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Post by Deleted on Jul 1, 2014 23:18:00 GMT -5
Did you put it in your new home or did you pull a Phil and invest it?
Someone mentioned tonight how their home is their biggest investment and savings account. They are in their 3rd home: never took money out, and financed or pay as you go for repairs. Also the big thing they did : when they upgrade they took the profit from the sale of the previous home and put it into the new house.
So ex: they recently purchased a 600k home but put 300k down , so only financed 300k. The home before that they purchased for 400k but put 140k down from the sale of their second home. Their first home they purchased for 250k and put like 10k down.
Between all 3 purchases they've financed: 240k the first time, 260k the second time, 300k the second time. While the house prices increased by 350k during that time frame, the amount balanced did not go up by more than 60k.
His practive vs Phil (invest the money)... which one you would have chosen?
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cronewitch
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Post by cronewitch on Jul 1, 2014 23:27:49 GMT -5
Some of each. I bought first house for 51.5 sold for 90 but had already bought my new house. So I took my 90 and paid off the separate property with garage and sent 10% more to the house to get rid of PMI then invested the rest.
I have don't cash out refis and invested the money and had HELCO paid off from refi which had paid for vehicles and boats.
Next house I will probably have a mortgage if rates are low, I don't want a more expensive home.
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Works4me
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Post by Works4me on Jul 1, 2014 23:29:12 GMT -5
I re-invested because my goal was to pay the house off and have no mortgage plus it avoids tax issues.
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Post by Deleted on Jul 1, 2014 23:34:22 GMT -5
Some of each. I bought first house for 51.5 sold for 90 but had already bought my new house. Good point... I guess to follow their system you would need to sell your old house first before buying the new one or make it contingent of selling the old house etc.
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Post by Deleted on Jul 1, 2014 23:35:30 GMT -5
I re-invested because my goal was to pay the house off and have no mortgage plus it avoids tax issues. What tax issues? The only one I know off is if you live there for 2 years you get to pocket up to 250k without paying taxes or 500k for married couples.
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NastyWoman
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Post by NastyWoman on Jul 2, 2014 0:19:48 GMT -5
I don't remember whether it is 2 or 3 years, but I do know that the amount is $500 k for a couple Carl
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quince
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Post by quince on Jul 2, 2014 2:12:28 GMT -5
We haven't bought another house yet, but all the proceeds from the sale of our first house got dumped into savings/investment. We will probably put a big chunk of money into the down payment on our next house, and pay extra on the mortgage. My husband is not fond of the market. We will also continue to invest and will not liquidate any investments to pay down a house, because I'm less risk-adverse, and hooray, compromise.
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phil5185
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Post by phil5185 on Jul 2, 2014 4:47:59 GMT -5
And some time in the future they can sell the home for $800k )and have $500k of equity). But, unfortunately, they will need to spend $800k or $900k to buy a comparable house. Or, they could have stayed in the original $250k house and waited for it to appreciate to $800k (and grow $600k of equity). Ie, you cannot make money by trading into bigger houses because you must always spend the sale-money on the next house.
That family is 'consuming' more sq footage with each move. The $600k home would rent for $40,000/yr to $50,000/yr. So, over the next decade they will consume about $500,000 worth of living space. Or, they could have purchased a pair of $300k houses with that $600k, consumed one, and rented the other for $20k/yr. After 12 or 15 years, when the houses are worth $600k each, they will have one to sell and actualize the $300k of profit (in addition to the $250k of rental income over the period).
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phil5185
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Post by phil5185 on Jul 2, 2014 4:54:50 GMT -5
Before 1997 you had to roll the equity forward into the next house - or pay taxes on the profit. That was changed with the 1997 $250k/$500k exclusion on a personal residence.
