What if you just don't buy a home? - aka. "Housing market is dogshit" general

[Hippopatumus]

I understand that buying property is better than renting but as a relatively young adult just entering both the job and housing market, where the hell are you gonna get 20-40k for a down payment on a house? That's like, a yearly salary for most starting wages. At this rate of inflation, saving money is gonna be damn near impossible too. Is there something I don't get? Are you supposed to take out a loan or something?

This is a good question.

A starter home is around 250k these days (on average).

That will be around a $1500 monthly payment including taxes and insurance.

You can get a 5% down loan pretty much anywhere, so that will be $12,500.

While that is not a small amount of money that is something that most people should be able to save up in a year or two even on an average salary. This is accomplished by living within your means, OR having more hustle--side income, additional hours, etc. This is where discipline and sacrifice early on pay dividends later.

I'm not a huge fan of Dave Ramsey but he has some good advice. He has some "baby steps" that can help, that I will modify a bit because he's a boomer that has no connection to normal people's reality:

1. Invest in yourself. You can't build savings if you are making shit money. You need to train up and find a job that gives you breathing room. This is actually the most high-impact step you can focus on, and helps erase a lot of mistakes you may make along the way. At one point I had like 90k in credit card debt and was in terrible financial shape but I clawed my way back to $0 by working hard on my career.

2. Save up $1000 for a starter emergency fund. This helps insulate you from normal tribulations and lets you focus on growing savings.

3. Pay off debt. Debt is slavery.

4. Save 3-6 months of expenses in an emergency fund.

5. Save your house downpayment, plus a few thousand for moving expenses, incidentals, surprise costs.

6. Buy your house.

None of these are necessarily easy, but if you focus and don't fall prey to temptation, your life will be immeasurably improved in the long run. You will be happier and healthier.

The ladder is getting pulled up faster and faster every single day. There should be a sense of urgency in following these steps because the longer you delay the harder it will be and the bigger the boot will be on your neck holding you down and preventing you from ever seeing social mobility. Fortunately you don't have to outrun the bear, just the fat kid. For as many people as there are pinching pennies and outbidding you on good houses, there are even more folks burning up their credit cards with starbucks and buying the newest iPhone.

 

[MysticLord]

You will never own a home and rent sucks. so travel light and squat in property owned by Blackrock or the Chinese.

I mean why should kids these days care if BLM burns down half the city when they'll never own a home?

 

[Lichen Bark]

That actually brings up another question: What if you have no family home? How does that affect things?

That makes thing's pretty rough in my opinion, you're missing a bit of insulation from hard times. There are ton's of people using the Bank of Mom to get a leg up in the real estate market as it is, so you're competing with those people as well. Even some of my relatives stay at home with parents while they reno their new house. When I was younger knowing I had a bit of a shield if something went totally wrong helped me get into investing, because I didn't have any experience, and I didn't know anybody who was even doing it amongst my friends, even if I screwed up, I would be ok so to speak. I had a place to fall back to and regroup.

For some people that extra bit of inheritance can help get rid of the last bit of their mortgage. If you have no family home/don't expect any money from anyone in the future then, it's all on what you can earn. It's difficult to say what the next step should be, because it get's into powerlevel information about your life/friends/connections you can leverage/relationships/age etc.

I guess I would make sure I was working towards the best possible career I could/growing my small business, from a max income standpoint, the house would sort of be secondary for me, personally. Some people end up spending more money as their salaries increase, which is terrible, but I know some people wearing old clothes and driving a beater who are infinitely better off. Talk about a difficult question.

 

[NoReturn]

That makes thing's pretty rough in my opinion, you're missing a bit of insulation from hard times.

That's why I bring it up. It's one thing if you just don't like with your parents or maybe they don't want you there, but it's quite another of you're an orphan or your parent/parents is/are homeless or renting themselves.

Even some of my relatives stay at home with parents while they reno their new house.

