company that will charge you just to work take an application. Some places will charge a fee of over $300 just to work up a proposal.
A good loan officer can work up a proposal in 10 - 15 min. If they tell you it will take a couple of days, they’re just lazy. You don’t want to do business with them.
[quote]jlesk68 wrote:
The market is way to overblown, wait a year until the prices come a little lower otherwise you’ll get stuck with a house that’s not worth what you paid for it, I was fortunate to buy before market went up, I bought my house for 132k, the value is now 370k, good luck…[/quote]
[quote]sasquatch wrote:
Do you honestly believe home prices are coming down any time soon? They may not overinflate as we’ve seen in the past few years, but as the economy comes into better times, home prices will at least gain at the national level.[/quote]
They will. The law of market equillibrium (supply & demand) will eventually level off and the prices will go down.
[quote]winchell_j wrote:
sasquatch wrote:
Do you honestly believe home prices are coming down any time soon? They may not overinflate as we’ve seen in the past few years, but as the economy comes into better times, home prices will at least gain at the national level.
They will. The law of market equillibrium (supply & demand) will eventually level off and the prices will go down.
[/quote]
It might take 50 years. Unless you are in a market that is achieving massive growth based on a single industry and that industry eventually busts, prices will likely continue to rise.
[quote]Zap Branigan wrote:
winchell_j wrote:
sasquatch wrote:
Do you honestly believe home prices are coming down any time soon? They may not overinflate as we’ve seen in the past few years, but as the economy comes into better times, home prices will at least gain at the national level.
They will. The law of market equillibrium (supply & demand) will eventually level off and the prices will go down.
I don’t want to presume to be smart enough to know whether prices will go up, stay flat or go down. That said, real estate markets tend to be very local, so you might have a situation where prices do come down in the overheated markets while they go up in markets that have not seen the same type of appreciation. So, ultimately the issue is one of geography and length of investment. Once again, if you are going to be in place for a long enough period of time, you should end up ok.
Really cool link, I read the whole page. When you click here, go to the part where he lists a bunch of real estate “gurus” and click on Robert Allen. He makes Kiyosaki look like a saint.
(And if you’re going to waste your time with their best-selling books, go with Robert Allen’s. It’s much more fun to read.)
[quote]randman wrote:
For a thorough analysis of Robert Kiyosaki’s books, check this out:
This guy is a reputable real estate investor who basically rips Kiyosaki a new one. Again, I’ve read some of his books and it did get me motivated about real estate but I also think he overinflates his success solely due to real estate. You be the judge.
[/quote]
As others on here it is difficult for me to save for the 20% down aspect of it. I’m in college and have to pay for it totally out of pocket. Thats roughly $6000 a year. So yeah it would be quite difficult to get the 20% I do have some in my IRA but dont want to touch that. Since there are quite a few on here that suggest the 80/20 option I will look into that. My sister also linked me to the Housing Development Fund of my area. They help people secure their first house without getting raped. The have one really cool option. It would sort of help me. What it is is they give you a $10,000 loan towards your home. This money doesnt have to be paid for 30 years, when I sell the place or if the house is paid off. I havent looked into the interest portion of it. They also do the 80/20 option to avoid PMI with the 20% being locked in at 3% interest. That sounds like a viable option also. So thanks to the advice in this thread things are looking up. Hopefully it will all work out!
[quote]jackzepplin wrote:
I’m not familiar with Florida, but perhaps you can find a duplex/quadplex and rent the other unit(s) out? You could rent for enough money to cover your mortgage.[/quote]
In most coastal Florida cities, this is difficult. I’m paying $1100 rent for an approximately $300K home. This is a slightly lower rent-to-value ratio than the average here, but not by much.
I work for a lender who is an investor for both mortgage brokers and mortgage lenders. T-Sizzle made some good points here but I would like to add to some of his statements.
I don’t see this happen very often. You also need to remember that PMI is not tax-deductible. I funded a deal yesterday where the lender had the option of putting the customer into a Fannie Mae Flex 97 at 6.25% with $70/mth in PMI or send it to a bank like mine and give the customer an 80/20 with a 7.15% for the 1st and a 8.99% on the second which matched the payment of the Flex 97. However every bit of his payment was tax deductible going the 80/20 route but definitely look at both options.
[quote]
On average homeowners in the US refi every 3 years. Try to get an ARM product. If you get an ARM get a three or a five year with a limited prepay. This will lock your rate in at the lowest rate possible. [/quote]
Very true here. Maybe even go with a higher pre-pay to get a lower rate on a 30 year. If the rate is low enough and you want to stay there a while then who cares about a pre-pay. Typically the longest pre-pay term is 5 years so just make sure you dont do anything before then. I remember a program offered not too long ago that was a 4.99% on a 30 year with a 5 year 5% pre-pay. It was a stiff pre-pay but it wasnt a big deal because they were giving a 4.99% which was .375 lower than conforming at the time.
[quote]
Make sure your mortgage company is a lender and not a broker. If you use a mortgage broker often times they will charge you additional fees to set you up with a lender. [/quote]
I dont agree with this. Every day I see lenders charging just as much and many times even higher closing costs than brokers. On top of that I see many retail lenders padding their rates to make more premium when the loan sells on the secondary market.
Not entirely true here. If you are dealing with a lender they can tell you what they typically have to offer from their daily rate and program sheets but many times the lender will shop the loan and possibly broker the deal out to get the customer the best deal which can take up to a day to get all of his offers back from the wholesale reps they may deal with. Most non-conforming (by this I mean not Fannie Mae or Freddie Mac) lenders have an automated underwriting system but not all of them do so it can take some time to get an answer back.