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IWETHEY Home / IWETHEY Board / Money, Financials, and Economics Forum / Here's the trick:
Post #54,891
by inthane-chan
Picture of inthane-chan
10/4/02 11:50:59 AM
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New Here's the trick:
My mom is offering a low-interest 4 year loan of around 12k - and that's more money than my wife and I will be able to pull together any time soon due to her student loans and my recent unemployment. It's a one-time deal - she's retiring soon, and she needs the money back.

Now, from reading the conversations here, it looks like the value of HOUSES stays relatively constant, but the value of the LAND is the variable value. So, let's say we take advantage of my mom's largesse, buy a house in the boonies where the house is 90% of the expense, and when the market implodes, we don't lose all that much money, AND we have some equity saved instead of rent, where we can jump to a better location.

Now, if this doesn't work, (and I have a feeling I'm leaving something out of the formula) then let me know I've been smokin' a bit too much of the Peruvian marching powder...
End of world rescheduled for day after tomorrow. Something should probably be done. Please advise.
Post #55,082
by ben_tilly
10/5/02 5:49:49 PM
Reply
New Quick questions to ask yourself.
Paying back your mom's loan in 4 years is about $250/month. How easily can you afford that? Remember your other debts, and how badly you would feel if you couldn't pay your mom back in time.

How does rent compare to a mortgage+taxes+upkeep on a house?

How much does it increase your expenses to live out of the country?

How overvalued is the real estate market where you are?

As for the value of houses versus land, that depends heavily on the amount of local regulation. In markets with little regulation the price was essentially the price of land plus the cost of building a house. In markets with lots of regulation the cost was much higher than that, and there was far less of a correlation between the size of the lot and the price of a house. Neelk had a beautiful link on that a while ago which I cannot find right now, but several of the papers [link|http://www.bus.wisc.edu/realestate/facstaff/pub-malpezzi.htm|here] hint at that result.

As for whether that applies locally, you can decide better than I can. And I can only guess whether a general housing bust would tend to sink all boats. Or for how long. (If you plan to own a house for 10 years, then short-term considerations matter a lot less than if you plan to own it for 4.)

Personally I wouldn't buy a house right now. But I don't know your circumstances, and there is a big element of guesswork involved in that. So buying a house might be reasonable for you, or it might not.

Cheers,
Ben
"Career politicians are inherently untrustworthy; if it spends its life buzzing around the outhouse, it\ufffds probably a fly."
- [link|http://www.nationalinterest.org/issues/58/Mead.html|Walter Mead]
     What's your thoughts on buying a place in this econ? - (inthane-chan) - (38) - Oct. 2, 2002, 11:20:43 AM EDT
         Re: What's your thoughts on buying a place in this econ? - (deSitter) - Oct. 2, 2002, 11:23:36 AM EDT
         Keep in mind... - (admin) - (5) - Oct. 2, 2002, 11:25:18 AM EDT
             Exactly what happened to me - (drewk) - (2) - Oct. 2, 2002, 11:41:46 AM EDT
                 One other thing though... - (admin) - (1) - Oct. 2, 2002, 11:47:18 AM EDT
                     Student loans are already a deduction. - (inthane-chan) - Oct. 2, 2002, 12:05:36 PM EDT
             Also, keep in mind property taxes. - (a6l6e6x) - (1) - Oct. 2, 2002, 05:37:11 PM EDT
                 Interesting facet of Michigan tax law: - (admin) - Oct. 2, 2002, 05:53:04 PM EDT
         What doe s Marysville look like for housing and how far is - (boxley) - (1) - Oct. 2, 2002, 12:40:18 PM EDT
             One big problem. - (inthane-chan) - Oct. 2, 2002, 01:19:00 PM EDT
         Beware the bubble - (marlowe) - (16) - Oct. 2, 2002, 12:53:34 PM EDT
             Less chance of a bubble in residential real estate - (drewk) - (11) - Oct. 2, 2002, 01:15:35 PM EDT
                 Seattle == Silicon Valley/2 - (inthane-chan) - (6) - Oct. 2, 2002, 01:27:04 PM EDT
                     We're looking to sell soon. - (Brandioch) - (5) - Oct. 2, 2002, 03:13:24 PM EDT
                         Hey, where do you work, anyways? - (inthane-chan) - (4) - Oct. 2, 2002, 03:37:45 PM EDT
                             One Convention Place -NT - (Brandioch) - (3) - Oct. 2, 2002, 07:50:48 PM EDT
                                 LMAO! - (inthane-chan) - (2) - Oct. 3, 2002, 11:12:39 AM EDT
                                     Week after is the soonest. - (Brandioch) - (1) - Oct. 4, 2002, 11:34:00 AM EDT
                                         Need contact info... - (inthane-chan) - Oct. 4, 2002, 11:42:52 AM EDT
                 Nearly 100% chance IMO - (ben_tilly) - (3) - April 20, 2003, 10:37:33 AM EDT
                     Re: Nearly 100% chance IMO - (deSitter) - (2) - April 20, 2003, 11:00:53 PM EDT
                         Yes -NT - (ben_tilly) - (1) - April 20, 2003, 11:05:01 PM EDT
                             Econ Laureate LRPD: Unintended consequences -NT - (Ashton) - April 21, 2003, 05:38:58 AM EDT
             Commented on that in my original post. - (inthane-chan) - (3) - Oct. 2, 2002, 01:23:48 PM EDT
                 Doesn't add up - (drewk) - (2) - Oct. 2, 2002, 01:57:36 PM EDT
                     The houses aren't what's causing it. - (inthane-chan) - (1) - Oct. 2, 2002, 02:06:07 PM EDT
                         OK, I get it. In the 70s that land would be 2 dozen lots. -NT - (drewk) - Oct. 2, 2002, 02:28:12 PM EDT
         You need to compare it to the alternatives. - (Another Scott) - (2) - Oct. 2, 2002, 02:36:43 PM EDT
             Something else re: condos - (drewk) - (1) - Oct. 2, 2002, 03:26:24 PM EDT
                 To add another twist: - (admin) - Oct. 2, 2002, 04:51:33 PM EDT
         Don't - (ben_tilly) - (2) - Oct. 2, 2002, 07:52:46 PM EDT
             Here's the trick: - (inthane-chan) - (1) - Oct. 4, 2002, 11:50:59 AM EDT
                 Quick questions to ask yourself. - (ben_tilly) - Oct. 5, 2002, 05:49:49 PM EDT
         Totally depends on when and where - (wharris2) - Oct. 4, 2002, 11:59:18 AM EDT
         Rent is a ripoff - (tuberculosis) - (4) - Oct. 11, 2002, 10:32:02 AM EDT
             Re: "mortgage payments are equity" - (a6l6e6x) - (2) - Oct. 11, 2002, 11:34:42 PM EDT
                 Thought about it - (tuberculosis) - (1) - Oct. 16, 2002, 11:08:25 AM EDT
                     No need for 20% down to avoid PMI. - (Another Scott) - Oct. 16, 2002, 12:34:56 PM EDT
             Don't forget to factor in: - (wharris2) - Oct. 14, 2002, 05:28:49 PM EDT

I promise you that if I am compelled to turn to the Dark Side on this issue you will come to yearn for the suave ripostes of CRConrad.
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