Home Values Always Go Up… Right?

“Go out and mortgage as much home as you could afford, because housing values always go up.” I was given this advice realtors, friends, and other peers when I looked for my first home in 2007.

History proved them mostly correct. Until 2008. Over 10 million foreclosures and roughly a 30% drop in home values later (with no signs of a rebound in the near future), the “get as big of a house as you can afford” theory has been blamed for being the cause of the housing bubble and ensuing collapse.

Despite the history lesson unfolding in front of our eyes, I still hear from peers that they view their home as an investment vehicle. After all, many in their parents (the boomer) generation are counting on their home as being their primary source of retirement funds, so it’s no wonder where they got this idea from.

Other than during the most recent housing boom (pre-bubble burst), home values tend to return to around the rate of inflation over time. Check out the Case Shiller 100-year home price chart for more on that.

Would you invest in the market with the goal of simply hitting inflation so that the real value of your money never went up? Probably not. So why is it OK to accept that from a home?

Buying Vs. Renting

In reality, homes can be a huge drain on resources. When you look at mortgage costs, interest over 15-30 years, property taxes, upkeep, realtor fees when selling, and energy costs, buying a home can result in a lower return on investment than renting a home or apartment and investing the difference saved.

When deciding whether to buy or rent, I’d recommend taking a look at the price-rent ratio, which can be calculated by taking the total price of a home and dividing it by the annual rent in that geography for a similar dwelling. The lower the ratio (10-15), the more it makes sense to buy in that geography. A very high ratio (20+ can indicate a housing market that has inflated prices).

With high unemployment, high foreclosure rates, slowing population growth, and this new outlook on home ownership, we may not see consistent home price appreciation for a while. And even if we do, there will likely be a number of investment vehicles that will get you a better return on your investment than a home in the coming decades.

Where Else will you Live?

The other thing to consider is that when you go to sell a home, you are left with a dilemma: you need somewhere to live! You can realize a net gain if you significantly downsize or move to a cheaper geography, otherwise, you don’t really keep your investment.

A wise person once told me that the best way to look at a home is with this phrase, “Four walls”. More and more, I am starting to see the wisdom in that statement.

Verdict: False. What once was true is no longer a given. Homes can result in a negative return over the short AND long-term these days. It’s better to look at homes for lifestyle and other benefits versus financial gains. Geography is a huge variable.

Alternative Advice? “Homes can provide a number of great benefits. But strong investment returns are likely not one of them.”

Your Home as an Investment Discussion:

• Do you think this cliche is true or false? Why?
• What are the reasons why you have or would buy a home?

Related Posts:

• You May be Ready to Buy your First Home if…
• The Cheapest College Towns
• 7 Huge Benefits to Downsizing into a Tiny Home
• 5 Reasons you Should not Buy a New Home

Good or Bad Personal Finance Cliche: “Your Home is an Investment” is copyrighted by 20somethingfinance.com without consent to republish.

If I had to sum up in one word why that is, it would be: value.

A second would be: lifestyle.

College Town Value & Lifestyle

When you think about it – most college students are fairly poor compared to the general population. They just don’t have that much money outside of the spoiled ones who have their parents wire them money. At the same time, they like to eat (and drink) and be entertained. This leads to there usually being a lot of cheap food, restaurant, bar, and entertainment options available for the students and you.

You also have the benefit of college sports, performing arts, & other entertainment on or near campus. It’s hard to be bored around a college town.

Transportation around college towns is also easy to do on the cheap. Every college campus I’ve been on has had bike trails, large walkways, and a bus system to help you get around without the need for a vehicle.

Colleges Provide Stable Employment & Real-Estate Opportunity

Another huge benefit to taking up residence in a college town is the stability of their real estate markets. Large universities provide a stable employment base of thousands of workers. For example, I graduated from Michigan State University (go green!) – which employs 5,000 (well paid) academic staff and 6,000 administrative staff. Universities rarely cut staff – preferring instead to raise tuition to generate additional revenue. Those employees provide a very stable real estate market.

