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Are you a millionaire? Yes or No? (1 Viewer)
- Thread starter Eminence
- Start date
Dentist
***Official FBG Dentist***
Lol. I run a pretty nice upper scale office. We're kind of high end lower volume so I have time to make posts between patients often.
I have mostly relaxed clientele
KCitons
Footballguy
Super King
Footballguy
Zimbabwean millionaire....
Bob Sacamano
Footballguy
Mmmm... gas
dino259
Footballguy
timschochet
Footballguy
I'll get there. Too much damn time on the Internet.
Tennessee_ATO
Footballguy
Yeah, blue sky is only worth something if there's someone willing to buy it. In a larger partnership setting, points are typically purchased at a predictable price point. Solo, 2-man. 3-man operations are very different.
My feeling is that equity in a home represents an "asset". The costs of maintaining a home shouldn't factor in because they're sunk costs inherent with needing a place to live. Heading down the other path (Stanley) always seemed to lead to the conclusion that renting is better than owning -- no large cash outlay up front, no maintenance cost, etc. That isn't the case though, because at the end of the day we'll most likely not die in the house we raised our family in because we will have significantly downsized or even gone the assisted living route.
Example: When my mom was disgnosed w/ Alzheimers at age 50, we liquidated her townhouse (which she paid cash for after selling her house when the kids moved out). That cash enabled us to pay her living expenses. It was absolutely an asset.
xulf
Footballguy
Dentist
***Official FBG Dentist***
DocHolliday
Footballguy
AhrnCityPahnder
Yinz-o-riffic
I have 7 figures in asshats.
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kupcho1
Footballguy
mr roboto
Footballguy
Yes, this has been covered. Also see my signature.
James Daulton
Footballguy
Didn't read thread, has a wheat penny joke been made yet?
chet
Footballguy
Otis
Footballguy
FUBAR
Footballguy
fantasycurse42
Footballguy Jr.
Feels like a good place to ask:
Hypothetically, you've been renting in an area where the property value has more than doubled in the last decade and you're locked into a rent that is half of market value...
Would it ever make sense to move out and buy or is it best to just keep renting below market value and investing?
Hypothetically, you've been renting in an area where the property value has more than doubled in the last decade and you're locked into a rent that is half of market value...
Would it ever make sense to move out and buy or is it best to just keep renting below market value and investing?
KCitons
Footballguy
Binky The Doormat
Footballguy
Tennessee_ATO
Footballguy
I'm a firm believer in buying instead of renting in most situations, but there are those who disagree with that.
It really comes down to a math problem if you derive no intangible benefit from owning your own home vs. renting. Only you can value that intangible benefit. For some it doesn't exist, for others it's really significant.
If you are renting for, say, $1500 a month, then you are trading $1500 for the right to live somewhere for 1 month. Nothing more, nothing less. If you have a mortgage payment of $1500 a month, you are getting a place to live for a month and some level of equity in your home. You have to remember that the lender will require you to escrow taxes and insurance on top of your debt service. That can vary wildly from place to place, but call it $200 a month on that $1500 P&I payment, which pushes you up to $1700.
First, the positives.
You are accumulating some equity in your home with each payment, at least if we assume that you paid FMV for your home and your home doesn't go down in value. For this exercise, I will assume that your home never increases or decreases in absolute value -- you will sell it for precisely what you paid for it. This means that it actually depreciates as it isn't keeping up with inflation. Early on, you will be accumulating very little equity as most of your payments will be interest. Say $250 is going towards principle early on, and $1250 to interest. That means you are paying $1250 (interest) + $200 (taxes and insurance) for the right to live somewhere for a month.
Now, here's the real potential benefit in my opinion, but it only really matters in certain situations: You get to deduct the taxes and interest from your gross income on your tax return. But, and this is a big "but", it only matters if you are already itemizing or can get significantly above your personal deduction ($12,400 if you are married, $6200 if you are single).
So you have to look at your current situation and compare. Do you itemize already? If so, then you should view the interest and taxes as a full reduction of your gross income -- i.e. an actual savings of (interest + property taxes)*(marginal rate).
If you aren't already deducting, then it gets a little more complicated. Many people argue that your savings in that situation is only ((interest + property taxes)-personal deduction)*(marginal rate). That is incorrect. Most folks will already have a fair number of deductions they can take if they itemize. State income tax, state and local sales tax, and charitable contributions are the obvious biggies. All of us pay state and local taxes, but only those who itemize get to deduct them. Most of us make contributions to our churches, athletic programs, charitable causes, etc. Only those who itemize get to deduct them. There are a host of other smaller deductions that you can only take if they add-up to more than 2% of your AGI. I'll ignore those for this purpose.
So, the real calculations for your savings if you don't already itemize is actually: ((interest+property taxes+state and local income and sales taxes+charitable contributions)-personal deduction)*(marginal rate).
If you calculate that figure and it represents a positive value (i.e., a savings), then you should deduct that from your mortgage payment to get the actual value of what you are paying for the right to live somewhere for a month.
But remember, that savings component to shrink a little bit each year as you start paying more and more principle and less and less interest. On the flip side, your equity acquisition will increase at the same rate.
Now the negatives.
It costs money to own a home. Now you have to replace the water heater when it dies. You have to mow and landscape. You have to repair the roof. You have tons of stuff to do to keep the thing from deteriorating. That costs money and time. Some people really enjoy doing that stuff, so the time isn't a problem for them. The money is real. Older homes generally cost more to maintain than newer homes. It's tough to predict costs for this and most predictions are based on the value of the home, which is a really bad way to make that guesstimate. You may be able to find numbers for your area, but be wary if they come from realtors -- they are notorious for overstating the benefits of home ownership for obvious reasons. A quality financial planner in your area should be able to get his/her hands on some reliable data to help you with this figure.
You can add some of those bigger "capital improvements" to your cost basis in your home, which will reduce the amount of income you realize when you sell your home. That doesn't matter right now since most folks won't have to pay taxes on the income made from the sale of their primary residence. But those laws change, so you should still keep track of it.
You'll also have to come-up with a down payment, which can take away money otherwise available for investment. You have to take that into account, but I think most folks overestimate the impact of what they would make with that money invested.
Hope that helps. I personally think that chasing appreciation in a home purchase is a pretty bad approach to the process because we really don't know what will be happening in 5 years, let alone 10 or 15.
ClownCausedChaos2
Footballguy
Are you kidding? I'm not even sure come in with a positive number.
Dentist
***Official FBG Dentist***
Nothing wrong with that depending on your age. I was negative when I bought my house also. I'd say many people are negative until their mid thirties if they had student loans, car loan, mortgage. Gets worse if you're in a high cost of living area
ClownCausedChaos2
Footballguy
Oh, well if Dentist says it's okay...
And don't forget daycare for two preschool children. The monthly cost of daycare is higher than the mortgage. It is the highest monthly bill that my wife and I have.
And we don't even own the titles to the kids yet! God bless having insurance, but just having to pay the deductibles and patient-responsible percentages of the bills are several grand. My wife had two c-sections, which required three nights in the hospital. If I remember correctly, the total (before insurance) was $20-25K per child.