I was wondering how people did this and I felt dumb when I learned they were staying with family. I'd spent the whole time previous trying to calculate home much money you'd need to rent a place while your home was being built or renovated.

For some people that extra bit of inheritance can help get rid of the last bit of their mortgage.

Family wealth is a real thing, and I have mad respect for people who take those steps for the welfare of their children and grandchildren.

 

[Joshuan Moon]

There are good times to buy a house and there are bad times to buy a house, but the bad times have to be really bad to be worse than not buying one at all.

If you want to get a feel for what a correction or crash might look like, check how much house prices have risen in the area you want to buy over the last twelve years (i.e. since the last crash). If they've gone up 40% nationally in that period and your area has gone up 80%, then you know your area is at a lot more risk of a severe drop than say an area where it's only gone up the national average or even less. I'm not talking about absolute values, I'm talking about percentage.

Right now I'm running off mostly emotion and fear (and probably jealousy of my home owning friends). This advice is good to keep things in check. Having a numeric value to estimate the impact of a possible correction would be key to knowing if my worries are valid or overblown.

You need to think of it in the context of the next twenty years of being a house owner. In that context, does waiting make sense? Are you still as worried about house prices being lower for five years before they go up again? Others have really highlighted how a lot of this isn't just about the difference in money, it's about the commitment in lifestyle, staying in work and other things.

I'm waiting to get a little more saved up and to resolve some personal questions that keep me from committing years instead of months. I'm not trying to time things to scoop up a sweet deal in a correction. I wouldn't expect that to happen until at least after midterms but could still hold out for years. No real sense holding out for that. Buying would mean me committing to my current circumstances in life for at least 5 years so I got to come to terms with that first.

Buying a house is not a quick process, anyway. You might find somewhere and be waiting four or five months before it goes through even if you do decide "I want to buy right now".

Good luck. We are all just fools on the Internet.

I have no real insight into how long it can take so that's good to know. My only real experience was with the place I was renting getting sold mid pandemic and being in the new owners' hands about 3 weeks after the listing went up. Definitely some good info here. I really appreciate the supportive comments.

 

[Oppressed By Corn Flakes]

Family wealth is a real thing, and I have mad respect for people who take those steps for the welfare of their children and grandchildren.

Depends. In most cases, the wealth is lost by the third generation because the kids never had to work for what they had and don't know how. There are exceptions, but mostly that is what happens.

 

[Bassomatic]

Rates are going to go up, so many people are going to fuck up major by rushing to beat hike, or get hit by a few points, and those add up fast compound interest is a bitch.

Now since it came up, there are programs for people with good credit to "buy out" PMI, now for those who don't know PMI is insurance you pay in case you default on the loan, normally for people under 20% Down. But yeah fuck paying to insure your bank. My best friend did that to keep more liquid either 200 till 20% (he put 10%) a month, or 2500 cash that day.. DUH! (also remember you pay interest first few years too so...)

For loss of family money it's often cited at 75-80% in those 3 gens. Fucking scary, shows you how those ultra wealthy pulled it off, 5 gens everyone made some loot and then great great great great grand kids are born on a leer jet kinda life.

In regards to family home and or family money, it's not just a meme, many boomers are credit stretched, I know people in 70s who have home notes (hey bank gets first dibs on life insure) but even if they do have a home/money etc, do not EVER plan around it or on it, wills take time, drama, etc, so if you see mom died and had 500k... don't go swipe your visa for a corvette, wait till thats in your hand and if you were looking at doing something big fisically, do it anyway and if/when any of that 500k comes it's a blessing and work with it like it fell in your lap. For example you want and can afford a 250k home.. get it and when that cash comes drop 30k and get your self some star trek shower and bathroom, rest in market. don't go oh.. and double your house budget.

 

[Quindoll]

Okay. Since the overwhelming response so far is for the purchase of a home instead of rent, I will play devils advocate for a little bit.

Sure. The key difference is that you get something extra for your money with a mortgage, and that something extra is equity.

