OK, I have a personal residence in Vegas I bought in 2002. As you all know Vegas Real Estate WAS booming, now it’s busting. I’m moving back because I’m having a hard time selling it and my wife is getting a pretty good job offer. I was renting it out, but the rental market sucks out there. I owe 330K and it barely rents for $1500 but my mortgage is 2,500K. Yes it was a stupid speculation mistake. :banghead
My question is: Should I
a)just move into it?
b)sell it and buy a fixer, foreclosure, REO, or discounted proptery to live in?
c) sell it and just rent somthing since rent is so cheap, and use the money to invest in property somewhere out of state?
I guess my thoughts of owning something are for income tax deductions. But also since rent is so cheap I could save the money to invest in other places. :help
Your personal residence is not an investment. It is your home. You should buy a place where you love to be. A place that you want to raise your family in. A place that has a park down the street and neighbors that you love to visit with. Buying a home to make money is like marrying your wife just because she can get a job and bring in another paycheck. Or having kids so that they can work around the house and you won’t have to pay domestic help. So live in your house, buy investment houses because they make money. You are mudding the water.
My point is that the attributes of a house that will make money are not always consistent with the attributes of a house YOU want to live in. If life’s circumstances have causes you to have to move, then you should try to mitigate any financial damage that may have been caused by it but you should buy a home just like you pick a wife. Whith your heart. I suggest with your home that you sell and then buy another with the overriding criteria being your personal happiness.
well I understand the a house is not an investment. I get all of what you are saying, I guess I did leave a few things out. I don’t plan on being there more than 3-5 years. Because the school system sucks! So it will not be a home for life. Actually ideally, I’d like to buy, fix up, live in it for 2 years than sell it until I own a house free and clear. Also I love the house, love the neighborhood, it was my first one. But with the market conditions being what it is in Vegas, not sure on my next move should be.
Thanks Dave T. That makes perfect sense. Viewing your other posts you seem to be pretty savvy. What about the tax benefits of owning real estate? Do you think it be worth looking for something that is discounted?
I agree with Dave when it comes to dumping the current home. it will take you forever to get back into the black. However the renting is cheaping than owning statement is not quite true. To start with you pay 100% interest. You never earn any equity. You never get any appreciation. You lose your largest tax write-off, and unless you want to live in a apartment your whole life you will eventually move into a home where you will end up paying for lawn care, general maintenance, as well as having a rent payment that is on par with what you would pay to own. If you can afford to rent, you can afford to own. I will say this though Dave T… I read through some of your back posts as well. You are pretty savvy.
to follow up on this discussion, I would add the idea of “discount” is a relative term. If you want to be in Vegas, then move in and possibly in 2 years use your Sect 121 exclusion to take out some Cap. Gain upon sale. Otherwise, SELL NOW! In my book, “a bird in hand is worth two in the bush”. Take your profits and move on. Frankly speaking, I would not recommend a 1031 or the like since you seem to lack the experienc eto proper assess and pick out a good deal. A 1031 means you have to act quickly and in this market, IMHO, there will be much tasty deals ahead in 6-12 months (outside the 1031 exchange window).
In the end, don’t let taxes dicate your strategy, but rather take advantage of what is offered if it makes sense for your situation.
Ordinarily, I would agree with you if we are making broad generalizations.
However, gypsydogg was asking about a specific strategy for a specific property in a specific market. In his case, he has a very expensive property in a declining market. His market is very likely to continue declining for the next 18 to 24 months, too.
Whether he owns or rents the same property he still has lawn maintenance and other minor out of pocket expenses, so that much of your argument is really a wash.
Owning this property is costing him $1000 more per month than he would pay out of pocket to rent the same property. If he is the renter however, his landlord will pay to repair or replace whatever breaks in the course of normal wear and tear. His landlord will pay the property tax and hazard insurance premium increases that comes with ownership.
Tax deductions? You don’t get deductions for homeownership unless you itemize. Even then, you have to spend a lot of money to save a little on your taxes. Say your mortgage interest is $24K per year and you are in the 25% tax bracket. You get to take a home mortgage interest deduction on schedule A which reduces your taxable income about $14K more than the standard deduction does for the renter. The bottom line is that your mortgage interest reduces your income tax bill by $3500 more than the renter, but you had to spend $12000 per year more than the renter to get it. So, after taxes, you are still out of pocket $8500 more than the renter who did not get all the tax benefits of homeownership that you did.
Remember, gypsydogg’s property is in a declining market. There is no benefit from appreciation now nor in the near future, so being a homeowner is looking more expensive for this market at this point in time.
I still say gypsydogg should rent for the next couple of years until his market bottoms. Then, if he wants to buy again in this market, he buys with brighter prospects of future appreciation and can make a larger downpayment with all the money he saved on his housing costs while he was a renter.
I agree with Dave. There’s no reason to hold on for tax reasons, etc. Tax deductions won’t amount to the costs, let alone if you need to spend money on surprise repairs or upkeep. One of my friends has a saying that “equity is a zero-percent rate of return”. If you hold on for appreciation, it’s going to cost you more than you can gain at this point.
When you sell, you have to recapture your depreciation anyway. Not worth it for your situation.