OT - Buying a House

[whaler11]

I own my house, have flipped a couple and have a couple of rental properties. I like buying real estate, but I live near a biggish city with a super strong housing and rental market. I would never buy a house in any of the towns you listed with the expectation of making it a financial instrument. You get whacked by the real estate agent for 6% when you sell it and they way the towns steal the value out of your house by raising taxes is a very real threat. The state budget has been squeezing municipal aid and it is likely going to make the real estate taxes worse.

When I buy rental properties it is tough to find properties in good shape that can attract quality renters and break even when putting 25% down. Personally these are long term plays for retirement annuities. The concept of just renting it out when you leave can be more difficult than you think. You also have to leave your down payment in the property so you’ll need a fresh batch of cash for the new house.

Buy a house cause you want to own something and make it your own and enjoy it. Buying a house in suburban CT because you think you’re throwing your money away on rent could backfire. At 250 your probably only putting 3600/year in principal payments at most. If you’re there for 5 years and the property appreciates at 2%/year you’re barely outpacing the agent fee when you sell. Put in a couple of oh shhhh projects and there is no real appreciation. The end result is that you are gambling 18k ish in principal pay down over 5 years in a good scenario. If the market turns or the taxes get jacked or something else happens, you have to choose between living in your starter home for 15 years or losing your down payment and renting again to get a different spot.

I totally get the desire to break the cycle of renting, but CT market has been a tough place for real estate. Needs to be a 10 year play and a lifestyle decision. My two cents.

Well @MattMang23 turned out in the end someone boiled it down to one legible post.

 

[whaler11]

Right but you said your work for that client was " mostly pro Bono"

Which means not pro Bono lol.

On the other hand if you have some clients pro Bono and some not, That makes sense and good on ya mate.

FrankIvy works mostly proboner

 

[8893]

Um. I thought it was allegedly humorous because pro bono means free and when I wrote "mostly pro bono" it's like writing "a little bit pregnant."
@8893 can you settle this?

Right but you said your work for that client was " mostly pro Bono"

Which means not pro Bono lol.

On the other hand if you have some clients pro Bono and some not, That makes sense and good on ya mate.

It was funny to me because “mostly pro bono” is a phrase that would tick the ears of most lawyers like “virtually” does, i.e., it means “not.”

The fact that they were Amish was just a nice bonus.

But, yes, good on ya for whatever pro bono or modest means services you provide. In all seriousness, modest means services is one of the areas of greatest need in terms of legal services, which is why many states are enacting Civil Gideon programs.

 

[nomar]

Um. I thought it was allegedly humorous because pro bono means free and when I wrote "mostly pro bono" it's like writing "a little bit pregnant."
@8893 can you settle this?

I'm mostly pro Bono in that I only like U2's albums through Achtung Baby.

 

[jleves]

This is an increasingly accepted view. Similar to what I posted earlier. My parents house appreciated 1000% in 30 years, it was worth 10x what they paid. It was an investment that paid for every car they ever owned and expensive college educations for two kids plus a good chunk of their retirement. I've been in my current house for 15 years and it is worth about 5% more than I paid for it. It is the biggest difference in financial terms between baby boomers and everyone else. Unless your area becomes the next hot market, your primary home is not going to be a good investment in terms of return. It may end up being cheaper than renting if you are there long enough but not if you are moving. Put it this way, the interest on a 300k mortgage at 4% is $515K over 30 years. Your rent would need to be triple your mortgage payment if you exclude appreciation. If you include appreciation of 3%/yr, after 30 years your house will be "worth" 728K - the 515K you paid in interest nets 213K or $591/month in rent equivalent after 30 years. Is your rent going to be $600 more than your mortgage P&I + taxes + PMI + maintenance?

Hard to see on a starter home and even worse for one you plan to spend 5 years in. Homes just aren't the investments they once were.

Build your emergency fund, fund your retirement accounts as much as possible, for the love of God take full advantage of your companies 401K match.

