The value of a home made gift
10 years ago
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- 10 years agolast modified: 10 years ago
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Limiting Home Equity to no more than 25% of Appraised Value, WHY?
Comments (29)Sorry it took me awhile to respond, thanks for all the comments Chelone I have lots of relatives who have a great retirement doing what you are doing. MIL struggled to put the kids through college on a teachers salary and now in retirement is rolling in it. Keep it up I have no problem mortgaging or not mortgaging my own house. Our real estate taxes are high, probably more than many mortgages, so even if you got rid of a mortgage you are still paying 1k a month in taxes. In the above example, I probably would do option 4, if I really had a 5% mortgage I would not pay it off and probably stick part of the money in a CD paying 5.5 or whatever rate I could get above 5! To pay it off really would be leaving money on the table if you could SAFELY get more than that. I agree that Universal life is seldom a good deal and I would only do that if I thought from an insurance point of view it was a better deal than term for some reason. Otherwise I think its just a scam. The problem I had with the post that started this, if you have a mortgage at 5% and now have some extra cash, great, do not park it in your house because you really can get more at the bank. However the advisor was suggesting pulling money out (does not matter REF or HELO) just so you have it in your hands instead of it sitting dead in your house. Thats a great idea but if I am borrowing at 6% and can only SAFELY invest at 5% who is going to pay the spread? Also what about the 10k in closing costs I paid to pull the equity out? Worse what if I do follow a hot stock tip that ends up not so hot?! People are tempted when they have acess to so much cash (I think I could manage but who knows). Dave claims its an issue of safety to have too much equity without owning it outright. The HELO that was suggested would actually be one way to safeguard the eequity. Do not tap it unless you really need it, the perfect storm scenrio that Dave mentioned where people cannot tap the equity and lost their house even though they have lots of equity Thanks for the compliment Celtic, I just could not figure out how to adress the shortfall in an owner occupied property. Ia lso agree with you about the rental increase issue, 6% annally is impossible, office leases around here have a 3% increase, sometimes less. CMarlin I love your examples and you have given me things to think about. My DH thinks I am the most risk averse person on the planet so I doubt we will be competing for property (especially from NY!). In running your numbers why even invest the 500k? If your debt service at 6.7% is about 116k and your income is 144k, even assuming taxes are 20k why tie up so much? Do the lenders require this? Is it to give yourself a perfect storm cushion? Why not put aside 100k in an interest bearing acount instead and maybe put down 100k so you can cover incidentals with the rental income? I have no idea how this works. What is an SFR? Also do you buy rentals locally? You mentioned you research the areas which assumes you go outisde of your local area, do you go out of state? Just curious. What about I have Two real estate stories I think about that stop me from following your lead, I guess if prices really do drop in a mini crash maybe I will rethink it. Although there are still lots of people like me who know a bunch of people who recently got rich on real estate so we wonder if we could do the same and I always wonder about things everybody is doing, someone has to lose money doing it. Not saying you CMarlin I actually think your plan is sound except for the 6% but I assume even at 1 or 3% you will still make money (although how does that play into local tax increase, here they have been increasing taxes up to 6% PER YEAR based on the rapid increas in value of these properties). How many apartments do you feel you need to own when starting out to truly spread the risk so to speak? Also of the 144k, what percentage is overhead unrelated to taxes and mortgage. What are those expenses? Here are the stories that stop me. In 1986 a wealthy physician I know (not well) decided to invest in real estate out of state in Boston. With the 1987 crasg the condo market went belly up and they could not sell these in the late 80s. He and several others were general partners. One of his relatives who got him into this ended up losing her law licsence over this! They tried to sue him and he almost lost everything outside of this (had a large home etc) fortunately most of his assets were in his wifes name anyway for liability reasons relating to his medical speciality, so they dropped the suit when they realized this. This same guy started trading stock on margin out of his retirement account in the late 90s, his account at one point was up to 42 million! Needless to say he is still working after that market crash and he is now near retirement age My father was approached by his accountant in 1975 who was running a tax shelter. He and his partners were buying a building near Lincoln Center in NYC. At the time the neighborhood was a bad and they paid 1m for a 40 story building plus garage (400 per car per month) and retail stores in the lobby (now a Chase Bank, a drugstore and a McDonalds). Dads share would have been 100k but back then he did not have it and even if he did, well I get my risk averse thing from him! For some reason I remember telling him to invest but who listens to a 12 year old and again they really did not have that kind of money to throw out with 3 kids. In 1987 (yes at the absolute height of the market) I bought a last