House Poor

[7mm-08]

Ya u guys are right. I know it's doable just need to figure out how. Last year I made less that 60k and at my current job thers not a good way to make a lot more so idk wat my rout is but I may need to switch it up. However at the moment I have all my vehicles paid for and no debt my wife and I have a good chunk saved altho not quite enough for a down payment yet I don't think

Invest in yourself. If you don't have kids, put that money to work in an education. A BS in Nursing will never not be in demand.

 

[sasquatch]

As a mortgage lender, I see a lot of people willing to be house poor (or so it might seem). And the rules allow it. Sometimes renting is better even if you aren’t building equity. Yeah it sucks, but if you’re saving $1,000 a month rather than buying, invest that money and it’ll do you quite well and get you into a place to be less house poor when the time is right.

This, when you “own” you really don’t own a damn thing, or build equity for many years unless the market is shooting up in real time right after purchase. Almost all of your first 10 years of payments are interest. If it’s not where you plan to be for a long period of time renting is the way.

To TRULY make money when you sell you have to make the 3-6% realtor fees on top of how much interest you’ve paid over the years.

Many people calculate what they made by subtracting sell price with purchase price. Which unless paid for cash is a very skewed measurement.




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[HuntHarder]

This, when you “own” you really don’t own a damn thing, or build equity for many years unless the market is shooting up in real time right after purchase. Almost all of your first 10 years of payments are interest. If it’s not where you plan to be for a long period of time renting is the way.

To TRULY make money when you sell you have to make the 3-6% realtor fees on top of how much interest you’ve paid over the years.

Many people calculate what they made by subtracting sell price with purchase price. Which unless paid for cash is a very skewed measurement.




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I look at it a little different. If you sell your house, any money made, is like a refund from your past payments. There are no refunds on rent.

Each situation is different and unique. A simple cost analysis will help identify whether renting or buying makes more sense. Renting does have a potential perk of not having to pay for all maintenance costs. An A/C alone could run 10k$ or more.

 

[Rotnguns]

I don’t care that their parents help them. I just hate when they get that level of help and act they did everything on their own.

The best phrase I've heard to describe such folks: "Born on third base and thinks he hit a triple."

 

[Jstumbaugh]

We started out buying a house in spring of 2008 at the peak of the housing boom back then. Young and dumb and excited. Sold the house in 2014 with some help from my mom to help us cover an $11k loss. All of this to help us make our dream possible. In 2012 we purchased 8 acres with a 30x40 garage and electric on it already. We started with a $175k house at 6.5% $1650 a month mortgage with tax. We hoped to break even selling the house but couldn't and sold for $167k. We moved in with my in-laws for 2 years while building our house. We went from 900sq ft to 3500sq ft. Financed $275k at 3.625% and my mortgage is $1254. My school and property tax is roughly $9700 a year which hurts but my house is 10 years old now and probably worth $700k. I am extremely grateful for my mother helping us get out of the old house and my in-laws for helping house us during the constitution process. My parents weren’t ever in a financial position to help us when we started and my mother helped from an inheritance. My parents helped build character and work ethic. My father provided construction knowledge and skills that I didn’t realize until later in life. My wife and I built our own house and only subbed out a few of the processes along the way(excavating, framing, spray foam and Sheetrock). We did everything else ourselves. In looking back, the only thing I would have changed would to have been buying a duplex for our first house. Never would have had to sell to make moves. New couples starting out need to look at these options. My wife and I are in a much better financial position over the last 18 years from job changes and promotions. I also still carry my work ethic and crush it with my side hustle. Our salaries give us stability to cover our bills and save for retirement but the side hustle makes me sleep well at night. I also want to give our kids more than we had but at the same time they need to earn it. My fathers gifts of trade skills weren’t always appreciated when I was younger and working every summer unlike other kids but damn they are paying dividend’s now.

