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Investing to Save for a House
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Lazuli Waves Offline
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Post: #1
Investing to Save for a House
I don't know much about investing. I read the Bogleheads approach because it seemed simple and for people who are cautious/conservative financially. On the Bogleheads forum, people said it's best to not invest for something that you will purchase within 10 years.

I have an emergency fund. For retirement I have a 403b, a retirement account outside of work, and a Roth IRA. I have been trying to save money to buy a house. I put the maximum into my 403b, and put the maximum into my Roth IRA. Lately, I've been thinking I shouldn't worry about the Roth IRA, and I should put that money toward buying a house.

I'm not planning to retire until I am physically unable to work or when I'm forced to retire and can't find another job. I doubt at this point I will have kids to take care of me.

My parents use their investments to help them pay for things like when they need a new car. I don't know how to do something like this, or if it's smart. Can I use investing to help me save for a house?

Some of these might sound like naive questions, but no one taught me about this when I was younger. I don't understand investing beyond putting money away that I will hypothetically have when I'm old and ill. I don't even understand investing and taking money out like my parents do.
11-05-2019 09:00 PM
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Leonard D Neubache Offline
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Post: #2
RE: Investing to Save for a House
"Buy a house".

Between a shack in the Appalachian foothills or a mansion in Hollywood, that's a lot of grey area

God demands of Man responsibility. God demands of Woman vulnerability. These are their curse and blessing alike. Libertianism is to Man as Feminism is to Woman.
11-05-2019 11:03 PM
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Matt Warner Offline
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Post: #3
RE: Investing to Save for a House
You can get ill way before you're old. Odds are when you are older but who knows.

Just me, but if I was looking to buy a house forget investing any more than you have to in those other things and concentrate on the house.
The argument renting and investing VS buying is a separate issue.
Like Leonard says there is a massive difference in prices in the US in different cities.
(This post was last modified: 11-06-2019 12:09 AM by Matt Warner.)
11-06-2019 12:08 AM
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defguy Offline
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Post: #4
RE: Investing to Save for a House
I do real estate loans. When I am ready to buy I will use NACA (which I cannot even offer to my clients). It sounds too good to be true but its legit. Most people its minimum 1 year to qualify for the program, some people are up and running in 2-3 months, but most people are 2+ years away or will never qualify.

NACA gives you 20% down (free) and the interest rate (with no fees to buy down the rate) cannot be beat by any lender or bank. The catch, you have to qualify, they micromanage your finances to a T to make sure you can truly afford the payment. It seems overkill but its a true nonprofit and people are more than prepared to be homeowners.

An example of overkill, lets say you make $100,000 in a year but a lot of that is overtime income. To qualify for a mortgage, if you are using overtime income you need to average 2 years of overtime income. I can take that $50,000 of overtime and stretch it over 24 months instead of just the 12 months and still qualify you for the home. NACA will say "you have to wait until 2 years on the job before we can get you approved since we have to average 2 years of overtime income." There are dozens of rules like this and everything micromanaged, but they are giving you the 20% down for free, you cant beat that.
11-07-2019 01:37 PM
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Lazuli Waves Offline
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Post: #5
RE: Investing to Save for a House
(11-05-2019 11:03 PM)Leonard D Neubache Wrote:  "Buy a house".

Between a shack in the Appalachian foothills or a mansion in Hollywood, that's a lot of grey area

Small 2 bedroom 1 bath "starter home" in a small city (not a major one). $125,000-150,000.
(This post was last modified: 11-07-2019 07:56 PM by Lazuli Waves.)
11-07-2019 07:55 PM
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NoMoreTO Offline
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Post: #6
RE: Investing to Save for a House
My Opinion: Save to buy a house. Don't invest.

Create a short term, 1 - 5 year time horizon, and save your money for the down payment. In this period, you shouldn't invest in equities because at any time you could take a serious haircut on your investment if there is a crash.

Invest in yourself, learn about plumbing, electrical, talk to people who own houses, help them with maintenance and little renovations.

Work on your credit rating, verifiable income, speak to your lend and take steps to ensure you are approved for the mortgage.

“Where the danger is, so grows the saving element.” ~ German poet Hoelderlin
(This post was last modified: 11-07-2019 08:07 PM by NoMoreTO.)
11-07-2019 08:06 PM
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TheFinalEpic Offline
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Post: #7
RE: Investing to Save for a House
There are ways to get a house for effectively free by renting out a portion of it, improving, and pulling money out of the asset at it's new appraisal.

Investing to save is an oxymoron. You have options where you need like 10 grand or less at 5% down.

Should you buy a house to live in that doesn't generate cashflow is a separate argument.

