Ask HN: Is buying a house in 2017 a good idea? • Hacker News Board

Re: Ask HN: Is buying a house in 2017 a good idea?

#31

Post by bsvalley » Wed, Jan 04, 2017, 8:38 AM UTC

Buying a house since 2008 has always been a great idea. So To answer your question - yes.

If you're coming with only %20 down in the Bay Area, you will turn cash poor, unless you're a millionaire. So think about that first, buying a house is the best mid-long term investment in life. But property tax here on a $1 million house is $10-12k per year. Home owner insurance is about $2-3k per year. So you're at about $12-15k extra per year (+$1000/month) just for the fact that you own a property. Now, the property itself will cost you about $4500/month at %3.8 APR for a $1 million house with %20 down.

Total of about $5500 net per month. Basically a bit below the average salary of an experienced software engineer in the bay area. And for $1 million, you don't get much here...

Re: Ask HN: Is buying a house in 2017 a good idea?

#32

Post by joeclark77 » Wed, Jan 04, 2017, 1:49 PM UTC

flukus wrote: post #6

codegeek wrote: post #2

In my opinion, buying a house is never a good idea unless you intend to live in it yourself for at least 5-7 years (usual real estate cycle) AND you have put down at least 20%. Anything less and you are exposing yourself to higher risks. I am not saying that you should not consider investment capacity etc at all but those should always be secondary motive, not primary unless you are an expert real estate investor (ev…

> AND you have put down at least 20%. I'm not sure how universal this is, but in my area this is also about the point where you're loan repayments will become cheaper than renting the equivalent. And your loan repayments will only go down over time, rent will only go up.

In general if you put down less than 20%, you have to pay for mortgage insurance, which pays neither principal nor interest. That may vary by region and by other things like first-time homebuyer or veteran status, so YMMV. But from first-hand experience I can say that paying 20% makes life a lot happier.

Re: Ask HN: Is buying a house in 2017 a good idea?

#33

Post by gigatexal » Wed, Jan 04, 2017, 2:13 PM UTC

siquick wrote: post #7

gigatexal wrote: post #3

Buy one cheap and rent it. That's my plan anyway. Already have one. Our current one will be our second. And I've already begun eyeing the third. But do your homework and never pay more than it's worth. So yes. Buy one but only as an investment because it's a huge money pit regardless but at least when renting it you can write off a lot of it on your taxes and others are building the equity in the home for you.

>>you can write off a lot of it on your taxes Can you explain this please? Excuse my ignorance of the US tax system. This sounds like a pretty shitty thing for the government to allow, giving existing home-owners a huge advantage to build up property portfolios over people not yet orable to get on the ladder. (similar to negative gearing in Australia where I live)

You can write off the depreciation of the home on a 29.7 (?) year basis, mortgage interest, most improvements are fully written off if not amortized over time, but I think there's a limit of 25k or so in max real estate losses one can accrue in a tax year. Yes it's a huge advantage. Fair? I don't know. Probably a discussion for another thread.

Re: Ask HN: Is buying a house in 2017 a good idea?

#34

Post by gigatexal » Wed, Jan 04, 2017, 2:18 PM UTC

udkl wrote: post #8

gigatexal wrote: post #3

Buy one cheap and rent it. That's my plan anyway. Already have one. Our current one will be our second. And I've already begun eyeing the third. But do your homework and never pay more than it's worth. So yes. Buy one but only as an investment because it's a huge money pit regardless but at least when renting it you can write off a lot of it on your taxes and others are building the equity in the home for you.

> Buy one cheap Can you elaborate ?

Most of you are well paid software developers? Or have been living under your means and saving some money? If you are willing to make improvements and "get your hands dirty" buying a foreclosed home (probably not too many left) or other homes on a short-sale is the way to go. I think as long as you can pay as close to or fair market value for a home (less would be ideal obviously but nobody is going to give away a home for cheap unless it's a bank that's just wanting to cut their losses) you'll be ok AND within your budget. Don't go bankrupt buying too much home to find ou there's a huge problem with it or you bought in an area where people won't want to rent it.

Re: Ask HN: Is buying a house in 2017 a good idea?

#35

Post by JSeymourATL » Wed, Jan 04, 2017, 3:20 PM UTC

Crystal Ball on Bay Area Real Estate says...

- Bay Area Projected to Lead U.S. for Home Price Gains in 2017 > http://blog.pacificunion.com/bay-area-projected-to-lead-u-s-...

- Bay Area Home Sales Projected to Decline Again in 2017 > http://blog.pacificunion.com/bay-area-home-sales-projected-t...

What to do? Find the ugliest place that needs tons of work in a solid neighborhood, that most retail buyers won't touch. That gives you a good margin of error. You can make $30-50K worth of fix-up fluff & buff go a long way.