Your rent is $2,500 a month all inclusive, meaning you pay $30,000 a year in rent.

Let's say you could apply that $2,500 to a mortgage payment instead. Take $350 off to account for taxes and utilities and/or condo fees, so $2,150.

What does that mortgage look like? Well, let's take a relatively bad interest rate of 4% and 10% down, amortized over a 25 year period--I'll spare you the math, but if you have $45,000 saved, you can get a mortgage on a $450,000 house for that kind of payment.

So, same payments, two different places, except on one you're paying rent and on the other you're paying a mortgage. Not much difference at first--most of your mortgage payment is going to be interest at first, but as you start to pay your mortgage, you start to repay the principal on that mortgage loan. Since you've reduced the principal of the loan with that first payment, the interest is less on the second payment, and so more of your payment goes toward paying down the principal. More and more of your payment goes toward paying down the principal as you make more and more payments, until 25 years later you've paid it all off.

What do we have at the end after paying the same payments for 25 years? Well, the renter has nothing, and the buyer has a house that they can sell, or refinance, or whatever. Chances are also really really good that that house is worth a lot more than he bought it for too. For simplicity's sake, let's say the house hasn't gained any value in the 25 years you've owned it.

When would you be better off not buying a house? Well, since you can cash out your equity in the house at any time, the only way it would make more sense to rent your whole life is if the total interest payments exceed the rent:

25 years of rent @ 2,500/mo = 750,000 payment
vs.
25 years @ $2,500/mo + down payment @ $45,000 - value of house @ 450,000 = $345,000 payment

So, even under these very pessimistic circumstances, it makes much more sense to buy than to rent. Interest rates and house prices would have to be very high and rent would have to be very low for it to make sense to not buy.

For people with extra money, this is why real estate is an attractive investment. Often, the rent payments can cover most of their mortgage payments and they get a free house at the end. See discussions on the "capitalization rate" in your city, a real estate specific term for the yield, for more in depth discussion. Very roughly, the difference between cap rates and interest rates, plus the value of the property, is the profit an investor can make on renting a property over the term of a mortgage.

Let's just take this in. As an explanation on how a mortgage works out in the long run? Perfect 10/10. As a suitable and fair comparison between renting and buying? Not so much. I really want to put emphasis on the "Well, the renter has nothing" at this point. Just keep that in mind. Let's start:

1. The downpayment
The buyer gets 45 k or 10 % our of nowhere. If we want to be fair, the renter should have at the very least the 45 k as well, right? Otherwise the comparison doesn't fit.
So we end up with at least 45 k.

2. Cashflow for the renter
Let's say we have a side-by-side duplex. One is owned, the other is rented out. The renter does NOT pay off any principal in this example. Furthermore his rent is also (correct me if I am wrong here for the US) already including the maintenance cost for the duplex. One is allowing the renter to be able to put money aside compared to the buyer. The other one is increasing the cost of the buyer, since he now has to put additional money away to pay for the maintenance.
So we end up with the 45 k + X amount of money each month in additional cashflow.

3. Investment
If the renter puts the downpayment money plus his free cashflow into a generic stock/bond portfolio, he did really well for himself in the past and should end up with a sizeable portfolio size after the 25 years.

Conclusion:
The statement "Well, the renter has nothing" is not really true, if the renter is putting his money into a portfolio and is saving. The behavior of the renter at this point is really important. So it doesn't have to end up with the quoted conclusion. Do renters overwhelming to what I describe? No. But that is not the point, is it? The choice of doing so is.

