Owning my own little house someday is one of my long-term goals. For much of the country, home ownership is the norm at about 66% based on the 2010 US Census. However, in California (my home state) it’s slightly lower at 60%. I’m going to postulate that the lower rate is directly correlated with higher home prices; the primary reason I’m still a renter and not a home owner. Since I’ve become fairly money-savvy, I want to stick to the age-old rule of purchasing a house no more than 3-times my income. Using this rule, I can afford a $225,000 home. But herein lies my dilemma: there aren’t any single-family homes in this price range in my zip code.

So what could I get for $225,000 or less? A townhouse or condo not far from where I currently live.

Condo for $199,000 in my neighborhood

For comparison, I checked three other areas in the nation (south, mid-west, and east coast). Here is what $225,000 can get me if I lived in another state:

I’ve fairly familiar with Overland Park and Lenexa, Kansas so I searched that area of the mid-west. For $215,000 I could purchase a beautiful 4-bedroom, 3-bath two-story home. (The weird thing is I’m familiar with this street! My cousins lived not far from here many years ago.)

Lenexa, Kansas - Nice 4-bedroom house

I’m not very familiar with the south. However, I’ve heard that Charleston, SC is a very nice city (I’m selecting this as my “south” choice). I was confused finding the “down town” area of Charleston using Zillow since there were so many rivers cutting through the area. So, I picked a house that was described as a “down town fixer upper.”  I can only assume this house must be near down town. For $225,000 I could purchase an adorable 3-bedroom, 2-bath 1,500 sq. foot house that needs a little renovation (mostly the wood floors.)

Charleston, SC - a quaint fixer-upper

For the east coast, I could have selected New York but I knew my price range would be much too low. Instead I selected Boston, MA. Again, not being familiar with this area, I stayed near Harvard and Cambridge; they just sound posh. Similar to where I live, the most $225,000 would get me in the city would be a condo. However, just slightly north of Cambridge, MA is Somerville. For $215,000 I could purchase a multi-family dwelling. Of course, I have no idea if this area is decent, or in the ‘hood.

MA - good or bad? I don't know.

Obviously, I could get the most for my money, and stay within the 3-times my income rule, if I lived in the mid-west or the south. Both coasts, the east and west, seem terribly overpriced compared to the rest of the nation. Even if I accounted for a reduced salary, I found lower-priced properties in both Charleston, SC and Lenexa/Overland Park, KS that would keep me within a 3-times my income price range.

Now if only I could convince my other half that Charleston isn’t too cold in the winter or hot in the summer.

Are you thinking of purchasing a house soon and using the h3-times your income rule? What does that get you where you live?

Looking for a home loan? Try CapWest Mortgage.

Since I was little girl, I’ve wanted my very own small-ish craftsman style house with a white picket fence and a luscious green lawn. Heck, I even started a blog which focuses on my quest for home ownership.  But the more research I do, the more this question pops up: Should I buy a house?

The media makes a strong case for home ownership. The government promotes home ownership in the way of tax breaks. Most personal finance bloggers also lean toward ownership of property as being more financially savvy than the endless renter who squanders their money away each month. I’ve written a few posts comparing and contrasting renting versus buying with the hope of resolving this burning question that I just can’t seem to answer definitively.


So, should I buy a house? The answer just isn’t very cut and dry so I’m again comparing and contrasting the benefits of each:

Yes, yes, I should buy a house if…

• I plan on living in the area for 6 or more years. Most home owners will agree that it doesn’t make much sense (at least not anymore) to flip houses short of 5 or 6 years. Since most people need a mortgage in order to buy a house, those first few years of payments are only applied to interest (even on a 15-year loan).
• I’m paying cash. Not many people can say they paid for their home in cash. However, it makes sense to buy a home if you have the full amount rather than continue renting (unless your rent is so low that investing the lump sum is more profitable).
• I’ve saved up at least a 20% down payment. A large down payment means a smaller mortgage and a better APR.
• The rent vs. buy calculators show it’s a better investment than renting. I love using finance calculators to compare the home prices in my area to my current monthly rent. They often predict when and if it is a better financial move to rent or buy. Currently in my neighborhood, it is better for me to rent for 30 years than to buy a home. However, if I moved a few miles south or east, it would be a better idea to buy (but I wouldn’t want to!)