Re: Ask HN: Is buying a house in 2017 a good idea?

#36

Post by bogomipz » Wed, Jan 04, 2017, 3:49 PM UTC

quesera wrote: post #26

bogomipz wrote: post #20

Earlier quoted context omitted.

You can write 100% of the interest on your primary or secondary residence in the US. You can not write off the interest on a house that is strictly an income property. http://homeguides.sfgate.com/irs-rules-mortgage-interest-ded... The intention is the incentivize people to own their own home, it is not to incentivize them to build up property portfolios. Indeed that would be perverse. I'm sure you can show a loss on…

> You can not write off the interest on a house that is strictly an income property. That is not correct. The article you posted seems to imply it, but it is absolutely not true. Pure rental property is treated as a business property, and mortgage interest on business properties is an expense that is deducted from rental income before determining tax liability. You can even carry a net loss over to your personal retu…

Oh sorry that sentence was meant to be "you can not write off 100% of the interest that is an income property."

For instance if you have bought a property as a pure investment property and the total mortgage + interest is being covered by the tenants monthly rent. You can not then write off that interest at 100% since you are not actually incurring that interest payment yourself correct?

Re: Ask HN: Is buying a house in 2017 a good idea?

#37

Post by bogomipz » Wed, Jan 04, 2017, 3:54 PM UTC

seanp2k2 wrote: post #27

bogomipz wrote: post #25

Earlier quoted context omitted.

Is it common for places to go over ask in the East Bay/SF? I'm assuming there were multiple offers at ask which is why you went over by 40K?

Almost all property in the Bay Area for the past few years has multiple bids over asking price. Many of them are also all cash from foreign investors. Rich Chinese are trying to move money out of their country. Many are also investors looking to rent it out or flippers. Many times, flippers sell to other flippers, so a property will have gone through multiple bad "lipstick remodels" in a few years, and each flipper w…

So this insanity is going on everywhere. I mentioned something about real estate being the new Swiss bank account in another thread. I wonder how long this can continue?

Is there no flip tax there? Or maybe the flip tax is insignificant compared to the profit made in flipping the property?

Re: Ask HN: Is buying a house in 2017 a good idea?

#38

Post by secabeen » Wed, Jan 04, 2017, 7:44 PM UTC

kspaans wrote: post #24

snowwrestler wrote: post #23

If you get a fixed-rate mortgage (which I would recommend), the payment is fixed for the length of the loan. This means that long-term inflation will take 2-3% out of your real housing cost every year. It's like rent control for yourself. If you put down 20%, you are creating 5x leverage. Even if the market value of your house only appreciates at 2.5%, your initial down payment (the cash you actually invested) will e…

The NYT has a pretty good online calculator for comparing renting vs buying. You just plug in a house price, mortgage details, and how long you're willing to stay in the house, and it will tell you what the better-deal level of rent is. http://www.nytimes.com/interactive/2014/upshot/buy-rent-calc...

The NYT one is good. If you need more features, like adjusting for renting a room, the Michel Blue Jay one is great too: http://michaelbluejay.com/house/rentvsbuy.html

Re: Ask HN: Is buying a house in 2017 a good idea?

#39

Post by baccredited » Wed, Jan 04, 2017, 7:46 PM UTC

snowwrestler wrote: post #23

If you get a fixed-rate mortgage (which I would recommend), the payment is fixed for the length of the loan. This means that long-term inflation will take 2-3% out of your real housing cost every year. It's like rent control for yourself. If you put down 20%, you are creating 5x leverage. Even if the market value of your house only appreciates at 2.5%, your initial down payment (the cash you actually invested) will e…

>you can keep up to $250,000 of capital gains from your home, tax free

And I'm pretty sure it is $500,000 for married couples: http://www.nolo.com/legal-encyclopedia/the-250000500000-home...

Re: Ask HN: Is buying a house in 2017 a good idea?

#40

Post by gigatexal » Wed, Jan 04, 2017, 8:46 PM UTC

bogomipz wrote: post #36

quesera wrote: post #26

Earlier quoted context omitted.

> You can not write off the interest on a house that is strictly an income property. That is not correct. The article you posted seems to imply it, but it is absolutely not true. Pure rental property is treated as a business property, and mortgage interest on business properties is an expense that is deducted from rental income before determining tax liability. You can even carry a net loss over to your personal retu…

Oh sorry that sentence was meant to be "you can not write off 100% of the interest that is an income property." For instance if you have bought a property as a pure investment property and the total mortgage + interest is being covered by the tenants monthly rent. You can not then write off that interest at 100% since you are not actually incurring that interest payment yourself correct?

Incorrect. Interest expense is a line item that is deducted from the company's tax burden. It's the same with a rental regardless if everything is being covered.