What is best for 1st time home buyers? old cheap house bought cash or nice house with a mortgage?

I wouldn't mind to live in an old and not so beautiful cheap house for a few years in order to save money. And then, buy a nice house.





What do you think is better? Buy a nice house with a mortgage or buy cash an old house, wait a few year, and save money?





I don't have any children yet.

What is best for 1st time home buyers? old cheap house bought cash or nice house with a mortgage?
It's always the better route to avoid being in debt.





If you don't have a mortgage payment you're financially free. You won't ever have to live in fear of losing your job and being out on the street because you won't be able to make your mortgage payments anymore.





Personally I'd live in the old house forever and rack up huge savings by not having a mortgage and retire earlier.
Reply:Buy an older house, do repairs and improvements as you can afford to do it, then sell the house and use the money as a down payment later when you buy a better house.


I know several people that buy an old house, live in it while they fix it up, them move into another one and sell the one they just finished fixing up, and put the money towards buying another one or ultimately to paying a huge amount down on a new house.


Zeba


http://www.BeatTheDebtMonster.com
Reply:It really depends on what your taste is...In Southern California it costs about the same...older homes sometimes have charm and the neighborhoods are established...Schools, store. Starbucks...etc are close to you!


New homes are new! duh....You will get a warranty for major repairs on either ...but lets face it your warranty is better in a new home...with the sluggish economy, a new home builder may offer incentives..


You should look at three of each.....and decide!
Reply:Buy a cheap house in a good neighborhood.


Live in it.


Buy another cheap house and rent it.


Later you can live in a nice house.
Reply:If you pay with cash, you won't be able to deduct anything except the taxes. And you'll be stuck in a lousy house with no cash reserves. Buy something you can afford, with a reasonable mortgage, and save your money.
Reply:go with the newer house. seriously, there is no better time than now to buy. people are desperate to sell to get out of their mortgage and banks are desperate to get rid of all the properties they foreclosed on. Real Estate agents are desperate to work on your behalf too just to get some business. The real estate market is only bad if you aren't a buyer. if you have enough money, then get a new house. if you wait a few years you might have more money for a house, but the market probably will be better, the prices higher, and the interest rates higher too, so you would be losing money by waiting. don't be foolish though and buy something way more than you can handle or you will end up like a lot of those people that are being foreclosed on right now. good luck.
Reply:Well remeber to look at how you'll get your money back out of the home.





If you buy the old ramshakle house to "save money" for a few years, will you be able to sell it to someone else in 5 years?





If you buy the nice home with a mortgage, how much easier will it be to sell it in 5, 10 or 15 years?





Now, you might be able to get the old house cheap, fix it up a bit and resell it for a nice profit, but then you've got tax issues.





What's your exit plan?
Reply:If you have the choice between borrowing the money and paying cash, then what you want to do is compare the interest you will pay on borrowing to the interest you will receive on investing the cash.





Be sure to account for the deductibility of the interest on what's borrowed, and the taxes you will pay on the income.





For example, you can borrow at 6%, and invest at 4%, and your tax rate is 25%, then the effective cost to borrow is 4.5% and the effective income is 3%. That would make paying cash the better move. On the other hand, if your income were 8%, the effective after-tax income is 6%, while the effective cost of borrowing is 4.5%, meaning you gain 1.5% annually at the end of the day by borrowing.





You should discuss this with your accountant or investment advisor and find out what YOUR numbers are.
Reply:I'd buy the old house, live there a few years and fix it up, then when the market improves, sell it for a decent proft. That should give you enough enough to make a huge down payment on a new house, which will leave you will a small mortgage and low payments.
Reply:Can I give you some real advice?


Don't buy, rent a condo close to work and save as much as you can. A house is a liability, not a bank, as many find out this days. You pay repairs, taxes, utilities and if you have to move, you pay the real estate agent 7%.


Most people can't calculate the expenses of a house, otherwise, half of all homeowners would rent instead of own.


Naturally, if you spend the money you save, when renting, instead of saving it, you look back in ten years and have nothing to show for.
Reply:It depends on what you like. The old house will probably require more repairs and maintenance. But you won't have a mortgage. Since you are single , it may be to your advantage to take a mortgage and enjoy the tax benefits.
Reply:You should buy something that is affordable and decent so you won't have to do many repairs. Since the market is in a slump you will have many choices in regards to your housing needs. Take out a small affordable mortgage and enjoy home ownership. Good Luck!
Reply:Every wealthy real estate investor I know says always use OOPS"S (other peoples money!) Always get a loan, use as little down as possible. Now these people have done this for years and are extremely real estate rich. But it's not the cash or loan that is going to make you the money buying now why it's low. It's the location. If you buy a home make sure it's in an area that you know will be worth more later or at least hold it's value in the next few year then go up. Unless you find a really cheap home in the ghetto, but make sure it's a great deal and then fix it up. But never put allot of money into a house that is in a not so great area. You have to fix the house up to the area not better then the area or that money is a waiste becuase someone will buy the house next to yours that is in worse shape because it's less thinking in thier heads that they can do exactly what you just did to fix it up but for cheaper. I am a flipper, investor, realtor and a home builder!
Reply:With the housing market the way it is right now, I would say buy whatever you can afford.


It's a great idea to check out foreclosed houses, too. You can get a house that would normally be out of your range for a great price.


Either way, living in it for a while, you'll probably be able to sell it for more in a few years.

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