 

[Scottyboy]

Good things are always overpriced, 30 years ago wooded land in MN was $200/acre but I was making $6/hour. I grew up on a dairy farm and knew from an early age that I needed hunting land so I started buying and going in debt, yes, land poor, at one time having over 1200 wooded acres. You can be not only house poor but land poor. Ask any farmer. Property only has value when you sell it. If you don't sell you only have expense.
We still own over 600 acres and it is a joy to walk out your back door and go shooting, hiking, ATV riding... BUT my property taxes would fund a couple western hunting trips/year and as I get older (presently 66) it becomes more difficult to properly maintain the land (food plots, tree plantings, trail maintenance, deer stands) If you are not planning on selling and capitalizing on land value increases you could find yourself land poor. Property ownership comes with a maze of complications due to local zoning, trespass issues, liability concerns, weather impacts (will my trees blow down in the next storm). Just consider the cost of buying equipment to do the work on the tree farm. I just bought a skid steer for work on the tree farm, it was over $80,000!
Don't rule out a long term hunting lease or outstate semi guided hunts.
I was a forester with the state of MN specializing in private forest management and now have a 1 man, part time forestry consulting business. I have visited with 1000's of private woodland owners over the last 45 years and most clients have inherited their land or purchased it many years ago. Wooded land values are near $5000/acre presently. Buying at these prices will put most people into the land poor category very fast! Be careful about deciding between what you want and what you need!

If you need help maintaining all that land, I’m sure we could work out something . No matter where you are in MN, I’m available anytime

 

[sasquatch]

I look at it a little different. If you sell your house, any money made, is like a refund from your past payments. There are no refunds on rent.

Each situation is different and unique. A simple cost analysis will help identify whether renting or buying makes more sense. Renting does have a potential perk of not having to pay for all maintenance costs. An A/C alone could run 10k$ or more.

Not right or wrong

Yes no refund on rent by almost every time someone buys they buy into a lot of “want” where as when they rent it’ll steer them more to only get what they “need”

Thus in the end, many times they’ll rent for a decent bit less per month than what they’d do buying allowing them to pocket money, they also don’t have to spend a dime on upkeep.

I have 3 nice rental houses, not one of them could pay less per month buying than they pay me rent, and I’m still spending on the maintenance.

If I thought I could sell for any sort of decent price I’d sell them in a heartbeat. There’s Just simple no money in it worth bothering with on a small scale.


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[Jstumbaugh]

Not right or wrong

Yes no refund on rent by almost every time someone buys they buy into a lot of “want” where as when they rent it’ll steer them more to only get what they “need”

Thus in the end, many times they’ll rent for a decent bit less per month than what they’d do buying allowing them to pocket money, they also don’t have to spend a dime on upkeep.

I have 3 nice rental houses, not one of them could pay less per month buying than they pay me rent, and I’m still spending on the maintenance.

If I thought I could sell for any sort of decent price I’d sell them in a heartbeat. There’s Just simple no money in it worth bothering with on a small scale.


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So are you cash positive each month on top of the equity?

 

[sasquatch]

So are you cash positive each month on top of the equity?

I bought them cash, so yes I flow positive

However, my return on capital has been at best 5% per year averaged across them all. I’d have been mountains ahead if I put the money into a standard index fund

If I bought them with a mortgage I’d maybe pocket 300 per month, which is nowhere near enough to deal with maintenance over 30 years of time (avg mortgage length)


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[Jstumbaugh]

That’s fair. I don’t have the cash to front that so I’m lookin more from the angle of the tent covers the payment and then a bit I’m positive on the month and building equity on someone else’s money. If I had the cash the time in the market is the way to go.

 

[Deeker]

I do not understand how people think it’s harder today than it was for our parents/grandparents

That is so far from the truth where I live. I feel a lot of people are delusional and are looking through a narrow lens.

