Personally, I think you are about to make one of the biggest mistakes that you could possibly make.

You want to buy to big liabilities (two homes) when you should not even buy one. Interest rates will continue to go down, so don't worry about that aspect, that should be the least of your problems right now.

You say that you have 30K in savings (assets). It doesn't make any sense for you to blow all of your assets to load up on liabilities (that is the way to make sure you will keep a heavy debt load for as long as possible or what your bank would want you to do).

Do you have to get married right now and spend 50% of your assets on that?

The smart way to approach home-ownership is to make sure that your assets will create enough monthly cash-flow to cover the mortgage payments. You have a good starting point with 30K and it would make no sense at all for you to blow that right now and start over from 0. Can you imagin how much time you will loose in doing so, how much risk you are willing to take?

I would recommend that you continue to add to your 30K, put that money to work and boost your assets until your monthly mortgage payment will be more then covered. Protect your assets, don't waste them.

Assets buy liabilities and not the other way around.

The majority approaches home-ownership the completely wrong way...want proof for that? Look at the economy, the housing market, the debt problem.

One more thing, do not buy a home and decide to use it as your ATM, to take out a home equity loan and pay for other things. Your home is your home so use it for what it was intended for, live in it. Period. End of story, treat your home like your home, your biggest liability on your balance sheet and do not attempt to view it as your personal banking institution (unless you want to follow in the footsteps of millions of home-owners that don't know how to get out of debt ot work the rest of their live to do so).

Be careful if you take loans from foreign banks and make sure you understnd the laws there. I would not recommend that a private individual will take a loan from a foreign bank (unless you have a good lawyer(s) just in case).

Hermes, Hermes, Hermes you wrote:
Homes are an ASSET not a liability.
The mortgage on the home, if any, is the liability NOT the home.
And what do you mean by.... "you should not even buy one?"
Are you saying paying rent would be better? The only other two options are live at home with your mommy or live under a bridge.


And then there's this:
If banks are dumb enough to loan money to people who probably won't pay it back on property that's priced double what it would cost to build the home brand new and then finance 100% of the inflated price then they deserve to go out of business and the former property owner can go back to paying rent.

Regarding the housing market....

It's quite good right now and I expect it will get better before it gets worse. Young couples and investors can buy at bargain prices now and during the next few years then sell same in five years back to:

Banks who are dumb enough to loan money to people who probably won't pay it back on property that's priced double what it would cost to build the home brand new and then finance 100% of the inflated price.

...and the simply continues...

__________________
Gary Spicuzza, *SAFE
Copyright 1956.
No Rights Reserved.
*Self Appointed Financial Expert

No, I did not mean you should never buy a home. I meant that you should not buy a home until your assets generate enough cash-flow every month to pay the mortgage. That's all. The 30K would be enough to accomplish that in my opinion but rather then to waste that for a down-payment (which is a waste of time and money) you should use that otherwise.

What I meant with 'you should not even buy one' I also meant that if the 30K is not enough to accomplish that you should wait until you have the monthly cash-flow in place.

If you want to view your home as an asset, that's fine. I don't recommend people to do so. I put them in the liability column due to all the expenses that are associated with home-ownership (not just mortgage). A true asset will put money into your pocket (to put it very simlpe) and a home does not due that. The majority views their home as an asset which may be very dangerous but in the end it is a personal choice you have to make.

One thing I agree with you is that there are bargains all over the real-estate market and smart investors can profit from the current melt-down which is very likely to continue for the rest of the year. Prices will continue to drop and shopping around for real-estate, either as an investment or simply to live in, should be quite some fun.

Yes, those banks and companies who are caught up in the real-estate crash deserve what they get. They knew the loans should have not been made in the first place but in a desperate attempt to boost profits the idea back-fired and now cost them billions of dollars...nice job by the funds that shorted that idea...

Thanks for both of your contrasting opinions.
Buying a home for my parents is my priority and I have to do that. My parents are citizen of that country and they have good relations with the banks there so I am not concerned about getting a loan from there, apart from the fact that it has 10.5% interest.

I think holding off to not buy a house here would be a better choice and just slowly build on my future.

Also I am not the kind of guy who can make my money grow. I can keep my money in savings and thats about it. I work hard for what i earn and save almost 50% of it. I just think that buying an equity is the best way to secure your money.

I understand not getting into two liabilities at one time but one of the liabilty is only $60000 which I think i should be able to pay off soon. (I dont see losing earning potential for good few years, I do have to keep a safe guard for emergencies and will try not to make any decisions where I will lose the ability to handle them)

If in case I do take a decision to buy a house here for ~$300k after making a downpayment of $30k, and based on a 30 yr fixed interest mortgage how much time does it take to build enough equity on it to get a $30-40k home equity line of credit.

Sir, Can you rent them a house instead of buying one at this time? 10.5 percent will be a burden for a long time. I would hold off on buying at this time. Avoid any debt would be my advice. Just keep saving. Robert

Hermes as we agree to disagree....