In addition, you have all of the businesses that thrive off of large student populations. And many college towns are incubators for new start-up companies. With universities that have a strong research focus, many of those start-ups are funded by the university. And if there’s a strong focus on medical, you’ll usually find a large medical center or hospital nearby. All add to stable employment, which leads to a stable real estate market and a thriving community.

If you’re interested in real estate beyond owning your own home, there are opportunities to generate significant rental income in college towns through the ever-present student population in need of a place to call home for the year.

Which College Towns are the Cheapest to Live in?

The number one factor contributing to cost of living in a college town is the cost of the housing. To that end, Coldwell Banker put together a report on all of the 120 universities that are in the College Football Bowl Series (which generally are the largest universities), called the College Home Listings Report. It will allow you to compare markets, see rank by state, and rank the entire list.

The top 10 cheapest college town housing markets to live in are (Market, University, Average Listing Price):

1. Memphis, Tenn. (University of Memphis): $89,244

2. Muncie, Ind. (Ball State University): $107,346

3. Ypsilanti, Mich. (Eastern Michigan University): $107,458

4. Toledo, Ohio (University of Toledo): $112,688

5. Kalamazoo, Mich. (Western Michigan University): $116,455

6. Buffalo, N.Y. (University of Buffalo): $123,212

7. Las Vegas, Nev. (University of Nevada, Las Vegas): $124,955

8. Fort Worth, Texas (Texas Christian University): $128,491

9. Kent, Ohio (Kent State University): $130,218

10. Lafayette, Ind. (Purdue University): $132,910

If you’re interested in moving to a college town, I don’t know that I’d start out with these 10 universities or locales, but the report should give you a good head start and allow you to compare universities in your state if you want to stay close to your present location.

On the flip side, here’s an infographic on the 10 most expensive college towns. No thanks, I’ll pass.

College Town Discussion:

• Have you ever taken up residence in a college town? Would you recommend it? Why or why not?
• What are your favorite things about living in a college town?
• What is your favorite college town?

Related Posts:

• The Student Loan Debt Trap
• The 10 Best Cities to Find a Job in
• The Top 10 Cities for Young Professionals
• Education Inflation

The Cheapest College Towns to Live in & why you Should Consider Moving to One is copyrighted by 20somethingfinance.com without consent to republish.

The reality is that this piece of advice being a financially smart move is not a universal truth. It’s anything but that.

Before I get into number crunching, I want to clarify the basics of what the mortgage tax deduction is and when you could claim it.

What is a Mortgage Tax Deduction?

When you get a mortgage, you are often paying insane amounts of interest in that mortgage, particularly in the beginning. Banks front load the mortgage with higher interest amounts in the beginning of the mortgage which taper off over the years. They do this so they can get more money out of each mortgage in the event the debtor were to pay off the loan early.

On the mortgages I’ve held, almost two-thirds of the total payment in the first 5 or more years of the loan were interest payments. The other third actually went to paying down the principal (what you actually owe) on the house. It’s highway robbery (but that’s a different story for a different day). Ask your bank for an amortization schedule if you want to see what you’d be paying in interest vs. principal.

There is also the difference between a tax credit and a tax deduction. A credit is getting the full dollar amount of taxes owed returned to you. A deduction is subtraction from your taxable income (what you actually end up being taxed on based on your tax bracket). Mortgage interest is tax deductible, not a tax credit.

To sum it up, a mortgage tax deduction is the amount of interest you pay on your mortgage, which you then can deduct from your taxable income total.

The Standard Deduction

It’s important to note that you can only claim the mortgage tax deduction if you itemize your taxes (in reality, only about 35% of taxpayers do). If you’re like the other 65% of the population that claims the standard deduction, you cannot additionally claim the mortgage tax deduction. In some cases, you’ll actually be able to pay less in taxes if you opt for the standard deduction.

The 2011 standard deductions are as follows:

• $5,800 for single filers & married filing separately
• $11,600 for married filers
• $8,500 for head of household

The standard tax deduction changes annually usually and is based on inflation. So while it will generally go up over the years, your itemized tax deduction will decline as your interest payments on your mortgage do too.

