Honestly, with your unvested savings, you are basically at a level most would consider financially independent. Given your desire to keep working, I say go for it. Maybe something comes up in another city and you have to either sell the house or find a property management company. Big deal, you're not going to lose that much on it. You're doing an awesome job so far.
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Personal Finance Advice and Education! (3 Viewers)
- Thread starter No. 16
- Start date
would your company buy your home or give you assistance to sell if you move?
What intrigues you about "wanting your own home?"
Here's an alternative approach that (I think) could ease some of your concerns.
Assuming that your company doesn't assist you with a resale of the house, why not just designate an account (or line item on your current account) and fund that like you're paying a mortgage. Once you feel like you're in a place where you'll be for a long period of time, or decide on a retirement location....then pull the trigger using all the money you saved for the house purchase (in cash as much as you can).
FWIW, I just found out today that if you retire early, you can take 401k withdrawals at 55 vs. 59.5. Good news for me, b/c I want to retire at 52 as well (when I'd be fully vested in my pension)
wilked
Footballguy
It wasn't tongue in cheek or condescending (sorry if that is how it was taken), more matter of fact. You painted a picture of a guy that has everything financially and career, but is still searching for something more. Talking with someone can help with that, help focus things. Then again it is only a couple posts and maybe I have it all wrong.
Doctor Detroit
Please remove your headgear
Buy some income-producing real estate Bender. Then once you get the hang of it, buy some more.
Long Ball Larry
Footballguy
I think that if you want a place that you can do work on and a possible place to retire in eventually, then it might make sense to buy. I think that you are overestimating the financial gain from purchasing a house. When you add up all of the taxes, repairs, insurance and updates over time, your ROI is really not going to be great.
So while it seems like there may be advantages for you, I don't think that your primary motivation should be the financial gain. I think that's what people in here are trying to say.
I appreciate what you are saying about paying the landlord's mortgage, but you are also paying for the freedom and flexibility. Once you purchase that house, there is always going to be something to deal with.
NutterButter
Footballguy
Both of your suggestions I like. Either rent a house or buy and accept a loss if you do have to sell. Sounds like bender has money coming out of his butt so no reason not to spend some of it to get what he wants while still having that mobility.
John Bender
Footballguy
Company would help with moving expenses and some assistance with the home as well. Wanting own home - I suppose it's a lot of the same for anyone:
First, understand, I'm asking here because I don't know if with my current situation, it's still to be paying someone else's mortgage. That's the crux of my questions. I have decent money doing nothing yet I'm renting my place.
Space - shared walls gets old after 15 years. Especially in the nicer condos and what not with the Condo Association. I get monthly complaints about dog barking when the mailman comes. I'm a musician, it'd be nice to have play the piano or guitar as loudly as I please. Have some friends over to jam, watch a movie with surround sound, run the blender before 8 am.
Not have a crazy neighbor who is a Doomsday prepper to stop me and show me his rifle and canned goods collection. You get the Idea.
Retirement: I'd like to retire early, but even with a 15 year mortgage, turning 34 in a month puts me at the age I'd like to retire at.(50s or so) It would be nice to have a paid off home that big enough for any lifestyle I may have at that time. I would not purchase a home I don't think is good enough for any circumstance from now until death. It'd be nice to retire without a mortgage I would assume. Again, I don't know, that's why I'm asking.
Setting down some roots might change a lot of the psychology of always being ready to go. Relationships in life have suffered due to my constant flight. Being ready to leave as soon as the company called me,jumping around a lot, has, no doubt affected my personal relationships (lovelife, family, and friendships). Being able to finally call a place home permanently would be nice to some extent.i still, 15 years later refer to Rhode Island as home. In short, I think there may be some level of happiness missing in that side of life.
A few of the major things above. Which all may be TERRIBLE reasons to buy a home. And you're all probably spot on... Home ownership is not my bag and not a financial safe haven. I'm ignorant, completely, hence my participation today.
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John Bender
Footballguy
Gotcha wilked. You know how it goes, hard to tell via message board text how it was meant.
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John Bender
Footballguy
Maybe I just need a new hobby.
I should just hang out all day on the median and call the cops on anyone misusing the carpool lane.
I should just hang out all day on the median and call the cops on anyone misusing the carpool lane.
