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Just sold my business for $200,000 - should I buy a house?

By skinnyninja follow skinnyninja   2011 Nov 7, 2:41am 8,841 views   18 comments   watch   nsfw   quote   share    


I am single, 35, live in an apartment for $470/month, and total monthly expenses run me around $1,300.

I have 12 thousand in savings and just sold my business for $200,000.

My main goal would be to avoid high property taxes. There are homes in my area that sell for around $22,000. Property taxes would run around $1,500/year.

My plan is to invest the $200,000 and keep adding to it, but my question is:

"Should I hold back about ten grand of the windfall and use it with my savings to pay cash for a cheap home?"

Then I would be living a bit cheaper, paying prop. taxes and upkeep rather than rent.

I don't particularly care if I live in a house or an apt. My main concern is to keep monthly expenses as low as possible. I am not sure if additional home ownership costs would make this into a wash or not. I have never owned a home.

These homes around me for 20 grand are not in top notch shape, but they are livable. Some are in decent neighborhoods as well.

I could easily afford a nicer home for 40,000 to 60,000 range or even higher, but then the property taxes get really annoying (compared to my current rent).

Thoughts? Any wisdom or insight is much appreciated.....

1   msilenus   ignore (0)   2011 Nov 7, 3:19am     ↓ dislike (1)   quote   flag        

It depends greatly on what you want to do. If you're focused narrowly on the next few years... I don't think it will matter much, and would lean against buying just on the basis of transaction costs and hassle. If you're focused on a very long-term, and at the kinds of prices you're tossing around here: I'd consider buying a house that you'll be happy with in the very long-term.

I'm not sure a middle road makes much sense right now.

If you're not moving for ten years or more, price will not matter much, but value will matter a lot. Quality will feed into your monthly expenses in a couple of ways, including maintenance and heating/cooling costs. If you're planning on staying in the place for a long time, that will add up, and the purchase price of the home will matter less.

Construction is an insanely expensive process. If you can buy a nice, recently-built home for ~$60k, you're getting it for much less than the cost of building it, even without land-value considered. Your value would consequently be very high. If you could ignore price over the long haul, you'd probably be in great shape.

Don't dismiss the idea of getting a mortgage. If I were buying today, I'd get a 30-year fixed. Inflation risk offloading + investment ROI + deduction > interest, in my opinion. Even without a mortgage, locking in your housing payment forever could be an excellent inflation hedge against many investment strategies.

Note: I can easily tell that our personal situations and local markets are very different, so take all this with a grain of salt.

2   Â¥   ignore (3)   2011 Nov 7, 3:59am     ↓ dislike (1)   quote   flag        

Taiwan, Singapore, or HK mebbe.

Singapore:

In 2011, however, a progressive property tax structure for owner-occupied residential properties will go into effect:

0% for the first $6000 ($4700 USD) of AV;
4% for the next $59,000 ($46,000 USD) of AV;
6% for the balance of AV in excess of $65,000.
Non-owner-occupied residential properties and other properties will continue to be subject to 10% property tax.

^ sweet

Hong Kong: The tax rate is 15% (from 2008/9) of the assessed annual rental income.

So if that $22,000 house rents for $800/mo, that would work.

$22,000 sounds way too low for HK, but there you are.

3   skinnyninja   ignore (0)   2011 Nov 7, 4:04am     ↓ dislike (2)   quote   flag        

@ ptiemann - Michigan, US. I called the county treasurer to find out what prop. taxes would be on a house that is for sale for $22,900. They said $1,500 annual. They base it on the home's value over the last 2 years they said.

$1,500 a year is not bad, given that I would pay cash for the house and have no mortgage. My only worry is other more hidden costs (upkeep, maintenance, etc.), as I have never owned a home before.

4   somebecca   ignore (0)   2011 Nov 7, 5:29am     ↓ dislike (1)   quote   flag        

Factors that would point to a house being a particularly good deal:
Planning to stay in the area for a while.
Being willing/able to do much of the maintenance yourself.
Wanting to garden and/or keep animals.

If you fix up a $20k home, will it get reassessed, resulting in higher property taxes?

5   Tude   ignore (0)   2011 Nov 7, 6:02am     ↓ dislike (1)   quote   flag        

Single and 35 years old? Might I suggest move to another city, have some fun, find a job, find a partner?

I cannot imagine at age 35 with 200k+ cash wanting to buy a crappy house in Michigan and staying put.

At the very least take some time and money and travel!

6   Dan8267   ignore (3)   2011 Nov 7, 6:11am     ↓ dislike (1)   quote   flag        

In my opinion, the decision whether or not to buy a house should be based on whether or not houses are a good deal in your area, rather than by how much money you have saved up. Savings are great, but they don't make a bad deal good just as the lack of savings doesn't make a good deal bad.