No, no, I should not buy a house if…

• I’m planning on leaving the area within a few years. Trying to resell a property only a couple of years after purchasing it will not be very profitable. And,  if the housing market stays flat, it may be too difficult to sell it.
• I’ve not saved any money towards a down payment. Since the housing boom and bust, most banks want to see some kind of a down payment, preferably 20%.
• The houses are 8 to 9 times my income level. In my current neighborhood where I’m renting, homes are selling for an average of $600,000. No, I’m not making this up nor did I accidentally add one too many zeros.
• The rent vs. buy calculators show that it isn’t very profitable based on the prices of homes compared to my monthly rent. According to Michael Bluejay (he’s an incredibly smart guy) you can multiply your monthly rent by 240 for a ballpark of when it just isn’t affordable to purchase a home. So if you pay $1,000 a month for rent and homes in your area are going for around $180,000, you should buy! However, if homes in your neighborhood sell for $600,000 and your rent is $2,195, you should continue to rent! The catch here is that I’d have to invest the difference to make this a more profitable choice.

Obviously the answer for me is no, I should not buy a house. However, under different circumstances, such as I move to a more reasonably priced area and decide to stay there for a while, then buying may be a better option.

If you compare rental prices and home prices in your area, which makes more sense using the 240 calculation?

This guest post was written by Henry Truc from Go Banking Rates, a website that brings you informative personal finance content and helpful tools, as well as the best interest rates on financial services nationwide. Follow them on Twitter at @GoBankingRates.

For most homeowners, paying down their mortgage loan is akin to fighting off the plague, but the dream of one day owning their home in full keeps them going. Unless you’re flush with cash, buying a house usually means taking on a sizable amount of mortgage debt, and with that, forking over a fortune in interest payments.

Conventional wisdom suggests that owning your home outright is the smarter financial strategy. You don’t owe lenders anything, you save money on interest payments and you’re one major step closer to financial independence.

That said, there are some disadvantages to owning 100 percent of your home equity that should be considered.

Disadvantages of Owning Your Home in Full

Though it’s debatable whether or not there is such a thing as good debt, paying off your mortgage in full does reduce certain opportunities for better use of your money. Home loan debt isn’t necessarily a bad thing and here are a few reasons why:

• Tax Deductions: One of the most popular reasons for maintaining mortgage debt is the tax advantages that you enjoy on interest payments. It doesn’t necessarily make sense on its own because owing money just to save money on interest defeats any economic purpose. It does, however, effectively reduce the cost of that debt.
• Greater Financial Flexibility: Instead of having no cash in the bank and a mortgage paid in full, it may be a good idea to tap into that equity just to ensure that you have some access to cash if an emergency arises. If you pour every dollar into paying down your mortgage and don’t have anything left over for home repairs or one-off incidents, you could be positioning yourself in a tough spot to handle any costs of unforeseen events.
• Cheaper Debt: If you can get a good mortgage rate, chances are it’s multiple times less than your credit card, personal loan or auto loan interest rate. Consolidating your debts with a HELOC or home loan refinance can provide you some debt relief and help you save money on interest payments. Plus, mortgage interest payments are tax deductible, unlike credit cards or other personal loans.
• Property Value: Since your property value isn’t affected by your mortgage balance, you can put your equity to better use than just having it sit around idly by, waiting for you to sell your house. You may want to consider taking out a loan against your home for value-added investments like remodeling your home or adding another bedroom that will increase its market value.
• Return On Investments: By the same token, you can probably do better with your home equity than having it sit around earning a zero percent return. Depending on your risk tolerance and the potential return on investment, you may be able to outpace a low fixed mortgage rate. Granted, no investment is guaranteed and you’d be hard pressed to find a CD rate that trumps your mortgage rate. So for practical purposes, putting your home equity at risk to pursue any investment may not be a shrewd idea.

