Does a mortgage make sense in this case?

lostnjax · 02-06-2007, 11:39 PM

I have sat and pondered for years about whether or not to jump on the real estate train. Let's face it, renting is America's best kept secret. In my area you can rent a $200k home for right around $1100/mo.

Think about it for a second, for $1100/mo. you have no property taxes to pay, no association fees, no costly repairs and so on.

Yes, I know the argument "you are making the landlord rich" but in reality at that rental rate I am making the landlord broke. His mortgage payment is probably pretty close to what I pay in rent. If something breaks he has a loss for the month.

But in my particular case, I am single with no kids so one of you guys out there convince me I need a mortgage. I'm all ears

Pale Rider · 02-07-2007, 12:09 AM

Well, unless the landlord is really screwing up and doesn't know what he is doing, I bet he is making a lot of money. Yes he has to pay income taxes on the $1100 per month, but he can also deduct property taxes, insurance, depreciation, and those monthly repair bills. I rented one of my houses for 6 months, which most people would point out I lost 6 months rent. I ended up getting every dime of federal income taxes back for the year because I was able to itemize for the first time ever. So, I pocketed the 6 months rent and paid no taxes last year.

Now, should you buy. It depends on a lot of factors. You will not get all the deductions a landlord will, but you will get some to offset some of the taxes and insurance. If you live in an area where prices are rising quickly, the equity would far outweigh the additional expenses.

In my area, I can spend less for a house, insurance and taxes than a 1 bedroom apartment. I'm not talking about a large house, but something comfortable with acreage. I think we would need a lot more info about your area to convince you one way or the other.

lostnjax · 02-07-2007, 12:23 AM

I'm in northern Florida. I'm sure it's pretty obvious what city I'm in based on my handle. Real estate is going banannas here. For a minute there was a big boom then everything cooled down and now the boom again.

Qtip · 02-07-2007, 12:31 AM

This varies by area, where I live the new landlords are screwed as lostnjax says. You cannot buy a decent house for under 300k and the rent is going for about 1500 to 1700 for single home.

That is not enough to cover a new mortgage, people that owned for some time are ok.

Pale Rider · 02-07-2007, 12:33 AM

I would look for some properties with good location, in good neighborhoods, with a few minor problems that can easily be fixed if you have the basic home repair skills. That way you have some instant equity as insurance in case the market slows by getting a great deal on a house that is not selling for the max. Find a good real estate agent (get referral from friends or family) and look at some of the deals and foreclosures to see if there is something you might want to invest in. You can always decide to keep renting. In some areas you can get great deals on HUD or VA foreclosures also, but in other areas they are over priced due to investor mania.

Qtip · 02-07-2007, 12:36 AM

Quote:

Originally Posted by Pale Rider

I would look for some properties with good location, in good neighborhoods, with a few minor problems that can easily be fixed if you have the basic home repair skills. That way you have some instant equity as insurance in case the market slows by getting a great deal on a house that is not selling for the max. Find a good real estate agent (get referral from friends or family) and look at some of the deals and foreclosures to see if there is something you might want to invest in. You can always decide to keep renting. In some areas you can get great deals on HUD or VA foreclosures also, but in other areas they are over priced due to investor mania.

Great Advice! I was just discussing that with significant other! Told her that next property should be a fixer upper.

hannah · 02-07-2007, 12:42 AM

Look for an older area of Jax that is starting to undergo revitalization. If you can find a house that just needs a bit of cosmetic work then you might be able to get a home for a lot less. If you have a friend who builds homes for a living, take him with you so he can make sure there isn't anything structurally wrong. Check out some of the shows on TLC and A&E called Flip This House and Flip That House for some details of what to look for. They usually air on Saturday afternoon.

Hedwig · 02-07-2007, 01:39 AM

Renting is not necessarily a bad idea. A lot of it is personal. Setting aside the expense issues for a moment, think about other aspects.

You have to spend a lot of time keeping the place up. If you rent a house, you still have to mow the grass and shovel the snow. If you rent an apartment, you don't even have to do that. Think about how you really feel about the burdens of home ownership.