Meet or beat the 50/30/20 rule; Spend no more than 50% of your earnings on stuff you need (housing/food/transportation), 30% on stuff you want (everything else), and 20% on your savings/retirement fund. The last number is the most important if you ever want to be financially independent.

I'm certainly not a financial adviser and I have no idea about the conditions in CT, but I'm really surprised that your house has only appreciated 5% in 15 years. I know there was the bubble burst in that time but I thought most places had increased significantly since the bottom. I was fortunate that I got my home in 2010 and it's appreciated 80% since then. Even if I go back to the price it sold at in 2006 before the bubble, it's still up 30% since then. Add in the tax benefits of interest and property tax (which may be more limited in 2018) and the fact that when you sell, most or all of the profit isn't taxed and I can't see a reason not to buy a house if you can afford it.

My advice for a 25 year old person with the means to buy a house:
1) Get rid of all debt - particularly credit card debt. There's no reason to pay double digit interest on money you don't have. Low interest car or student loan debt is more tolerable but you still want to get rid of it as fast a possible. Pay off the higher interest debt first while maintaining the lower interest debt. Eat raman, get rid of as much of luxury things you can live without, put on a sweatshirt and turn down the heat and pay off as much debt as you can. You have your 40s and beyond to be comfortable.
2) As to the 50/30/20 rule, there's no reason to spend 30% on things you want at that age - lower it. Your late 20s early 30s will still be amazing without spending 30%.
3) Don't get married or have kids until you can afford it. You're going to live longer than you parents and way longer than your grandparents. 40 plus years with a spouse is more than enough - wait until you're 35 or so. Your kids will be out of the house when your 60-65 - that's good enough.
4) Go ahead and live with someone who can do 1) and 2) above until you're ready to have kids and can afford it.
5) If you can do 1) and 2) go ahead and buy a house as soon as you can. Buy the worst house you can afford and can fix up in the best neighborhood you can find. If you are handy, you can create at ton of equity/worth in a fixer - particularly if you don't have kids to deal with. Know your limits. It's stupid expensive to find contractors for things you can't handle.
6) Sell your first house in 2 to 5 years depending on market conditions. If you can get 250k in profit, it's not taxable. That profit is in your pocket tax free.
7) Take the profit and equity and buy the next worst house you can fix in the best neighborhood you can find. You have 5 years this time because you can only take the free tax from profit once every 5 years.
8) Rinse repeat buy, fix, sell every 5 years until you have enough money to buy the house you want to spend the rest of your life in. You can turn about 5 houses over between 25 and 47 or so. If you get married in that time frame, you take 500k in profit without taxes. If you do it right, by your late 40s, you can buy a great house with no mortgage.
9) Make sure you never get emotionally attached to a house so that you can't do the 5 year turn over. It's all a means to an end.

Good luck!

 

[Dove]

When you lock in on some target properties go to Town Hall and peruse the property file:

Banks/insurers hate financing noncompliance and may require sellers to show permits for various work done. So, if a seller is hyping a major kitchen remodel and a screened in porch there better be some approvals. Roofing requires a building permit and an unpermitted roof job can stall a closing. Windows and siding are maybes.

Get a Schedule A and any other deed that may show there are easements or right of ways on a property. Would hate to see you a property to find out old man Green can let his goats cross the rear 40 foot strip every day. Or a property you're looking at has a view easement granted to a neighbor.

Some subdivisions may have Home Associations. Some people are oblivious to this and learn the hard way.

If you look at a property on septic know what how a system works and review that property file.

Ask about obscure taxes. Middletown has a fire tax. What's a view tax?

Finally...observe the neighbors. Would hate to see you move next door to an alchie or barking dog owner guy.

***Our first house was a great little cape in Meriden. Excellent bang for our buck at $130k. At $240k you should find something in a nicer neighborhood. Taxes were a bear but all cities kind suck.

 

[ConnHuskBask]

Interesting responses so far regarding rent/own.

Basically seems like if you want to buy a home to have a bigger space to raise a family, then go for it. Just don't expect it to be an investment, but rather an expense, particularly in the northeast.