Running the Numbers on the Mortgage Tax Deduction Benefit

Let’s take a hypothetical situation to crunch some numbers. We’ll assume:

• You take out a $200K mortgage @ 4.5% interest over 30 years.
• In your first full year, you’d be paying about $8,873 in interest and $3,287 in principal.
• You have property taxes of $3,000 per year.
• You’re married.

Your two biggest itemized deductions would likely be your mortgage interest and your property taxes. This would equate to a total deduction of  $11,873. If you had no other deductions, you’d only gain a total of $273 in tax deductions. If you were in the 15% tax bracket, this would equate to a whopping annual tax savings equal to $41 (15% x $273).

In the process, you’ve paid $11,873 (mortgage interest + property taxes) that you’ll never get back to get that $41 in tax deductions.

Still think your buddy’s advice is so great?

This is just one scenario – your benefit may vary dramatically. It does highlight the importance of running the numbers for your own situation before buying a home. You may find that unless you buy a very pricey home, the tax benefit for you is going to be minimal, potentially even negative compared to the standard deduction.

There has even been discussion of the mortgage tax deduction being eliminated. Imagine buying a home under the guise of huge tax savings only to the deduction be wiped out by legislators in desperate need of generating new revenue.

What Should you Consider When Buying a Home?

There are some other things that I would recommend considering above any tax deduction benefit possibilities. They include:

1. How long do you plan on staying in the home? If less than 5 years, it probably doesn’t make sense. Don’t forget that there are closing costs and realtor fees involved in buying and selling a home. And houses are not easy to sell in this market, so it may just sit there as a burden.
2. Are you ready to make that kind of expense commitment? It will create a lack of freedom to invest that money elsewhere.
3. What does the mortage-rent ratio look like in the area you are living or moving to? Some places offering a compelling reason to buy. Others are very risky.
4. Do you need a home to live the lifestyle you feel like you need to live?

I’m a happy homeowner myself, but buying a home is not a decision that should be based off of generalized advice that might actually be wrong.

Mortgage Deduction Discussion:

• Have you heard the advice of buying a home for the mortgage tax deduction?
• Have you bought a home based on this advice?
• What factors would you recommend when considering whether to buy a home?

Related Posts:

• Home Sale Loss Tax Deduction
• You May be Ready to Buy your First Home if
• Real Estate Capital Gains

Buy a House for the Mortgage Tax Deduction? Not so Fast is copyrighted by 20somethingfinance.com without consent to republish.

Building a home allows us to control all aspects of a home. There’s nothing to complain about – it’s all new and fresh and should be maintenance free for many years to come!

Resist. The. Urge.

There are undoubtedly some benefits to building a new home. However, the negatives far outweigh them. Here are 5 reasons why you show not build a new home.

1. The Cost of New Homes Vs. Older Homes

There are a few reasons why new homes are going to cost you more than equivalent older homes.

In a poor housing market, such as what we have right now (and likely will for many years to come), foreclosures and slow home turnover results in lower prices for older homes.

According to the AP, the median price of a new home in the United States is now 48 percent higher than that of a home being resold, more than three times the gap in a healthy housing market. 48%! I don’t care how nice the new digs would be, there are too many nice older homes on the market right now to pay a 48% premium on a new one.

The thing is you can’t really get a good deal on a home that you build. All leverage power you had went out the door when you told the builder you were interested in working with them. It’s a buyer’s market for existing homes right now. But it’s always a seller’s market when you build new.

You might be able to get a good deal on a new home that has already been built and is sitting around – but you’ll almost never get one if you’re building your ‘dream home’.

2. The Environmental Impact

I would personally find it very hard to justify using up all of the materials, adding to urban sprawl, and authorizing the CO2 output required to build a new home vs. buying an older home (particularly when there are so many vacated homes already on the market).

Even if you build a LEED certified home (which you’ll pay a huge premium for), you could simply use up less energy by moving into a smaller home or retro-fitting an older home with energy saving materials.

The exception to this is if you build a tiny home to live in. And double bonus if you use reclaimed materials. These homes have a significantly lower carbon footprint because they use so much less energy and materials.