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All of your reasons make perfect sense. But given your possibility to move at a moments notice, you just run yourself the risk of being subject to the market at the time. What about renting a house for the time being? With that, you gain a lot of the wants that you express....then when you land on a time/place to settle, then purchase?
John Bender
Footballguy
Thanks TF (and all)
Renting looks to be the better option for me based on the feedback.
I am going to look into.
Any suggestions for money management or a financial planner. Things to look for/avoid? I guess I can simply read through this thread.
Renting looks to be the better option for me based on the feedback.
I am going to look into.
Any suggestions for money management or a financial planner. Things to look for/avoid? I guess I can simply read through this thread.
All depends on how involved you want to be IMO. I'm trying out a fee financial planner this year b/c I want him to point out things that I should be doing specific to my situation.
What do you have your 401k allocated to? FWIW, I picked a fund targeted to my retirement date....set and forget.
FUBAR
Footballguy
FWIW we've rented homes for the past decade now after owning a home for 6 years in Kansas. If I thought we'd stay in one place more than a couple years, I'd probably buy again but that's unlikely even though we've been here 4 years now. Understand the desire to own and feeling like you're throwing money away. I enjoyed owning our home, it was a hundred years old and needed work but it was satisfying to work on it and I learned a lot.
We have many friends who own homes across the country, most of the time it works out but the headaches are big. Even our landlord has to deal with stuff breaking, even though we're very good tenants and most landlords aren't as lucky.
Don't think just because you get a 15 year mortgage that you couldn't pay it off early, or that you need to pay it off before retiring. I'm not sure if we will own our home outright before retiring and I'm not worried about it. No need to rush it, but yeah, if you want to buy a house and are ready for the headaches, the reasons you gave are valid as any other. Go for it, or just casually look at the market for foreclosures or houses you can work on but don't need too much work out of your expertise.
John Bender
Footballguy
John Bender
Footballguy
Sand
Footballguy
The very basics of this stuff that will keep you out of trouble.
- Low cost ETFs (or Vanguard Admiral Mutual funds if you qualify). Never buy a loaded mutual fund. Ever.
- Asset allocation: 40% US equity, 20% international Equity, 30% US bonds, 10% Real estate (REITs). That will let you sleep at night very, very comfortably.
- Always buy term life insurance. Whole life, universal life, etc. are what make insurance salesman rich and you poor
- Never buy an annuity unless you have really researched it. They are a tool for a purpose, but can have high fees and are pushed by the unscrupulous.
- Never entertain sales pitches for ridiculous crap - private REITs, llama farms, gold bullion. 99% crap.
- If you get an adviser find a fee based adviser.
There you go - financial planning in six sentences. Sadly there is a huge population that isn't willing to invest the time to understand these things and get fleeced over and over.
FUBAR
Footballguy
Llama farms in Arizona are an especially great deal. Spot on as always. We could argue the allocation but this is as reasonable as any. I'd go closer to #5 here http://thecollegeinvestor.com/10973/building-perfect-portfolio-allocation-5-models-follow/ it's up to the individual.
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ghostguy123
Footballguy
Sorry I am an idiot when it comes to investing in stocks and whatnot, and I have probably asked this before in this thread somewhere.
Just gimme a little tidbit on which of these is better and why?
- Fidelity 2040 freedom fund (target retirement date for me personally is probably around then), also called "BlackRock LifePath Index 2040 Portfolio Class K Shares"
or
- Vanguard Institutional Index Fund Institutional Shares
John Bender
Footballguy
FUBAR
Footballguy
There are a few factors and I'm not sure we could definitively say it's better.
Foremost is cost. how much do each of those take in annual fees?
Life cycle funds probably cost more and might be overly conservative for what you want.
Life cycle funds are an easy way to set and forget, they rebalance without you needing to do anything. So in that sense they could be better.
Rick James
Footballguy
CommonBond just came back with a 5 year fixed loan @ 5.1%. That alone would save us 30,000 in interest. Going to get two other offers and get this thing moving.wilked said:
General Malaise
Footballguy
Disagree with homes you live in not being a part of your overall investment portfolio.
mquinnjr
Footballguy
Disclaimer: I'm a big Charles Schwab fan. I use them for brokerage and Roth IRA, along with their online checking.
