[The0pportunist]

i would buy the house & rent out the unused rooms.

One day your kids might want to live with you or you might want to pass the asset over when the time comes.

Good luck

[flgfish]

Originally Posted by Run Silent

You should immediately pay off the car. Having a loan on a 7 year old car is ridiculous.

The number one way to building wealth is to not have any debt (with exception of a home).

You should absolutely buy a home, but only if you can meet the following criteria. If you cannot meet ALL of the items below, continue to rent until you do so:

1) A down payment of a minimum of 20% of the cost of the home. No PMI.
2) A payment that is no more than 25% of your total take home pay.
3) A fixed rate mortgage for a maximum term of 15 years.
4) You plan on living there for at least 5 years.

So long as you can meet all four of those items...and.... you don't have any other debt of any kind - buy the home.

Otherwise, wait.


EDIT: I see you live in a relatively high cost of living area. This doesn't change anything I just said. Simply living in an area that is expensive does not give you a pass on basic math.

I was going to write basically the same thing. 25% may be bit conservative but this is all good, solid advice - and being house poor sucks.

[Run Silent]

Originally Posted by UncleWede

Because he bought a wife AND 360

I don't get the 'wife' part? She may be foreign, but she makes much more than me.

[NickyC]

Originally Posted by BMWILUVU

I rent. When I did own, my weekends were spent on maintaining the house and my taxes went to paying for school for other people's kids

Nothing is more irritating, and damned if people in the area just don't FALL over themselves to vote for every available tax increase for "the children". These dumbass kids need better parents and better teachers, not more money thrown at them. It's a joke.

Also OP, I wouldn't recommend paying off the car. At least from my own personal experiences (failings), every time I pay off a car I almost immediately get the itch to buy something new. I can't explain it, but when I have a payment I enjoy my car and don't look elsewhere. I intentionally go for 48 month car loans because of this. Not sure if you're the same way, just something to think about!

[King Rudi]

Originally Posted by UncleWede

Because he bought a wife AND 360

Not at all. I think the wife is there because she wants to be not because he bought her. From what I understand the 360 is more of an investment type thing. Run Silent correct me if I am wrong.

I only say listen to this guy because he is very astute and I've yet to see him offer poor financial advice. My advice tends to be on an inner peace type level and comes from years of making poor decisions. Reverend Runs advice tends to be on a financial basis and comes from a very fact based mentality. I've yet to see him steer anyone wrong.

Not the same subject, but in my journey on weight loss and getting in shape, I get all kinds of advice from people. I hear a lot of different things. I get told often that I am too skinny.....fat people tell me this. They also tell me I can eat whatever I want as long I continue to work out....they don't step foot in a gym and would pass out if they did a 1/4 of my gym routine. People in good shape tend to not offer advice, but are all too willing to provide if I ask. These are the people I listen to. By no means am I, what I would call, financially set; but I'm comfortable. I'm not "360 in my garage" comfortable though. When it comes to finances, Run speaks, I pay attention.

I know you mean no ill will in your post, just clarifying my statement.

[chassis]

obert, you mention home prices in your area are “insane”. How would it feel if you decide to pay an insane price?

Pay off the car loan and rent a dwelling for as long as it takes for your economic condition to change. This could mean asset prices fall, or it could mean your income increases significantly.

In 25 years of home ownership across 3 houses and 2 widely separated geographic regions, I estimate home ownership to be a breakeven proposition vs renting. I have bought the homes in the past as primary dwellings, in desirable school districts (higher property tax than surrounding areas) and have lived there for as long as life conditions warranted me to do so.

Have a look at online cash accounts such as from FNBO. I just learned about these and will probably park some cash there.

[KenB925]

My advice/vote would be buy a house, rent out a room.

[Run Silent]

Originally Posted by chassis

In 25 years of home ownership across 3 houses and 2 widely separated geographic regions, I estimate home ownership to be a breakeven proposition vs renting. I have bought the homes in the past as primary dwellings, in desirable school districts (higher property tax than surrounding areas) and have lived there for as long as life conditions warranted me to do so.

You are an anomaly.

There are countless studies which show that a person who purchases a home using sound fiscal policies (no other debt, 15Y or less mortgage, >20% down, PTI <25%, etc.) will be far ahead financially of anyone who continues to rent throughout their life.

