Buying a first home: Las Vegas

[pig4bill]

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I think you should hold off buying for a few more years. I have a feeling vegas RE hasnt gone down nearly as far as it will.

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FYP

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The prevailing sentiment on this board is that housing, particularly in Vegas, will continue to fall. I dont' know if thats true or not. But I disagree that waiting to buy is best because I believe that you dont' have to look at your primary residence as an investment. That is your house. Buy what you want. If you can afford it and you feel like it'll improve your quality of life, by all means, by it. I wouldn't wait to buy on some vague notion that the market MIGHT fall farther in 2 years. IMO, that is a completely RIDICULOUS way to think. Clearly you want to buy a house. So buy one.

If you have 20% to put down and a 740 credit score (which is excellent), then you'll get a loan. The only difference is that you MIGHT have to pay a bit higher of an interest rate for a NO DOC loan. NO DOC loans are loans where the bank doesn't ask for income verification. But even now banks are dying to write high quality paper, which you are, so don't fret. You shouldn't have a hard time finding financing.

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That is just a BRILLIANT post to make on a business and finance forum. Who cares if he might be able to save fifty or a hundred grand by waiting a couple years, right? He'll be able to plant his vegetable garden NOW.

[SlowHabit]

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Slow,
these are good points. he doesn't need to own a house out in vegas though, he can rent, so the state income tax should work either way. also, from what i have been told, claiming the home office thing is one of the surest ways to get audited. for getting a tax rebate on 1/6th of his mortgage payment, as a professional poker player who probably has some things he wouldn't want the IRS seeing, that might not be the wisest decision.

i guess what i'm thinking about reading all of these replies is that there really is no "right" answer here. i don't think anyone can argue that renting is not the safer course of action here. if i'm an internet poker player (which i am), i'm certainly looking to minimize any other risks in my life over the next two years, at least until we all know more about how the environment in which we work in will change.

tc

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I don't know about others but I file my taxes so I don't care if I get audit. That does not mean I do not think getting audited is probably a pain in the ass and I will try to do my best to avoid getting audited. However, that does not mean I won't try to minimize my tax liability legally.

As for claiming 1/5th or 1/6th of the mortgage, it was just an estimation. If I buy a house with 2000 square feet in it and my home office is 500 square feet, I wouldn't forgive myself if I do not claim 1/4th of my mortgage.

As for renting is probably the safest route, you're right. But keep in mind that Good2cu wants to bang hot girls and raise his street cred. Renting just doesn't get it done. Well, it might if he already own a place somewhere else.

Another factor, which I think is very important, is that he's a poker player. It's not a job where adults will hear upon introduction and instantly think, "young man, I wouldn't mind if my daughter walk down the aisle with you." By having some type of asset, at least he'll feel better about himself and his profession. One might argue that he doesn't care what others think of his choice of his work but I am sure that he would be giggling from ear to ear if his job title generates compliments instead of "oh."

Which reminds me, when you introduce yourself to adults, do you introduce yourself as an entrepreneur/businessman [considering that you co-found CR] or do you say you're a professional poker player? I'll bet you $1 at even odds that you say the former more often [img]/images/graemlins/cool.gif[/img]

[DesertCat]

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If you took out a $250,000 mortgage fixed for 30 years at 7% interest you would be paying $1,600 per month.

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Right now you can rent a 3 bedroom, 2 bath house for around $1,300 a month, You could find a 2 bedroom apartment for less than $1,000. If you rented for 1-2 years you could easily put the $300-$700 month you save in a good interest earning place for a few years when the market is in less turmoil.


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I think you are on the right track. It's impossible for the vast majority of us to time markets. But it's possible to compare the cost of owning vs. the cost of renting. Though owning has some intangible benefits, you really want the costs to be at least similar before you own. After all if you make a mistake purchasing a home it's a very expensive and time consuming mistake to undo. And if you are a renter it's a lot less hassle because you don't have to maintain the place.

In this example, we haven't considered property taxes, insurance costs, maintenance, and lost interest/investment gains on our downpayment. Assuming this $250k mortgage is on a $300k home with $3K per year property taxes, $1k per year insurance, $1k per year maintenance and required a $50k downpayment, which could have been earning $2.5k per year in interest (5%). Your gross costs are $25k per year, or almost $2,100 per month.

Then you need to figure out how much of a tax deduction you will get. First you have to itemize, and if you make over $100k per year, you may lose some or most of your tax deduction because of the AMT calculation. But assuming you can keep all of it, and that you are in the 28% federal bracket, you'd be able to benefit around $5500 per year. So your net costs are about $1,600 per month.

Note: Don't get hung up on my estimates, use your own accurate numbers, I'm just showing you the template to doing the math.

But if you did estimate your ownership costs at $1,600 per month, and renting a similar place cost a similar amount, owning probably makes sense if you are planning to stay at least five years. Eventually you'll see some appreciation. You need at least 7% appreciation just to pay the realtor fees when you sell the place and break even, but everything over that will be gravy, so the longer you stay in the place the better ownership will work out.

If you are only going to own for a couple years, I'd just avoid the hassle and rent if the costs were similar.

[stephenNUTS]

Hey Taylor,

Your comment is abit different,as you are talking about buying a second/vacation home for yourself which has a totally different set of paramaters,such as higher mortgage rates for second homes,selling it first before your PRIMARY home in an emergency,maintanence,lack of a rental income maybe,etc.

He is talking about his FIRST primary home. If he plans on living there for 5+ years its another story.I have many years of R/E experience,good and bad(including the 1990's R/E collapse after the stock market crash where the sky was falling then too),but over time you I would rather own R/E than ANY instrument in the world.

