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Wellesley Rent: $2500 or Buy: $554,900

 
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melonleftcoast
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PostPosted: Sun May 25, 2008 11:51 pm GMT    Post subject: Wellesley Rent: $2500 or Buy: $554,900 Reply with quote

Rent this house for $2500 a month

http://boston.craigslist.org/gbs/abo/691920367.html

Or buy it for $554,900

MLS#70643992
http://www.realtor.com/ ...truncated...

Even if one put 20% down and with an interest rate of 6%, the mortgage alone (not including taxes, insurance and maintenance) is still more than the rent. Add another $500/mo for taxes and insurance and $200/mo for maintenance. Some people might want to pay that much more to own, but I think I'll save and invest the extra $800+/mo and keep on renting.

Come on seller! Wake up!

Editor's Note: This post was edited to abbreviate a URL which was widening the page due to the way that the forum software lays out posts. No other changes have been made, and the URL still points to the original destination - only its display has been shortened.
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PostPosted: Mon May 26, 2008 2:24 am GMT    Post subject: Reply with quote

Yeah the price may be a little high but if you were serious about buying you could probably offer a reasonable amount less. And/or you could use a 5 or 7 year arm which puts the mortgage below rental cost (you could always refi later if you wanted). You still have property taxes and maintenance (although that is not a guaranteed expense). My point is, this example doesn't seem too bad in my opinion, and if your income is high enough to afford this mortgage the tax writeoff would bring your costs down even more. Buying always costs more at the beginning than renting, so I'm not sure what your point is. You expect to buy a place for what your paying in rent? It takes a while before you reach or surpass the break even point.
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melonleftcoast
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PostPosted: Mon May 26, 2008 2:40 am GMT    Post subject: Reply with quote

Funny, my husband also thought it was a reasonable price since they were so "close" in value, once the tax deductions were figured in.

However, one still has to be willing and able to put $111,000 (20%) down for the numbers to work out so nicely.

That is a lot of money to most people, including me. My point is that buying a house is still much more expensive than renting the same house. Too much more expensive, IMHO. That "homeowner premium" may be worth it to some people, but not me.
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admin
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Joined: 14 Jul 2005
Posts: 1826
Location: Greater Boston

PostPosted: Mon May 26, 2008 2:48 am GMT    Post subject: Reply with quote

Good to see you back, mel.

melonleftcoast wrote:

However, one still has to be willing and able to put $111,000 (20%) down for the numbers to work out so nicely.


Right, and that represents a substantial opportunity cost when used as a down payment. That's at least several hundred dollars in interest you could be earning per month, invested very conservatively.

Also, refinancing is not always an option. Rates can go up, and you take on interest rate risk by using an ARM. Best to lock in low rates now with a fixed rate.

- admin
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Rentaholic
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PostPosted: Mon May 26, 2008 10:52 am GMT    Post subject: Reply with quote

A complete No Brainer

Rent , and if u like it a whole lot
explain economics 101 to owner,
maybe he will take the 400K
the house is worth Exclamation
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PostPosted: Mon May 26, 2008 2:02 pm GMT    Post subject: Reply with quote

admin wrote:
Good to see you back, mel.

melonleftcoast wrote:

However, one still has to be willing and able to put $111,000 (20%) down for the numbers to work out so nicely.


Right, and that represents a substantial opportunity cost when used as a down payment. That's at least several hundred dollars in interest you could be earning per month, invested very conservatively.

Also, refinancing is not always an option. Rates can go up, and you take on interest rate risk by using an ARM. Best to lock in low rates now with a fixed rate.

- admin


1. Yes there is opportunity cost, but there always has and always will be. It basically boils down to "instant gratification" vs "delayed gratification". By keeping your cash in the bank and collecting interest on it you may feel that your money is actually doing something for you rather than being "cooped up" in a property. However, the rates banks are paying is very low and with real inflation likely much higher than what the govt is stating, your money is actually losing value. Long term it's a terrible strategy to keep it in cash, it would be better to invest in stocks but then you have taken more risk of course.

2. Regarding the refinancing, you're absolutely right. If your timeline is long than you may as well get a fixed rate. However, the whole argument is whether to buy vs rent when the premium isn't really all that far off. If you are renting, than obviously you aren't "locked" at a low rate either, so you are taking the exact same chance as you would with an ARM about where rates will be. I also think ARMs have gotten somewhat of a bad rap since they are a great option for people with 20%+ down, good credit/income since it allows more flexibility with your payment options.
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PostPosted: Mon May 26, 2008 2:07 pm GMT    Post subject: Reply with quote

Rentaholic wrote:
A complete No Brainer

Rent , and if u like it a whole lot
explain economics 101 to owner,
maybe he will take the 400K
the house is worth Exclamation


Let's see, 400k @ 20% down @ 5.25% (easy with a 5-7 ARM) = $1767 (you can actually get lower rates than this).
+ property tax $500/mo

$2267/mo - not even factoring in tax deductions

Sounds a little unrealistic to be able to buy it for less than it rents for, but if you can find this deal I suggest you jump all over it.
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PostPosted: Mon May 26, 2008 2:13 pm GMT    Post subject: Reply with quote

melonleftcoast wrote:
Funny, my husband also thought it was a reasonable price since they were so "close" in value, once the tax deductions were figured in.