With that said, they are rolling out a new program called Schwab Intelligent Portfolios this quarter, so soon https://intelligent.schwab.com/and also the FAQ page https://intelligent.schwab.com/about-sip.html . From what I can gather, it's taking the Life Cycle concept of hands-off investing, but tailors the asset allocation to the investor and uses their own funds to build the portfolio, albeit at a much lower expense ratio and does your re-balancing for you. I do things manually in my Roth IRA account for long-term retirement investing (fund selection based on the Asset Allocation I want in line with lowest fees possible, and re-balancing annually). I am kind of excited to try this out, and see how it compares to what I've been doing with my past 5 years of doing it myself.
I'll be the guinea pig and report back. If I don't like it, I'll be very clear on that, bottom line is AA the way I like and lowest fees possible. If this ends up being a winner, could really change things for the Life Cycle investor in my opinion.
With that said, they are rolling out a new program called Schwab Intelligent Portfolios this quarter, so soon https://intelligent.schwab.com/and also the FAQ page https://intelligent.schwab.com/about-sip.html . From what I can gather, it's taking the Life Cycle concept of hands-off investing, but tailors the asset allocation to the investor and uses their own funds to build the portfolio, albeit at a much lower expense ratio and does your re-balancing for you. I do things manually in my Roth IRA account for long-term retirement investing (fund selection based on the Asset Allocation I want in line with lowest fees possible, and re-balancing annually). I am kind of excited to try this out, and see how it compares to what I've been doing with my past 5 years of doing it myself.
I'll be the guinea pig and report back. If I don't like it, I'll be very clear on that, bottom line is AA the way I like and lowest fees possible. If this ends up being a winner, could really change things for the Life Cycle investor in my opinion.
DocHolliday
Footballguy
Bender,
You got lots of good advice so far. You are right, there really are helpful folks here.
If I were in your shoes, I would rent a house until you have a reason to settle down. You will likely settle down eventually. You will either grow tired of moving, find a woman that wants to stay in town X, have kids and not want to move them from their friends, or you could become satisfied with your position/location with your company.
Putting roots in one place is satisfying. It seems like you are starting to get that need.
Since you will probably be moving in the next few years, owning a home would add confusion to your move. And, it is really not going to help you that much financially.
You got lots of good advice so far. You are right, there really are helpful folks here.
If I were in your shoes, I would rent a house until you have a reason to settle down. You will likely settle down eventually. You will either grow tired of moving, find a woman that wants to stay in town X, have kids and not want to move them from their friends, or you could become satisfied with your position/location with your company.
Putting roots in one place is satisfying. It seems like you are starting to get that need.
Since you will probably be moving in the next few years, owning a home would add confusion to your move. And, it is really not going to help you that much financially.
RUSF18
Footballguy
The Fidelity fund is made up of (roughly) 66% diversified domestic stock funds, 27% international stock funds, 8% bond funds, and 1% in money market funds. The associated expenses annually are 0.78%.
The Vanguard fund is set up to mirror the performance of the S&P 500 and is made up almost entirely of US stocks. You're buying into Apple, Microsoft, Exxon, GE, etc. The associated expenses are 0.04%.
So "better" depends on what you're looking for...some global diversification that also comes with a bit of hedging through the bonds included or a much lower fee paid while still having the growth potential of US stocks.
I'd go for the Vanguard. While the Fidelity fund isn't what would be considered expensive, that's a LOT of money you're saving over the years.
Dentist
***Official FBG Dentist***
right.. because with my arrangement with merrill edge there are literally zero fees that i'm aware of, and I look... so if there is cheaper than that i'd like to hear about it.
Sand
Footballguy
What kind of account is this? IRA, 401k, taxable brokerage, etc.? If taxable which broker? The tax status of the account matters in what you'd choose. In taxable use ETFs. In tax shelters either work.
And as RUSF said those two funds really have different purposes.
RUSF18
Footballguy
What are the tax differences between ETFs and other index funds? Aren't you taxed on whatever gains either way?
Dentist
***Official FBG Dentist***
well i get 100 free trades a month and I rarely use more than 3, so there are no fees there.
My vanguard ETF i buy has a 0.18% management fee, so I do incur that fee, but it's not charged by my broker... nor are there other quarterly brokerage fees unless I leave or something.