There are a TON of steals,forclosures,even "short sales by banks"...which is the bank selling at a severe discount to the mortgage/mortgages held on the property(this was unheard of years back)in Las Vegas right now.The fact L/V has a vibrant economy,jobs,low taxes compared to us in the bigger cities...he will not get hurt if he does his home work beforehand

True ...prices "may" drift south in the next few years,but alot of the damge is done.There are PLENTY of scared sellers NOW,and by the time he "actually buys" will be a few months foward anyway which should offer him even more bidding flexibilty?

Some of the prices of homes I looked at during the WSOP in June in LV are already 30+% lower since then,and MUCH lower from their 2006 highs.

IMO Las Vegas incurred one of the greatest % rises,but also one of fastest to fall the last year or so.If a particular property owner was speculating/flipping the house with 0% down,then he has already felt the wrath of the damage,and anyone NOT speculating/flipping or also subject to one of those ridiculous ARM's are not going to give their homes away ,if they LIVE there.
Yes their net worth may have dropped,but if they have a job,retired,or paid CASH....they are not going anwhere.

Once this inventory has subsided,prices will slowly begin to appreciate,and a young person buying a home vs. renting or playing the stock market is well on his way $$$ long term.Just based on the #'s he mentioned above...he can be a [censored] MANSION compared to us in NY,Chicago,Boston,ect.!

As the supply dwindles(new home builders are DONE as of now)the market should be fine in next few years,but TIMING that is impossible!

On a side note..I think you live in Chicago?
Well I am seeing the R/E markets drop abit HERE now in New York as well,along with the other "bulletproof" big markets that have not felt the pain yet.I dont think they will fall anywhere near as hard... but a flat to lower market is expected here as well the the next year here also

IMO R/E markets that have gotten SLAUGHTERED first with a sound economic base ...will see a recovery FIRST (ala Las Vegas)

According to what he claims to be putting down 30% and a high FICO score,getting ONE FIXED RATE mortgage,along with this being a long term primary residence,he will not get "hurt" by any means if he shops around prudently now.

I am seing deals that are ludicrous(i am paying cash and that may be the reason) but they sure are out there

I also would reco. that he get a pre-approved FIRST mortgage before he bargains,as that holds alot of weight to with a potential seller,and hungry brokers willing to hunt around for you

The real recovery IMHO will not be when buyers return,but when credit standards are loosened on the consumers end,and that has already started with last months .50% Fed cut!

I do have a concern though if the Stock Market were to collapse,(then all bets are off)but I dont think that would happen with rates still historically low,as our dear FED GOV'T will do whatever they have to do,to save the economy and their asses from past debacles

~stephen feraca [img]/images/graemlins/cool.gif[/img]

**I mean i'd rather own a home that MAY go down abit than have a $100k+ laying around on PokerStars and Fulltilt earning me ZERO interest...no?

[scotchnrocks]

For those who are saying to wait because Las Vegas real estate is trending down, isn't it feasible that at least some of the property out there has already been corrected to a price near its actual value? And the additional declines that ya'll are expecting to see over the next year will primarily be a result of stubborn sellers who are slowly backing off their listed prices and getting closer to where the builders are?

[soko]

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For those who are saying to wait because Las Vegas real estate is trending down, isn't it feasible that at least some of the property out there has already been corrected to a price near its actual value? And the additional declines that ya'll are expecting to see over the next year will primarily be a result of stubborn sellers who are slowly backing off their listed prices and getting closer to where the builders are?

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http://www.cnbc.com/id/20907018

As of last month, 74% of homeowners don't think the value of their houses has gone down since last year.

"Is this a buyers market?"
http://www.businessweek.com/the_thre...s_a_buyer.html

[DonButtons]

Just rent for now. Prices are sick low anyway.

If things go bad with poker, you might turn into one of those super motivated sellers and lose a lot of money. And anyways market doesnt seem bottomed out yet. Supply lot bigger than demand.

[Jimbo232]

I've posted my thoughts on the rent/buy decision in some of the other recent "Should I buy a home" threads, but I wanted to make an additional observation.

Assuming most people are taking out a mortgage for a significant portion of their home - if you are tying to time the housing market by waiting X amount of months to purchase, by the same reasoning shouldn't you be taking into account potential interest rate changes and the effects on your housing costs? If we are going to try to time one market that the experts can't even figure out, why not try to time them all?

If you save $20,000 on a $400K home (5% decline) by waiting 12 months, but in that time the going rate on a mortgage increases by 1% (from 6.5% to 7.5%) the increase in monthly payments will eat away the costs savings in less than 7 years of payments. While we are in a time of historically high housing prices, we are also in a time of historically low interest rates. Just something else to think about if we are recommending trying to time markets.

I believe if OP feels the #'s from a buy/rent analysis show it is prudent for him to buy, and his lifestyle preferences making owning desirable; then by all means if you can find a good deal now there is no need to wait. Buying a primary residence should not be purely a numbers game - the biggest factors should be the OP's lifestyle preferences.

[SlowHabit]

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Just rent for now. Prices are sick low anyway.

If things go bad with poker, you might turn into one of those super motivated sellers and lose a lot of money. And anyways market doesnt seem bottomed out yet. Supply lot bigger than demand.

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I'm outrage an ex-owner of a lambo says this! [img]/images/graemlins/cool.gif[/img]

[maxtower]

Jimbo, in your example you have to also take into account that prices may fall even lower if interest rates rise because that too changes the rent vs. buy calculation. So basically its a wash.