What is better return wise? Renting with investments or buying a house? I don't know. In the recent past, housing did great. In the more distant past, not so much. So I don't think it depends on the exact return or which now is better. That is nonsense. The behavior is more important. In both ways you end up with a sizeable amount of "wealth". I'd put the decision on buying or renting with investments more on the soft factors, such as:

Arguments for ownership:
- A mortgage is forcing you to save
- You are protected from your landlord canceling your renting contract
- You have more options to renovate/change your house to your own liking
- You can find joy in craftsmanship and working on your house as a hobby
- It just feels better to own a house compared to renting
- Family is more likely to "help" with money when it comes to buying a house compared to buying some stocks
- Owning a house is a simpler concept compared to a stock/bond portfolio
- Some form of housing is barely existing for rent (For large families for example)

Arguments for renting plus investment:
- A house is more inflexible for the changes in life. Illness, divorce, job loss, midlife crisis, emigration and so on.
- You can move with little loss if your area turns into a ghetto
- Renters usually have lower commute times to the job compared to owners - which all the additional costs this entails
- Most people end up with a lot of money in one single asset. Which is often an underestimated risk

So all in all I don't think it matters much what you choose. It depends far more on your behavior then on the asset itself.

For me flexibility is really important. So you can guess which choice I ended up with. I will buy a house if I find the place where I can surely see me spending the rest of my life there. That's about it.

 

[DamnWolves!]

@Quindoll

As a suitable and fair comparison between renting and buying? Not so much. I really want to put emphasis on the "Well, the renter has nothing" at this point. Just keep that in mind.

Fair, but I'm still going to push back.

The buyer gets 45 k or 10 % our of nowhere. If we want to be fair, the renter should have at the very least the 45 k as well, right? Otherwise the comparison doesn't fit.
So we end up with at least 45 k.

3. Investment
If the renter puts the downpayment money plus his free cashflow into a generic stock/bond portfolio, he did really well for himself in the past and should end up with a sizeable portfolio size after the 25 years.

Fine, granted, but you're treating it like the buyer's $45k is spent instead of invested.

The renter ends up with $45k in cash, and the buyer ends up with $45k in equity. What's the renter going to do with that cash? Probably invest it, as you point out. The only difference is that one is invested in the housing market and one is invested in like a 60/40 moderate risk profile with a ~5% return (you can't just look at the S&P and say "hurrr 3000% returns"; you need to blend it with bond rates to attenuate risk). Who's going to do better over the moderate-long term? Probably still the cash investor, you're right, but I don't think it'll be by much.

In my calculations, I'm treating them as if they have the same discount rate, which is why I'm subtracting the down payment's PV from the buyer in my calculations instead of its FV. I haven't missed it; I've just simplified it out.

The renter does NOT pay off any principal in this example. Furthermore his rent is also (correct me if I am wrong here for the US) already including the maintenance cost for the duplex.

I reduced the possible monthly spend by $350 a month to account for property taxes and fees--your bank will do that anyway when you apply for a mortgage. That might be a bit slim; I'm seeing that average maintenance is about $3.1k a year on the average $305k house, and we're talking about a $450k house in the example. But you're right; we should be subtracting another ~$100k from the buyer's total, with compounding market interest for 25 years. Works out to about $167k NPV. Buyer's still ahead, by quite a bit.

In both ways you end up with a sizeable amount of "wealth".

The amount of money you end up lighting on fire is significantly more in a rental situation. A much higher percentage of your spending in a mortgage situation can be redeemed at a later date. I'd love to be able to tell you "do whatever you want; it's all the same", but it would be irresponsible for me to tell people that.

 

[Just Some Other Guy]

I'd love to be able to tell you "do whatever you want; it's all the same", but it would be irresponsible for me to tell people that.

While that post was an attempt at playing devil's advocate, every time I see someone try to equate renting to home ownership it comes off as 100% coping. It's one thing to say "Yeah, I tried but I really needed something now and it's only temporary", and then there's saying "Well here's how renting is just as good, maybe even better".

 

[Quindoll]

@Quindoll

Fair, but I'm still going to push back.


Fine, granted, but you're treating it like the buyer's $45k is spent instead of invested.

