Great comments! I completely agree that it's important to realize the balance transfer fee should be less than the savings you expect to incur from having a lower interest rate on the new card, and that doing numerous balance transfers can both impact your credit and cost you more in the long run. Thanks for sharing!
Good for you. I have been trying for almost 2 years and now Citi is threatening to foreclose on me. I sent them 2 years worth of docs which they keep losing, I have called them and they are NEVER helpful and today I was told I have 72 hours to get them more bank statements. I explained that I have to go in for surgery in the morning and asked them to please give me more time but they are not willing to work with you. Can you give me the name of the person who approved you so I can speak to that person? Citi has been terrible and I have paid the trial amount for almost 2 years and now they want 12K more.
Hi Veritroth,
I agree - assuming it is cash flow positive after you take into account risk. For example, if I can only generating 5% return in real estate - I would agree it is a poor investment compared to stocks that generate 4-5% dividend yields.
An investment is something that has value and returns capital either in the form of interest income or appreciation. So, no, a single home is definitely NOT an investment unless youre flipping it or renting it out to someone else.
If you’re looking for cheap college books, you have to check out http://www.cheapesttextbooks.com/. I used to buy used from one of the stores at UDEL until I found this site, they had every textbook I needed for this semester for like half the price. Then, you can sell them back to the stores for the same price. Can’t beat it.
I think you're missing the key point of considering real estate to be an investment. You're investing a ton of money that you're borrowing, rather than money you already have. If you have $200,000 cash in your hand, then it may or may not be a good investment to buy a house. However, if you borrow $200,000 from the bank, paying a low interest rate, getting 2% back through appreciation, a significant amount of money back through income tax deduction, and differencing out the amount you would have paid through rent by renting, you might just be making quite a bit of a profit.
If you're renting at $1,000/month, then you are giving away $12,000 per year with no hope of recovery of any of it. You started with no cash, so you're making no money on other investments.
If you buy, and your mortgage interest is $1,000/month (ignoring principal since that's not truly an expense), then you may get back $200/month ($2,400/year) through income tax deduction, and your home value increases by $4,000/year (2%), for a total of $6,400/year increase, which even that number increases every year. A $6,400 "profit" for "zero" initial investment is pretty darn good.
Of course, in real life, there's a down payment (not truly an expense but a big out-of-pocket event), property tax, closing costs, commission, home repair, and a ton of other expenses, which eats away at that $6,400 pretty fast. So the true question about whether home ownership is a good investment is whether or not your ownership expenses outweigh the return, and how long you live there may be the biggest factor in that question.
My eyebrows raised at this. I didn't think PMI was a function of the loan amount -- just of total cost vs downpayment. (I could be wrong, though -- in any case I say talk to a financial advisor or mortgage specialist to make sure. If you have already, then I guess it's just different in the US than in Canada.) And doesn't it complicate things unduly to have two mortgages at once, instead of just one?
I understand your antsiness fully, btw -- I too would LOVE to stop renting. But until my savings account hits the magic number, I'm waiting.
The real reason to wait until you have 20% is that without it, most lenders require you to pay mortgage insurance if you're buying without 20% down. Mortgage insurance will up your monthly payments significantly. In addition, I've heard many reports of people having a really difficult time getting their lenders to stop charging the insurance -- even after they've managed to pay down 25 or 30% of the capital.
I say wait a year, and save the money. In the long run, a 20% down payment will save you a significant quantity of cash over your mortgage repayment plan. I suspect your judgment is being clouded by the sense of urgency that a low-cost housing market can bring. I promise -- this time next year, you'll still be able to find a house that you love.
You may be right about some of them, but even then, some things are more valuable for you than to others so it really pays to pay more upfront. You might also say that people that have an emergency fund do that out of fear - but i find it the most rational way of dealing with bad days. Maybe i am scared when i prefer a good cheese to some junk cheeseburger, but the taste is a lot different:) Some choices are not made out of fear, but out of good ol' planning.
Great post! I just did a post about a similar topic - needs v. wants. Here is a list of questions I like to ask:
Do I need this;
Why do I actually need this;
Is there a better alternative;
Is there a simpler alternative;
Is there a cheaper alternative;
Do I need this now;
Why can't this wait; and
Why do I need to buy this exact product or service, from this company, at this time, from this store?
I first encountered this Facebook test in July when I was in Kenya. Fortunately I didn't have any problems identifying everyone. But some of the photos were a bit tricky to guess. If I needed to do it several times, I'd probably run into trouble at some point, since some of my friends like to tag themselves as objects, or sometimes a person's spouse or other family is tagged as the friend.