3. The Hassle

This is coming from personal experience, but I’ve never met someone who has built a home and didn’t complain about how much work, micromanagement, decision-making, fighting, and frustration it created for them.

If you place a value on time, buying an older home is so much quicker and easier.

4. The Quality (or Lack of it)

They just don’t make them like they used to.

I’ve bought two homes and probably looked at 100 homes in the process that were built over the last 100+ years (if you’re a realtor, you should probably run if I approach you. I’m a very big pain in the ass). From a quality of material standpoint, newer homes of similar cost tend to have much lower quality materials than older homes.

Yes, it’s newer. But that doesn’t mean it’s better.

You see, craftsmanship and pride used to count for something in the homebuilding industry. There were many more local builders, but the industry, much like the fast food industry, has consolidated and turned it into a factory-like process that puts a premium on speed and keeping labor and material costs down.

I’ll never forget walking into a pair of houses built in 2007 that both had huge foundation cracks running from the top to the bottom of the basement wall. 2007! Most builders these days don’t care about getting the job done right. They just care about getting it done as cheaply and quickly as possible.

5. The Pride

This is strictly personal opinion. If I ever built a home, I’d feel like I took the easy way out in that I didn’t have to put any work in to improving anything. Having done a lot of remodeling work on both of the homes I’ve owned, I feel like there’s a lot of pride to taking something and leaving it in a better condition than when you found it.

Even if it’s a simple floor sanding or wall painting project, that just seems so much more rewarding than walking into a house that requires no elbow grease.

Building a New Home Discussion:

• Have you built a new home? What was your experience?
• Do you want to build a new home? Why?

Related Posts:

• 7 Tiny Home Benefits
• Box of Tricks Tiny Apartment
• Rent or Buy a Home

5 Reasons Why you Should Not Build a New Home is copyrighted by 20somethingfinance.com without consent to republish.

Admittedly, I haven’t made the leap from a regular-sized home to a tiny home just yet. But that hasn’t stopped me from strongly considering it. I have a 1,000 sq. ft. home with a semi-finished basement. And I’m desperately trying to declutter my life and down-size to a simpler lifestyle.

Since I’ve lost a pretty good chunk of change on my existing home, I haven’t made the plunge to a tiny home. But others are. The tiny home movement has taken off, and now there are dozens of tiny home manufacturers. And with a little study and help from some crafty friends, you could even build your own home in a short period of time.

Whether you move from a 2,000 sq. ft. home to a 1,000 sq. ft. home, or a 1,000 sq. ft. home to a 200 sq. ft. home, you can expect to enjoy a number of huge benefits from the transition.

Benefits of Making the Move to a Tiny Home

1. Tiny Homes Save Huge Money

The smaller the house, the lower the cost. Not only will you be able to open up room in your monthly budget, but if you have saved a modest amount, you might be able to pay for the whole thing up front and completely open up the ‘housing’ line item in your budget to other things.

2. Freedom from Debt

Big houses come with big mortgages. Smaller houses can result in no mortgage at all, if you play your cards right. And without that mortgage, you don’t have to feel the stress of wondering how you’ll be able to make your payments if you were to somehow lose your job or come across other financial hardships.

3. Freedom from Stuff

When you live in a small home, you have very limited space. It will force you to declutter and only keep things that you use frequently (in many cases, you will have to have multiple uses for an item).

4. Freedom to Take your Home with you

This is the biggest benefit of all, in my book. If you hate moving, raise your hand (envisioning 99 out of 100 of you raising your hand in front of your apathetic computer screen). What if moving was as simple as turning the key to your ignition and driving away? A large number of tiny homes are being built upon truck beds, making moving a cinch. Just think of the possibilities here. You could:

• Move your house when you take a new job without ever having to go through the hassle of selling and buying a new one.
• Never have to worry about hiring a mover and renting a damn U-Haul truck.
• Stay with friends/family for extended periods while not infringing upon their space (or them on yours).
• Avoid anticipated natural disasters.
• Never have to pay for a hotel room on any road trip.
• You already own a vacation home!