Hermes wrote:

Quote:

If you want to view your home as an asset, that's fine. I don't recommend people to do so. I put them in the liability column due to all the expenses that are associated with home-ownership (not just mortgage).

Are you really saying while a person is figuring their net worth they should list the value of their home in the liability column AND also list the mortgage in the liability column?

While it's true a person who rents housing never sees a property tax bill or property insurance bill or repair bill for maintenance they are most certainly paying for these items with their rent payment.

__________________
Gary Spicuzza, *SAFE
Copyright 1956.
No Rights Reserved.
*Self Appointed Financial Expert

No Gary, that's not what I said.

When you figure out your net-worth its best not to list your home at all (unless it is completely paid off). There is a reason why a popular magazine excludes homes as part of net worth of an individual.

You don't really own the home until its paid off and sure if you list the value of it in your asset column your net worth may look good but that is the problem. A home is the biggest illusion of wealth especially among the middle-class since they feel wealthy and start to use it like an ATM...we all know the story, come on Gary.

Hey, just for the heck of it...do your balance sheet and do not include the value of your home and just list the monthly expenses in your liability column and see if things still look as great. If they do, perfect.

Since a home should not be used for anything else but to live in it why would you want to list it as an asset in the first place?

The majority does have a problem with that for obvious reasons. A home is attached with many emotions and emotions lead to poor financial decision making. Having said that, the majority are not financially independent and lacks a solid financial foundation (if this would be wrong we would not have a debt problem to start with).

The standard approach for the calculation of net worth is worth less then many think it is. All I do is give people another way to look at it, one way that will keep you out of financial problems many face after purchasing a home. There is a reason why so many people struggle with it.

Yes, if you rent that all the expenses listed the tenant pays for as, I agree with you.

Listen Gary, I never said that to rent is better then to own, not at all. What I do say is approach it the smart way to avoid potential problems so you can enjoy your home and be aware that whatever wealth you may feel from your home...it is nothing more then an illusion of wealth to the majority.

Odigo,

buying an equity is not the best way to secure your money. The best way to secure your money is to purchase real assets and not liabilities or even worse liabilitites that you mistake for an asset.

If you're priority is to purchase a home for your parents then do that since you seem to accept the high interest on the loan.

I still would not recommend that you use your only assets that you have as a down-payment for a home. That would be a complete waste.

If you don't have the knowledge to put your money to work you may want to start to invest some of your time and possibly money to edcuate yourself about what you can do (it will pay-off in the long-term). Just to put 50% of your earnings into a savings account (which is impressive) but you really loose out a lot. Even to get fee-based advice on what to do with your money will give you better results than just to put it in the bank (which is the second worst thing you can do besides to burry your money in the backyard).

I think you already have the complete wrong thinking pattern as you start to think about how long it will take out in order to get a home equity loan. Basically you want to take out a liability backed by a liability that you do ot own.

Why do you want to use your home as a credit institution?

Use it to live in it and for nothing else (That is only my personal opinion).

I just think that even you may do ok now that you just call for financial problems down the road.

Hermes your positions on this subject are preposterous, contradictory and not grounded reality.
$30,000 would not generate enough cash flow to pay the mortgage unless your calculations use unsustainable gains as you continually posit.

A $100,000 30 year fixed mortgage @ 6% has a Principal and Interest payment of about $600 per month requiring a 24% Return On Investment year after year after year each and every year just to service the debt.

But wait, there's more, in Florida, you can add another $400 per month for taxes and insurance bringing the total payment to about a $1,000 per month.

With that in mind, now you must have a 40% Return On Investment year after year after year each and every year on $30,000 to pay the total housing cost each month.

I know, I know, I know a 40% Return On Investment is no big deal for you because you "know" what you're doing!

Which leads to your comments such as:
Opinion being the operative word.

__________________
Gary Spicuzza, *SAFE
Copyright 1956.
No Rights Reserved.
*Self Appointed Financial Expert

Gary,

I am glad that you seem to be the one and only person on this planet who knows every single home-owner and that you have it all figured out.

Yes, the majority will follow the approach that is accepted as the right way to own a home which is perfectly fine with me. You don't like the idea and that is your own opinion which I do respect but do not cali that it is not grounded reality.

It is easy to accomplish but that not favored by the majority. The majority favors high debt loads and financial dependence on their employer. That is what they have been told is the right thing to do. Study hard to get a great secure job with benefits and invest in mutual funds and max out your 401k...that is the standard (very simplified). The only thing that aggrevates me is if those people ask for help from the government or anyone for that fact.

If that approach would be a smart and good choice we would not face the continued problems we have. The minority goes against those principles and for some reason do not face those problems.

In the end every single person needs to decide what is in their best interest. You may think that those gains are unsustainable and that is not correct. They are unsustainable for the majority of individual investors and for mutual funds, I agree with you on that but it can be accomplished so don't claim it can't be done. The majority will not go down that road and once again all I say is to give another way to look at it.