Originally Posted by chassis

Have a look at online cash accounts such as from FNBO. I just learned about these and will probably park some cash there.

These accounts are good, and I use them as well (Cap1), but are only a smart financial decision for short term cash that needs to be readily accessed. For any savings that will exceed 5 years in maturity, investing in good growth stock mutual funds will generate are far better return over the long run and should be utilized. For short term savings goal, like paying for a vacation, a car, etc - the online cash accounts are a good plan.

Over the long run, however, they are a terrible investment.

Originally Posted by KenB925

My advice/vote would be buy a house, rent out a room.

This is a smart way to generate additional income, but should never be used as 'a way to afford the dwelling'. If he cannot afford the house without the tenant, then he shouldn't buy.

[Run Silent]

Originally Posted by Now_Rudi

Not at all. I think the wife is there because she wants to be not because he bought her. From what I understand the 360 is more of an investment type thing. Run Silent correct me if I am wrong.

LOL - thanks man.

FWIW, while the wife now works around 30hrs per week so she can spend more time with our child, when I first met her and up till recently - she was making about twice what I made.

[UncleWede]

Originally Posted by Run Silent

I don't get the 'wife' part? She may be foreign, but she makes much more than me.

Foreign wife that you are making a citizen

Troll lol lol lol

[Darth One]

Lots of things that others have covered here, so let me just write the very first thing that came to my mind:

If you’ve already made $150k off the sale of a home, that should tell you why buying a home is a good idea

Someone said you should try to time the market, which is fine, but only if you can afford to wait, and have perfect information about future trends (which no one does)

[Grumpy Old Man]

Originally Posted by Run Silent

I don't get the 'wife' part? She may be foreign, but she makes much more than me.

My lovely bride makes almost double what I do, or did anyway. Some guys can't get their heads around it though.

Your advice on the four criteria is spot on from where I sit.

[Run Silent]

Originally Posted by Grumpy Old Man

My lovely bride makes almost double what I do, or did anyway. Some guys can't get their heads around it though.

Your advice on the four criteria is spot on from where I sit.

Didn't accidentally own a Ferrari and two homes on an accountant salary. Being fiscally responsible so you can be fiscally frivolous (to some degree) later works.

I imagine the same could be said for you.....retired cop with a 993. Didn't happen by accident. Happened because you made smart fiscal choices.

[xander_g]

house. without a question

[lsturbointeg]

man I don't think I would like to be in your shoes!

[dinonz]

Originally Posted by Run Silent

You should immediately pay off the car. Having a loan on a 7 year old car is ridiculous.

The number one way to building wealth is to not have any debt (with exception of a home).

You should absolutely buy a home, but only if you can meet the following criteria. If you cannot meet ALL of the items below, continue to rent until you do so:

1) A down payment of a minimum of 20% of the cost of the home. No PMI.
2) A payment that is no more than 25% of your total take home pay.
3) A fixed rate mortgage for a maximum term of 15 years.
4) You plan on living there for at least 5 years.

So long as you can meet all four of those items...and.... you don't have any other debt of any kind - buy the home.

Otherwise, wait.


EDIT: I see you live in a relatively high cost of living area. This doesn't change anything I just said. Simply living in an area that is expensive does not give you a pass on basic math.

Based on that I shouldn't have bought (built) my new home - I failed #3. I just checked and I could meet #3 without blowing the rest, I'm just not sure I want to, nor am I sure it would make sense in my situation (I'm not "working for a living" expecting the house to be my retirement).

[tcphoto]

I would pay off credit cards and other debt before a car, interest rates on cars are much lower than credit cards. There are many indications of an approaching recession so I'd think twice about reinvesting that $70K into a house unless you're confident about your income. What is the car worth compared to the payoff or resale? It may be best to just keep it, especially if you bought it new and you've maintained it well.

[Run Silent]

Originally Posted by dinonz

Based on that I shouldn't have bought (built) my new home - I failed #3. I just checked and I could meet #3 without blowing the rest, I'm just not sure I want to, nor am I sure it would make sense in my situation (I'm not "working for a living" expecting the house to be my retirement).

It is your money, not mine. You are welcome to spend it however you see fit. He asked for advice. As a CPA, I gave him some.

