Buying a Home/Investing in Property

M

metalshark

New member
Jan 3, 2011
652
5
0
I’ve been in Vegas for a good 10 years now and home prices have never been cheaper. You can literally find homes priced at 1/3 of what they were several years ago. A good friend of mine is an agent, so the other day I went and got pre-approved and then set out looking at several places.

I actually came across a brand new neighborhood, with gorgeous homes, in a stellar area, all within my price range. I have a decent chuck of cash saved up and money has been consistently good for a while now, so I could easily afford the down payment and to furnish it nicely. The monthly payment would actually be cheaper than the current condo that I’m renting.

At first I was stoked, but then I actually started getting a little depressed about it. I’m 22, single, none of my family lives here anymore, and I know that eventually (rather soon) I’d like to make it out near the beach. Maybe Socal, Perhaps Thailand….not sure yet. I also really like my condo, it’s quite nice.

Here are my 2 different perspectives on it:

A) Investing in property generally seems to be wise. I could always rent it out or sale it later for profit. Prices may never be this cheap again.

B) It’s a 30 year loan. Why lock myself in on such a commitment this young? Honestly too, it kind of seems like something that would be much more exciting if I was married. AND WHAT IF I’m 52 FUCKING YEARS OLD BEFORE I PAY IT OFF! *shudder*

I tend to think that people on this board have a common outlook on smart investments and financial decisions and I can’t really talk to anyone around me about it – most of my friends still live at home with their parents.

At first I was leaning towards it pretty confidently, but now I don’t think I’m going to do it. I’m open to advice.
 


Unarmed Gunman said:
Don't buy in Vegas. You guys aren't going to have any water in 10 years.
Click to expand...

Vegas truly is a valid concern. I remember reading about a retirement/paradise city out somewhere near a man made lake. Tons of people flocked there to live and the lake dried up creating a ghost town. Interesting read, I can't seem to find the article.
 
metalshark said:
Vegas truly is a valid concern. I remember reading about a retirement/paradise city out somewhere near a man made lake. Tons of people flocked there to live and the lake dried up creating a ghost town. Interesting read, I can't seem to find the article.
Click to expand...

I believe you're referring to the Salton Sea in SE Cali. Vegas gets most of its water from the Colorado River apparently. I'd personally be more concerned with what summertime temps would be 30 years from now.
 
The problem with buying a home/investment property is that the factors that make a great home typically make not the best investment property.

Get a 15 year mortgage if you can at all afford it. The rates are lower so the payment isn't that much higher. But if you look at how much equity you will have in 5 or 10 years it makes ALL the difference in the world. Say a 100k loan with a 30 year you might owe 90k 5 years later, with a 15 year its like 76k. The difference gets even bigger at years 8-10. By year 12-13 even with peasant status you can probably look at the principal balance as yeah i think I am just gonna pay that sucker off right now. Then your looking at being 35 with owning your place free and clear.

Buying with a short term outlook is always risky. Prices can shift from under you then you may be either renting a place out and dealing with the headaches associated with that, on a small scale so theres hardly any payoff either.

Take a hard look at your life, you say you want to go to the beach, but maybe you would be happy just renting some swanky beachhouse for a month, two, or over a summer, in which case having a home would only get in the way of things minimally.

Being single makes it weird though. A chick is going to look at your house as your bachelor pad and want to move when things get serious. Which could make a renting condo in a fun section of town possibly a better financial decision. Less long term ramifications anyways.
 
metalshark said:
I’ve been in Vegas for a good 10 years now and home prices have never been cheaper. You can literally find homes priced at 1/3 of what they were several years ago. A good friend of mine is an agent, so the other day I went and got pre-approved and then set out looking at several places.

I actually came across a brand new neighborhood, with gorgeous homes, in a stellar area, all within my price range. I have a decent chuck of cash saved up and money has been consistently good for a while now, so I could easily afford the down payment and to furnish it nicely. The monthly payment would actually be cheaper than the current condo that I’m renting.

At first I was stoked, but then I actually started getting a little depressed about it. I’m 22, single, none of my family lives here anymore, and I know that eventually (rather soon) I’d like to make it out near the beach. Maybe Socal, Perhaps Thailand….not sure yet. I also really like my condo, it’s quite nice.

Here are my 2 different perspectives on it:

A) Investing in property generally seems to be wise. I could always rent it out or sale it later for profit. Prices may never be this cheap again.

B) It’s a 30 year loan. Why lock myself in on such a commitment this young? Honestly too, it kind of seems like something that would be much more exciting if I was married. AND WHAT IF I’m 52 FUCKING YEARS OLD BEFORE I PAY IT OFF! *shudder*

I tend to think that people on this board have a common outlook on smart investments and financial decisions and I can’t really talk to anyone around me about it – most of my friends still live at home with their parents.