The renter ends up with $45k in cash, and the buyer ends up with $45k in equity. What's the renter going to do with that cash? Probably invest it, as you point out. The only difference is that one is invested in the housing market and one is invested in like a 60/40 moderate risk profile with a ~5% return (you can't just look at the S&P and say "hurrr 3000% returns"; you need to blend it with bond rates to attenuate risk). Who's going to do better over the moderate-long term? Probably still the cash investor, you're right, but I don't think it'll be by much.

In my calculations, I'm treating them as if they have the same discount rate, which is why I'm subtracting the down payment's PV from the buyer in my calculations instead of its FV. I haven't missed it; I've just simplified it out.

I reduced the possible monthly spend by $350 a month to account for property taxes and fees--your bank will do that anyway when you apply for a mortgage. That might be a bit slim; I'm seeing that average maintenance is about $3.1k a year on the average $305k house, and we're talking about a $450k house in the example. But you're right; we should be subtracting another ~$100k from the buyer's total, with compounding market interest for 25 years. Works out to about $167k NPV. Buyer's still ahead, by quite a bit.

The amount of money you end up lighting on fire is significantly more in a rental situation. A much higher percentage of your spending in a mortgage situation can be redeemed at a later date. I'd love to be able to tell you "do whatever you want; it's all the same", but it would be irresponsible for me to tell people that.

Ya, the "which is better scenario" depends highly on the returns in housing, stocks and bonds as well in which housing market you are and how you allocate your portfolio. A 100 % stock portfolio will do better than a 50/50 stock/bond one. Mix in a few assumptions and we could have a never conversation over which is better in the end .

Let's take the maintenance cost for example. We only have to look at the cost of the house. So for the 450 k house. Dunno. Might be 100 k for the property and 350 k for the house itself. Let's think about that 1 %.
If we assume we want to compensate the depreciation of the house completely - we would be able to live in the house for 100 years. Not quite realistic, right?

Let's take the Vonovia SE, one of the biggest residential companies with around 500.000 units mostly in Germany, Austria and Sweden.
The average maintenance costs for the dwellings was 1,2% p.a. for their annual reports from 2015-2019. They also have the NAV value on the homes. Based on that the average maintenance was 2,4 %. The truth probably lies somewhere between those two figures.
Then one of us could argue that a renter is probably causing more wear on tear on the dwelling unit compared to an owner. Correct.
The other could argue that most of their portfolio is multiple dwelling units, which by definition have a lower wear and tear compared to a single family home and that they have cost savings when it comes to hiring craftsman and materials. Also correct.

The Federal Reserve Bank of Cleveland uses maintenance cost of around 2 % of the homes value by year. But this includes the property so it would be lower.

Buy a Home or Rent: A Better Way to Choose

Knowing whether buying a home is a better financial move for a family than renting requires a consideration of costs and options that people often neglect to factor in.

www.clevelandfed.org

I just mention them, because I think the calculation of the Federal Reserve Bank of Cleveland is very well made and can be replicated for your own assessment on what you do. You can put your own numbers and assumptions into it and see what works out better. If you are a handy craftsman, you can lower the maintenance costs and can up significantly better. Just as an example.

I just want to be contrarian here, since I believe there is a side that can argue for the rent & invest alternative.

While that post was an attempt at playing devil's advocate, every time I see someone try to equate renting to home ownership it comes off as 100% coping. It's one thing to say "Yeah, I tried but I really needed something now and it's only temporary", and then there's saying "Well here's how renting is just as good, maybe even better".

You see this on both sides. It's a shitload of money for most people. Probably the one thing they spend the most money on in their lifetime. So it's clear that everyone is going to be very defensive about their choices. That can come from the renter side as well as from the owner.

But since it is such a big investment, one should look at it and really plan it though.

 

[greenthrowaway]

Won’t let me reply to quindoll’s post for some reason.

“I will buy a house if I find the place where I can surely see me spending the rest of my life there. That's about it.”