Growing up I never seen a car newer than 10years old, going fishing and towing a little boat we always had a break down due to pieces together junk, never ever seen 4 door vehicles or extended cap trucks, vacation was something you maybe did 2-3 times in your whole childhood, eating out as a family wasn’t even heard of, never heard of such a thing as traveling to some other state to hunt, no such things as credit cards to buy now pay later etc etc

I can go on and on. My grandpa grew up when his first house cost 17k and he had no earthly idea how he’d ever afford the note!

He always said “yea bread was only a nickel when I grew up, but we never had a nickel!


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Pretty simple. My father in law bought his first house for 60k when he made 40k per year. It was a starter house.
My dad bought his first house for 20k when he made 30k per year.

In my area right now those same style houses are selling near 500k. So you would need to make right around 400ish to make it pencil out the same.

 

[HuntHarder]

Pretty simple. My father in law bought his first house for 60k when he made 40k per year. It was a starter house.
My dad bought his first house for 20k when he made 30k per year.

In my area right now those same style houses are selling near 500k. So you would need to make right around 400ish to make it pencil out the same.

Interest rates in the 80's were between 10% and 16%. Almost double to triple what we call "high" interest rates today.

I do agree and so do the "experts," that it is significantly harder today vs. 20 years ago to be a first time hone buyer. I read an article a few weeks ago saying the average age of first time home buyers is now 40 years old. Seems crazy to me.

 

[sasquatch]

40 years ago people were working full time and joining trades as teenagers. Actually getting ahead in life

Today they on their parents insurance until they almost 30 and entering the workforce at 25 years old just starting out.

So many are staring out 10 years later than their parents/grandparents.

Again, we look through a very tight tunnel and don’t always make real life comparisons.


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[Jstumbaugh]

Interest rates in the 80's were between 10% and 16%. Almost double to triple what we call "high" interest rates today.

I do agree and so do the "experts," that it is significantly harder today vs. 20 years ago to be a first time hone buyer. I read an article a few weeks ago saying the average age of first time home buyers is now 40 years old. Seems crazy to me.

I was 24 when we bought the the first house.

 

[HuntHarder]

I was 24 when we bought the the first house.

I was 25. Crazy to think the average today is 40 huh?

 

[Deeker]

40 years ago people were working full time and joining trades as teenagers. Actually getting ahead in life

Today they on their parents insurance until they almost 30 and entering the workforce at 25 years old just starting out.

So many are staring out 10 years later than their parents/grandparents.

Again, we look through a very tight tunnel and don’t always make real life comparisons.


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When my dad bought his house he worked in a feed mill, and ran equipment during harvest. My father in law was a wannabe fire fighter / laborer. Not high speed jobs by any means. My “grandpa” bought 40 rental houses and a shit pile of acreage with his military retirement and a job as an electrician/ handyman.

It’s not apples to apples anymore. I like to call the new generation lazy as much as the next guy. But if I actually look at what it would take to buy a house right now, in my market it is crazy. Shit box starter houses going for 500k. Every once in a while a decent deal pops up, but then guys with money buy them up and turn them into rentals.

 

[sasquatch]

When my dad bought his house he worked in a feed mill, and ran equipment during harvest. My father in law was a wannabe fire fighter / laborer. Not high speed jobs by any means. My “grandpa” bought 40 rental houses and a shit pile of acreage with his military retirement and a job as an electrician/ handyman.

It’s not apples to apples anymore. I like to call the new generation lazy as much as the next guy. But if I actually look at what it would take to buy a house right now, in my market it is crazy. Shit box starter houses going for 500k. Every once in a while a decent deal pops up, but then guys with money buy them up and turn them into rentals.

And I can give the exact opposite example, many things are also location dependent. I bet most of them also felt exhausted monetarily, now we just have the benefit of hindsight

Before I’d be house poor I’d look at moving to get a better life.

Also, if we try to use gold as a stable monetary value, prices have on average came down.

Our government has deflated the dollar so bad we don’t know what’s what. All in the name of robbing Peter to pay Paul, after they skim some for themselves of-course.

