What should be my financial goal to have a nice home built for cash?
Matthew L
5 years ago
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cpartist
5 years agoUser
5 years agoRelated Discussions
paying cash for a house part 2
Comments (31)i agree with you conceptually about only investing in thing you believe in, or rather in things you can stomach as most investments and industries have a downside if you look hard enough. eventually you get to exploited workers and poisoned rivers and solid waste. i personally struggled with the payday investment i made. the return was high, but i did not want to be associated with it. i said no for about 6 months. over that six months i learned how they (where my money is now) did business. after i understood it i had a hard time thinking of it any differently than a bank. they both loan money based on ones ability to earn money and pay it back. the only difference is the duration and the size of the loan. a bank allows me to spend money i don't have on a credit card and then charges me 13-18% until i pay them back while they themselves are leveraged 10 to 1 on those dollars loaned. the payday place will only loan me money that will be covered in my NEXT paycheck and charge me a flat fee of $5 or $10 while they themselves have a dollar for every dollar they loan out. when i look at it like that i really had no problem with the payday place, but started to have them with the banks. the payday places are not dragging the economy down because of their recklessness. they are also not enslaving an entire generation by offering them credit they cannot pay back. there are people who use them recklessly, and it is real easy to point them out because they are the fringe. it is a little harder to point out the middle class suburbanite who is a slave to their credit card and bank because they get up and go to work each day and keep a nice yard but are living on credit. both industries lend money and both are technically guilty of charging people who don't have money. they are in business to make money, not give it away. in the end neither is good nor bad just as fire is neither good nor bad. the good or bad all depends on who uses it and how they use it. the payday places service a far less afluent and unsophisticated clientele and therefore gives them very little wiggle room to abuse the system. if they want to stay one paycheck behind for the rest of their lives, that is about all they can do. the bank will let me get decades behind because they assume i am responsible and won't let it come to that but do little to stop me and recently have even encouraged me to do so. in my mind it is a match compared to the bonfire. both can be abused, but the potential abuse of a credit card is far greater. but there may be other payday places that have different policies than where i invested. mind you i don't have equity in the payday place�"they borrowed money from me to lend. in short my money is on deposit to be lent out just as if i put it in a savings account for the bank to lend out on a credit card loan. the main difference is my rate of return is almost 10 times higher but not FDIC insured. the only thing i do struggle with is the 10% they charge for cashing checks. this is outrageous in my opinion. i can't understand why anybody would do that unless they were unable to cash it elsewhere and i won't speculate as to why. but in the end they have their reason and are paying a premium for it. and with that i leave it. cigarettes are another issue and i am totally with you. i feel the same way about other products as well most are not as overtly damaging, but their products do carry liability and they push them with abandon to those who are hurt by them. not just talking guns and alcohol. a few minutes watching saturday morning cartoons was an eyeopener to the type of products marketed to kids. slap a mcdonald's logo on a bucket of mud and i think my kids would want to eat it. a friend of mine who is militant about his hate for phillip-morris and smoking in general (i think he lost a parent to lung cancer) holds half his portfolio in tobacco stocks. he justification was that it "those people" are going to annoy him with their smoke and take his taxes in healthcare, they are going to pay him for it. an interesting take on moral investing practices, but for him it makes sense. i respect your desire to not follow my practice of investing in payday lending. we not only have to undderstand our investments, but repect if not love them. i do not love payday lending, and to be honest would rather be elsewhere, but for the time being it is a good place and i am no so morally apposed to money lending as to not take the opportunity. i do however own no bank stocks for obvious reasons, i think their model is risky. i also think they are on the more unethical side of business. they have laws and loopholes that allow them to do things that are illegal to any other company. id it because we need their services and that is what it takes, or is it because they have power to influence if not make laws that favor them? i think recent events have shown us it is a little of both. before i sound too anti-establishment, let me say i think financial institutions are important and necessary�"ie. banks, insurance companies, the US government, the FED, and even payday lenders. BUT they are in busniness to make themselves rich, not us. if you do not understand what they are doing, how they make money, or worse, what you are doing, they will take advantage of you. thus education. it is through education that you can see the smoke and mirrors they use to make you feel good