Those funds aren't really comparing apples to apples. Fidelity has the FUSVX Spartan 500 index fund that mirrors the S&P. That has a .05% expense ratio.
My Fidelity Lifepath 2040 fund has a .11% expense ratio.
ETA: The lifepath 2040 could be something only that my employer offers.
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General Malaise
Footballguy
Well, let's see....
1. Significant annual tax deduction.
2. Historically low interest rates.
3. Ultra competitive rental environment where rental rates are at an all time high.
4. Rising home prices especially in his area of the country.
5. Vast potential for sweat equity, especially for a single guy with money and time to devote to a fixer-upper.
6. Terrific potential in his city to rent his property for a premium - perhaps a great premium - to his monthly mortgage payment.
7. Psychologucal benefit in the pride of home ownership; vehemently disagree with the sentiment that that's a fabricated myth: it's not.
8. You can do whatever the hell you want to it, it's YOURS! (Always check with your HOA first).
You absolutely should consider buying.
General Malaise
Footballguy
And when you move to another city, rent your place out and buy another. Hell man, build a small Bender empire. Even if you use a management company (and you should) you'll ton it in this environment (which won't last forever, so take advantage whilst you can).
mquinnjr
Footballguy
In my Roth IRA with them right now, I'm in these ETF's:
SCHB U.S. Broad Market ETF 0.04% Fee
SCHM U.S. Mid-Cap ETF 0.07% Fee
SCHA U.S. Small-Cap ETF 0.08% Fee
SCHF International Equity ETF 0.08% Fee
SCHP U.S. TIPS ETF 0.07% Fee
TLO SPDR® Barclays Long Term Treasury ETF 0.10% Fee
These are on their proprietary list with no commission/load fees if you're a customer. When I select, I bucket based upon desired asset allocation, filter on offered funds, and look for the lowest cost to own ETF's that match the strategy I'm most comfortable with after reading the fund overview and holding listing.
I am excited to see what my weighted average expense ratio would be for the SIP offering once it's live. If it's close, it would be great to just make contributions and let them handle everything, but if it's higher I don't have to do anything and just keep doing what I'm doing. Compared to what fees are charged for a life cycle fund, if Schwab can automate investing for an investor just like a life cycle fund would at enough of a discount to entice them to give it a shot, that's good for everyone in the market for a life cycle fund I'd have to think.
I'll give this all a spin once it's live and report back.
xulf
Footballguy
RUSF18
Footballguy
All of those are good reasons to buy a place but it comes down to what Bender wants. From his posts, it seems like he feels a rational need to anchor down (stop paying someone else's mortgage) but has a lot of other emotional and personal needs that conflict with that. He can sort of get the best of both if he decides that he's okay with selling his home on short notice, and taking a slight hit, or worst case, paying someone to manage it as a rental. But if he's stressing about the "anchor" part of it now, as an idea, it's going to stress him every damn day when it's actually happening. Because after all, we know the decision is coming:
edit: I'd also add...you're obviously in a great position financially. Keep perspective on what a "wrong decision" really means for you and your bottom line in this case. It means selling a relatively new home in a solid location over a reasonable marketing period (the slight hit I mentioned earlier that would likely materialize). You're not talking about taking the first offer you get at $100K under list because you need the cash to pay for your new place in New Mexico.
And worrying about having 15 years of house payments still to come when you retire, and not realizing (seemingly, correct me if I'm wrong) how easily it is to prepay your mortgage once you get to that point, kind of comes across as looking for reasons not to settle down in one spot.
edit: I'd also add...you're obviously in a great position financially. Keep perspective on what a "wrong decision" really means for you and your bottom line in this case. It means selling a relatively new home in a solid location over a reasonable marketing period (the slight hit I mentioned earlier that would likely materialize). You're not talking about taking the first offer you get at $100K under list because you need the cash to pay for your new place in New Mexico.
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Pretty much this. Bender, if I wasn't married I think I would be in the exact same situation. Out of college I knew I wanted to own a place, renting wasn't for me. Although I am married and it plays into it, I can easily be moved for work and several friends have been moved all over the country while owning a home and had to sell right away and I don't think any of them regret buying even if it was a bit more of a headache during the job move.
wilked
Footballguy
lol...
