House Buying - ZOMG HALP!

[WayAbvPar]

Private, hidden investments.

 

If you want to set down roots and raise a family, buy a house. Otherwise keep your options open and your money working for you in other places. Home ownership is a fucking pain in the ass. Especially when you buy at the very top of the market, like say, October 2006. Who me, bitter? Perish the thought. I love knowing that if I had waiting 18 months to buy I could have been 10 miles closer to work, 20 years or more newer on house age, and tons more property. Or I could have had an extra grand or so a month to invest (in poker pots).

[Merusk]

Private, hidden investments.

With a BIG prenup, "to protect THEIR investments from YOU." 

[Sky]

What I want to know is where is Paelos' 7% account :)

[Paelos]

What I want to know is where is Paelos' 7% account :)

Pick one of the index funds.

https://personal.vanguard.com/us/FundsSnapshot?FundId=0040&FundIntExt=INT#tab=1

There's a Vanguard 500 fund. 10 year growth on that is 7.77%, including the dip for the recession.

[Miguel]

I know you meant well, but loooool - Haymarket is not DC. When I said WASHDC, I meant it - not VA, not MD. I'd be working in the SW portion of NW, pretty much all my friends are in the relative area, and so is pretty much everywhere we would normally go for dinner and such. The only thing I'd be going out to VA for regularly would be to play hockey probably. Also, looking at the potential commute from there - you'd have to pay me, a lot, to deal with that terrible possibility - either driving in for about an hour on 66, or two hours hopping a bus to the Tysons metro stop and taking that in. I don't suffer from road rage now, but I think I would if I had to deal with that every day.

Wow...I so don't miss living in the DC area (Burke).  The multi-hour drives everywhere were a drag.

For ice hockey, I used to play at Mount Vernon Rec Center in Alexandria; played there when I was on the George Mason club team, and then in a rec league and I bet it's (still) pretty close to downtown DC.

[Morat20]

What I want to know is where is Paelos' 7% account :)

Pick one of the index funds.

https://personal.vanguard.com/us/FundsSnapshot?FundId=0040&FundIntExt=INT#tab=1

There's a Vanguard 500 fund. 10 year growth on that is 7.77%, including the dip for the recession.

7% is still optimistic. I'd use 3% -- 5% at most. Admittedly that's conservative, you're likely to make more over the long term than that. But better, in my mind, to lowball it.

Although my 401k has now hit the stage where I've "lost" or "gained" thousands of dollars overnight. (Not that I do shit about it but say "Damn, company stock took a beating". 10% of my fund right now. I thin it back every time it hits 12% or 13%. Pretty volatile and a huge chunk of my 401k.)

In terms of savings though, you also got to be realistic. Home ownership is "forced" savings. You pay your mortgage like you pay your rent. You don't cheat on it. Lots of people won't save cash that way though. I'm awful at saving like that myself, which is one reason I cranked my 401k contributions so high.

[Strazos]

Wow...I so don't miss living in the DC area (Burke).  The multi-hour drives everywhere were a drag.

For ice hockey, I used to play at Mount Vernon Rec Center in Alexandria; played there when I was on the George Mason club team, and then in a rec league and I bet it's (still) pretty close to downtown DC.

Yup, driving in the DC area is redic- I avoid it at almost any cost.

As for hockey - the Caps' rink in Arlington (Ballston, Kettler Iceplex) seems to have a men's D league that I'll have to look into, though Alexandria isn't necessarily too much further depending on when games and such are.

[Paelos]

7% is still optimistic. I'd use 3% -- 5% at most. Admittedly that's conservative, you're likely to make more over the long term than that. But better, in my mind, to lowball it.

Although my 401k has now hit the stage where I've "lost" or "gained" thousands of dollars overnight. (Not that I do shit about it but say "Damn, company stock took a beating". 10% of my fund right now. I thin it back every time it hits 12% or 13%. Pretty volatile and a huge chunk of my 401k.)

In terms of savings though, you also got to be realistic. Home ownership is "forced" savings. You pay your mortgage like you pay your rent. You don't cheat on it. Lots of people won't save cash that way though. I'm awful at saving like that myself, which is one reason I cranked my 401k contributions so high.

Why is that optimistic? I just showed you an index fund where the 10 year was 7%. The lifetime since 1976 was almost 11%. That's the market. It dips and curves and jumps, but in general the standard models would tell you risk-free returns run about 3.50% while there's a premium on other stocks investments depending on risk factors. Investing with a more diverse portfolio in various index funds averages out those risks.

[Yegolev]

I believe he means it is "Morat Optimistic".  I'm agreeing with Paelos here about the numbers, with the asterisk that there is risk in everything.

Maybe just buy some stocks that pay good dividends and don't think too hard about it.  There are several out there.  The most important thing to remember is that putting money into a mortgage is not a good financial investment, even if it is a great way to get a house now.

[Torinak]

I believe he means it is "Morat Optimistic".  I'm agreeing with Paelos here about the numbers, with the asterisk that there is risk in everything.

Maybe just buy some stocks that pay good dividends and don't think too hard about it.  There are several out there.  The most important thing to remember is that putting money into a mortgage is not a good financial investment, even if it is a great way to get a house now.

For "fire and forget" investing, a mix of low expense broad-based bond and index funds (e.g., total stock market, total international stock, total bond) can work quite well. Adjust relative percentages based on one's risk tolerance, and it takes only a few minutes a year to keep one's investing on track. Or for a one-stop shop, a low-expense target retirement fund can work too. No worries about picking the wrong handful of stocks, or watching high-flying "solid" dividend companies (e.g., Chesapeake Energy) suddenly cancel their dividends and plunge in value.

It's possible that we'll return to the long-term historical average returns of 10-11% (nominal) for the broad stock market, but there's nothing now and nothing on the horizon that could spur that kind of growth (we need infinite petroleum). 7% nominal is probably going to be as good as it gets, and I expect even that to creep downward as international economic policies continue to break the world while energy becomes increasingly expensive or scarce.