"Money over bitches, nigga stick to the script." - Jay-Z
They gonna love me for my ambition.
11-07-2019 08:49 PM
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Loki131 Offline
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Post: #8
RE: Investing to Save for a House
(11-07-2019 01:37 PM)defguy Wrote:  I do real estate loans. When I am ready to buy I will use NACA (which I cannot even offer to my clients). It sounds too good to be true but its legit. Most people its minimum 1 year to qualify for the program, some people are up and running in 2-3 months, but most people are 2+ years away or will never qualify.

NACA gives you 20% down (free) and the interest rate (with no fees to buy down the rate) cannot be beat by any lender or bank. The catch, you have to qualify, they micromanage your finances to a T to make sure you can truly afford the payment. It seems overkill but its a true nonprofit and people are more than prepared to be homeowners.

An example of overkill, lets say you make $100,000 in a year but a lot of that is overtime income. To qualify for a mortgage, if you are using overtime income you need to average 2 years of overtime income. I can take that $50,000 of overtime and stretch it over 24 months instead of just the 12 months and still qualify you for the home. NACA will say "you have to wait until 2 years on the job before we can get you approved since we have to average 2 years of overtime income." There are dozens of rules like this and everything micromanaged, but they are giving you the 20% down for free, you cant beat that.

Ill have to check it out. Is it for minorities mainly?
11-07-2019 09:50 PM
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whitewashedblackguy Offline
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Post: #9
RE: Investing to Save for a House
I would read ‘Why We Want You to be Rich’ by Trump and Rich Dad Poor Dad. They have a bunch of advice on how to invest your money. I also agree with NoMoreTO. Some of the best advice I’ve gotten was to invest in myself until I can make 10k a month, and then invest in other stuff.

After talking to a young lady for a while, she told me “Even though your skin is black, I can tell your heart is white.”
11-08-2019 08:59 AM
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rockoman Offline
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Post: #10
RE: Investing to Save for a House
If you pay property taxes on 'your' house, then essentially you do not own it. Rather, you are renting it fom the state.

If a tenant stops paying rent to his landlord, then he can be evicted. If someone cannot pay property taxes to the state, then they can lose their home.

The advantages of house ownership from the point of view of the tax authorities are twofold:

1. All owners are conveniently registered.
2. Houses are immobile.

Making the owners sitting ducks for taxes and fees.

I'm anticipating increasingly onerous taxes on residential property across the West as pension systems come under strain and governments look around for funds.

As in Illinois:

https://www.zerohedge.com/news/2019-01-2...nt-incomes

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11-08-2019 06:12 PM
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Sargon2112 Offline
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Post: #11
RE: Investing to Save for a House
At least in SC, property yearly taxes are a fraction of what a year's worth of mortgage payments is. There are also exemptions, such as, agricultural exemptions. If you have at least 5 acres with trees, you can claim it as a "tree farm" under an agricultural exemption and the taxes drop drastically... as in $1500 per year verses $200 per year with the exemption. It's perfectly legal under the county tax code. Most counties in SC have similar exemptions.

If you buy a house, your primary goal in life should be to pay the mortgage off as soon as possible. Nothing else is more important, financially, than eliminating debt. Debt is a necessary evil sometimes (rarely) but one must eliminate it with a vengeance. I've seen people get addicted to credit like crack. Don't spend your life being a slave to making payments.
11-08-2019 07:17 PM
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StarcraftGG Offline
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Post: #12
RE: Investing to Save for a House
Please read the books "The House Hacking Strategy" by Craig Curelop available from BiggerPockets. If possible, only buy a duplex, triplex, or quadplex. Live in one unit, collect rent from the other units and basically live for free. If you're ok with paying PMI, use FHA loan put 3.5% down. Excellent strategy.

For a more advanced strategies involving buying deeply discounted real estate by finding motivated sellers or buying from wholesalers (flippers), you can also get a house with lots equity and little to no money out of pocket. For example, I recently purchased from a wholesaler a house for $175K including closing costs. I put in $90,000 worth of construction. Total cost: $265,000, all of which I raised from friends and family giving them 6% interest per year. From purchase to construction to refinance took 6 months so interest is $7,950.

After repairs, house appraises at $325,000. I obtain a mortgage at 80% LTV which is $260,000. I use all of this $260,000 to pay back my private lenders, plus I have to take $12,950 out of my own pocket to pay the remaining $5K I owe them plus the $7,950 interest.

In summary, I had to spend $12,950 of my own to buy a house currently worth $325,000 but which I owe $260,000 on, resulting in $52,000 in created equity from forced appreciation ($325,000 value minus $260,000 owed to bank minus $12,950 cash out of pocket).

After two years as my principal residence I can sell the house for a tax free gain of up to $250,000 in profit. Assuming 3% appreciation per year, the house will be worth $344,792.50. I sell, pay back the roughly $252,000 left on the principal, pay 5% on the real estate commission (17,239.60) and am left with about $75,000 in the pocket. Over 2 years my mortgage payments (principal and interest) is about $32,000, and don't forget the original $12,950 I put into the house. $75,000 minus $32,000 of mortgage payments minus $12,950 = getting paid approximately $30K over two years to live in my house.