The only real estate that should be considered an investment is from a rental that is cash flow positive. A person's primary residence should in no way be considered an investment. Common sense dictates that housing values can only rise sustainably with rising wages, making real estate an inflation hedge at best and outright liability at worst (interest on mortgage, insurance, taxes, maintenance, etc.)
Too bad for most people, their house is, by far, their largest "investment."
I go out into nature and PRAY. Then I listen. Next I plan how to handle whatever it is that is causing the stress. Once I take action I feel more empowered. My avoidance behaviors include eating my favorite foods and reading.
The article should also consider the fees that are paid by the merchant when using credit cards or a signature purchase on a debit card. I do not use signature transactions on my debit card for this exact reason. Since the money has vanished from my account instantly, where is the "loan" aspect of this and why should the merchant pay any fee whatsoever?
I do have to agree that using a debit card to rent a car (and sometimes for hotels) is annoying because they hold the money. However, I just increase the amount in my checking account for the duration of the "hold" and then put the money back into savings. I love it when I can keep credit card companies/banks from getting these fees!
Completely agree, Antar. I too, totally bought into the "truism" that real estate is a wise investment. I'm sure it was a sound and sure investment strategy in the "old days" when homebuying was something you did just once or twice (and saved up for for years), because you planned to stay in the home your entire life. IF that is your strategy, it probably still makes sense in the long haul. The trouble is, very few people buy homes for the long term anymore; they intend to continue "trading up" every few years.
Now that I am a homeowner and have experienced first hand how many other expenses it introduces, like tax, maintenance, and insurance, I'm inclined to believe renting might be the better way.
I feel that Susanne made a good point. Appreciate what is given. I have always been taxed excessively and I have adjusted to beleive that I will continue to be taxed that way. I just need to look at my life style and see what I can do to prevent it from being so much or be prepared to pay in the end. Our lifestyles have become fast paced, always running, eating out, living for the moment. Well it does not save, does not teach, does not guarantee that we will leave a stamp for a better tomorrow. Most americans do not even attempt to save. It is always what can you give to me.... Not what can I do to make it better, or how can I teach my children (tomorrow's leaders) what it does when you take and never give back. Refer to the giving tree.. by silverstein. As long as american's feel this way.. there will be no hope for change. kdr
It really depends quite heavily on your particular bank. My bank, with associated MC logo debit card, offers 0 fees other than insufficient funds. Overdraft is free and decent management will avoid all NSF fees. They offer easily obtained 0 liability on unauthorized purchases, which I experienced in person when I was charged more than a dozen small online purchases I did not initiate, most of which garnered NSF fees, and the entire mess was reversed and new card issued within a few hours with a single phone call. Their policy is to apply debits in the order most benefiting the customer and costing the fewest NSF fees when applicable. And they offer a decent rewards system of either cash or products. My credit card, on the other hand, has no rewards and charges interest on purchases even when the balance is paid in full before the due date.
My point being: not all banks are evil and some can even be better than credit cards. For those with other banks and in other situations, these points may be absolutely correct. And it is inconvenient - but not impossible - to rent a car with a debit card, I'll grant you that. :)
Just recently I tried a Pabst Blue Ribbon (PBR) after listening to a band call Ceann. They have a song called "Pabst Blue Ribbon" pretty funny. I found PBR to be a decent pilsner. Most domestic big name beers are pilsners. Another cheap decent pilsner is Old Milwaukee.
Great comments! I completely agree that it's important to realize the balance transfer fee should be less than the savings you expect to incur from having a lower interest rate on the new card, and that doing numerous balance transfers can both impact your credit and cost you more in the long run. Thanks for sharing!
I write to relieve stress...there's something about putting pen to paper that gets all of those negative emotions out...
Good for you. I have been trying for almost 2 years and now Citi is threatening to foreclose on me. I sent them 2 years worth of docs which they keep losing, I have called them and they are NEVER helpful and today I was told I have 72 hours to get them more bank statements. I explained that I have to go in for surgery in the morning and asked them to please give me more time but they are not willing to work with you. Can you give me the name of the person who approved you so I can speak to that person? Citi has been terrible and I have paid the trial amount for almost 2 years and now they want 12K more.
"...do you know if you have a Netflix subscription you can watch thousands of movies and TV episodes free on your computer..."
If you have a Netflix subscription, you're not watching anything for "free."