However, one still has to be willing and able to put $111,000 (20%) down for the numbers to work out so nicely.

That is a lot of money to most people, including me. My point is that buying a house is still much more expensive than renting the same house. Too much more expensive, IMHO. That "homeowner premium" may be worth it to some people, but not me.


Yeah, I understand it's a lot of money, but with two incomes you should have been able to save that amount pretty easily in a few years. I did it on one income, and I seem to be in a typical position with people I know.

It's always going to be a personal decision on when the "premium" is worth it to buy and I respect that, but it's not as far off as some people make it out to be. For me the premium is worth it for many reasons, but as long as you are happy that's all that matters
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admin
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Joined: 14 Jul 2005
Posts: 1826
Location: Greater Boston

PostPosted: Mon May 26, 2008 2:18 pm GMT    Post subject: Reply with quote

Anonymous wrote:

1. Yes there is opportunity cost, but there always has and always will be. It basically boils down to "instant gratification" vs "delayed gratification". By keeping your cash in the bank and collecting interest on it you may feel that your money is actually doing something for you rather than being "cooped up" in a property. However, the rates banks are paying is very low and with real inflation likely much higher than what the govt is stating, your money is actually losing value. Long term it's a terrible strategy to keep it in cash, it would be better to invest in stocks but then you have taken more risk of course.


I don't disagree that cash is weak long term investment, but it will outperform property as long as price appreciation is falling or anemic. I don't expect that situation to last forever, but while it does last the opportunity cost is a lot greater than normal. Price appreciation would normally balance out the opportunity cost, so in normal times the opportunity cost isn't as big of a deterrent.

Anonymous wrote:

2. Regarding the refinancing, you're absolutely right. If your timeline is long than you may as well get a fixed rate. However, the whole argument is whether to buy vs rent when the premium isn't really all that far off. If you are renting, than obviously you aren't "locked" at a low rate either, so you are taking the exact same chance as you would with an ARM about where rates will be. I also think ARMs have gotten somewhat of a bad rap since they are a great option for people with 20%+ down, good credit/income since it allows more flexibility with your payment options.


The difference with rent is that you can more easily move.

ARMs have gotten a bad rap because people went into them only looking at the initial monthly payments, expecting to refinance in a few years when the artificially low teaser rates reset. That turned out to not work so well with higher rates and falling prices. What's not being accounted for is that while lower interest rates mean lower payments, they also mean higher risk.

- admin
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melonleftcoast
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PostPosted: Mon May 26, 2008 6:48 pm GMT    Post subject: rent vs. buy Reply with quote

Thanks for the welcome back admin. Our new baby girl is doing great. It looks like I'll be changing my username to melonrightcoast this summer. Or maybe it should be: melontherightcoast Very Happy!

Guest:

I think many people would disagree with you that saving over $100,000 is easy to do. It takes planning, discipline and perhaps some lifestyle sacrifices to be able to do it, and clearly many people are not capable of doing it or we wouldn't be such a nation of debtors.

Not to pat my back too much, but we've been able to save nicely on one salary. However, we've done it with some specific lifestyle choices, such as owning only one (older) car, kicking the starbucks habit, drasticly limiting our dining out expenses, RENTING and investing.

I'm a bit hesitant to put that money into a (currently) depreciating asset. Maybe I just don't value homeownership enough. Maybe it is just that I don't like what our money can buy us in Boston. Maybe we value our time and don't want to spend it doing home improvement projects. Probably all those things will change someday and we'll decide to buy. But not this year. Maybe next year.

As for ARMs, like admin said, there is a risk in using them as your rate isn't set. Additionally, as I'm sure it has been pointed out many times, one's costs are not truly fixed being a homeowner, as property taxes and insurance costs can and do increase. When we were homeowners, we had a property tax increase at about $175/mo. That was what we had budgeted for saving for a vacation.
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JCK



Joined: 15 Feb 2007
Posts: 559

PostPosted: Tue May 27, 2008 6:31 pm GMT    Post subject: Reply with quote

Just my thoughts. And I haven't done the math on buying vs. renting this particular property...

One of the biggest factors in this decision is your own personal timeframe.

If you think you may be in Boston for a just few years, or if you'll likely want to move into a different house before too much longer, then I think renting now is much more sensible.

However, if you think you're likely to be around for a longer time period, and this house matches up well with your needs over the long haul, then buying may be financially more sensible.