remaining sponser apartment in, you guessed it, that building for more than double what 10% of a 200 unit building would have cost 12 years earlier! This was a fluke dad did not realize it until he saw the purchase contract. They ended up selling the apartments back to the tenants for 10m in 1985! They kept the master leases on the garage and the McDonalds so I am sure that funded someone's retirement. The irony is this was sold as a tax shelter, it was not supposed to even make money! Dad has no regrets (well other than that 4th child they never had!LOL) he says that for every successful deal he was offered, there were 20 that failed and he would have lost his investment I know this is way too much information but its what makes me leary about real estate as an investment. I actually just want a bigger house for me and my household, I do not care if its paid off or not as long as I am not awake nights worrying about how I can pay the mortgage. Still trying to figure out how to get there Its funny I flip flop on the do it yourself investing. I hate being told what to do and need to understand it before I can commit. I also hate mutual funds as a general rule excpet for the ones that are based on indexes. I sort of get frustrated with magazines like money that seem to try to make everyone feel like they need to be in mutual funds and not just one, but a portfolio of them,. Are they secretly owned by a constortium of mutual fund. Also I wonder what an investment advisor can tell me? Its like my theory on stock brokers, if they were so great at picking stocks why would they need me to make money. No offense intended to any investment advisors. I do think an individual investor can beat the market average (or not!) even if they do not have access tp all the inside information because they have flexibility that a mutual fund running 1B does not. Then there are days when I look at my house which is basically decorated but the reality is that it lacks the fine tuning a decorator could give it but I hate the idea of living with something someone else has chosen for me(I tend to return gifts too). Its sort of like that with investing, I am not comfortable with the loss of control but I do not have the time and energy to follow this all the time...See MoreResale Value on Stickley Furniture made in 1990's
Comments (7)I think you could check the listings in the SF Craigs list for furniture and you might find what others are asking for thier high end furniture. My daughter lives near Seattle and just before Thanksgiving she found a beautiful hand made dining room set with a table that extends about 15 feet with all the leafs in and 12 chairs, all with arms and very beautiful thick pads in the high backs and seats. The original cost was over $6000 abd she paik only $1200 for it....See MoreWhich remodel would be better for my house value?
Comments (17)I vote for the bathroom. If you are "looking ahead", here's our story. In 1989 we bought a 2bd 1ba cottage with an illegal 2-room apartment on the ground floor/garage level. After taking a hideous 18 months to remodel it in fits and starts, in 1991 it became a 2bd 2ba with a master suite downstairs to replace the apartment. When the RE appraiser came to look at it, he criticised us for putting in such a "disproportionate" and "huge" bedroom suite. Remember this is 1991 - very few people had ever seen big remodeled kitchens and master bedroom suites in our (older housing) city, let alone HAD them. We didn't get the appraisal amt we hoped for and couldn't refinance. Fast-forward to 2003. Neighborhood is gentrifying fast, old people moving out and young couples moving in. We decide to take out some equity and try the refinance again. Appraiser comes out, walks in the door, and says, "Wow, great job!" (tall cathedral ceilings, big picture windows looking out towards the hills). He goes downstairs and says, "And you even have a master bedroom suite! Gee, lots of people want these nowadays and so few of the houses around here have them!" We got an incredible appraisal, in fact he pulled comps on 3bd homes because he said so few 2bd homes in our area had the features we did. My niece and nephew, both of whom own homes and are getting married this year, would kill to have a master bathroom ensuite. Go for it!...See MoreLaminate Floors and Home Resale Value
Comments (79)(1) Laminate WILL NOT stand up to big dogs. I have a breed that is huge - 29" at the shoulder 110 -130 lbs. Water bowl spills kill it. Potty accidents kill it. (2) wood-look laminate floors -- I will either walk away or make an offer low enough to cover ripping that junk out and replacing it with anything else. It is NOT wood. It is sawdust that is glued together. The a photograph of wood is glued to the saw dust. The plastic is poured over it. Absolute low rent garbage. $20,000 to put down hardwood flooring....... WOW! That is nuts for anything less than 1600++ sq ft of oak or maple that had to be stained and finished. FInd a Lumber Liquidators store. Get some unfinished pine - even down to the $1.39 a sq ft. Get some mastic. Get some stain. Get some real varnish - like McCloskey's Marine and do 4 coats. Get a circular saw. Put down the flooring. If you need to level, get some underlayment - adds about $1300 to the project. Pay your handyman $20 an hour. Work alongside him getting boards, putting down mastic, spreading stain and varnish, doing the light sand between coats with 150-200 grit and wiping with a tack cloth...... if it takes 2 weeks (huge am0unt of time) you pay him $1600. Total cost for the whole house - $5200 -7300 if you do it and $6800 -9100 if you have help. (and you won't be doing the bath or kitchen....so sq ft would be less)...See More- 10 years ago
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