By purchasing a home you avoid being priced out of your future residence as you’ll always have a similar exchangeable asset. Due to the nature of down payments you are afforded significant leverage into its return on investment and tax advantages. Even if you buy just to rent out a year later I think it’s beneficial to own at least one property at any time. Owning two free and clear significantly reduces cost of living as the rental covers insurance, tax, and maintenance on both. Additional cash flow can provide near subsistence with side work covering any luxuries.

Real estate isn’t the best investment class but it is one of the best classes to reduce cost of living.

 

[Quindoll]

Won’t let me reply to quindoll’s post for some reason.

“I will buy a house if I find the place where I can surely see me spending the rest of my life there. That's about it.”

By purchasing a home you avoid being priced out of your future residence as you’ll always have a similar exchangeable asset. Due to the nature of down payments you are afforded significant leverage into its return on investment and tax advantages. Even if you buy just to rent out a year later I think it’s beneficial to own at least one property at any time. Owning two free and clear significantly reduces cost of living as the rental covers insurance, tax, and maintenance on both. Additional cash flow can provide near subsistence with side work covering any luxuries.

Real estate isn’t the best investment class but it is one of the best classes to reduce cost of living.

I largely agree I would say. I kind off hinted that the landlord cannot cancel your contract and I would have to add to that, that ownership protects you from rent raises, of course. The cost of living argument is also true.

I don't dislike real estate. I just dislike the "prevailing" attitude that it is obviously the better choice than renting. It can be kind of disheartening to see the current prices in the market in combination with that attitude. Because then you are only left with the choice to take up a huge amount of debt, because the alternative is to literally burn money. It's just an alternative with it's own pros and cons. But is way better to just feel defeated and doing nothing.
Real estate or a stock/bond portfolio is miles better than just mindless consumption or letting the money idle around in a checking account.

The one way I would disagree with is the way of owning real estate. I would and do go out and get shares of companies which business model it is to rent out housing units. I believe these companies should just do better based on a few key factors:

- Risk is stretched out over far more properties/kind of properties
- They have dedicated legal/tax staff and knowhow
- They get discounts when it comes to maintenance cost, in material and labor
- They get better rates when it comes to loans
- Better rates for insurances

All these are cost benefits on the commercial side of renting. This is important, because if we go by Econ101 then the price of any good in a functioning market tends to go toward the cost leader in said market. Everyone else has to follow said cost leader, otherwise their goods will not or only partly sold. That shouldn't be fundamentally different in the rental market. And the above mentioned points put the commercial renting out ahead.

Otherwise. Behavior is key. And home owners largely end up with significant more wealth than renters. The force to build equity via the mortgage payment is a huuuge advantage.

 

[NoReturn]

Because then you are only left with the choice to take up a huge amount of debt, because the alternative is to literally burn money.

This is exactly how I've been feeling recently. I won't PL too much, but I will say that having personal experience looking for home in this environment is extremely disheartening and genuinely reminds me of how things looked pre-2008.

 

[iNEEDthatMoney]

Sure. The key difference is that you get something extra for your money with a mortgage, and that something extra is equity.

Your rent is $2,500 a month all inclusive, meaning you pay $30,000 a year in rent.

Let's say you could apply that $2,500 to a mortgage payment instead. Take $350 off to account for taxes and utilities and/or condo fees, so $2,150.

What does that mortgage look like? Well, let's take a relatively bad interest rate of 4% and 10% down, amortized over a 25 year period--I'll spare you the math, but if you have $45,000 saved, you can get a mortgage on a $450,000 house for that kind of payment.

So, same payments, two different places, except on one you're paying rent and on the other you're paying a mortgage. Not much difference at first--most of your mortgage payment is going to be interest at first, but as you start to pay your mortgage, you start to repay the principal on that mortgage loan. Since you've reduced the principal of the loan with that first payment, the interest is less on the second payment, and so more of your payment goes toward paying down the principal. More and more of your payment goes toward paying down the principal as you make more and more payments, until 25 years later you've paid it all off.