about making them rich at your expense. one of the most ubiquitous is the home mortgage. i am emphatic that the most expensive ways to buy a house are in this order; cash, paid off early mortgage, continually refinanced mortgage, a 15-year note, a 30-year note, ARM, variable rate, interest only, and deferred interest-AKA sub-prime being the cheapest. that said, i don't like differed interest as it assumes the risk in the real estate market and if used by the uneducated or irresponsible it can (and has) blown up in the borrowers face. what does the bank want you to do? they love you to take out a 30 year and refinance every few years or pay it off early. if you are going to take it to term, they prefer you take out a 15-year because it makes them more money and that is why they have a cheaper rate to take it�"they need to give you incentive to do what benefits them and think you are getting the better end of the deal�"if it makes them more money, how can it also save you money and show up in two places at once? this all sounds like hericy i know. but where do we get our financial education from? our bank? alan greenspan has a nice quote about the variable interest only mortgage being the best deal out there if people only knew how to use it and the 30 year not serving its customers as the think. i will see if i can find it. the mortgage subject was perhaps the most eye-opening and influential education i ever had in finance. it is the lesson that taught me to see the whole equation and not look at a financial strategy in a vacuum. it taught me to understand finance on a macro economic level to understand how to best use products on a micro economic level. it is painful and feels like you brain is removed and turned around and put back in. but i assure you it is all true and useful information, but it requires the user to be responsible for their financial life and some are not willing to do this and for them it is not wise to have control. just as fire in the hands a of one is destructive and to another the opposite. what i am talking about is basic business finance�"in short figuring out the lost opportunity cost and the taking the greatest margin. if done properly with understanding risk is minimized and growth is maximized. some will refuse to believe, but that does not prove those strategies wrong. i myself do not practice whole-heartedly all the strategies i know an believe because of issues regarding timing, my own laziness or whatever. this does not mean i don't acknowledge their strengths or potential. but it serves me to understand alternatives. there are many i have encountered on this forum and in other places who flat out throw up a wall and won't even try to understand that there are several strategies to use in every situation and they all have merits. my beef is with those who claim merits that are not truly there or ignore others. those who emotionally attach themselves to dogma that was sold to them without trying to understand. i have been guilty of this and still am at times and it only hurts myself. when i have a few hours to spend with a calculator, i will start a new thread and actually run the numbers on the most popular mortgage products side-by-side including paying cash. i will treat all as equals. it is amazing how different the outcome is from popular beliefs, but if you look at who is selling the mortgages and the information i guess it is not shocking. it won't prove anything other than which is the most expensive in terms of money and what risks are inherent in each scenario. the individual would have to choose which is best for them. the problem is that most choose the wrong thing for what they claim to want. if you know how they each work you can choose more appropriately for your goals whatever they may be....See MorePurchasing a home with cash - bad idea?
Comments (44)FF - I talked to her last night and she said that her FP charges based on the amount of money she manages for her, not hourly or by commission, so she is confident that she's not ill advising for the FP's own gain. She also said that the FP said to consult a tax specialist, which made me breathe a sigh of relief. She made an offer on the condo and sent me the comps to look at after the fact. I don't know what she was thinking because she lowballed her offer when the comps were alot higher. She offered $380K on a $420K asking price, when the comps showed nothing went for less than $410K. I hope that the seller looks at it as a starting point for negotiations and doesn't flat out refuse. Here's something weird. When she told her realtor she wanted to put in an offer, the realtor didn't hightail it to get the paperwork done. She spoke to the realtor on Thursday and the papers are being faxed to her today (Saturday). I thought that was kind of odd. I always thought realtors jumped lickety split to get the offer in so the buyer doesn't become remorseful. Her realtor also didn't suggest an expiry time for the offer. I told her to call the realtor prior to the papers being faxed to put a time limit. The seller's realtor also said that another offer "may" be coming in, which I find strange since the condo has been on the market for over 4 months. We don't know if it's a bluff or they're holding out for the 2nd offer and that's why they delayed getting the contract to her. Her realtor and the seller's realtor are in the same office, which added to my suspicion. I told her to make sure that she gets a copy of the response from the seller, even if they flat out refuse it so she knows the offer was actually presented....See MoreI hate my house: Should I stay or should I sell now?
