Down payment vs reitrement fund - Page 5 - PeachParts Mercedes-Benz Forum

TwitchKitty · #61 03-20-2013, 09:45 AM

I didn't read the thread so this may have been said but...

You have to have a place to live. It is a basic necessity and you don't have the option of investing that money. Owning is a way to divert cash flow in such a way that you might get it back someday.

If you buy, watch out for the army of blood suckers that will line up to take a piece of your hide.

We are buying a place now if the offer is accepted. We will pay cash and then get a fixed rate equity loan if needed. This reduces the blood suckage by a huge factor.

Simpler=Better · #62 03-20-2013, 09:46 AM

Thanks for the advice guys. I'll leave the funds alone, and possibly only borrow if the stars align and it won't hurt my balance while finding a cheaper home.

Moving isn't an option-I like my job (Packaging Engineer) and the wifey is planning on staying with hers for a while as well.

My main motivation is the (relatively) low interest rates, combined with lowered pricing in the area. Most of the prices appear to have dropped by 30% in the past 5-8 years.

t walgamuth · #63 03-20-2013, 10:21 AM

Quote:

Originally Posted by Simpler=Better

Thanks for the advice guys. I'll leave the funds alone, and possibly only borrow if the stars align and it won't hurt my balance while finding a cheaper home.

Moving isn't an option-I like my job (Packaging Engineer) and the wifey is planning on staying with hers for a while as well.

My main motivation is the (relatively) low interest rates, combined with lowered pricing in the area. Most of the prices appear to have dropped by 30% in the past 5-8 years.

At your age, with the real estate market moving up, I would take out of the retirement in a heartbeat.

t walgamuth · #64 03-20-2013, 10:24 AM

Quote:

Originally Posted by spdrun

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!

Sorry, I tend to be a very literal person.

The biggest things on commercial property that set it apart from buying to live in is the maintenance and depreciation are deductible.

I never liked paying rent to anybody. When I had the opportunity to buy for my business it was a natural to buy a larger building and let my tenants pay most of the mortgage for me.

Without my real estate investments, my income as an Architect working for myself would have left me with nothing for retirement.

As it is I am possibly a thousandaire.

cmbdiesel · #65 03-20-2013, 11:31 AM

Quote:

Originally Posted by PARSHOOT1

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.

Exactly. You loan yourself the money from the 401k, then pay it back. Perfectly legit, and won't really hurt you in the long run, and has the added benefit of getting you into your own home.

Just be smart and only buy what you can afford. It's very tempting to purchase a huge expensive home because they are cheap right now, but keep it modest and try to ensure that your mortgage will be less than your current rent.

Building equity every month with the same outlay of $$ that used to go to a landlord is the smart play. As stated, everyone needs to live somewhere, and tossing money down the rent hole every month nets you nothing.

spdrun · #66 03-20-2013, 11:45 AM

If the "huge expensive home" is in a desirable area (relatively) and can be easily split into two apartments, legally or not, then it may be a better deal than a smaller home.

Botnst · #67 03-20-2013, 12:38 PM

Borrowing from your 401k should bea last resort in emergency as you will #1 lose interest on the borrowed funds (interest accrual is the only reason to have a 401k in the first place) and #2 pay interest to the manager for the funds you borrowed from yourself.

This is a compounded function. Don't put yourself on the wrong side of a compounding slope.

cjlipps · #68 03-20-2013, 12:41 PM

OP hasn't even stated what type of retirement account it is. Assuming it is a 401k it might not even allow loans and if it does, the most he can borrow is half the account value (up to $50K). Having been at that job only two years it's unlikely this number will be large enough to make much of a difference.

Simpler=Better · #69 03-20-2013, 01:52 PM

Quote:

Originally Posted by cjlipps

OP hasn't even stated what type of retirement account it is. Assuming it is a 401k it might not even allow loans and if it does, the most he can borrow is half the account value (up to $50K). Having been at that job only two years it's unlikely this number will be large enough to make much of a difference.

Sorry about leaving that detail out, you're correct. I can only borrow about 1/3 of the balance(at 4.5%), and it's not a huge amount.

[RANT]
Real estate rates here are insane. All I want is a house, 5 acres, and a shack (or a flat piece of land to build a shack) for wrenching. To fit that bill I'm looking at a 45min-1hour commute (not terrible, traffic does that to me now) and pricing starting at 250k. 120k will buy an empty "rural" lot.

300k gets you a house, 5-8 acres, and a barn. These properties were previously bought/sold listed in the 450 range during the boom. They were typically bought for 10k back in the 40s (going by tax records)

Your typical mini-McMansion runs 500k+
[/RANT]

spdrun · #70 03-20-2013, 01:55 PM

Unless you're farming it, what the blue fark do you need 5 acres for? Even an acre is a PiTA to take care of -- why not buy something on a lot 2-3x as big as the house closer in and use the detached garage (typical for 1920s-1940s contruction) as your wrenching pad/mancave?

Only way I'd be interested in 5+ acres would be if it were a farm outside a college town in New England and I was planning to go 90% hippie/organic.

buffa98 · #71 03-20-2013, 02:03 PM

Quote:

Originally Posted by spdrun

Unless you're farming it, what the blue fark do you need 5 acres for? Even an acre is a PiTA to take care of -- why not buy something on a lot 2-3x as big as the house closer in and use the detached garage (typical for 1920s-1940s contruction) as your wrenching pad/mancave?

Only way I'd be interested in 5+ acres would be if it were a farm outside a college town in New England and I was planning to go 90% hippie/organic.

Why five acres? For me it would be one word. PRIVACY

spdrun · #72 03-20-2013, 02:14 PM

Quote:

Originally Posted by buffa98

Why five acres? For me it would be one word. PRIVACY

.25 acre. Tall fence. Curtains. 5 acres is just a waste of money unless you're farming it or planning to subdivide.

tbomachines · #73 03-20-2013, 02:30 PM

Look for houses that butt up against parks or woods. Low price, lower taxable land, same amount of space back there, no need for upkeep. Problem solved!

t walgamuth · #74 03-20-2013, 02:34 PM

In 1990 we bought a wooded acre in the city in a flukey neighborhood with 192' deep lots for a block or so. It was in an old estate and the realtor was telling people there were likely to be foundation issues becuase of the building rubble in the lot. After we put our offer in two or three other Architects (I was told) inquired about buying it but did not move fast enough.

Its been a lovely place to live with lots of trees, its like being in the country but is a five minute walk from the courthouse. I also subdivided the lot and sold off a lot to my son to build his house.

Simpler=Better · #75 03-20-2013, 03:02 PM

Why the acreage? I don't like people. If I can see my neighbors they're too close. Ideally, I would LOVE to have 100+ acres. I grew up on 300, I know what it takes to keep it. 5 is the smallest I want to go. I'm not going to borrow a couple hundred thousand to have a place I don't like.

-Privacy
-I want at least a 1,000sq foot barn (one day) to hold the rustang, frankenjeep, oddball motorcycles, mill, lathe, etc.
-Allows me to have some sheep/ goats/ chickens
-Space to do what I want.