Why Your First House Is A Liability • Hacker News Board

Re: Why Your First House Is A Liability

#31

Post by chrisseaton » Sat, Sep 05, 2020, 2:53 PM UTC

mellosouls wrote: post #2

Seems to be written from the perspective of somebody who cannot see the difference between an investment and a home . Even if you look at it in mostly financial terms there are positives and negatives; the essay here is far too black and white. Sure, by chasing every dollar you can sacrifice quality of life for a few years to maximise your bank account at a later date, but in the meantime some of us prefer to live a…

Another bit of reality is that most homes aren't available to rent! If you want a nice home for your family in a nice area in the countryside... well guess what that isn't something easily available on the rental market.

Re: Why Your First House Is A Liability

#32

Post by jaimex2 » Sat, Sep 05, 2020, 2:53 PM UTC

Depends what country you're in really. Here in Australia the advise is pretty terrible.

House prices in some cities go up faster than any investment you could make and there are some pretty crazy tax gymnastics purposely put in place to keep the dirt cash churning.

Meanwhile your mortgage repayments are slightly higher than renting in the same area so why wouldn't you just pay for an asset instead of paying off someone elses mortgage.

Youre building equity which you can leverage for other investments while keeping a roof over your head.

Re: Why Your First House Is A Liability

#33

Post by bluedevil2k » Sat, Sep 05, 2020, 2:54 PM UTC

bluedevil2k wrote: post #4

Lots of bad financial advice here. “You can’t unlock a house’s appreciation” - wrong, they have home equity lines of credit, refinances with cash out. “You could do so many better things with the money” - you have to live somewhere, wouldn’t you rather live in a nice house with the potential for appreciation than rent with no chance at all? Also, there’s tax advantages to mortgages here in the US. Renting out a house…

I'll add a comment to my own comment. In the last 3 months we've seen a HUGE advantage to home ownership over renting. I recently refinanced, as lots of Americans have done with the historically low mortgage rates. I knocked hundreds of dollars a month off my mortgage payment. You think your landlord is going to knock hundreds off your rent when he refinances the building you're in? No, that extra profit is going right into his pocket.

Re: Why Your First House Is A Liability

#34

Post by jccalhoun » Sat, Sep 05, 2020, 2:54 PM UTC

treyfitty wrote: post #11

Why is Medium filled with, what I call, celery? I consume articles, but there is absolutely no substance. Is there some unknown incentive for these people to share empty “enlightenment?” It’s as if these people are becoming content farms being graded on number of articles published. Anyway, this article is garbage.

Since Medium started I've said it was called Medium because it wasn't Well Done...

Re: Why Your First House Is A Liability

#35

Post by thrwn_frthr_awy » Sat, Sep 05, 2020, 2:57 PM UTC

jlj wrote: post #22

dawg- wrote: post #13

I bought my first house at 24 which is apparently rare nowadays. I sold it and made some money. If I had taken my down payment and invested it in a bunch of AMD stock or something I would have made triple the money. But I don’t regret it - there is something so satisfying about owning the place you live. It’s like a sense of self-efficacy and control over your life that is not the same when you rent. I would recommen…

> A mortgage payment is always less than rent for an equivalent property, anyway. Not always, though they often track closely to reach other, they can also diverge. If rent is high and home prices are low that could be a good signal to buy. And you also have to consider what you equity would be doing if it was invested in something other than your house.

> > A mortgage payment is always less than rent for an equivalent property, anyway

Yeah, I don’t understand these statements. It is clear that people making them do not have experience is real estate or only have experience in specific markets. There are absolutely many real estate markets where the rent is more than the mortgage, and anyone with enough real estate knowledge to give advice would know this.

Re: Why Your First House Is A Liability

#36

Post by johnyzee » Sat, Sep 05, 2020, 2:57 PM UTC

> best personal finance book “Rich Dad Poor Dad”

Lost me right there. That is such a stupid book.

Re: Why Your First House Is A Liability

#37

Post by jccalhoun » Sat, Sep 05, 2020, 2:57 PM UTC

This really varied from place to place. I live in a small city in the midwest. My mortgage payment is barely more than my rent was and I went from 1 bedroom to 3. I also went from hearing neighbors all the time to rarely hearing them and having a fenced in yard where I can do whatever I want. Those luxuries are more than worth it to me.

I could make more in a large city but real estate would be way more too.

Re: Why Your First House Is A Liability

#38

Post by sokoloff » Sat, Sep 05, 2020, 2:58 PM UTC

cactus2093 wrote: post #19

CincinnatiMan wrote: post #6

Earlier quoted context omitted.

The tax advantages are pretty rare now that the standard deduction was raised to $12k per individual. Only something like 10% of homes still use the interest deduction.

Yep between the salt tax deduction cap, incredibly low interest rates, recently lowered limit of $750k for how much home value qualifies for the mortgage interest deduction, and recently raised standard deductions, for a married couple (and maybe also for a single person but I haven’t calculated that in detail) the tax benefits of owning a house are very close to 0. Which is probably a good thing, there’s no need to…

I’m in favor of the owner-occupied mortgage interest deduction (MID) because I believe that owner-occupied housing should not be at a disadvantage compared to commercially rented-out property.

Without MID, landlords can (tend to) outbid owner-occupants for property because of differential tax treatment. (Commercial loans for profit-seeking businesses are always tax-deductible as we tax profits and not revenues.)

Re: Why Your First House Is A Liability

#39

Post by bonzini » Sat, Sep 05, 2020, 2:59 PM UTC

thrwn_frthr_awy wrote: post #35

jlj wrote: post #22

Earlier quoted context omitted.

> A mortgage payment is always less than rent for an equivalent property, anyway. Not always, though they often track closely to reach other, they can also diverge. If rent is high and home prices are low that could be a good signal to buy. And you also have to consider what you equity would be doing if it was invested in something other than your house.

> > A mortgage payment is always less than rent for an equivalent property, anyway Yeah, I don’t understand these statements. It is clear that people making them do not have experience is real estate or only have experience in specific markets. There are absolutely many real estate markets where the rent is more than the mortgage, and anyone with enough real estate knowledge to give advice would know this.

> There are absolutely many real estate markets where the rent is more than the mortgage

That's what the quote is saying.

Re: Why Your First House Is A Liability

#40

Post by sokoloff » Sat, Sep 05, 2020, 3:00 PM UTC

bluedevil2k wrote: post #17

danhak wrote: post #10

Earlier quoted context omitted.

Other major tax advantage is zero tax on up to $250,000 in gains ($500K for married couples)

Taking your point even further, you can raise the cost basis of your house by all the improvements you made to the house while you lived there. If you added a $50k pool to a $400k home, your cost basis is now $450k. Further, you can deduct all the sales commissions (real estate 6% fees) from the profits as well.

You deduct the sales commissions because that’s money you lost in the round-trip. (Your profits were actually reduced by the amount you paid in commissions and we tax profits/gains.)