Gary, it seems like you have problems with different opinions or at least with my opinion which doesn't bother me at all. The nature of humans is that if you don't understand something you just classify it as bad or impossible to accomplish. It has been like that for centuries and I could care less, it's not my problem.

At the very least I hope to point out potential problems with the standard approach and make them think twice, consider more options and then decide.

You seem to make all your points based on what has been done by millions before and claim it has worked but has it really worked?

Don't even try to answer that question becasue it depends on how you qualify 'worked'.

Do what you think is best for you and let the individual decide what is best for them.

Gary, you made all my points for me... thanks!

First off, I do agree that I don't think you have quite enough saved yet, before doing all of this. Your going to need some money to put into the homes you buy (if you don't believe this, then you don't have experience buying homes). Also, you are going to need emergency funds, anywhere from 6-12 months salary, in liquid savings. This is to protect yourself and your family in case of job loss or salary cuts. Remember, you are financing your parent's home and therefore their home is at risk the same as yours.

Lastly, in order to get an equity line on the new home, you'll ideally need to have double the equity, although you'll find lenders that will push the envelope on this (80-90% equity available). So you'll at the least have to have $60k paid down in order to have $54k in equity available, if not closer to $100k of equity available. If the equity line is fixed rate, and it is less than 10.5%, then your strategy would indeed work, assuming you have the equity available.

I think you have a good strategy, I just don't think you have enough cash to pull it off... yet. And since Hermes can get you a 40% return, probably over the course of a month or two, with no risk because of his unique knowledge, maybe you can get this done even sooner!

Hermes, if you want a bunch of money for your hedge fund, here's what you do... start a bank, and guarantee 10% fixed interest 12-month CD rates. You'll get an unbelievable amount of principal, and at your investment returns, you'll make a killing! And I bet it's a bigger % than the cut your hedge fund(s) get! Since there is zero risk because of your unique knowledge, this should be no problem for you.

Just my 3.14159... cents.

There is just one small problem with your idea in regards to me (and I don't know if you wanted to be sarcastic, insulting or both but in he end I could care less):

I do not want anything (as you suggested). The only thing I have always done is give my point of view. Now, you may disagree or not like it at all, maybe you think they are stupid and that is your opinion which is fine. I may do the same with your suggestions. I think that's why we are here...to offer our opinions and then let the individual decide what is right for them.

The only thing I would ask you not to do is accuse me of something that I have not done (which is what you did in your last post to this thread). You can dislike me or my ideas all you want and insult me if that makes your day a bit better but stick to the facts. I can't recall that I have ever accused you of something that was not correct.

Continuing on with my previous box rant......

Hermes if two equally qualified persons in all respects walked into the bank and wanted to buy a $100,000 home and each had $30,000 cash to use for that purpose. The one who puts 20% down ($20,000) and finances the balance of $80,000 is going to get the loan/home. They still have $10,000 cash on hand.

The one who tells the banker/lender his Return on Investment is 40% on his $30,000 which generates $1,000 per month income... so, ({your words in bold} "rather than to waste that for a down-payment (which is a waste of time and money") wants the banker to loan him $100,000 to buy the house because ({your words in bold} "your assets generate enough cash-flow every month to pay the mortgage") is NOT going to get the loan/home without collateralizing most or all of the $30,000.

The banker/lender may very well be impressed with your ability to earn 40% per year guaranteed each and every year in any market but the loan underwriters (of reputable lenders) are going to remove the word RISK from the transaction.

__________________
Gary Spicuzza, *SAFE
Copyright 1956.
No Rights Reserved.
*Self Appointed Financial Expert

Hermes,

I've always stated I appreciated your opinion.

However, you also have to understand that I care about the people that come to this board and will challenge, professionally, any post that deems to give inappropriate advice.

Why do I consider your advice "inapprorpriate" many times? Because you don't understand the person you are giving advice to!

The fact is, since you want to deal with facts, the vast majority of those who come to this board are looking for ideas that are realistic, appropriate, sincere, and doable. You may "think" a 17% average annual rate of return provided by a mutual fund portfolio is bad compared to what you can do, but that's not the point. The point is that the typical individual posting on this board would probably be ecstatic with getting 17% average on a well-diversified, low-expense mutual fund portfolio. Why? Because it's something they CAN do! And they can do it with a lesser degree of experience in dealing with investments.

Can a more experienced investor earn a greater return? Certainly. Can leverage be used to enhance those returns? Certainly. Can investments strategies be used to reduce risk in greater return investments? Certainly.

But it is simply unrealistic for most. Not to mention, any regulatory agency would question why an inexperienced investor was "advised" to invest in a hedge fund, relying on an assessed growth % to fund their mortgage! That's exactly how pension funds became corrupted. They overstated returns and when those returns didn't actually happen, they had no money to honor their obligations. Unfortunately, individual investors do not have a government agency that will step in and bail them out when they do something ridiculously stupid like that.

Since the Democrats (political joke, ha ha!) haven't created a regulatory agency that supervised general advice being given on discussion boards/forums, we have to self-regulate the posts on this board.