What do we have at the end after paying the same payments for 25 years? Well, the renter has nothing, and the buyer has a house that they can sell, or refinance, or whatever. Chances are also really really good that that house is worth a lot more than he bought it for too. For simplicity's sake, let's say the house hasn't gained any value in the 25 years you've owned it.

When would you be better off not buying a house? Well, since you can cash out your equity in the house at any time, the only way it would make more sense to rent your whole life is if the total interest payments exceed the rent:

25 years of rent @ 2,500/mo = 750,000 payment
vs.
25 years @ $2,500/mo + down payment @ $45,000 - value of house @ 450,000 = $345,000 payment

So, even under these very pessimistic circumstances, it makes much more sense to buy than to rent. Interest rates and house prices would have to be very high and rent would have to be very low for it to make sense to not buy.

For people with extra money, this is why real estate is an attractive investment. Often, the rent payments can cover most of their mortgage payments and they get a free house at the end. See discussions on the "capitalization rate" in your city, a real estate specific term for the yield, for more in depth discussion. Very roughly, the difference between cap rates and interest rates, plus the value of the property, is the profit an investor can make on renting a property over the term of a mortgage.

This was very informative, except the property tax.
Rent you pay to the state forever, so you never really own it fully.

https://wallethub.com/edu/states-with-the-highest-and-lowest-property-taxes/11585

New Jersey, according to that link , you would be burdened with an additional $200,000+ after 25 years in just property taxes.

 

[The Final Troondown]

tbf i pay £430 a month rent + bills + internet + council tax all inclusive for my flat
if i decided to mortgage id have to take over council tax, bills and the general headache of running a property as basically a second job which makes no sense to me

and what's the upside?

You're missing the part of the equation that builds equity. Your rent needs to be less than your cost of borrowing to make sense, not the cost of your whole house, and I can guarantee you it won't be.

Put another way: you can't compare your rent to your mortgage payment; you need to compare your rent to your mortgage interest payment on average.

You also need to consider that the housing market appreciates at a pace faster than interest and in some cases, faster than the S&P. If you can afford a house that you can stomach to live in, you really should be buying one.

you also need to leverage that against whether you'll still have a body worth using when it becomes time to unlock said equity in the house you bought
getting the post mortgage windfall in your mid fifties when you're half dead is pretty pointless

 

[BelUwUga]

So things kind of got weird with COVID. Prices were high before, some feared too high and an oversupplied market. Well lockdowns have a multifactor effect. People are losing work, people are staying put, but at the same time the cost of building materials has gone through the roof. A good lesson to take away from this is that getting in a hurry is a great way to waste a whole bunch of money. OP I noticed you're more looking at cleared land with modern, move in ready houses. You pay a very hefty premium for that privilege. If you have no carpentry/construction experience, I guarantee there is a charity in town that would love to have you at any skill level. You'll learn the basics, how to learn new things you need to pick up, and you'll get a good working knowledge of the $50 or so worth of tools that will save you thousands over a lifetime. Money, effort, or time, something has to pay for improvements. If you're short on money you'll need to put in more of the other two. Some options:

