Hmmm... any thoughts?

Hi guys,

My fiancee of nearly two years now has been talking to me about purchasing a house, though not living in it, rather making money from renting it out.

I think this is a fantastic idea but I believe it's better for us to get married first before mucking around with this sort of thing...

What do you think is a good plan? How do I go about telling Luke how I feel? (Every time I mention marriage he kinda goes blank... I know he wants to eventually but he has told me he wants to take his time... having said this he seems to want to buy a house first... it just feels like we are doing everything the wrong way!!!)

I think that there are two big separate issues here. The first is buying a home. It's not the easiest thing in the world to do - I know because I'm doing it right now. How does he want to split it? What if you want to make home repairs and he doesn't? There are a lot of things to think about. And to buy a home with a man who isn't anxious to get married to you? If he's not wanting to get married, why do you want to go into such a big thing as a buying a home and getting involved in business with him?

My advice is to not buy a home with him until he has made a commitment to you and your future.

I think you should live in it, not rent it out....

How is he your fiancee if he goes blank when you ask him about marriage?? You say that you know you two will get married some day.. he just wants to take his time? I dont get it.

NNNNNNNNNOOOOOOOOOOOOOOOOO!!!!!!!!!!!!!!!!

NO NO NO NO NO NO NO

A lot of people have been doing this in recent years, and believe me, they are going to get BURNED SOON. The current housing prices are an economic bubble, and the bubble is going to pop soon.

Do you remember the dot com bubble bust of 2000? Tech stocks and the internet were new, and the prices went soaring in the late 90's. Soon they reached ridiculous prices because everyone thought they were so valuable. Why? Because the price of the stock was going up. On the surface that might make sense, but it doesn't. There was no fundamental reason why the prices should be going up. It wasn't because "Oh, they make a great product and many people are buying it, so I think the profits will increase and stock value will rise." It was just "Everyone else is buying the stock, and the price is going up, so I better get on board too before it's too late!" And the prices just kept increasing, and increasing and increasing. Until one day everyone suddenly realizes the companies are worthless because they're making no money. And the bubble popped. The values collapsed overnight and many, many people lost everything they invested.

The same thing happened in real estate in Florida during the 1920's. People were buying hot florida real estate because, and a bubble soon formed. The Florida newspapers were the biggest in the nation in terms of weight, because the real estate sections were so big. The bubble collapsed in 1928 I think. More recently it happened in Japan in the early 90's. Real estate prices have actually fallen there every year ever since.

And now we have a huge housing bubble here in the United States. Here's a hint when you know the bubble will soon be popping: average Joe on the street is ready to invest in whatever the bubble is, because it's a sure thing! Just like your boyfriend wanting to buy a house to rent it. You have lots of people who have no clue about real estate who are buying condos and houses because the values are increasing so much. They hold it for a few months or a year, and flip it for a profit. Or they rent it out, like your BF wants to. The only way the bubble has been maintained is because the Federal Reserve has kept interest rates extremely low, and credit standards have fallen so banks are giving out exotic high risk mortgages to people who have no business buying a home. When the interest rates go up (the Fed has raised them for 12 consecutive meetings), the minimum monthly payment on the mortgage goes up, and suddenly people will be looking to sell homes they can't afford a mortgage on. A lot of people will be looking to sell. A LOT of people. Simple law of economics with supply and demand. When the supply of houses increases rapidly as many houses are put on the market, and there aren't many buyers, the prices will collapse.

So no, I think it's a terrible idea. As for how you should tell him about it, you can try to talk to him about the housing bubble and see what he says. I can find some resources (audio interviews/discussions and articles) for you two to look at. Feel free to PM me if you want to talk about it more.

I think buying a home with him is a real big committment, and one you need to look at from the view point as to what happens when things go wrong. What happens when you break up? What happens when he wants to sell, but you don't or vice versa? What happens when he wants to live there, and you want to rent it? You need to think about how you would collectively deal with decisions. If you really want to do soemthing like this, you might want to form a company to own the house and then you each own part of the company. It oculd work great if you agree on everything, and it could turn out to be a disaster. I know of two brothers who bought a hosue together, and for years did not talk. It was a surprise that one showed up at the other's wedding. I would pass on doing this.