So in this strawman of super high rental prices and dirt-cheap houses, yes you should buy.
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Sand
Footballguy
Significant differences between mutual funds and ETFs. Funds can and will have capital gains distributions. ETFs use a different scheme and don't suffer this. In a sheltered account it doesn't matter, but in taxable if the fund has high turnover it can be a big thing year after year.
wilked
Footballguy
GM, that is about as biased as you can get...
Another way to look at your arguments
1. Significant interest payments to the bank, likely more than your current rent, of which you get about 30% back via tax savings
2. Historically low interest rates driving (propping) housing prices up
3. Rental rates at an all time high, since the buy-rent ratio tends to be fairly stable and with housing prices climbing rental prices must rise to keep pace
4. Home prices are up 20% y-y in many areas, with many worried about a mini-bubble ongoing. Unfortunately the time to get a reasonable deal was a couple years ago. Luckily prices will flatten or drop once interest rates rise
5. You will no longer spend your weekends having fun, but instead mowing lawn / fixing #### / watching youtubes on how to lay tile
6. You might even get to be a landlord, nothing like your tenant calling you cuz his toilet is overflowing! Or you can hire a management company so that your profits go from marginal to negative
7. There is a real psychological pride of ownership, much of which is driven by advertising from realtors. If you tell people you own a house they go 'that is great for you, you must be doing well!' even though it doesn't change you or your situation one bit.
8. You get to make it yours, that part is real
----
This is coming from a recent homeowner in September... I have no regrets but buying a home when I was single would have been a mistake
Another way to look at your arguments
1. Significant interest payments to the bank, likely more than your current rent, of which you get about 30% back via tax savings
2. Historically low interest rates driving (propping) housing prices up
3. Rental rates at an all time high, since the buy-rent ratio tends to be fairly stable and with housing prices climbing rental prices must rise to keep pace
4. Home prices are up 20% y-y in many areas, with many worried about a mini-bubble ongoing. Unfortunately the time to get a reasonable deal was a couple years ago. Luckily prices will flatten or drop once interest rates rise
5. You will no longer spend your weekends having fun, but instead mowing lawn / fixing #### / watching youtubes on how to lay tile
6. You might even get to be a landlord, nothing like your tenant calling you cuz his toilet is overflowing! Or you can hire a management company so that your profits go from marginal to negative
7. There is a real psychological pride of ownership, much of which is driven by advertising from realtors. If you tell people you own a house they go 'that is great for you, you must be doing well!' even though it doesn't change you or your situation one bit.
8. You get to make it yours, that part is real
----
This is coming from a recent homeowner in September... I have no regrets but buying a home when I was single would have been a mistake
mquinnjr
Footballguy
I think that's a big driver, whilst agreeing with all of your other points.
It's a savings/retirement account balance in the form of a building which you own, that people can see and where you live vs. an account balance in a retirement account or other savings account that you can only see online. It's not "sexy," or something people can show off to their friends or host parties in.
If it's the visual that gets people, I would bet less people would go buy vs. rent if you put next to the home they're thinking about buying a pallet stacked with all of their current savings in $20's. Add a compounded 7-8% of that cash onto the pallet - next to the house - 30 times. Now sure, homes can appreciate too. If you said, "Which would you choose if you could only have one?" I'd be interested to see that.
RUSF18
Footballguy
Thanks. Definitely need to do more reading on this. That link mentions that index funds (like the Vanguard S&P one mentioned) will have lower turnover but seemingly could still be subject to this. Any other links you can pass along explaining more or how often that hits index funds?
Mystery Achiever
Footballguy
You can get turnover rates for ETFs just like funds. This one, MOO (Global Agribusiness Index), is probably on the higher side, but shows 33%, so check all individually. SPY S&P 500) is ~3%.
http://finance.yahoo.com/q/pr?s=moo&ql=1
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This seems like a bad analogy to me. Where are you getting this pallet of money from?
mquinnjr
Footballguy
20% downpayment (to avoid PMI). I'm more looking at this glass half empty, or people that might be getting in over their heads just to have a home, to have a home. Not JB's situation, which is not like that it seems. Moreso following up on wilked's reply that it's not 0% downside risk in buying a house.
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