5. More Time

Homes are very time consuming. But what if you could vacuum your floor in 1 minute and just be done with it? The size of your home is inversely proportional to the free time that you have. With little home to take care of, you have plenty of time to do the things you really want to do. And that’s liberating.

6. Great Minds Think Alike

You’ll also become a local celebrity of sorts and random interesting people from around the country will strike up conversation wherever you take your home. Your home could become a community builder.

7. Better Quality Home

You should, in theory, be able to upgrade the quality of the home around you because you’ve been able to cut down on the materials and cost of the home so significantly. Putting in that marble counter-top shouldn’t cost that much when it is only 5 square feet. Hardwood floors? You can install hardwoods in your whole house for the price that most people pay for one bedroom!

Don’t take my word for it. Check out this recent PBS story on tiny homes and accompanying video about Dee Williams and her move to an 80 sq. ft. home (below).

Tiny Home Discussion:

• Have you made the move to a tiny home? How has it changed your life?
• Are you planning on moving to a tiny home?
• If you don’t think you’d ever be able to adjust to a tiny home, what are the big roadblocks?

Related Posts:

• Tiny Home Jay Shafer Inteview
• Box of Tricks Tiny Apartment

7 HUGE Benefits to Downsizing into a Tiny Home is copyrighted by 20somethingfinance.com without consent to republish.

I had previously highlighted Mapskrieg as one of the 4 best real estate search tools. Mapskrieg essentially overlays all Craigslist apartment listings over a Google Map, so that you can visually see the location of all the listings. Craigslist is very inefficient in that way on its own. You have to find the apartment address, then jump over to a map service and look it up. It can be very time consuming and not that helpful if you are honed in on a particular area.

Mapskrieg was the first of its kind to offer this service, which seemed amazing at the time. However, it hasn’t improved at all since it launched. And now a similar mashup tool has come along and taken its place – PadMapper

PadMapper is Superior to MapsKrieg

In my experience with Mapskrieg, searches for your city or zip only worked half the time. That was problem #1. Problem #2 is that once you completed a successful search, you didn’t have any way of filtering it down further. You basically have to click on each listing to find what you’re looking for.

In both areas where Mapskrieg fails, PadMapper succeeds. Every search I completed gave me results (note that for both tools you need to search in an area that has Craigslist apartment listings). It also works in listings from apartments.com and forrent.com (you can filter out both if you want to stick to Craigslist listings) so that you can have a complete apartment search without having to go to any other website or tool.

But it’s the filtering options is where PadMapper really succeeds. Here’s how it works:

Step 1: Search for the area you are looking for. And click ‘go’:

Step 2: Click the little ‘+’ box in the lower right corner to start filtering:

Step 3: Filter however you like to narrow down your options.

Filter Away: In the above example, you can see that I’ve decided to narrow my search down to apartments that cost more than $400/month, but less than $1,000 per month (trying to stay away from a crappy one and a real expensive one). I’ve also decided I want between 2 and 3 bedrooms, and 2 bathrooms. This narrowed my options down from hundreds to about 30.

If I wanted to, I could also have chosen whether or not cats or dogs were welcome, if it was a sublet or not, if there were pictures in the Craigslist post, and where the source is from. Pretty awesome!

Final Step: Super-Secret Advanced Features.

PadMapper takes things to the next level by letting you filter in quality-of-life components:

• Walking distance to work address
• Crime rate
• Walk Score
• A list of Yelp bars, groceries, restaurant, and gyms

Did I mention that PadMapper is free and you don’t even have to create an account? Good stuff. And for those wondering – no, I’m not moving to Provo.

Craigslist & Padmapper Discussion:

• Have you used Craigslist to find an apartment?
• Have you tried Padmapper? What did you think?

Related Posts:

• Real Estate Capital Gains Taxes
• Buying vs. Renting
• Tax Deduction from Home Sale

Craigslist Apartment Searches on Google Maps Mashups is copyrighted by 20somethingfinance.com without consent to republish.

This time the tax credit extension was voted as a 3 month relief to homebuyers who were tardy on closing their purchases. In order to take advantage of the homebuyer tax credit, you still must have had a signed purchase agreement by the original tax credit extension date of April 30, 2010.