This housing cost and affordability problem is so complex it’s hard to pin point and truly figure out how to resolve it. It’s just too easy to try and point the blame with a finger, that’s just not reality

-Work ethic,
-Age entering work force
-Additional to wants vs needs (more and nicer things)
-Family’s now want 2k sq ft for 1 kid. Use to be 5-7 people in 1k sq ft
-hardly ever keeping a vehicle past pay off
-constant desire for the govt to take care of something for us
-immigration

Just to name a few issues that all play into it.


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[fngTony]

And I can give the exact opposite example, many things are also location dependent. I bet most of them also felt exhausted monetarily, now we just have the benefit of hindsight

Before I’d be house poor I’d look at moving to get a better life.

Also, if we try to use gold as a stable monetary value, prices have on average came down.

Our government has deflated the dollar so bad we don’t know what’s what. All in the name of robbing Peter to pay Paul, after they skim some for themselves of-course.

This housing cost and affordability problem is so complex it’s hard to pin point and truly figure out how to resolve it. It’s just too easy to try and point the blame with a finger, that’s just not reality

-Work ethic,
-Age entering work force
-Additional to wants vs needs (more and nicer things)
-Family’s now want 2k sq ft for 1 kid. Use to be 5-7 people in 1k sq ft
-hardly ever keeping a vehicle past pay off
-constant desire for the govt to take care of something for us
-immigration

Just to name a few issues that all play into it.


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I know it used to happen, but I am not big on the idea of having that many people in a small space. Nowadays, it would have to be in an apartment to do that but back in the day you at least got a sizable yard along with your tiny house. I think when the age of consumerism got started with the baby boomers, we kind of forced ourselves to need three times that amount of space so we could have walls of bookshelves to hold our DVDs, records, eight track tapes, cd’s, you name it and collect all the garbage figurines from happy meals. But I think this newer generation is coming back around to living with less. I know my kids could get by with a bedroom kitchen and a garage/flex space all they really need is an Internet connection and maybe a 30 inch monitor. They just don’t own a lot of physical items anymore, which would make it a lot easier to go back to living with less space.

 

[CorbLand]

I know it used to happen, but I am not big on the idea of having that many people in a small space. Nowadays, it would have to be in an apartment to do that but back in the day you at least got a sizable yard along with your tiny house. I think when the age of consumerism got started with the baby boomers, we kind of forced ourselves to need three times that amount of space so we could have walls of bookshelves to hold our DVDs, records, eight track tapes, cd’s, you name it and collect all the garbage figurines from happy meals. But I think this newer generation is coming back around to living with less. I know my kids could get by with a bedroom kitchen and a garage/flex space all they really need is an Internet connection and maybe a 30 inch monitor. They just don’t own a lot of physical items anymore, which would make it a lot easier to go back to living with less space.

The younger generation seems to be spending more on experiences than items. I know a few people that shake their head when I tell them that an out of state elk hunt costs me 2500-3000 bucks but they will spend twice that filling their garage up with shit they dont use.


Part of the problem with housing sizes is that the land has gotten more expensive than the house in some cases. When you buy the land, it doesn't matter if you put a 1000 sq foot house or a 4000 sq foot house on it, the land is the same costs. People started to maximize that by putting bigger houses on less land. The land under my house is worth more than it would cost me to rebuild my exact house (house was built in 66 and the upstairs was remodeled in the early 2000s).

Around here, its pretty hard to find single family homes under 1800 sq foot. They are all generally townhomes if they are that small.

 

[loganwayne]

We bought a small run down house from the 40s with a big shop 40x80 on 3 acres right outside of town, but bought it outright because the house was so rough. Lived in it for 4 years before I could afford to gut and remodel it. Still need to redo the decks and siding.
I spent around 120k to renovate it, tore down to the studs and redid everything. Its not perfect but better than most houses here. Had it appraised and it came back in just over 600k.
I grew up in the country and dont like being on the edge of town but we are here at least until I can find 20+ acres and build another house.