 

[whaler11]

I'm certainly not a financial adviser and I have no idea about the conditions in CT, but I'm really surprised that your house has only appreciated 5% in 15 years. I know there was the bubble burst in that time but I thought most places had increased significantly since the bottom. I was fortunate that I got my home in 2010 and it's appreciated 80% since then. Even if I go back to the price it sold at in 2006 before the bubble, it's still up 30% since then. Add in the tax benefits of interest and property tax (which may be more limited in 2018) and the fact that when you sell, most or all of the profit isn't taxed and I can't see a reason not to buy a house if you can afford it.

My advice for a 25 year old person with the means to buy a house:
1) Get rid of all debt - particularly credit card debt. There's no reason to pay double digit interest on money you don't have. Low interest car or student loan debt is more tolerable but you still want to get rid of it as fast a possible. Pay off the higher interest debt first while maintaining the lower interest debt. Eat raman, get rid of as much of luxury things you can live without, put on a sweatshirt and turn down the heat and pay off as much debt as you can. You have your 40s and beyond to be comfortable.
2) As to the 50/30/20 rule, there's no reason to spend 30% on things you want at that age - lower it. Your late 20s early 30s will still be amazing without spending 30%.
3) Don't get married or have kids until you can afford it. You're going to live longer than you parents and way longer than your grandparents. 40 plus years with a spouse is more than enough - wait until you're 35 or so. Your kids will be out of the house when your 60-65 - that's good enough.
4) Go ahead and live with someone who can do 1) and 2) above until you're ready to have kids and can afford it.
5) If you can do 1) and 2) go ahead and buy a house as soon as you can. Buy the worst house you can afford and can fix up in the best neighborhood you can find. If you are handy, you can create at ton of equity/worth in a fixer - particularly if you don't have kids to deal with. Know your limits. It's stupid expensive to find contractors for things you can't handle.
6) Sell your first house in 2 to 5 years depending on market conditions. If you can get 250k in profit, it's not taxable. That profit is in your pocket tax free.
7) Take the profit and equity and buy the next worst house you can fix in the best neighborhood you can find. You have 5 years this time because you can only take the free tax from profit once every 5 years.
8) Rinse repeat buy, fix, sell every 5 years until you have enough money to buy the house you want to spend the rest of your life in. You can turn about 5 houses over between 25 and 47 or so. If you get married in that time frame, you take 500k in profit without taxes. If you do it right, by your late 40s, you can buy a great house with no mortgage.
9) Make sure you never get emotionally attached to a house so that you can't do the 5 year turn over. It's all a means to an end.

Good luck!

Dude should be pumped his house is worth more than he paid for it. This isn’t Cal-if-ornia sunshine.

Everyone be sure not to make more than 250k in 2 years. You’ll have to tread softly.

 

[whaler11]

Oh god never buy a house with well/septic.

Unless you’d like to buy mine in like 15 years. Otherwise. Good lord it’s 2018 - have sewers.

 

[uconnbill]

In CT. I want to stay under $250 because I want this to be more of a starter home...taxes scare me.

So far I’ve been looking in Newington, West Hartford, Southington, Farmingtom, and Berlin. Wanna stay close but the market has been dry.

Does anyone live in Wolcott, Plainville, Meriden, or Bristol? What’s it like there I may expand my search by a few more towns.

Wallingfod has a good mill rate and school system, plus the cheapest electric in the state.

 

[whaler11]

Wallingfod has a good mill rate and school system, plus the cheapest electric in the state.

Just struggles with the whole near anything but Hamden and Meriden category.

 

[Dove]

Oh god never buy a house with well/septic.

Unless you’d like to buy mine in like 15 years. Otherwise. Good lord it’s 2018 - have sewers.

Just imagine living on public water knowing this water was sand-filtered over and over, laden with flouride and probably is purified gray water.

It is nice to know one can flush anything into a sewer system and somewhere down the line there is a crew that cleans up eveyone's waste. Septic systems have shelf life and can hinder house expansion. Nervous to own but it is nice to be self-reliant.