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gooddecisions
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Post by gooddecisions on Jul 2, 2014 5:43:00 GMT -5
What profit? We purchased 3 primary homes between 2002 and 2005, all appreciated by 2007 and today none would sell for what we paid for them. So we rent them. We have become hermit crabs. Note: equity in the form of down payment or mortgage pay down is not profit.
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Miss Tequila
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Post by Miss Tequila on Jul 2, 2014 5:55:30 GMT -5
Well, I had no profit as I lost $70k on the sale...but we had only taken out a mortgage for half the cost of construction (I know, Phil would not approve!). I took my share of the cash and bought two rental properties. Dh took his share and purchased our family home for cash (including money he already had). Two different styles but it works for us
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giramomma
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Post by giramomma on Jul 2, 2014 6:16:17 GMT -5
We lost money (about 4K). But we sold in 2009 (bought in 2002). What we lost, we made up in the tax credit to prop up the housing market.
Yes, we took the equity from our old house and put it in the new one. If we didn't we would have been house poor and not been able to afford other things we wanted (vacations, a third child, private school).
We also do not view our house as our biggest investment, because it's not.
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zibazinski
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Post by zibazinski on Jul 2, 2014 6:22:59 GMT -5
I'm hoping to close on mine August 4. I'm investing 70k of it into a thing that may make me a lot of money or I might lose it all. Obviously, I'm hoping for the former. I'm taking a 100k and putting it into Schwab to be invested on my behalf. The rest I'm putting into savings for emergencies and also because I won't have that rental income anymore. Next year one of my last two goes on the market and the year after that, I'm out of real estate for good. It has served me well but my situation has changed. My kids are grown and out of the nest and I can live on my pension and other investments. I don't want any rentals anymore and especially long distance ones.
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Post by Deleted on Jul 2, 2014 6:41:32 GMT -5
I made $100K on the sale of my townhouse in 2011 and used it for the down payment and closing costs on my current home.
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Gardening Grandma
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Post by Gardening Grandma on Jul 2, 2014 9:06:24 GMT -5
We cleared $150,000 from the sale of our last home. We put 100% into our current home because DH wanted to retire and we did not want a large mortgage payment. When we sold his rental in 2012 we paid off the mortgage and invested the balance.
If we were younger, we might have done things differently.
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Bonny
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Post by Bonny on Jul 2, 2014 9:08:44 GMT -5
When we bought the "move up" SF Bay Area house in 1995, we bought with 10% down and when we sold the "little" house about a year later we did take most of the net proceeds to buy down and refi our purchase loan. There was a smarter way to do that but rates had dropped enough that it made sense.
When we bought the AZ home in 2003 we just used savings and converted the old SF Bay Area home into a rental.
The N. San Diego County house was purchased via a 1031 exchange out of a 50% share of commercial property DH inherited. The commercial property needed a lot of work and the ownership structure made it impossible to do anything to substantially improve the bottom line so we traded out of that management headache into a single family home we thought we would eventually move into (and have no partners!). Most of the net proceeds went into the house. There was a little extra (boot) maybe 10k-15k that we paid tax on.
At this point in time we own enough property that when we start to sell we'll probably pay off the mortgage of the house we move to and invest the rest in our taxable account. But we'll do the math first. If we sell the SF Bay Area house in let's say 10 years and move to the N. San Diego County house, that loan will be about $170k and we'll have net proceeds likely north of $1M. It may be smarter to keep the mortgage and invest everything.
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busymom
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Post by busymom on Jul 2, 2014 9:57:14 GMT -5
We made around $40,000 on the sale of our first house, & we rolled all of it into our 2nd house.
I'm kind of like Phil's wife, that I will only feel completely at peace once the house is paid off.
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Plain Old Petunia
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Post by Plain Old Petunia on Jul 2, 2014 11:21:41 GMT -5
My next home will cost far less than my current home. I will put down 20% when I buy. If there is anything left, I will invest it.