Hi Veritroth,
I agree - assuming it is cash flow positive after you take into account risk. For example, if I can only generating 5% return in real estate - I would agree it is a poor investment compared to stocks that generate 4-5% dividend yields.
Antar
Hi Stephanie,
thanks for your input and support of the paradigm. I'm curious to know what constitutes a wise investment for you?
Antar
Just an FYI not all libraries carry music, movies and video games some libraries would rather spend limited resources on books.
An investment is something that has value and returns capital either in the form of interest income or appreciation. So, no, a single home is definitely NOT an investment unless youre flipping it or renting it out to someone else.
So people have to look at Rent vs Buy scenarios.
If you’re looking for cheap college books, you have to check out http://www.cheapesttextbooks.com/. I used to buy used from one of the stores at UDEL until I found this site, they had every textbook I needed for this semester for like half the price. Then, you can sell them back to the stores for the same price. Can’t beat it.
I think you're missing the key point of considering real estate to be an investment. You're investing a ton of money that you're borrowing, rather than money you already have. If you have $200,000 cash in your hand, then it may or may not be a good investment to buy a house. However, if you borrow $200,000 from the bank, paying a low interest rate, getting 2% back through appreciation, a significant amount of money back through income tax deduction, and differencing out the amount you would have paid through rent by renting, you might just be making quite a bit of a profit.
If you're renting at $1,000/month, then you are giving away $12,000 per year with no hope of recovery of any of it. You started with no cash, so you're making no money on other investments.
If you buy, and your mortgage interest is $1,000/month (ignoring principal since that's not truly an expense), then you may get back $200/month ($2,400/year) through income tax deduction, and your home value increases by $4,000/year (2%), for a total of $6,400/year increase, which even that number increases every year. A $6,400 "profit" for "zero" initial investment is pretty darn good.
Of course, in real life, there's a down payment (not truly an expense but a big out-of-pocket event), property tax, closing costs, commission, home repair, and a ton of other expenses, which eats away at that $6,400 pretty fast. So the true question about whether home ownership is a good investment is whether or not your ownership expenses outweigh the return, and how long you live there may be the biggest factor in that question.
I would refer you to an old post of mine on my blog at: http://sleeplessandtired.com/?p=33
"A Stress Reliever Remedy From the Good Old Days"
I hope you will post the best of your entries for all to read, as this is an important topic in today's stress-filled and sleep deprived world.
Thanks,
Ronald Czarnecki
We would be getting two loans to avoid the PMI
My eyebrows raised at this. I didn't think PMI was a function of the loan amount -- just of total cost vs downpayment. (I could be wrong, though -- in any case I say talk to a financial advisor or mortgage specialist to make sure. If you have already, then I guess it's just different in the US than in Canada.) And doesn't it complicate things unduly to have two mortgages at once, instead of just one?
I understand your antsiness fully, btw -- I too would LOVE to stop renting. But until my savings account hits the magic number, I'm waiting.
Hi Carlos,
The real reason to wait until you have 20% is that without it, most lenders require you to pay mortgage insurance if you're buying without 20% down. Mortgage insurance will up your monthly payments significantly. In addition, I've heard many reports of people having a really difficult time getting their lenders to stop charging the insurance -- even after they've managed to pay down 25 or 30% of the capital.
I say wait a year, and save the money. In the long run, a 20% down payment will save you a significant quantity of cash over your mortgage repayment plan. I suspect your judgment is being clouded by the sense of urgency that a low-cost housing market can bring. I promise -- this time next year, you'll still be able to find a house that you love.
You may be right about some of them, but even then, some things are more valuable for you than to others so it really pays to pay more upfront. You might also say that people that have an emergency fund do that out of fear - but i find it the most rational way of dealing with bad days. Maybe i am scared when i prefer a good cheese to some junk cheeseburger, but the taste is a lot different:) Some choices are not made out of fear, but out of good ol' planning.
Great post! I just did a post about a similar topic - needs v. wants. Here is a list of questions I like to ask:
Do I need this;
Why do I actually need this;
Is there a better alternative;
Is there a simpler alternative;
Is there a cheaper alternative;
Do I need this now;
Why can't this wait; and
Why do I need to buy this exact product or service, from this company, at this time, from this store?
I first encountered this Facebook test in July when I was in Kenya. Fortunately I didn't have any problems identifying everyone. But some of the photos were a bit tricky to guess. If I needed to do it several times, I'd probably run into trouble at some point, since some of my friends like to tag themselves as objects, or sometimes a person's spouse or other family is tagged as the friend.