Comments (16)I want to thank you all for replying to my post. It was very generous of you to take the time to help me with this decision. You all made some great points for me to consider. Looks like we'll be putting it on the market but I thought I would address some of the comments in your posts at this point: Play up what 'spoke' to us when we bought it issue: That's gonna be tough. I dare say I do hate EVERYTHING about this place: but I know that can't be entirely true. Mostly is though! I'll give it that it has a pretty good floor plan and a nice neighborhood. Period. Why did we buy it? Well we had a list of things we wanted the new house to have and this one had many of them, when we looked at the list on paper and put checkmarks next to it, it looked ok. i.e. 2 car att garage, 4 bedrooms, office, screen porch, playroom...Plus basically had the square footage we wanted for our family of 5, a nice quiet neighborhood, and was in the school district we were trying to get into, which was our #1 priority and could close in time (#2priority). That's about it. Nothing of the actual house itself spoke to us, other than to say" you'll need to fix this , clean that, update this, repair that"....ad nauseum. It had been neglected by previous owners and showed its wear and tear but we thought it had the bones to work with and once we put "our mark on it, it would be nice" and we'd be in a good school district. I remember saying that. We had left a lovely new house that I had drawn the plans for and needed nothing done but was in a poor school district. After the move I sunk into a very deep depression which I have been able with much effort to scratch and crawl my way out of but as a result I think I'll forever resent this hellhole since it robbed me of a couple years when I was depressed. We have done a lot of improvements and in fact it is considered by most (not me) to be quite nice. It is nice but I am too emotionally tied to hating it to ever see it as really nice. We could stay and continue working on it since there are a few mre things we'd like to do. The only thing is the more we do, though in a way it helps, in another way it just reminds me of what a mistake we made by buying it in the first place. The $30,000 lost issue: I think I was referring to the fact that the market has depreciated by that much here so I was seeing it as a loss IF we move but I agree with the point that it's actually already lost! I had never thought of it that way. Thanks for pointing that out. The can we afford to move question: I'd say that's the million dollar question. And the answer is a definite yes but with some caveats. We'll be paid off here within 9 years. Oldest will be starting college in 6 years. If we move, we'd need to go back up to a 15 year mortgage and payments would be about the same as now. Yikes, I am very frugal and paying a mortgage for an extra 6 years is a tough pill to swallow. Tougher even than the Prozac maybe! We have lots of friends who have lovely houses and 30 yr mortgages but I can't handle that, though we could have one S W E E T !!! house if I could. Not in the cards for me or my DH since I hate debt. a 15 yr mortgage again will be a little tough to take but less so than living here where I'm unhappy. And you know what they say: "If Momma ain't happy, ain't nobody happy!" Life is short issue: Sure is which is why we are planning on selling. It's a tough market and we're only willing to lower the price such that we can get a nicer place with a 15 yr mortgage. We won't go so low on price here that would necessitate us getting a 30 yr mortgage for any new place. That would definitely make me resent any new place such that I'd be in the same boat as now. Hopefully we'll get lucky and be able to sell with not too big a loss. So, have I mentioned that I have a lovely house to sell????? LOL...See MoreHow a financial professional lost his house
Comments (51)"The debt doesn't generate income. Rent generates income. Debt costs money. It always has and always will. Sometimes, you can net out positive, but you are always increasing your risk. Lots and lots of people have bankrupted themselves by financing multiple rental properties." That mans they did not know what they were doing, and likely over leveraged the debt they carried. The frast ;itte hicup om cash flow ad they crash ad burn. while debt costs money, it is one of the things that allows our economy to work and prosper. he lack of any method to borrow is one of the things that holds may economies back. It is also a trap for fools that do not understand the money is not free and creditors expect (and often can demand) repayment. Or you can try to save up to put enough down on investment properties (normally a minimum of 20%, ad often more is actually needed) and not ever get very far. While it is true the rent is what pays the income, without the ability to borrow at least some portion of the purchase price the income would never have existed. Better rethink that whole concept a little bit. Yep, the lender gets a cut. But I get a nice cut also. I really like having someone else make my mortgage investment payments for me, while I skim off some cash every month, and then have an increase in value when I sell. Even when I have 50% of the price into the property, if the value increases by 2%, that is 4% on my investment (and the tenants are paying the expenses). If only you could find someone to pay for a loan on stock andlet me pcket the increases....See MoreDLM2000-GW
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