Assuming it all works out, I don't have to pay to live in my primary residence - I get paid to live in it. If you can pull this off with a 3 bedroom single family home, live in one room and rent out the others, you will be paid big time to live in your house whether you decide to sell it or just keep living in it and renting it.

Creative real estate investing is a blast.
11-08-2019 08:39 PM
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Repo Offline
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RE: Investing to Save for a House
^^^ Got it people? All you need to do is borrow a measly $90k from family and friends!
11-09-2019 02:06 PM
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Dr Mantis Toboggan Offline
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Post: #14
RE: Investing to Save for a House
(11-08-2019 07:17 PM)Sargon2112 Wrote:  At least in SC, property yearly taxes are a fraction of what a year's worth of mortgage payments is. There are also exemptions, such as, agricultural exemptions. If you have at least 5 acres with trees, you can claim it as a "tree farm" under an agricultural exemption and the taxes drop drastically... as in $1500 per year verses $200 per year with the exemption. It's perfectly legal under the county tax code. Most counties in SC have similar exemptions.

If you buy a house, your primary goal in life should be to pay the mortgage off as soon as possible. Nothing else is more important, financially, than eliminating debt. Debt is a necessary evil sometimes (rarely) but one must eliminate it with a vengeance. I've seen people get addicted to credit like crack. Don't spend your life being a slave to making payments.

Not necessarily. Mortgage rates have been historically low the last few years and will remain so for the foreseeable future. If you're locked into a 30-year mortgage at nominal 4% per year or less, why would you pay off a penny more than the monthly minimum when you could use any extra cash each month to invest in the market at historical average 10% nominal return, save towards a down payment on an investment property, or both?

The way to go right now is get as many investment properties as you can locked in at low interest rates before they start coming back up.

I got my Magnum condoms, I got my wad of hundreds, I'm ready to plow!
(This post was last modified: 11-09-2019 04:35 PM by Dr Mantis Toboggan.)
11-09-2019 04:34 PM
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StarcraftGG Offline
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RE: Investing to Save for a House
(11-09-2019 02:06 PM)Repo Wrote:  ^^^ Got it people? All you need to do is borrow a measly $90k from family and friends!

No Repo, I borrowed a measly $260,000 from family and friends! For more on the subject, you can read "Raising Private Capital: Building Your Real Estate Empire Using Other People's Money" by Matt Faircloth
11-09-2019 06:06 PM
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Lazuli Waves Offline
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Post: #16
RE: Investing to Save for a House
(11-08-2019 08:39 PM)StarcraftGG Wrote:  Please read the books "The House Hacking Strategy" by Craig Curelop available from BiggerPockets. If possible, only buy a duplex, triplex, or quadplex. Live in one unit, collect rent from the other units and basically live for free. If you're ok with paying PMI, use FHA loan put 3.5% down. Excellent strategy.

For a more advanced strategies involving buying deeply discounted real estate by finding motivated sellers or buying from wholesalers (flippers), you can also get a house with lots equity and little to no money out of pocket. For example, I recently purchased from a wholesaler a house for $175K including closing costs. I put in $90,000 worth of construction. Total cost: $265,000, all of which I raised from friends and family giving them 6% interest per year. From purchase to construction to refinance took 6 months so interest is $7,950.

After repairs, house appraises at $325,000. I obtain a mortgage at 80% LTV which is $260,000. I use all of this $260,000 to pay back my private lenders, plus I have to take $12,950 out of my own pocket to pay the remaining $5K I owe them plus the $7,950 interest.

In summary, I had to spend $12,950 of my own to buy a house currently worth $325,000 but which I owe $260,000 on, resulting in $52,000 in created equity from forced appreciation ($325,000 value minus $260,000 owed to bank minus $12,950 cash out of pocket).

After two years as my principal residence I can sell the house for a tax free gain of up to $250,000 in profit. Assuming 3% appreciation per year, the house will be worth $344,792.50. I sell, pay back the roughly $252,000 left on the principal, pay 5% on the real estate commission (17,239.60) and am left with about $75,000 in the pocket. Over 2 years my mortgage payments (principal and interest) is about $32,000, and don't forget the original $12,950 I put into the house. $75,000 minus $32,000 of mortgage payments minus $12,950 = getting paid approximately $30K over two years to live in my house.

Assuming it all works out, I don't have to pay to live in my primary residence - I get paid to live in it. If you can pull this off with a 3 bedroom single family home, live in one room and rent out the others, you will be paid big time to live in your house whether you decide to sell it or just keep living in it and renting it.

Creative real estate investing is a blast.

That's very impressive. I don't think I'm being too hard on myself when I say I'm not savvy enough for that. Still, I'm ordering the book from the library.
11-10-2019 08:50 PM
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