Suze Orman, in her book, "The Young, Fabulous, and Broke" also has a similar view as Beec. A person asked, "I'm single, and so is my friend, we don't have the money separately to buy a house, so we were thinking of buying one together."

Suze's response is ABSOLUTELY NOT. What happens if the friend meets someone and decides she wants him to move in? Or she wants out of the house, and wants to buy her own place with him? What if she dies and her crazy sister inherits her half of the house? And the crazy sister wants to move herself and her 10 cats in? Or wants to sell the house or have you buy her out? What if the sister can't afford to pay her half of the mortgage, and thus you're stuck paying for the entire thing, and you just can't do it! There are so many variables and so many bad things that can happen, it's just not a good idea.

Since you two aren't married, the same thing goes. What happens if you two break up? What about if he dies, and his mom and dad inherit the house? And they want to sell the house?

Like Some_guy said, I'm not sure if buying a house to rent out is the smartest financial move at this time for you two. I think it's better to buy a home that you're actually planning to live in. Furthermore, I'm not sure if a bank would be very keen on lending money to such a young couple who isn't even married and isn't even planning on living in the house.

I think Some_guy is right about the housing bubble. I'm buying a condo, but I'm planning on living there for a while. So, even if the housing market does go down, I think by the time I do decide to move on to a new city, the price will be at least at the same level, if not a little higher. However, I'm buying a home so I don't have to pay rent and so I can have a place that is mine. Not to make a profit.

I'm very concerned, like a previous poster said, that he is "blanking" on marriage if he's your fiancee. That's a really really bad sign. I think you two need to be on the same page before you get married or buy a house together.

I agree with the other posters. Buying a house together can be a financial minefield. too much can go wrong and it places undue stress on the relationship.

Make sure you guys are emotionally committed before becoming financially committed.

Like Some_guy said, I'm not sure if buying a house to rent out is the smartest financial move at this time for you two. I think it's better to buy a home that you're actually planning to live in. Furthermore, I'm not sure if a bank would be very keen on lending money to such a young couple who isn't even married and isn't even planning on living in the house.

Sadly, that's not the case. And that is what has helped keep the bubble alive for so long.

The lending standards have gone way down. A lot of places aren't even verifying income anymore. They just check the FICO (credit) score. As long as you have a good one, they'll give you the loan for hundreds of thousands of dollars to buy the home. So right now I could go get a mortgage because my FICO score is excellent, even though I only work part time and would have no way of paying the mortgage. In years past you had to put a 20% deposit down on the house that you bought. But as the prices started getting too high, it became a 10% deposit. But with the craziness lately, they're requiring no deposit at all! Interest only loans. And negative ameratization loans where the minimum payment you make for the first 5 years actually increases the debt you have on the mortgage instead of reducing it. You'd be amazed at the number of people who have bought homes recently with these kinds of exotic loans, and they are going to be the ones who are hurt the most. During a downturn, they'll be forced to sell the house for less than they paid for it, or maybe they can't find a buyer at all. Then the bank forecloses on them, and they lose everything.

Both Beec and Annie make excellent points that would apply all the time. Right now is just a particularly bad time. To anyone else thinking of buying a home - or even a condo! - I'd seriously suggest you wait six months to a year if you can. You'll be able to get a lot more for your money, and it'll be a real buyers market. Right now it's looking like the bubble is losing steam. It appears prices have already peaked this past March. Prices in some individual markets are already starting to see serious downturns, but nothing quite so dramatic as the dot com bust yet.

What I mean is that he kinda closes up whenever I mention the "M" word. He has told me he isn't going to rush things.. the way I see it is that it doesn't have to be expensive - we can just invite close family and have a half an hour ceremony! Very cheap!

From a financial perspective I believe that it is better to be married and establish money before jumping into something like this..

The reason for renting out a house instead of living in it, is because we have jobs that have a house accompanying them (I live in remote Western Australia so they have to encourage people somehow)... and we figured that the rent would be an additional income. We would purchase a house in the city so that Luke's parents could monitor it and make sure that the tenants aren't up to any mischief.

I am not sure whether they have it in the US, but in Australia we can get a first home-buyers grant which is about $7000, which is basically a deposit on a moderately-priced house. Seeing there are two of us we wouldn't be able to claim for both but the idea was one of us would claim it and the other would claim theirs in a few years time, should we choose to purchase another investment property.