Financing any purchase over 30 years is a terrible use of capital. The interest on a 30 year mortgage versus a 15 year mortgage is nearly double. The PV of the FCF on that interest expense is in the millions for an average purchase price of $350K.

[dinonz]

Originally Posted by Run Silent

It is your money, not mine. You are welcome to spend it however you see fit. He asked for advice. As a CPA, I gave him some.

Financing any purchase over 30 years is a terrible use of capital. The interest on a 30 year mortgage versus a 15 year mortgage is nearly double. The PV of the FCF on that interest expense is in the millions for an average purchase price of $350K.

Thanks - don't get me wrong, I appreciate the advice, but our company chairman also gave me advice which I've listened to as well. This house is not an investment for me - it's somewhere nicer than an apartment to live where I don't have a baby elephant living upstairs and dogs barking all day long etc. - my investment is still the company which should return vastly more than the house.

I really only plan to keep the house 5-10 years (I expect to retire back to NZ in that timeframe) so I'd have to balance it and see if the extra cost and interest in that period makes it worthwhile paying the additional $1200 or so a month in home loans.

[TXSTYLE]

Without even bothering to read comments...

Here is the opinion from a Middle-Aged relatively successful dude (Me):

If you have the opportunity to get a House, do NOT hesitate. Sure there's more upkeep and Taxes. But there's also more Tax Credit. I want to be able to Jam my Stereo and Home Theater loud AF whenever I want! But, I do NOT want to hear anyone jamming theirs loud AF. There should ALWAYS be some rate of return with a House. Renting is just that. Our first home was purchased in 2001 for @ $250k. 18yrs later, we sold it for $460k. We are now in a $500k home with half of it paid. In the 1.5yrs we've been here, it has appreciated by $20k. You see where I'm going.

[dinonz]

Originally Posted by Run Silent

It is your money, not mine. You are welcome to spend it however you see fit. He asked for advice. As a CPA, I gave him some.

Financing any purchase over 30 years is a terrible use of capital. The interest on a 30 year mortgage versus a 15 year mortgage is nearly double. The PV of the FCF on that interest expense is in the millions for an average purchase price of $350K.

I just ran some numbers - if I go for the 15 year home loan, I end up with just shy of $200K more equity in 10 years ($196K to be exact). Nothing to sneeze at.

If I put the difference into my investment account (returning a consistent 11% per anum) compounding, I come out with an extra $273K (pre tax on interest however). Even allowing 25% income tax on the interest, I end up with about $230K.

Avoiding debt is not always advisable when you have higher interest paying investments available.

[hubbahubba]

Originally Posted by Run Silent

You should immediately pay off the car. Having a loan on a 7 year old car is ridiculous.

The number one way to building wealth is to not have any debt (with exception of a home).

You should absolutely buy a home, but only if you can meet the following criteria. If you cannot meet ALL of the items below, continue to rent until you do so:

1) A down payment of a minimum of 20% of the cost of the home. No PMI.
2) A payment that is no more than 25% of your total take home pay.
3) A fixed rate mortgage for a maximum term of 15 years.
4) You plan on living there for at least 5 years.

So long as you can meet all four of those items...and.... you don't have any other debt of any kind - buy the home.

Otherwise, wait.


EDIT: I see you live in a relatively high cost of living area. This doesn't change anything I just said. Simply living in an area that is expensive does not give you a pass on basic math.

This is really great advice, and I wish I could have been in the financial position to follow it every time I bought a home. That said, even though I did not buy while using that criteria, if I had waited to get what I considered a liveable home for my family, I would have been priced out of what I was aiming for. Market timing also needs to be considered, and if done properly you could enjoy the tax benefit of a 30 year mortgage vs nothing on renting, and accrue some decent capital appreciation. Especially in Seattle. Yes, being house poor sucks, but at this point in my life I am pretty sure that if I had a chance to do it again, I would do what I did. Renting sucks (to me anyway) more than being house poor. For me, home ownership created other opportunities to leverage money as well, which also contributed to what has accumulated in my little nestegg. Rule number 1- capital appreciation, rule number 1A- capital preservation. Any way you slice it, to be thinking about it in this fashion for the OP is a great thing, and I wish him nothing but the best!

PS.. FWIW, I am on a 15 year now, and it really is the way to go if you can swing it.