Doesn't this sort of depend upon your financial situation and whether you
look at investing in a home is a reduction in expense or an opportunity to
make financial gains?

My first house was an attempt to reduce expense - my house payment was $550
per month for a place that rented for $700 per month so it made since even
if the house didn't appreciate. Lucky for me it doubled in 6 years but that
was a gift that fell in my lap. If you can't save and invest on your own -
buying a home as an investment is a good choice. If you are saving and
investing and are comfortable you will reach your financial goals - buying a
house to reduce expenses is a good way to go.


"Amy McCall" <nyer18[at]yahoo.com> wrote in message
news:876f1bb2.0407101538.8b8f439[at]posting.google.com...
- quote -

Amy McCall <nyer18[at]yahoo.com> wrote:

- quote -

A rising tide lifts all boats (to an extent). While prices will rise
more in the most desirable areas, as long as your neighborhood doesn't
go downhill, a general area increase will affect it as well.

You will spend a ton more money to live in something upscale (I have
some concept of what people pay for real estate in north jersey), and if
you are comfortable in this middle class enclave, you can save the
difference. If you do that religiously, it will probably end up being
more money that you could have made on the resale of a more expensive
coop. And in the worst case (real estate downturn -- they happen), you
won't get stuck with a coop that you *need* to sell and can't for enough
to cover your mortgage.

Basically, you should make your decision for this like you would make
any other long-term *consumption* decision, like buying a car or a big
piece of furniture. Is it worth more to you in the long run to live in
the nicer neighborhood? As much as you'll have to pay? Can you afford
it if a relatively normal run of bad things happen (say real estate
drops 10-15% and while it is down, you end up out of work for a few
months, or need to relocate)? If the answer to all three of those
questions is yes, then go for it. If it's no, I would avoid the pricier
real-estate.

The only caveat here is how bad the neighborhood is. You've described
it as middle-class, and I'm not aware of Bergen County having any really
bad neighborhoods, so this shouldn't apply.

But if the cheaper place is truly unsafe (crack houses or bad projects
nearby, not much healthy community activity), and not looking on the
upswing, you might want to make sure you can stomach a near total loss
before buying in there.



Michael

Amy McCall wrote:

- quote -

Generally I would agree with the advice that you should treat this
something other than an investment. That is, being able to sleep at
night is worth a *lot* and there are alternative investment uses for
the amounts you are pushing towards the house.

That said, I would just make sure I understood *why* these
particular coop properties hadn't appreciated in the past few years,
and be sure I could live with the underlying issues. That is, have
they failed to appreciate because they are problems with the
building not being kept in good repair by the association, is there
some major issue with the specific location, is just that studios
aren't the type of property that buyers in the area are interested
in or that most properties in the area aren't coops (which are
unique beasts)?

That said, I find that for a lot of people a home is an item of
consumption that they can convince themselves is an investment, for
the reasons you mentioned. And for that reason, they tend to
believe it's "OK" to greatly overreach when buying a residence.
And, in fact, they view the price they paid for their home to be an
ego boost of sorts--heck, I live in a "$XXX,XXXX" home, so that
means I'm successful <grin> .

My own take is that if you can avoid that and view the home
dispassionately for what it is (fulfilling the requirement for
shelter) and then use the funds you aren't spending on housing for
other, more diversified investments, you are probably going to be
ahead in the long run. As well, my gut reaction right now (which
may be wrong <grin> , so take it with a grain of salt) is that the
current housing price boom can't continue forever--and when the
bubble bursts, it will be much like the tech stock crash.

So, personally, I think it makes a lot more sense to not put
yourself in a position where you could face a major cash crunch in
the near future if prices don't continue to rise and/or interest
rates go up. Too many people right now forget that even if we allow
the view that their home is an investment, right now for many people
it's a highly *leveraged* investment--and leverage adds tot risk.
Add to that the number of people paying "at their budget limit" with
interest only ARMs and you have a disaster waiting to happen.

--
Ed Zollars, CPA
Phoenix, Arizona

In article <876f1bb2.0407101538.8b8f439[at]posting.google.com> , Amy McCall
<nyer18[at]yahoo.com> wrote:

- quote -

This comes down to a lifestyle choice. Do you want a lifestyle
where your house payment is $275 a month (assuming you borrow the
whole $45K), or $1500 a month (for a $250K townhouse). That $1225
a month savings is going to add up to be a nice tidy little sum
over the life of the loan. In this case, I would suggest that you
do what makes you happy, and treat investing as a seperate issue.

-john-

--
================================================== ==================
John A. Weeks III 952-432-2708 john[at]johnweeks.com
Newave Communications http://www.johnweeks.com
================================================== ==================

Hi--I live in the New York area (Bergen Cty, NJ) and have an
opportunity to buy a coop in an otherwise pricey neighborhood with a
middle class enclave: The coop costs just $45,000 (studio unit) and
monthly maintenance is just $250. This is attractive to me because I
would not be rent poor. The downside is the history of this garden
apartment coop complex is a lack of appreciation over the years, not
making it a very good investment. I hear people gloating about their
coops and townhomes doubling and even tripling over the years, but I'm
not knowledgeable about what the costs are associated with such real
estate that might be eating into such massive appreciation. My
question is does it make sense to buy the modest coop and be able to
sleep at night or buy a more expensive coop or townhouse elsewhere
that might appreciate more in the future even if the maintenance/taxes
are higher? Thanks.