7   elliemae   ignore (0)   2011 Nov 7, 6:17am     ↓ dislike (2)   quote   flag        

what the dan-ster said, combined with the question: Where do you want to live? If it's there, or if you have family that you'd want to live in the house at some point if you move, buy a place. That's certainly a cheap price. However, you'll probably look around you and fix it up a bit, spend a bit.

One thing that's (almost) guaranteed when buying a house; as soon as you buy it, you'll have some life-changing circumstance. Marriage or a life-partner, new opportunity across the country or world...

IMHO it's better to buy a place you like in a good neighborhood than to buy a place that's livable.

8   Infiltrate   ignore (0)   2011 Nov 7, 6:39am     ↓ dislike (1)   quote   flag        

Tude says

Single and 35 years old? Might I suggest move to another city, have some fun, find a job, find a partner?

Lol! Why would you want to ruin his life?

9   Dan8267   ignore (3)   2011 Nov 7, 9:35am     ↓ dislike (2)   quote   flag        

Infiltrate says

Tude says

Single and 35 years old? Might I suggest move to another city, have some fun, find a job, find a partner?

Lol! Why would you want to ruin his life?

partner does not equal spouse

10   APOCALYPSEFUCKisShostakovitch   ignore (52)   2011 Nov 7, 11:07am     ↓ dislike (1)   quote   flag        

It's never been a better time to squat in a foreclosed McMansion!

11   TechGromit   ignore (0)   2011 Nov 7, 11:45am     ↓ dislike (1)   quote   flag        

skinnyninja says

. There are homes in my area that sell for around $22,000. Property taxes would run around $1,500/year.

I am single, 35, live in an apartment for $470/month, and total monthly expenses run me around $1,300.

The stock market is doing awful right now. There really no "safe" investment right now in my opinion. What not buy 9 houses for 22k each? if you are paying $470 in rent, in theory, you could rent 9 houses out for $4,230 a month, or about 50k a year. Taxes on 9 houses would be $13,500, net gain of $36,500. You would make you money back in about 6 years. That's an 18% return on your investment. WAY better than the stock market, even during the "bubble years".

12   FortWayne   ignore (4)   2011 Nov 7, 12:28pm     ↓ dislike (2)   quote   flag        

Tude says

Single and 35 years old? Might I suggest move to another city, have some fun, find a job, find a partner?

I cannot imagine at age 35 with 200k+ cash wanting to buy a crappy house in Michigan and staying put.

At the very least take some time and money and travel!

exactly. no need to tie down when you have all the world as your oyster.

take some time to enjoy yourself, start a family, invest into another business.

13   Katy Perry   ignore (2)   2011 Nov 8, 12:45am     ↓ dislike (1)   quote   flag        

if I were in your shoes I'd invest in myself. yoga classes would be a good start for me. maybe learn guitar. I'd park the money in a money market fund and forget about it.(local bank) I'd take a meditation workshop in Joshua tree CA for 10 days. it's beautiful out here this time of year.

14   bill1102inf   ignore (1)   2011 Nov 8, 1:40am     ↓ dislike (1)   quote   flag        

You should not buy a 'house', but you should buy a 'horse' at least if needed, you could eat him.

15   TechGromit   ignore (0)   2011 Nov 8, 1:42am     ↓ dislike (1)   quote   flag        

Katy Perry says

I'd park the money in a money market fund and forget about it.(local bank)

The Best rates at Money Market Funds at banks are 1% right now, that's $2,000 interest a year.

16   seaside   ignore (0)   2011 Nov 8, 1:46am     ↓ dislike (1)   quote   flag        

TechGromit says

The Best rates at Money Market Funds at banks are 1% right now, that's $2,000 interest a year.

Damn, tell me what bank is that please. Wells Fargo pays 0.2%, and my local credit union pays 0.3%. They're giving me a free big mac each month. lol.

17   bubblesitter   ignore (0)   2011 Nov 8, 4:46am     ↓ dislike (1)   quote   flag        

seaside says

TechGromit says

The Best rates at Money Market Funds at banks are 1% right now, that's $2,000 interest a year.

Damn, tell me what bank is that please. Wells Fargo pays 0.2%, and my local credit union pays 0.3%. They're giving me a free big mac each month. lol.

Try this:

http://personalsavings.americanexpress.com/

18   Tude   ignore (0)   2011 Nov 8, 5:49am     ↓ dislike (1)   quote   flag        

seaside says

TechGromit says

The Best rates at Money Market Funds at banks are 1% right now, that's $2,000 interest a year.

Damn, tell me what bank is that please. Wells Fargo pays 0.2%, and my local credit union pays 0.3%. They're giving me a free big mac each month. lol.

I keep my cash savings in Everbank. Not quite 1% (.76%) but hell, it's a good bank, highly rated.

https://www.everbank.com/personal/high-yield-money-market.aspx?tab=yield-pledge


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