With this new extension, you now have until September 30, 2010 (vs. June 30) to close on the purchase of the home. This legislation was forced, and overwhelmingly approved because it is estimated that as many as 180,000 homebuyers would not have qualified for the tax credit even though they had a signed purchase agreement by April 30, because lenders were inundated with buyers rushing to close their sale and qualify for the tax credit.

Related Posts:

• You May be Ready to Buy your First Home if…
• Real Estate Capital Gains Taxes on a Home Sale
• Buy or Rent a Home?

Homebuyer Tax Credit Extension Date Moved…Sort of is copyrighted by 20somethingfinance.com without consent to republish.

Capital Gains on the Sale of a Home: A Good Problem to Have

If you have to pay capital gains on the sale of a home, it’s really not a bad problem to have. It means your house has appreciated in value since you have purchased it. You’re luckier than just about anyone who has bought a home in the last 10 years! That being said, there are certain rules and exceptions that can exclude you from paying capital gains on the sale of property that should be at the top of your mind.

Real Estate Capital Gains Principal Residence Exclusion

There is a huge real estate capital gains tax exclusion that allows you to exclude $250,000 in profit (individual) or $500,000 in profit (married). In order to be eligible for exclusion from having to pay capital gains, you must have lived in the home as your principal residence for 24 months out of the last 5 years.

Why should you pay attention to this? Well, if you are considering when to sell your home and you know that you will make profit on it, but you’re not quite to that 24 month mark, you may want to consider holding until the two year mark.

Exceptions to the 24 Month Rule

If you lived in your home less than 24 months, you still may be able to exclude a portion of the exclusion amount.

According to the IRS, principal residence exclusions are allowed for certain “unforeseen circumstances“, including:

Capital Gains Partial Exclusions

The maximum partial exclusion that one can use if they meet one of the previously mentioned exclusions is limited to the percentage of the 24 months that the person fulfilled the requirements. As an example, if you owned and occupied a home for one year (half of two years) – you may exclude half the regular maximum amount, or up to $125,000 of gain ($250,000 for most joint returns). The proportion may be figured in days or months.

How do you Report Capital Gains on Real Estate in your Tax Return?

You must use IRS Form – Schedule D to report gains. When you have owned your home for less than a year, it is considered a short-term capital gain. Over a year is considered a long-term capital gain.

Can you Deduct Capital Losses on a Home Sale from Taxes?

Sorry, no. Real estate capital gains (and capital losses) are treated completely differently than other investments. Capital losses cannot be treated as tax deductions.

What About Exemptions on Capital Gains for Investment Property?

Sorry, you are not excluded from paying capital gains. In fact, capital gains on real estate were primarily created to take a cut of investment property gains. This goes back to the home needing to be your principal residence for two years rule.

More IRS Real Estate Capital Gains Tax Help

If this is a topic that hits ‘close to home’ (pun intended), you may also want to check out these IRS articles:

• IRS Topic 701: Sale of a Home
• IRS Publication 523: Selling your Home
• IRS Publication 530: Tax Information for Homeowners

Home Sale Taxes Discussion:

• Have you had to pay capital gains on a home sale?
• Have you been eligible for the exclusion on a previous sale?
• Did you wait to hit two years before selling to be eligible for the exclusion?

Related Posts:

• How to Sell your Home For Sale By Owner (FSBO)
• Buying Vs. Renting a Home: What to Look At
• Can you Deduct Money Lost in Home Sale?

Real Estate Capital Gains Taxes on the Sale of a Home is copyrighted by 20somethingfinance.com without consent to republish.

Tiny House, Big Budget… For Now

Innovation comes with a steep price. The apartment, located in Hong Kong, was created by Gary Chang, founder of an architectural firm called Edge Design Institute. It was his 4th renovation that yielded the ‘box of tricks’, at a price of $218,000. His efforts were ‘counter-frugal’, at worst. Since it was a prototype, the costs were going to be high.

What I’m hoping is that the design principles he worked into his apartment are adopted at a wider scale, which would bring on economies of scale, and lower the price of renovation for dwellings like his (pictured below).With the world’s population continuing to explode, the human race may not have any other choice.