Keep in mind that these options should only be considered if you own a majority of your home equity or own your property outright. Mortgage debt is still debt. Whether you owe a balance on your first mortgage, are refinancing to consolidate other debt with higher interest rates or using it to fund a home improvement project, you’re still taking out debt on your home. Before agreeing to any home loan, use a mortgage calculator to ensure that you can afford the monthly payments first.

Advantages of Home Equity

Owning your home, whether outright or just a majority of the equity, has undeniable advantages. The more equity you own in your home, the more stable your financial situation may be. The peace of mind and stability of not having to worry about meeting mortgage payments is hard to put a price on.

You shouldn’t consider taking on more mortgage debt against a home you have little or no equity in. In addition, if you are fortunate enough to be in a financial situation where you can own your home outright, be debt free and have a surplus of savings to invest wisely, you may not need to access your home equity at all. The key, as always, is to find the right balance that fits your financial strategy and maximizes the efficiency of your money.

Do you think it’s better to own your home outright or to owe a small mortgage balance?

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This article was produced by the property management specialists at Focus Property Management, a real estate investment firm based in Sydney, Australia. Focus provides informative articles for those interested in entering the property investment market, and are devoted to providing the highest standard of professional management services to a range of investors across the globe.

Property investment has been a popular route to wealth for many people for many years. Sensible investments in property have many short and long-term attractions. Buying your own home is often the first investment many people make; purchasing another property may well be the second even before shares and other assets. The concept is straightforward – You invest. You find tenants. You earn a return. However in reality this concept may not be that simple.

It is every landlord’s nightmare to land up with undesirable tenants – the ones that bend the rules, that don’t pay rent, that damage property and have no regard for your investment. In addition to a very large headache, tenants can cost a landlord thousands of dollars each year.

Property managers guarantee an additional element to the straightforward concept of investment. You invest, and you earn a return while your property manager takes care of everything in between. The main benefit of hiring a property manager is saving your time and aggravation and in turn offering the peace of mind each landlord desires.

There are many questions to ask yourself before you decide to manage your own rental property:

Marketing: Do you have any marketing and sales experience? Would you know how to advertise for tenants? Do you know which advertising methods have the furthest reach at minimal costs?

The tools: Have you any experience in the ability to perform background and credit checks on potential renters? Do you have access to a legal expert to assist with the drawing up of contracts?

The marketplace: How familiar are you with market trends? Do you feel confident that you have the ability to negotiate and maximise your annual rental income?

The maintenance: Do you have access to a network of contractors to use for repairs and maintenance or do you have the ability to carry out the repairs yourself?

The time: Do you have the time to dedicate to enquiries and administration work?

The confidence: If a renter does not pay, can you knock on the front door and ask for the money? Would you feel comfortable to evict someone for non-payment of rent?

If you answered “no” to any of the above questions, then you need to consider using a property management service to rent your home on your behalf. This third party medium will ensure that you have peace of mind, are skilfully represented and that your investment income is maximised at all times.

I’m not very hip when it comes to music, but thankfully my husband is a music connoisseur. One video and song I’ve become especially fond of is Edward Sharpe and the Magnetic Zero’s song Home. There’s just something about the video and lyrics that makes me think back to the free loving days of the 1960′s. Of course I wasn’t alive during that decade, so I can only postulate what it may have been like during the love-ins and hippie era of flower children and bell bottoms. Now that I’m finally settling into my new apartment with the thought of living here for a few years, I’m still dreaming of a little house of my own in the near future. This video inspires me to think of home slightly differently. As the lyrics note, “Home is where ever I’m with you…”.

Perhaps I need to think more along these lines and not worry so much about finding my own home.