At first I was leaning towards it pretty confidently, but now I don’t think I’m going to do it. I’m open to advice.
Click to expand...

Single, no ties to the area, want to leave, long for the beach.... you are making the argument yourself. Take your nest egg, buy a rental in some low priced / high return state, do not skimp on the property management and collect the extra $700/month cash incoming and set it all aside toward a home and area where you will want to live.

Buy a home where you want to live, or by an investment. One or the other.

You also might want to research Vegas and the number of homes bought by investors thinking there were enough renters to fill all of the homes. That dynamic may wreak havoc on that market for many years beyond when you want to sell.
 
The best RE strategy is flipping. Buy cheap, Renovate, Sell back X time the price. I know a guy who does it and he makes half a million working 3 months a year. He's on golf trips the other 9 months.
 
Well, I'm 59 years young and just paid my mortgage off. I got an erection so hard a cat couldn't scratch it. :)

Do you really think that at 52 your old as dirt? When you get closer to that age your opinion WILL change.
 
craigmc said:
Well, I'm 59 years young and just paid my mortgage off. I got an erection so hard a cat couldn't scratch it. :)

Do you really think that at 52 your old as dirt? When you get closer to that age your opinion WILL change.
Click to expand...

That's it. I'm not doing it.
 
metalshark said:
I actually came across a brand new neighborhood, with gorgeous homes, in a stellar area, all within my price range. I have a decent chuck of cash saved up and money has been consistently good for a while now, so I could easily afford the down payment and to furnish it nicely. The monthly payment would actually be cheaper than the current condo that I’m renting.
Click to expand...

You are young and shrewed and I imagine there's a ton of foreclosures on the market over there. Why pay retail like the rest of the schmucks in a market like this? Buy a house that's been banged-up and fix it up while you live in it. Sweat equity will put you in a way better position in just a year or less.

Not really for the faint of heart but if you have the drive and ambition it can certainly make for a nice chunk of $ when you cash out (refi and rent out or sell outright).

And remember the first rule of investing, the money is made when you buy not when you sell. So your first step is to buy smart and buy under market value.

metalshark said:
A) Investing in property generally seems to be wise. I could always rent it out or sale it later for profit. Prices may never be this cheap again.
Click to expand...

Buying to rent is certainly investing, however buying for appreciation is speculation. You can't be sure your property is going to appreciate in value unless you are directly controlling that appreciation (see first paragraph).

metalshark said:
B) It’s a 30 year loan. Why lock myself in on such a commitment this young? Honestly too, it kind of seems like something that would be much more exciting if I was married. AND WHAT IF I’m 52 FUCKING YEARS OLD BEFORE I PAY IT OFF! *shudder*
Click to expand...

Investors generally don't make it a goal to pay off their mortgage. Why would they when they can tap their equity for a nice line of credit at low interest rates and put the money in their business, more property, etc..

With that said, you should invest in an area you can see yourself within the next few years.

If you end up going to Thailand hunker down for a while and get familiar with the land before you pony up any cash because Gringos get sharked in 3rd world countries.

metalshark said:
I tend to think that people on this board have a common outlook on smart investments and financial decisions and I can’t really talk to anyone around me about it – most of my friends still live at home with their parents.
Click to expand...

:thumbsup:
 
#1 - Do comp research, regardless of where you're at, this is paramount to finding a good deal. I am somewhat unfamiliar with the LV market, but do know it's in severe distress. Find someone that HAS to sell and can sell for a low price (Maybe a short sale?) and then beat them to death on the price. Learn how to make multiple offers with a right of refusal. I see most good investors in my area do this, they typically end up with properties 30% under what the norm is for bargain basement pricing (30% lower than median foreclosure price).


#2 - 30 year loans are a blessing and a curse. I have 30s and I have 15s, the 15s in my case are almost always better. A 30 can create more cashflow, however you HAVE to condition yourself to make extra payments. My 15 year loan is now at year 5 and we have paid something like 25% of the loan off already, our 30 year loan is nearing year 6 and we have paid off less than 5% of the loan. During a up market (when prices are increasing) appreciation can help ease this, but I wouldn't factor in appreciation as a firm standard. I figure preparing for the worst is the best.

#3 - Rentals are always underappreciated. Do it right and you have a great property, great tenants and something that produces a great return every month. Do it wrong and you end up with a house that breaks even or possibly even loses money. Rentals are MUCH more forgiving than flips because you can grow your way out of a bad decision, with a bad flip it will cost you dearly (I personally saw a dozen flipping companies/groups go under during the 2007-2008 crash in prices, they went from making mid 6 to low 7 figures to negative cashflow very quickly).
 
You must log in or register to reply here.
Top Bottom