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monopoly-house[1]A friend recently sought some counsel regarding a house purchase. I wrote up a few thoughts. Perhaps they are interesting to people beyond their initial recepient. For your reading pleasure:

  1. Compare real estate investment to other investments.
  2. It’s typically unwise to buy if renting a comparable place is cheaper and you plan to move again within 5 years.
  3. It’s typically unwise to rent if you can afford to buy and live in a neighborhood that will have substantially above-market appreciation.
  4. It’s very unusual for neighborhoods to appreciate fast enough that a 5-year real estate therein is a better investment than the stock market.
  5. Sometimes family members offer down-payment support that wouldn’t have otherwise been available for investment and therefore taking the money is a wise financial choice since there is little opportunity cost. It may also be a wise personal choice since family members may feel happiness and fulfillment from their generosity.
  6. That said, accepting financial support from anyone else, always involves some measure of complication.
  7. More important than the specifics of a house, for most people, is the neighborhood (can you walk places if you care about walking, do your friends live nearby, do you like the restaurants, is it the right amount of fancy, etc).
  8. I don’t have a view about what neighborhood you should live in.
  9. I love my neighborhood but realize that it’s not right for everyone.
  10. Living further from the central business district usually leads to paying less on rent/mortgage and spending more in commuting time. This can be a good or bad decision depending.
  11. Since it’s harder to quantify the value of a short (or walkable/bikeable) commute than the cost of a higher mortgage, I suspect that people tend to have some bias toward longer commutes.
  12. For me, living an easy bike from downtown means I exercise regularly whereas if I lived a long ride away I wouldn’t bike and in no circumstance would I regularly go to the gym (I’m too lazy).
  13. There is a lot less inventory right now (winter). A lot of stuff comes on the market in the spring.
  14. Interest rates may go up though.
  15. If interest rates go up, I think it will hold real estate prices down since it will limit most buyer’s buying power approximately equally (except investors who pay cash).
  16. People rarely regret moving slowly.
  17. They often regret moving too quickly.
  18. The ability to walk away is an important part of getting a good (and fair) deal.
  19. Having enough information to move quickly and assertively, in the appropriate situation, can also be a key to getting a good deal.
  20. If you want to move quickly and assertively, make sure it is because you have a substantial command of the market and are quite sure you see an unusually good deal–not because emotion or time pressure implore you to.
  21. Where you live have a big impact on who you hang out with. If you like people, try to live near them. Being lonely sucks.