 

[CTBasketball]

Just imagine living on public water knowing this water was sand-filtered over and over, laden with flouride and probably is purified gray water.

It is nice to know one can flush anything into a sewer system and somewhere down the line there is a crew that cleans up eveyone's waste. Septic systems have shelf life and can hinder house expansion. Nervous to own but it is nice to be self-reliant.

Need to check the leech fields proximity to the well. The condition of the septic tank, the well, etc.

 

[Dove]

Wallingfod has a good mill rate and school system, plus the cheapest electric in the state.

At $250k in Wallingford you get a 80-year old ranch or cape on a slab where your back yard is someone's rear yard.

At $350k in Wallingford you get better construction but your rear yard is someone's side yard and another's rear yard.

The town is totally built out.

 

[methodology]

Oh god never buy a house with well/septic.

Unless you’d like to buy mine in like 15 years. Otherwise. Good lord it’s 2018 - have sewers.

A lot of the nice towns worth living in are still septic and wells. Just have to understand what it's about if you are coming from sewer/ city water

 

[whaler11]

Just imagine living on public water knowing this water was sand-filtered over and over, laden with flouride and probably is purified gray water.

It is nice to know one can flush anything into a sewer system and somewhere down the line there is a crew that cleans up eveyone's waste. Septic systems have shelf life and can hinder house expansion. Nervous to own but it is nice to be self-reliant.

Maybe you have the knowledge and equipment to be self-reliant with a septic system.

I’m sort of stuck with professionals that can install water systems and pump septic tanks and replace well motors. I had my yard dug up to find out the women of my house get a lot of hair in the drain. When there is actual
human waste in your back yard on a hot Saturday afternoon it’s tremendous.

Nothing beats hauling 40lb bags of salt all over the place. It’s like being Davy Crockett.

 

[whaler11]

A lot of the nice towns worth living in are still septic and wells. Just have to understand what it's about if you are coming from sewer/ city water

Agreed you want to understand it’s an absolute constant pain in the rear and is expensive as hell.

 

[jleves]

Dude should be pumped his house is worth more than he paid for it. This isn’t Cal-if-ornia sunshine.

Everyone be sure not to make more than 250k in 2 years. You’ll have to tread softly.

I usually don't bother to respond to people making idiotic comments on my posts, but really? That's what you have from my post? This isn't California and don't make over 250k in 2 years? Try harder. Or don't. Go find something else to do.

 

[MattMang23]

My parents moved from West Hartford to East Granby last year, trading town water for septic. Upon home inspection found out the entire septic had to be replaced. The seller footed much of the bill but the entire thing was 25K to replace. No thank you. City water for my next place.

 

[8893]

I'm mostly pro Bono in that I only like U2's albums through Achtung Baby.

I might be a little more pro Bono because I love "The Beat Goes On."

 

[CTBasketball]

My parents moved from West Hartford to East Granby last year, trading town water for septic. Upon home inspection found out the entire septic had to be replaced. The seller footed much of the bill but the entire thing was 25K to replace. No thank you. City water for my next place.

Septic tank sizes also should be looked at. If you have a smaller sized tank, with 4 people in your house, you might want to consider a larger tank. Or have the tank pumped out 2x a year to be safe. If the tank fails you might as well light yourself on fire.

I’ve been staying towards sewer - grew up with a septic tank and I’m well aware of their issues.

 

[uconnfan68]

I'm certainly not a financial adviser and I have no idea about the conditions in CT, but I'm really surprised that your house has only appreciated 5% in 15 years. I know there was the bubble burst in that time but I thought most places had increased significantly since the bottom. I was fortunate that I got my home in 2010 and it's appreciated 80% since then. Even if I go back to the price it sold at in 2006 before the bubble, it's still up 30% since then. Add in the tax benefits of interest and property tax (which may be more limited in 2018) and the fact that when you sell, most or all of the profit isn't taxed and I can't see a reason not to buy a house if you can afford it.