We love each other to bits but I don't want to be defacto for much longer!! I really hate my last name! And I don't see why marriage should have to change anything... so that's why I think marriage should come before houses..

But I am just not sure how to go about explaining this without him getting upset or anything... he knows I am committed to him, and he is committed to me also... are all guys just plain scared of marriage because it makes things official?

Seeing there are two of us we wouldn't be able to claim for both but the idea was one of us would claim it and the other would claim theirs in a few years time, should we choose to purchase another investment property.

To be able to do this you would have to purchase the first property in one name only...terrible idea. I am also pretty sure that grant is not available unless you are purchasing the property to live in it.

lol

All that stuff I posted about a housing bubble and it doesn't even really apply to you.

Home prices are up worldwide (I hear Britain's housing bubble is just as bad as that of the US), but I'm really not sure on the Australian situation. Still, I think all the other practical things Annie and Beec said still apply.

As for marriage, you're kind of young, aren't you? You probably hear that all the time...How old is your fiance? Have you two ever talked loosely about setting a date? Like, "Oh, we'll do it next year. Or in two years" Something to that effect? If not, maybe it's time to approach him about that.

Lol sorry Some_guy! I'll keep your response in a safe spot just in case I decide to move to US!

I know I'm kinda young but I feel like it's the right thing to do. My fiancee is 23 (had to think about that)... I haven't pushed the subject with him much because I know I'm ready, but if he's not then it's not really right to force him...

Well, I don't really understand these kinds of things. If he wasn't ready to marry you, then why did he get down on one knee (He did get down on one knee, right!? ) and ask you to marry him? Are you the woman he wants to spend the rest of his life with or not? If you set a date, it's not like the date has to be tomorrow or next week or anything. It could be a year, or two, or three in the future. Plenty of time to plan and consider.

It's only been two years so far so I guess I wouldn't worry about it too much. But if I were you, I'd be getting pretty antsy before the end of next year.

Well, to be honest... I proposed to him! LOL!

He has told me he doesn't want anyone else - I have helped him through a lot of hardships and have always been there for him no matter what, we have such a great relationship with each other - how many guys have girlfriends that play Battlefield, Burnout, Tekken, World of Warcraft and stuff with them? He loves to show me off!

I would like to set a date so I have something to look forward to... I just feel like he is afraid I will marry him and take his money from him... but there's no way I could do that to anyone!

Well, when I blew the candles out on my birthday cake in October, I said "I wish I am married by this time next year"... but all of my friends are getting married next year, so I probably won't have any money to pay for ours!! (Most of them are having their weddings in Perth which is 2800kms away from us - very costly!!)

I guess your right - he has been with me thus far and we have had no problems... maybe I should just tell it to him the way it is! hehe

Not like I of all people should be giving anyone any marital advice, but I'd marry first then think about getting a home. Dont' put the horse before the cart. Trust me, you will regret it later.

The reason for renting out a house instead of living in it, is because we have jobs that have a house accompanying them (I live in remote Western Australia so they have to encourage people somehow)... and we figured that the rent would be an additional income. We would purchase a house in the city so that Luke's parents could monitor it and make sure that the tenants aren't up to any mischief.

 

I am not sure whether they have it in the US, but in Australia we can get a first home-buyers grant which is about $7000, which is basically a deposit on a moderately-priced house. Seeing there are two of us we wouldn't be able to claim for both but the idea was one of us would claim it and the other would claim theirs in a few years time, should we choose to purchase another investment property.

A few things about this bother me. If you two live in remote western austrialia, I don't think that a house is the best "investment property." Ideally, you want to rent out a house in a strong market, preferably, a big city like New York or San Francisco, or a house in a college town, so you can rent to college students (be careful though - they cause a lot of damage to the house!)

I don't think that renting a house in a remote area is a great idea. (That is, if I have this story right.) Furthermore, I wouldn't rely on Luke's parents to do anything for you. It's your life, your money, your future - if you and Luke do this, you have to be a team together.

Like Melrich said, I'm pretty sure that first time home-owners grants are for people who plan to live in the house, not to rent it out.

And yes, I really think there's something bad if he's choking up around the M word.

Marry first, buy real estate together later.

The idea was to purchase property in Perth which is the capital city in Western Australia - there is no way I would buy a house up here! It's a horrid little mining town..