A 26-Year Old's Perspective

NEW -> Contingent Buyer Assistance Program
<p>I need the obligatory big busted, blonde from the other thread.... But then again, my wife might be a little upset at that! </p>

<p>-bix</p>
 
IT guy (if you're still reading), I didn't buy a house until I was 36 years old. That's right, I rented until then. My first mortgage was $351K on a $390K house (i.e. 10% down) in the suburbs of Boston which back then was a "jumbo" loan. That was the year I made $200K -- a sudden rise after many years under $50K and a couple years of $80K-$120K. In all those years I never carried a credit card balance, and had only one car loan: 4 years @ $125 a month for a Japanese pickup that I named "The Trucklet."





Even though I made $200K, the $350K loan loan scared the hell out of me, and so did the size of the house. Two years later I moved to Seattle making $250K. Sold the house in Boston for the same $390 I paid (net of real estate commission) and bought a house for $258K. Took a 20% down mortgage for $206K. Then I started paying down principal. Two years later (1998) the loan principal was down to $190K or so.





In the same year (1998) I got fired in a reorganization, but they gave me a goodbye kiss of $175K after taxes. I found a job back in Boston for $350K. I kept the Seattle house because that's where I wanted to retire. Rented it out, and bought a house in the suburbs of Boston for $450K with a $300K mortgage. Paid extra principal and cut the loan principal by about $50K over five years. I also paid extra principal in Seattle and cut that balance down to about $160K.





In 2003 I became disabled and now I live on the disability insurance. Sold the Boston house for $610K. Paid the $250K mortgage + $30K real estate commission + $20K moving costs and walked away with $310K. Paid off the Seattle mortgage and put the rest of the money in the bank. I've owned my house free & clear for the past five years and it feels great. As for your frustration, I sympathize with it. Your $80K now is like my $45K back in the late 1980s. Doesn't go very far.





That said, when I was 26 years old, I made $21K, which in today's dollars is $43K. Just before I turned 27, I found a job for $60K in today's money. But the job was in L.A., and my rent was $1,200 in today's dollars; that big raise required me to move from Kansas City, where my rent had been $390 in today's money. Still, I felt pretty damn flush, so I got my first-ever credit card. It was an American Express card, which I had to pay every month in full. To this day I remember the first time I ever used a credit card. It was dinner at a restaurant in Santa Monica.





Sorry for this shaggy-dog story, but I guess what I'm trying to tell you is that you ought to take the long view. You will rarely regret what you didn't buy. If you avoid the Four Horsemen of the Financial Apocalypse -- trophy houses, trophy spouses, fast cars, and credit card debt -- you are ahead of the game. Don't do drugs, save your money, pay attention to your career, and with a bit of luck your day will come. When it comes to houses, the rule of thumb is to pay no more than about 160 times monthly rent for a place, and no more than 35% of monthly income for a mortgage.





House prices are WAY out of line now. They are at least double their rational value. Keep saving, working, and renting. Things will work for you. In the meantime, always live below your means and stay away from sharp objects.
 
p.s.: Don't listen to real estate agents -- EVER -- and don't buy into the Southern California mythology that says you have to pretend you're rich. If that makes it impossible to meet a spouse or significant other, then move somewhere else. I guarantee you that the whole conspicuous consumption thing is NOT universal throughout the United States. I have lived all over the place and have traveled to every state in the country, and it is Orange County, CA that's the exception, not the rule.
 
<p>Dr. West - My hand is raised! I will help you test out your invention. Please let me know if you have a prototype ready. I would be more than willing to help in the marketing. I also may know a way to help you get the funding to help back your idea.</p>

<p>I also have a request which in my mind seems simple but I want a salt water hot tub. Salt corrodes the pipes and chlorine stinks. If you can come up with something I know I could sell it.</p>

<p>BTW I can't wait for my nanotechnology TV. Because of people like you not only will you make things like that possible but there are so many possibilities with nanotech that will be amazing. I thank you for your skills and I have loved your comments going back to the Pat Veling days.</p>
 
Graphix,





The hot tub does work in salt water. My honey and I took it to Catalina and filled it with cold salt water, warmed it to 107 degrees and soaked..........under the stars. I am building 4 or 5 units now so maybe we could schedule an IHB float and soak party.......





As for Nanotechnology..........sky's the limit, but we are a few hundred years away from any major advances...........


<img alt="" src="file:///C:/DOCUME~1/Paul/LOCALS~1/Temp/moz-screenshot.jpg" /><img alt="" src="file:///C:/DOCUME~1/Paul/LOCALS~1/Temp/moz-screenshot-1.jpg" />


<img alt="" src="file:///C:/DOCUME~1/Paul/LOCALS~1/Temp/moz-screenshot-2.jpg" /><img alt="" src="file:///C:/DOCUME~1/Paul/LOCALS~1/Temp/moz-screenshot-3.jpg" /><img alt="" src="file:///C:/DOCUME~1/Paul/LOCALS~1/Temp/moz-screenshot-4.jpg" /><img alt="" src="file:///C:/DOCUME~1/Paul/LOCALS~1/Temp/moz-screenshot-5.jpg" />
 
<p>I don't know why but the pics are not showing up. Maybe you can just post the links.</p>

<p>All I want is a normal hot tub that would work with salt water. It kills me that a pool will be fine but hot tubs are forced to use chlorine. It's just a personal preference in that I don't want to be soaking in chemicals. </p>
 
<p>I saw this pic and thought of Nano.... trying out a new "hot tub roof/deck" invention.</p>

<strong>In Marketplace</strong>

<a href="http://pr.atwola.com/promoclk/1615984946x1144666086x1079366699/aol?redir=http://realestate.aol.com/gallery/inspection-nightmares"><img alt="Inspection Nightmares" src="http://www.aolcdn.com/aolportal/hot-tub-160dr092507.jpg" /></a>
 
<p> Interesting article per seller financing discussion earlier on this thread</p>













FHA Down Payment Rule To Ban Seller Financing











<p>http://www.washingtonpost.com/wp-dyn/content/article/2007/09/28/AR2007092801828.html</p>
 
Very interesting article, and this sort of "scam" should be stopped.





I don't think that the FHA will stop seller backed second mortgages. The second mortgage, offered by the party selling the home, gives the bank the downside protection they need in the case of a loan default.
 
<p>I'm also a 24-yr old new professional renting in Irvine for like 5 years now! 3 of em' were schooling years. </p>

<p>Waiting for the right time to pounce.. right now renting (although paying $1000/month) but hopefully that'll save me lot's in the long run..</p>

<p>How much of the income should be spent on rent?


I spend about 38% of my net monthly income on rent alone. Alteast 20% of the next monthly income goes to savings.. the rest is all on living and reccuring expenses..The 401k right is set at 20% pre-tax. </p>

<p> </p>

<p>Now you can figure out how much I make/ how much I saved base on this info!


</p>

<p> </p>

<p> </p>
 
mad scientist...don't think you can beat 1000 a month. Your plan sounds solid, hang in there and you will reap the rewards. Good luck.
 
<p>Scientist, </p>

<p> Sounds like you are doing the right thing. Its no fun to just sit on the sidelines, but its better than watching a great opportunity pass you by because you spent all your time buying toys and or just blowing it. Oh well, take it easy </p>

<p>-bix</p>
 
<p>great thread. i feel like i'm in the same exact boat here... early/mid 20's doing well in the computer industry and will probably fall in line with the rest of your plans to wait it out. </p>

<p>thanks IHB!</p>
 
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