Are you in Philly proper or the 'burbs? There's cheap stuff in Upper Darby, some in Morton, Lansdowne, some even in the part of Ridley that has a Swarthmore ZIP code. A lot of it is within walking distance of the Media electric train line.

Your S&P 500 example of growth is real world. Not theory. Trying to use one's personal residence as an example of investment growth gets trumped and dwarfed by even the simplest of parallel examples to the stock market's run of 30 years. It certainly does in my example I delineated above. Some here are trying to mix investment real estate into the mix of personal residence - they're two different things. Some aren't able to make the distinguishing differences in the two. I would venture most people in America have no experience investing money in financial instruments over the long-term of several decades - hence some of the opinions getting bandied about here about how great a personal residence is as an investment, when they aren't investments. Your personal home is a lousy place to try and build wealth.

__________________
'06 E320 CDI
'17 Corvette Stingray Vert

Disagree. Let's say you own a duplex where half pays for the mortgage and property tax. It may or may not appreciate, but you're saving the $1500/mo or so that you'd otherwise pay in rent. You can then either use that $1500/mo for leisure or invest it in something else.

Or let's say that you own a condo in a very desirable area where expenses are significantly less than rent on the same, AND that you can rent at a moment's notice if you decide to move somewhere else -- the difference between income and expenses would come close to covering rental of a similar condo in many US cities.

The line between "personal residence" and investment property can be as blurry as you choose to make it. Also, look up owner equivalent rent. Buying property where mortgages are fixed at 3-4% for 30 years and potential rent minus expenses is close to 8-9% in some areas isn't a bad deal, at all. This when "safe" stocks are paying dividends of 2-3% on the dollar.

You do realize that mortgage rates were around 13% in 1983? Throw that into the mix (higher if it's not your primary residence) and it looks even worse mathematically. Plus, you have a lot of assumptions (bought well, low repair costs, able to keep occupied, quality tenants, able to resell if the need arose...) that must pan out in order for it to be a happy time.
I understand what you're saying and how rental income works (I have rental property) but my point is that while it's often profitable to buy property for the sole purpose of renting it out, it's not a good consideration when seeking a primary residence. IMO these two scenarios are best viewed separately, especially when you get into roommates with a family concerned.
Generally I recommend against hitting the retirement account so early in life. Depending on what it is (he still hasn't said) it could cost up to 25% in penalties.

__________________
1983 M-B 240D-Gone too.
1976 M-B 300D-Departed.

"Good" is the worst enemy of "Great".

Even if it's a "primary residence", you can be considered to be renting it to yourself. i.e. -- you're paying $x per month in expenses. The residence would rent for $y. Your "income" from the residence is $y - $x, since the money that you're not spending on rent is going into your pocket.

This isn't even considering mortgage and property-tax tax deductions.

Basically, my situation is that given my apartment and a couple of other rental properties in Jersey, I can live basically rent-free in NYC. Since salaries and hourly rates here are geared to people who have to pay through the nose for housing, not having that expense means quite a lot of dough in my pocket every month which then can be applied to other things. Like grad school courses, travel, and other investments.

^^^ Exactly.

"Hello Mr. spdrun, I'm from the IRS and your tax return has been selected for audit."
Seriously, I think we've overcomplicated things for the OP. It seems we all agree that when feasible, owning a home is better than being a renter. We also agree that many folks successfully operate income-producing property. Where we differ is in whether he should access his retirement funds to make a down payment on his home purchase.
There are a lot of moving parts in this scenario but IMHO he is better off not tapping the retirement account. He would be better off (as I and someone else mentioned earlier) suspending contributions for a time to save toward the down payment.

__________________
1983 M-B 240D-Gone too.
1976 M-B 300D-Departed.

"Good" is the worst enemy of "Great".