When I look at the choice between fixed rate and ARM, one thing to pay attention to is the difference in rates between the two products. If you're only looking a small difference in rates, I wouldn't get the ARM, because it involves more risk than the fixed rate, and little benefit. Sometimes, however, the spread is much greater (as much as a full point). In that situation, I'd be much more willing to take on the risk, in exchange for the guaranteed savings (assuming you don't spend the savings foolishly).

But admin has correctly pointed out some of the downsides to ARMs, which are (a) that a refinance depends on at least stable property values, and (b) that there's risk that rates will be higher in the future.
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melonrightcoast



Joined: 22 Feb 2009
Posts: 236
Location: metrowest

PostPosted: Tue Mar 03, 2009 2:48 am GMT    Post subject: Re: Wellesley Rent: $2500 or Buy: $554,900 Reply with quote

melonleftcoast wrote:
Rent this house for $2500 a month

http://boston.craigslist.org/gbs/abo/691920367.html

Or buy it for $554,900

MLS#70643992
http://www.realtor.com/ ...truncated...

Even if one put 20% down and with an interest rate of 6%, the mortgage alone (not including taxes, insurance and maintenance) is still more than the rent. Add another $500/mo for taxes and insurance and $200/mo for maintenance. Some people might want to pay that much more to own, but I think I'll save and invest the extra $800+/mo and keep on renting.

Come on seller! Wake up!

Editor's Note: This post was edited to abbreviate a URL which was widening the page due to the way that the forum software lays out posts. No other changes have been made, and the URL still points to the original destination - only its display has been shortened.


I thought I'd update this post with the sale price of 77 Wellesley Ave. in Wellesley at $528,938 in September 2008.
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Boston ITer
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PostPosted: Fri Sep 11, 2009 2:29 pm GMT    Post subject: Reply with quote

I'm going to reverse some of my usual stances and say that $554K in Wellesley is an ok price, provided one's certain about one's career stability.

The reason for it is that the depreciation matrices, for places like Boston, is ex-burbs first (i.e. Rte 495/295 perimeter to NH), working class towns (Saugus/Salem/Watertown) second, and then immune towns (Lincoln/Wellesley/Lexington) last. That still averages out as a loss, for the typical owner but the immune zones get a sort of *bottom zone*, faster than others. This is a similar dynamic to places in and around London UK, where the working class (those who either commute from afar or live in less well off neighborhoods) suffer more during a downsizing than the landed rich in Britain's Kensington/Mayfair areas.

All and all, realize that immune town residents, on the average, don't worry too much about money because many are professionals but from deep pocketed families, not the 1st generation of entrepreneurs or doctor/lawyers, and others are just simply rich (see Celtics players, Fund managers, CEOs, etc).

From the point of view of a tech worker, but w/o deep pocketed ancestors, I see any real estate exposure in metro Boston to be problem because all and all, mobility is the key to survival. The ability to sell one's place, within a 6 mos span, w/o a major loss is critical to survival. And having that let's say $100K+ in a combination of CDs, Bonds, and Silver certificates says that one will never really have to suffer during downturn in one's career, (i.e. 6 mos in Houston, 6 mos in Chicago, 6 mos in Omaha, etc) to maintain employment. I mean just look at the explosion in storage facilities during the past few years, mobility is becoming the new norm.
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john p



Joined: 10 Mar 2006
Posts: 1820

PostPosted: Fri Sep 11, 2009 4:30 pm GMT    Post subject: Reply with quote

I'd lowball on one of these:

http://www.realtor.com/realestateandhomes-detail/54-Clearing-Farm-Rd_Kingston_MA_02364_1108172159

http://www.realtor.com/realestateandhomes-detail/Kingston_MA_02364_1107239789


I think you want to avoid paying a "want-a-be" premium to be in a certain "immune" town. I know people who bought in Wellesley 40 years ago when it was affordable like a house in Kingston is now. I have a colleague who lives in Newton and it takes longer for him to get into our office near Fanuiel Hall (green line) than it does me coming from Halifax(commuter rail). Also 40 years ago, Wellesley was a much more peaceful town. They had more farms and forests, roadside farm stands, etc. It is a rich town now, but it is very crowded and it has lost the quietness it once had. Of course, there are quiet neighborhoods, but the basic flow around town is a bit choppy and you'll end up spending a lot of time out on Route 9. I kind of like more open natural settings and Wellesley seems a bit constrained and kind of far from the ocean (which is the big appeal of the "Bay State"). It's funny because people who live on the shores who move further out say things like "Oh, Boxford is like what Lynnfield used to be like 40 years ago". Today, moving to Wellesley is like moving to West Roxbury 40 years ago.

I see it kind of like going to a snooty old inn where you get gouged or you go to a new place with modern amenities and they treat you well and offer you more for less. Stowe versus Sugarbush... Kingston is right near the ocean and you can get over to the beach, Plymouth, and do day trips to the Cape or Newport or Boston. Wellesley is so far from the ocean, I mean I knew people that used to drive to Marshfield to go to the beach.

For that type of money, you'll get treated like a king in Kingston, and a second class citizen in Wellesley.
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