• Auction- be very careful to know the exact terms and know what you are getting into. Laws regarding this vary a lot and usually ignorance/errors are not going to play out in your favor. These will frequently be more work intensive. It may have evicted tenants or sat unoccupied for a while. Know your budgets, know your limits, and know when to cut your losses. My house should be going for about 3x what we bought it for. That said we put half the purchase price worth of repairs/construction over more than two years. Super cheap but not the fastest or the easiest. By nature of the market these are frequently in less-desirable locations.
• Old/small construction- a big part of what drove my prices down was that it was built in the 60s. There's some "tacky" stuff about it that I live with but the whole thing is beefy ass blocks with plaster/lathe interior walls that could probably stop a tank. In the non-asbestos floors that didn't require carpet covering, it's nice original hardwood. You don't really get overbuilt buildings quite like them anymore.
• Sheds- now hear me out. A shed and a house or garage are generally set apart by their lack of permanent utilities. Since sheds don't have them the permitting is either much easier or much cheaper. Now, usually there is zero regulation from you putting in a concrete pad with roughed-in connections, and then building a shed on top of it. Where I am there's like a 30 day hiatus where the shed permit has to close, and then you can pull plumbing/electric permits piecemeal. I turned about 10% worth of fees/taxes for construction and pretty much reduced it to a rounding error. That "shed" is a three car garage with an apartment above it today.
• Homesteading- if you don't mind surviving innawoods in the middle of BFE the government may literally give you land. It might be thousands of miles from a road or another person, but it's cheap!
• "Homesteading"- similar costs but setting up encampments on a more or less permanent basis in national forests/parks is very popular. The "Rainbow Family" does it near me every winter and as much as I hate the filthy wooks I'll recognize they literally operate cashless. Lots of weird drugs to purchase with odd currency (good tires and breakfast cereal always go very far). They're like Gypsies but should be trusted even less. Some are violent. They frequently skirmish with the white supremacists with compounds out there. It should tell you something that the locals pull for the klan even if they hate them. The rainbow people are that bad.
• Van life- like the light version of the above. Camping out in a vehicle in dubiously free parking areas.

 

[mindlessobserver]

Tl;Dr

Even if you are paying more for property then what it is worth you are still winning. If your mortgage is 30% underwater you are still banking 70% of the money you burn to keep a roof over your head.

If you keep renting you bank 0% and are 100% underwater.

Rent is for wage slaves and welfare niggers.

 

[eternal dog mongler]

• Auction- be very careful to know the exact terms and know what you are getting into. Laws regarding this vary a lot and usually ignorance/errors are not going to play out in your favor. These will frequently be more work intensive. It may have evicted tenants or sat unoccupied for a while. Know your budgets, know your limits, and know when to cut your losses. My house should be going for about 3x what we bought it for. That said we put half the purchase price worth of repairs/construction over more than two years. Super cheap but not the fastest or the easiest. By nature of the market these are frequently in less-desirable locations.

You can (sometimes) find something the USDA is auctioning off.

This is not always hillbilly country either since what the USDA classifies as rural doesn't make much sense. The good properties tend to have bidding wars on them though. Plus you need cash in hand if you win.

If you want some really cheap property though, that's how you'll find it.

 

[BelUwUga]

You can (sometimes) find something the USDA is auctioning off.

This is not always hillbilly country either since what the USDA classifies as rural doesn't make much sense. The good properties tend to have bidding wars on them though. Plus you need cash in hand if you win.

If you want some really cheap property though, that's how you'll find it.

Also an important thing if it's something like the USDA/BLM/Etc do not expect rationality from the bureaucracy. It can get weird. The absolute best method is to not be in a hurry. You can figure out when local sources update and you want to stay on top of it. You're not going to get any kind of interior inspection, in a lot of cases even entering the property is technically prohibited. If you end up buying they will not care. Specific performance is an incredibly difficult measure to impose. If you decide not to bid there's not really much they can do about it. Obviously know the legal definitions and what counts as "breaking" and avoid that but you can usually see enough to get a fair idea.

My process but with different dollar amounts, scale is proportionally about the same as actual. Budget was $60K, bidding was starting at $20K and we had a fair amount of confidence it would need no more than $10K. Add a 50% safety margin and we were "safe" bidding up to $45K. Not $46K or even $45,001, do not violate the boundaries you set for yourself her. It can easily start you down a ruinous path. We "missed" one at $48k and were bummed until we heard through the grapevine the interior was a disaster. Won the auction and closed for $42K and put about $7.5K worth of materials and a lot of man-hours into it. It's nothing extravagant but it is well made and more than well enough for my tastes. Once it was move in ready it probably would've sold almost immediately for >$70K.