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tskeeter
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Post by tskeeter on Jul 2, 2014 11:41:34 GMT -5
Did you put it in your new home or did you pull a Phil and invest it? Someone mentioned tonight how their home is their biggest investment and savings account. They are in their 3rd home: never took money out, and financed or pay as you go for repairs. Also the big thing they did : when they upgrade they took the profit from the sale of the previous home and put it into the new house. So ex: they recently purchased a 600k home but put 300k down , so only financed 300k. The home before that they purchased for 400k but put 140k down from the sale of their second home. Their first home they purchased for 250k and put like 10k down. Between all 3 purchases they've financed: 240k the first time, 260k the second time, 300k the second time. While the house prices increased by 350k during that time frame, the amount balanced did not go up by more than 60k. His practive vs Phil (invest the money)... which one you would have chosen? Yes. We've done both. Rolled gains and principle payments on previous homes into new homes. Usually to keep the mortgage payments comfortable. (And we did usually tend to upgrade the quality of the house with each move.) On the last house, we pulled a good sized chunk of equity out of the house and dumped it into investment accounts. Not exactly what Phil would have done, but along the same lines. I think that Phil has done a better job than most of us at using financial leverage to increase his net worth. Gotta admire his savvy.
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dancinmama
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Post by dancinmama on Jul 2, 2014 11:52:47 GMT -5
The first time we sold there wasn't much gain so we rolled it all into the second home.
When we sold the second home, we were relocating to a much higher COLA so we rolled all the equity into the third home and still had to take out a substantial mortgage. We have the capital to pay off that mortgage, but choose not to because of the low interest rate.
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buystoys
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Post by buystoys on Jul 2, 2014 12:20:32 GMT -5
We had a paper loss on the house we sold in NY, used part of it for the move and down payment on our Texas house, and invested the rest. I pulled a Phil on DH and he agreed to go with a mortgage on this house as long as I agreed to pay it off within 20 years. Good news is that we still have the $500K for use when selling this house. Bad news is that we'll NEVER get that much for it!
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kittensaver
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Post by kittensaver on Jul 2, 2014 12:34:34 GMT -5
We have always rolled the "profit" forward to the next house, but we are financially conservative so it works for us. Plus - that's how you end up living in a nice neighborhood in a VHCOLA area, seriously! There is NO WAY I could afford to buy my house today with our income - - it is all the "magic" of appreciation in a hot housing market coupled with cash to throw at the purchase to reduce your mortgage. In my world, if you "blow" your equity you will perpetually live in "starter" housing. JMHO YMMV.
According to Zillow, my house's (4bedrooms/2bathrooms, 1,978 sq ft) estimated worth is $1.05 million and the monthly mortgage payment is $1,385. THAT is the power of equity and appreciation. In our housing market, we could *probably* rent a small, one bedroom apartment in a moderately safe neighborhood for *maybe* $2,000-$2,500 per month. The comparison is laughable.
This house would be untouchable to us if we were trying to finance the whole thing or close to the whole thing. I say forget refi's for the purpose of getting cash, and roll your equity over if you ever want to live comfortably or move up in a HCOLA area.
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swamp
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Post by swamp on Jul 2, 2014 12:46:37 GMT -5
I sold my first house to my parents at a loss.
Then they turned around and gifted me $11,000 towards the purchase of my new house.
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Bonny
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Post by Bonny on Jul 2, 2014 14:01:56 GMT -5
We have always rolled the "profit" forward to the next house, but we are financially conservative so it works for us. Plus - that's how you end up living in a nice neighborhood in a VHCOLA area, seriously! There is NO WAY I could afford to buy my house today with our income - - it is all the "magic" of appreciation in a hot housing market coupled with cash to throw at the purchase to reduce your mortgage. In my world, if you "blow" your equity you will perpetually live in "starter" housing. JMHO YMMV.
