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Home Ownership

By David Luhman on Mon, 05/11/2009 - 23:31

Home Ownership

Is housing a good investment?

Should you buy or rent your housing?

Titling of property

Is housing a good investment?

Housing prices have done fairly well in the recent past

  • Up about ten percent annually in the 1970s
  • Up about five percent annually in the 1980s
  • Flat to down modestly in the early 1990s

With the baby boomers already settled into their homes, it's tough to be bullish on housing

Housing market will of course vary regionally across the United States

Should you buy or rent your housing?

Deductibility of mortgage interest makes housing seem attractive

But this also drives up the price of housing

Generally can use lots of leverage when buying a home

Can buy home with only 10 or even 5 percent down

Leverage increases potential for gains or losses

Because of closing costs, you generally need to stay in home at least five years to break even

People say that they want to stop renting and have something other than a pile of rent receipts

This argument for buying a home is weaker than it appears

If you buy a home, your payments are higher than if you rent

If you invest the difference in stocks, you'll probably have a valuable portfolio after 30 years -- but no home

But you obviously need discipline to invest in stocks

A mortgage forces you to save!

Also remember that when you take out a mortgage, you're still renting money

What value is a pile of mortgage interest receipts?

Best advice

Buy a home because you want to own one, not because of the "tax advantages" or the "capital gains potential"

Titling of property

Sole owner

  • Property passes to estate and is divided according to will or state law
  • In the case of an IRA, pension or life insurance assets directly pass to named beneficairy

Tenancy in common

  • Owned by 2 or more in equal or unequal shares
  • May be spouse or other
  • When tenant dies share is distributed like sole ownership
    • Doesn't pass automatically to spouse or other tenant

Joint ownership with rights of survivorship

  • Owned by two or more in equal shares
  • Tenants include spouses or others
  • An owner can transfer her portion by agreement of all owners
    • Any profits are shared among partners
  • If one tenant dies, share passes to surviving tenants

Tenancy by the entirety

  • For married couples in some states
  • Own property 50-50
  • Can't be sold without permission of both spousees
  • Automatically passes to other spouse upon death
  • In divorce, former spouses become tenants in common

Community property

  • Valid in a few states with a primarily Spanish legal heritage
    • AZ, CA, ID, LA, NM, NV, TX, WA, WI
  • Property acquired or owned by married people
  • Own 50-50 regardless of name on title
  • Includes real estate, wages, savings accounts
  • Does not include property acquired before marriage or by inheritance
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