But Small Can be Cheap

A number of tiny home designs exist, and a house under 250 square feet can be built for well under $20,000, or even free if you’re handy and resourceful enough. I interviewed Tiny House pioneer, Jay Shafer, in the fall. Shafer lives in a 998 square foot house that he designed and built from scratch. Between appearances on Oprah, he travels the country with his house on a flatbed trailer, showing others the virtues of tiny home living.

There are a lot of Great Lessons we can Learn from the Box of Tricks & Tiny Homes

What I love the most about the ‘box of tricks’ and other tiny homes is that they force you to simplify and de-clutter your life. You simply cannot live in a 344 square foot or 998 square foot dwelling without having to make a number of tough decisions about what really matters in your life.

When you give up all that stuff, in order to make a home that small comfortable and livable, you are forced to really re-consider what you value in life. You are forced to give up stuff. You free yourself from being owned by your stuff. And that has to be incredibly liberating.

Without stuff and with a tiny dwelling and a tiny or non-existent mortgage, you can live big on the cheap.

I have made a lot of steps in this direction over the last few years, but I certainly have a long way to go.

Does this type of lifestyle appeal to you as well?

Tiny Home Discussion:

• How small is your dwelling? How small do you think you could go?
• What comforts have you given up in order to free yourself from stuff?

Related Posts:

• 8 Personal Finance Spring Cleaning Ninja Moves!
• 8 Huge Benefits of Owning a Tiny Home
• 3 Simplistic Strategies for Getting Rid of Clutter
• How to Sell your Stuff Online

Box of Tricks: 1 Apartment, 24 Rooms, 344 Square Feet is copyrighted by 20somethingfinance.com without consent to republish.

Two years ago I sold my previous home FSBO for $140K (that’s it in the picture and more pictures below). Just out of curiosity, I was looking at home prices on Zillow for my old neighborhood. To my surprise, I found a house right down the street that is an identical twin to my old house selling for a mere $49K!!

I couldn’t believe it. It is literally the same exact structure as my old house at almost one-third of the price. It looks like the house is a real estate owned (REO) property. This means that it went to foreclosure and was not sold at an auction. The bank took ownership of the property and is now trying to sell it at a fraction of its value.

Granted, it looks like this house is not quite as nice as my old house and needs a little TLC – but not THAT much TLC. With about a $15-20K investment, it would probably be in better shape than my house was. Then you’re still looking at about only half price.

What can you Take Away from this Example ?

1. Barring major structural damage, I am positive that it would be hard to lose money on this house. For $50K, I have never seen a house this nice. 3 bedrooms, 2 baths, 2 story home in a desirable neighborhood. I might even consider this as an investment opportunity. There are bargains to be had in the market right now. If there in my neck of the woods, they might be in yours too.

2. If you’ve been on the fence about buying a home and come across opportunities like this, why wait any longer? I can’t imagine prices getting much lower than this. And if lower, how much lower could they go? Many experts are now predicting that prices will bottom in the first half of 2010. But why wait until they rebound?

3. If you’re a first time home buyer and can take advantage of the first-time home buyer tax credit on an opportunity that is this cheap, it would be kind of crazy not to. In this example, it would equate to almost 20% of the purchase price. That’s enough for the entire down payment!

4. 30-year fixed mortgages are still near a historical low of 5%. It’s a great time to lock in a low interest long-term loan.

My Advice on Looking for Homes

I’m not telling you to go out and buy a house, but what I am telling you is that depending on the market that you live in, there may be some true bargains out there and it is a great time to look for them and ask yourself if prices could get much lower and the timing better than this.

Home Buying Discussion:

• Have you bought a house recently?
• Are you considering buying a house?
• Has the 1st-time home buyer credit given you incentive to buy?

Related Posts:

• You May be Ready to Buy your First Home if…
• Are Home Sale Losses Tax Deductible?
• Your Home is an Investment?
• Should you Rent or Buy a Home?

I Could Buy my Old House for One-Third of the Price? is copyrighted by 20somethingfinance.com without consent to republish.