Now, on to the monetary discussion. Again, everyone's situation is different.

You need to look at the house you are going to buy. How old is it? Does it need fixing up? If so, can you do the work yourself? If you can do the work yourself, you need to consider the expense of the supplies and the time you'll need to invest. If you spend a lot of time working on the house, that's time you can't spend with friends or family. Make sure you're willing to make the sacrifice.

If you aren't going to do the work yourself, how much money will you need? Unless you're buying a home below market value and can get a mortgage based on market value, you can't get money out for several years. You'll need to be able to cover the mortgage, utilities, maintenance, repairs, all the new drapes and other things you always need in a new house, and you'll need to be able to handle emergencies.

The other financial aspect that many people overlook is called opportunity cost. See how much owning a house costs a month. Now see how much renting costs. Normally, owning is more expensive, at least at first. Now consider the results if you rent and take that difference and invest it. See where you'll end up in 10-15 years both ways.

Of course there are no guarantees, but these are some things to think about. Sometimes even what makes the most sense financially isn't the best thing for you, if you're not comfortable with it. Every situation is different, and every situation is personal.

I hope this helps a little, at least gives you something to think about.

lostnjax · 02-07-2007, 05:40 AM

I thought this would be a great subject considering I think the home ownership bug has bitten me. There are some great deals here in Jax especially with condos and townhomes. With this being a military town, homes are always for sale but on the flipside the rental market is very competitive. So competitive that landlords are luring renters with anything from gas and gift cards to 2 months rent free w/one year lease. The best one was a complex that was offering to pay your lease termination fees if you dumped your current landlord and moved in with them. Part of the huge rental inventory is accredited to more and more renters buying. Builders over the last 2 years got very agressive and overbuilt and then rates went up. So now they are just blowing these homes out with incentives such as paying closing costs, sending you on a cruise, and all kinds of upgrades included in purchase price.

I noticed there had'nt been much posting in this forum and thought I'd start the dialog up and get some opinions from others. It's a tough decision.

Hedwig · 02-07-2007, 08:48 AM

Hopefully you got some different opinions so you have something to think about. As I said, there are several options, and only you know what works for you.

Good luck and keep us posted on what happens.

Qtip · 02-07-2007, 10:16 AM

If I may ask and I am sure I will look rather dumb. "Jax" what state or city stands for?

lostnjax · 02-07-2007, 12:07 PM

Jacksonville, Florida located in the nations largest county by land mass (Duval County).

Airport code is JAX. But the reason you typically hear people refer to it as Jax is we have one of the country's largest Naval Airbases and people who wind up stationed here always have referred to it as NAS JAX. So there you go.

Geography wise we are as far north and as far east as you can get in Florida.

Qtip · 02-07-2007, 02:15 PM

Quote:

Originally Posted by lostnjax

Jacksonville, Florida located in the nations largest county by land mass (Duval County).

Airport code is JAX. But the reason you typically hear people refer to it as Jax is we have one of the country's largest Naval Airbases and people who wind up stationed here always have referred to it as NAS JAX. So there you go.

Geography wise we are as far north and as far east as you can get in Florida.

Thank you for the history lesson!!

drivel · 02-07-2007, 04:11 PM

Quote:

Originally Posted by Qtip

Thank you for the history lesson!!

History lesson? Where?

now geography lesson, maybe.

Qtip · 02-07-2007, 04:31 PM

Quote:

Originally Posted by drivel

History lesson? Where?

now geography lesson, maybe.

I guess I have to point it out

Quote:

the country's largest Naval Airbases and people who wind up stationed here always have referred to it as NAS JAX.

That sound it like history to me, although I should have used geography, but hey who cares. Oh weit a minute you do

jlynn · 02-07-2007, 04:55 PM

Jax, not only should you consider the financial pros and cons, but are you secure in your job? If you lost your job today, is there plenty of opportunity within your industry or would you have to relocate? If housing market is cooling, and you had to move, you might have to make two payments a month.

Relo packages are becoming more and more nonexistent.