It just gets worse and worse for those with no memory of the real estate and interest rates of the past. No matter how they try and paint their residence as a shining example - it usually just doesn't work versus invested money as in your S&P 500 example since 1983. The aggregate, average appreciation on homes is a paltry 3% to 4%. Hardly enough to keep up with inflation. That factoid alone tells the history on homes in America. To be accurate, I agree, CLipps, there's very little info to go on contained in the OP's posts, certainly not enough to make a specific analytical assessment. need a lot more info...... jcyuhn had some of the best advice I've read here today - move! Why anyone would not move to the Sunbelt states where the taxes are less, the population is growing, the annual weather is wonderful, and the disposable incomes buy a whole lot more - is frankly difficult to understand. The comment jcyuhn also made about the non-diversification aspects of those folks that sink their money in a home is very true.

On a somewhat related issue:
I recall some here have even cashed-in their retirement accounts to buy an old, used Mercedes-Benz..... Perhaps that's really smart in a parellel universe - somewhere?!

__________________
'06 E320 CDI
'17 Corvette Stingray Vert

I think you know what I mean -- the money not spent on rent is still taxed (unless it goes into a tax-deferred retirement investment vehicle), but you're still pocketing 2/3 or so of it. And are able to deduct mortgage interest, property taxes, etc, all perfectly legally, whereas rent paid isn't deductible unless it's for a business.

If he finds the right deal (say a foreclosure that's going for 60% of the non-distressed price) then he should absolutely cash out. It really depends on the exact circumstances and it pays to be flexible rather than dogmatic about it.

I'm on the main line, that's why I said immediate area. Upper Darby is eh...bad. Crime rate is going out of control. I am personally looking in Drexel hill, plus the wynnfield section of Philly. I work along the main line, right now it's within biking distance.

__________________
TC
Current stable:
- 2004 Mazda RALLYWANKEL
- 2007 Saturn sky redline
- 2004 Explorer...under surgery.

Past: 135i, GTI, 300E, 300SD, 300SD, Stealth

Check on auction.com -- there was an REO listed to auction in Havertown a while back. Not sure if it went yet or not.

Simple=Better, Been an investment adviser for 30 years, so I'm use to telling people what to do with their money. No brag, just fact. It's what I do. I didn't read every comment on this thread, but there are alot of good ones and food for thought. Bottomline is you gotta have a roof over your head, and it is always better for you to be paying yourself for that roof than putting rent money in someone elses pocket. Sounds like you and the soon to be Mrs are headed in the right direction and ready to become homeowners, so go for it. You can borrow the money out of your 401k tax-free and then pay yourself, i.e, 401k, back. If you would like some additional info on this PM me. To share a story, my oldest daughter is 25, 3rd year schoolteacher in South Carolina. Fortunately homes in S.C. are cheaper in Baltimore, but the she now realizes she can buy a house and have about the same payment as the ever increasing rent at her apartment. I told her a year ago she should think about buying a house and she wasn't much interested. She's had a change of heart over the past year as she now sees what I see in terms of similar payments to rent as to own. When I visit her at Easter we are going house hunting.

Even if it's not your fault, when you get divorced prepare to lose that house *AND* 1/2 your pension, and get buried in lawyer's bills.

Because that is how the law works in Divorce Court.


Makes it all a moot point.

Doesn't it?

__________________
1991 560 SEC AMG, 199k <---- 300 hp 10:1 ECE euro HV ...

1995 E 420, 170k "The Red Plum" (sold)

2015 BMW 535i xdrive awd Stage 1 DINAN, 6k, <----364 hp

1967 Mercury Cougar, 49k

2013 Jaguar XF, 20k <----340 hp Supercharged, All Wheel Drive (sold)

Although cj came close to saying it this would not pass muster with the IRS. You'd have to take the standard deductions available for a residence.....on the other hand I have heard it said "any deduction is legitimate...until you are audited".....

__________________
[SIGPIC] Diesel loving autocrossing grandpa Architect. 08 Dodge 3/4 ton with Cummins & six speed; I have had about 35 benzes. I have a 39 Studebaker Coupe Express pickup in which I have had installed a 617 turbo and a five speed manual.[SIGPIC]

..I also have a 427 Cobra replica with an aluminum chassis.

You're not LITERALLY renting it to yourself. You're just saving more money since you're paying less than month than renting. This can be said to be the EQUIVALENT of renting it from yourself at a discount. With the added benefit that certain expenses (r.e. taxes, mortgage interest) are currently deductible. Perfectly legally deductible, I may add!