According to Zillow, my house's (4bedrooms/2bathrooms, 1,978 sq ft) estimated worth is $1.05 million and the monthly mortgage payment is $1,385. THAT is the power of equity and appreciation. In our housing market, we could *probably* rent a small, one bedroom apartment in a moderately safe neighborhood for *maybe* $2,000-$2,500 per month. The comparison is laughable.
This house would be untouchable to us if we were trying to finance the whole thing or close to the whole thing. I say forget refi's for the purpose of getting cash, and roll your equity over if you ever want to live comfortably or move up in a HCOLA area. One of the reasons we kept the SF Bay Area house when we moved to AZ in 2003 was that I was afraid that we couldn't afford to move back if I couldn't handle the summer temps (115 degrees vs 65 ). However given the timing we watched the value go from $750k in 2003 up over $1M (maybe 1.2 ? ) and then back to $750k (given its fixer condition after 9 years of tenant neglect ) in June 2012. But between prop 13 capping our property tax at a value of $450k and the lack of inventory I doubt we could have bought back the house. Also the amount of rent the tenants paid over that 9 year period was more than the mortgage balance. Therefore despite the roller coaster ride I'm glad we kept it. The house is hovering around $1+M again. And the thought of paying $10k/yr in property taxes makes me . Rent would be north of $4k/mth.
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Post by Deleted on Jul 2, 2014 14:39:25 GMT -5
Can't invest negative profit, but I did invest the proceeds from the sale of my last home into a mix a mutual funds and individual stocks.
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Plain Old Petunia
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Post by Plain Old Petunia on Jul 2, 2014 17:18:17 GMT -5
Can't invest negative profit, but I did invest the proceeds from the sale of my last home into a mix a mutual funds and individual stocks. Lol. Yeah, I should have said "proceeds", too. I don't think I need to worry too much about what to do with my "profit".
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Works4me
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Post by Works4me on Jul 2, 2014 19:21:36 GMT -5
I re-invested because my goal was to pay the house off and have no mortgage plus it avoids tax issues. What tax issues? The only one I know off is if you live there for 2 years you get to pocket up to 250k without paying taxes or 500k for married couples. 52 y/o single adult - born/raised/worked in the Bay Area and now live on the central coast of California - as Bonny and others can attest, $250K/$500K + can be almost nothing for appreciation in our real estate markets thus making taxes a valid concern.
I like keeping things simple, clean and easy - minimal debt, live below my means and invest wisely and widely. Career was in medical social work plus took 7 years out to work in high tech during the dot com era - lived cheap and saved a lot - unfortunately I had to stop working at 48 due to Lupus and was fine financially, able to do anything I wanted within reason and now since my father died, I am looking forward to doing some of the unreasonable stuff like extensive domestic and international travel.
Carl - you and your wife are on a good path - slow and steady wins the race plus allows you to have some real fun along the way - my mother died at 55, 6 months after my parents retired at 55/60 - fortunately she was able to do some of the travelling and other things she wanted to do the last few years of her life but no where near enough - this is why I believe in a combined approach - save a lot and invest well but also have fun along the way- all about balance.
Here is an example - when I was younger I liked having different purses/shoes to go with each outfit - now, I like the simplicity of black purse/shoes going with almost everything - have 2 good leather purses (one large, on smaller) that are brand names and go with everything - much easier for me now.
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Post by Deleted on Jul 4, 2014 0:43:02 GMT -5
After my divorce in 1997, I took my $100k of equity from the marital home and added a $250k mortgage to buy another place . It kept the payment manageable and I sold at a nice profit in 2003.
DH and I married and moved to KS and put only $50k down on our new house - also a very good decision. The $200k we didn't need has grown nicely while the house hasn't appreciated much.
Next step: downsizing. I'm seriously considering another mortgage, especially if the market us down and interest rates remain low, but love the idea of no mortgage in retirement. We shall see.
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8 Bit WWBG
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Post by 8 Bit WWBG on Jul 4, 2014 6:32:29 GMT -5
I'm hoping to never have to sell.
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