Great ideas! Also joining (or starting) a babysitting co-op is a good way to save on child care! See http://www.frugal-living-now.com/babysitting-co-op.html for tips.
The only real estate that should be considered an investment is from a rental that is cash flow positive. A person's primary residence should in no way be considered an investment. Common sense dictates that housing values can only rise sustainably with rising wages, making real estate an inflation hedge at best and outright liability at worst (interest on mortgage, insurance, taxes, maintenance, etc.)
Too bad for most people, their house is, by far, their largest "investment."
I go out into nature and PRAY. Then I listen. Next I plan how to handle whatever it is that is causing the stress. Once I take action I feel more empowered. My avoidance behaviors include eating my favorite foods and reading.
The article should also consider the fees that are paid by the merchant when using credit cards or a signature purchase on a debit card. I do not use signature transactions on my debit card for this exact reason. Since the money has vanished from my account instantly, where is the "loan" aspect of this and why should the merchant pay any fee whatsoever?
I do have to agree that using a debit card to rent a car (and sometimes for hotels) is annoying because they hold the money. However, I just increase the amount in my checking account for the duration of the "hold" and then put the money back into savings. I love it when I can keep credit card companies/banks from getting these fees!
Completely agree, Antar. I too, totally bought into the "truism" that real estate is a wise investment. I'm sure it was a sound and sure investment strategy in the "old days" when homebuying was something you did just once or twice (and saved up for for years), because you planned to stay in the home your entire life. IF that is your strategy, it probably still makes sense in the long haul. The trouble is, very few people buy homes for the long term anymore; they intend to continue "trading up" every few years.
Now that I am a homeowner and have experienced first hand how many other expenses it introduces, like tax, maintenance, and insurance, I'm inclined to believe renting might be the better way.
I feel that Susanne made a good point. Appreciate what is given. I have always been taxed excessively and I have adjusted to beleive that I will continue to be taxed that way. I just need to look at my life style and see what I can do to prevent it from being so much or be prepared to pay in the end. Our lifestyles have become fast paced, always running, eating out, living for the moment. Well it does not save, does not teach, does not guarantee that we will leave a stamp for a better tomorrow. Most americans do not even attempt to save. It is always what can you give to me.... Not what can I do to make it better, or how can I teach my children (tomorrow's leaders) what it does when you take and never give back. Refer to the giving tree.. by silverstein. As long as american's feel this way.. there will be no hope for change. kdr
It really depends quite heavily on your particular bank. My bank, with associated MC logo debit card, offers 0 fees other than insufficient funds. Overdraft is free and decent management will avoid all NSF fees. They offer easily obtained 0 liability on unauthorized purchases, which I experienced in person when I was charged more than a dozen small online purchases I did not initiate, most of which garnered NSF fees, and the entire mess was reversed and new card issued within a few hours with a single phone call. Their policy is to apply debits in the order most benefiting the customer and costing the fewest NSF fees when applicable. And they offer a decent rewards system of either cash or products. My credit card, on the other hand, has no rewards and charges interest on purchases even when the balance is paid in full before the due date.
My point being: not all banks are evil and some can even be better than credit cards. For those with other banks and in other situations, these points may be absolutely correct. And it is inconvenient - but not impossible - to rent a car with a debit card, I'll grant you that. :)
Just recently I tried a Pabst Blue Ribbon (PBR) after listening to a band call Ceann. They have a song called "Pabst Blue Ribbon" pretty funny. I found PBR to be a decent pilsner. Most domestic big name beers are pilsners. Another cheap decent pilsner is Old Milwaukee.
Monitor your water bill for unusually high use. Your bill and water meter are tools that can help you discover leaks.
Water your lawn and garden in the morning or evening when temperatures are cooler to minimize evaporation.
Wash your fruits and vegetables in a pan of water instead of running water from the tap.
Spreading a layer of organic mulch around plants retains moisture and saves water, time and money.
Use a broom instead of a hose to clean your driveway and sidewalk and save water every time.
If your shower fills a one-gallon bucket in less than 20 seconds, replace the showerhead with a water-efficient model.
Collect the water you use for rinsing fruits and vegetables, then reuse it to water houseplants.
If water runs off your lawn easily, split your watering time into shorter periods to allow for better absorption.
We're more likely to notice leaks indoors, but don't forget to check outdoor faucets, sprinklers and hoses for leaks.