My advice for a 25 year old person with the means to buy a house:
1) Get rid of all debt - particularly credit card debt. There's no reason to pay double digit interest on money you don't have. Low interest car or student loan debt is more tolerable but you still want to get rid of it as fast a possible. Pay off the higher interest debt first while maintaining the lower interest debt. Eat raman, get rid of as much of luxury things you can live without, put on a sweatshirt and turn down the heat and pay off as much debt as you can. You have your 40s and beyond to be comfortable.
2) As to the 50/30/20 rule, there's no reason to spend 30% on things you want at that age - lower it. Your late 20s early 30s will still be amazing without spending 30%.
3) Don't get married or have kids until you can afford it. You're going to live longer than you parents and way longer than your grandparents. 40 plus years with a spouse is more than enough - wait until you're 35 or so. Your kids will be out of the house when your 60-65 - that's good enough.
4) Go ahead and live with someone who can do 1) and 2) above until you're ready to have kids and can afford it.
5) If you can do 1) and 2) go ahead and buy a house as soon as you can. Buy the worst house you can afford and can fix up in the best neighborhood you can find. If you are handy, you can create at ton of equity/worth in a fixer - particularly if you don't have kids to deal with. Know your limits. It's stupid expensive to find contractors for things you can't handle.
6) Sell your first house in 2 to 5 years depending on market conditions. If you can get 250k in profit, it's not taxable. That profit is in your pocket tax free.
7) Take the profit and equity and buy the next worst house you can fix in the best neighborhood you can find. You have 5 years this time because you can only take the free tax from profit once every 5 years.
8) Rinse repeat buy, fix, sell every 5 years until you have enough money to buy the house you want to spend the rest of your life in. You can turn about 5 houses over between 25 and 47 or so. If you get married in that time frame, you take 500k in profit without taxes. If you do it right, by your late 40s, you can buy a great house with no mortgage.
9) Make sure you never get emotionally attached to a house so that you can't do the 5 year turn over. It's all a means to an end.

Good luck!

My house is estimated at about what I paid 18 years ago... if I’m lucky. The market in my area is through the floor. And I’ve put $1000s into it. The houses for sale around me have been like that for months.

 

[Dove]

Maybe you have the knowledge and equipment to be self-reliant with a septic system.

I’m sort of stuck with professionals that can install water systems and pump septic tanks and replace well motors. I had my yard dug up to find out the women of my house get a lot of hair in the drain. When there is actual
human waste in your back yard on a hot Saturday afternoon it’s tremendous.

Nothing beats hauling 40lb bags of salt all over the place. It’s like being Davy Crockett.

Oh, we experienced a well pump fail 2 years ago. I enjoyed helping the well guy pull it up 240 fee of well column! (Thank God for Rhodes Pump Service!!). And pouring salt into the water system is no big deal.

But whe a toilet flush sounds like a 'gurgle gurgle' instead of a whoosh des make me cringe sometimes. And the methanic smell out front I blame on the wetlands across the street. Yeah, it's the wetlands!

 

[jleves]

My house is estimated at about what I paid 18 years ago... if I’m lucky. The market in my area is through the floor. And I’ve put $1000s into it. The houses for sale around me have been like that for months.

I'm guessing you are in/around CT. I had no idea value was that flat. That does suck as your home should be an investment. Sorry to hear that.

 

[whaler11]

I usually don't bother to respond to people making idiotic comments on my posts, but really? That's what you have from my post? This isn't California and don't make over 250k in 2 years? Try harder. Or don't. Go find something else to do.

I was being kind only gently mocking your post.

Maybe advice like this is useful in California but this has no bearing on the reality of Connecticut:

Sell your first house in 2 to 5 years depending on market conditions. If you can get 250k in profit, it's not taxable. That profit is in your pocket tax free.

Spoiler alert: Here, if your house appreciates enough in 2-5 years to pay the realtor’s commissions you got lucky.

I guess you can ignore the dozens of people posting about the reality of real estate values in Connecticut and tell us about the benefits of tax free profits up to a quarter of a million dollars. Just like people all over the country get to tell us about attendance and UConn. Super accurate.