Preserving one’s opportunities needs to be balanced against setting down roots and building community.

I am saddened to think how many people are trapped in krappy or unfulfilling jobs for financial reasons. Ethical people who are upside-down come to mind.

On the other hand, once you decide to settle somewhere, if you can afford a house and have enough flexibility to support it (e.g. if you get laid off, you are able to do something else, or have chosen modestly), then I think the rest of the discussion is moot. Whether or not you could have made a better investment decision is a 2ndary question, if you have created a home and are not trapped.

Very interesting discussion. Kind of like a psychological mirror…

I agree. I’m looking for a 3 BR house with a decent yard in a decent school zone (I’ve got two small kids) in Seattle, and I haven’t found anything even remotely acceptable for less that $2,400 a month. Maybe my standards are too high, but I doubt it. I’d like to see this post’s scenario re-run with a more realistic rent, like, say $2,500.

RE: The Tim @ 46 – RE: what goes up must come down @ 98 –

my wages are mine to spend as I see fit not to dump in a stream of upgrades and repairs and and endless upwards spiral of taxes on a house. No, no more. Cabinets can be old, new, white. Countertops can be granite, laminate, concrete–I don’t care. Just_don’t_care.

The American dream has lost its grip. However I can live cheaply and move to make more money is my primary interest. The less I own the better off I am.

If as I suspect, there are more people like me in the ‘market’, the US real estate industry is in for a very serious long term crash. We don’t need you any more and we’re done paying our dues.

A room is a room is a room.

Could not agree more. The housing obsession is hopefully over for good. Why people can’t see counter tops and finishes do not make a happy and comfortable home, the state of mind of the inhabitants makes a happy home. evan in a rented home.

The thing is, perhaps you can find a place to rent for $1,200, or a house in King County for $175,000. The question is though, would you want to live there? By using condo units you could do an analysis in different price ranges, and the “neighborhood” would be a neutral factor (although you might have view, condition or other location factors that could affect the result).

That was a funny read. The goldbugs coming to his defense are absolute knuckleheads. It’s so easy to see where he ran afoul of the IRS. Not to mention…if he was paying them with GAEs as legal tender at their $50 face value then he’d be breaking the law WRT minimum wage laws.

You could still trade gold for a house if you wanted. Shoot…you could even trade a dang collection of Elvis collector plates for a house if you wanted to. It’s just a matter of paying the taxes correctly.

IMHO…why bother trading gold for a house? Just use dollars. That’s what they are there for. Keep your gold forever as generational wealth….until they confiscate it again. ;^)

…and ditch the Elvis plates.

Sure, there are lots of people here and all over the city with great rental rates, and just as many paying too much, but there is always a catch to any good rental deal, which is usually stability and the lack of a lease which allows them to get rid of you as soon as it is advantageous for them.

I used to love my month to month lease, now it would be a huge potential liability for me.

http://www.lvrj.com/opinion/47141327.html

Mr. “software”engineer, thermal loss does not scale linearly with floor square footage. It is HIGHLY dependent upon square footage of “exterior walls” (is your house an irregular shaped, rambler, basement, etc.), the number of windows and skylights, physical orientation (open south or west facing exposure), roof to square footage ratio (i.e., rambler vs two story) and a whole host of other items. Even if all things were even, I highly doubt that a house with twice the interior volume to heat would have twice the heating bill. It may take twice the energy to initially heat 2x volume house, but maintaining the temperature once you have heated your house to 72 degrees comes down to thermal loss (radiation + conduction + convection) through the walls, ceiling, and floor–this most certainly would not track linearly with 2x floor space or even 2x interior volume.

I took advanced thermal dynamics (and statistical mechanics which is the study of thermal dynamics at the quantum level) in college and while I agree with your astute observation that it is “pure thermodynamics” it is not trivial thermodynamics.

RE: Rojo @ 113 –
Where you can really get cheap winter heat….get an upstairs condo surrounded by neighbors…LOL….heat rises.

In Bozeman, MT we rented an attic apartment with a massage therapist below who practiced in her apartment. One relatively mild winter we never had to turn on the heat. Even in the coldest winters we had monthly bills (electric resistance heat) of $40 at the peak, including lights and stove.

HI ROJO:

The way I’ve seen a lot of this glueboard housing get slapped together lately, it doesn’t surprise me, Hades they may of used no insulation on the energy pig and got it by the inspector with a wink and a nod [and a $100 bill in an envelope]….LOL….that sheet rock in new house construction from China lately was a real joke, horrifying toxic fumes.

But all things on a flat table, if you’ve got a big cathedral ceiling and more air to heat, it looks wonderful, but pull out your wallet come winter and it gives you no extra space to live in. Build a house with half the SF [and half the air to heat] and the same insulation quality, I’m positive you’ll get about half the heating bill with the same utility company. I’m an engineer and its pure thermodynamics.

Where you can really get cheap winter heat….get an upstairs condo surrounded by neighbors…LOL….heat rises.

However rentals that I own, is not a good place for family exactly.

Perhaps you should change your screenname to slumlord ;)

I guess the reason I ask is that McMansion or not, energy costs are depending on use habits and construction/insulation quality. My current house >3000sf has lesser bills than my older house house half its size (both constructed in the last 10 years). I pay ~200/month on gas+electricity costs. I am interested in finding out if that is good or bad – that is why I asked. Btw, I have dual fuel system with gas and electric.

HI ROJO:

I have Puget Power, not City Light. Let’s put it this way, my house is all electric and my winter house bill(s) were less than my girlfriend’s Seattle 800 SF 2 bdrm apartment.

ROJO, also: unlike a lot of utility users, I crank my thermostat to 72 degrees 24 7s. I have a special needs adult living with me, so the washer and dryer are on constantly.

Electric use isn’t just the bill, just like your gas milage on an identical car isn’t necessarily my gas milage [I generally get about 30% less gas milage than car owners claim they get for the same car when I drive it myself].

Let’s put it this way, my old McMansion in Bellevue ate twice the energy costs my newer fuel efficient one eats now. I’m the same user, so its comparing apples to apples.

Perhaps. But you assume that the renters are “renters for life” not renters saving for a big downpayment to puchase when prices are lower. If that downpayment is big enough and the entry point low enough, the current renters may be able to handle a 15 year fixed mortgage no problem, and wind up actually owning their house much sooner than their “owner” counterparts.

And just because you anticipate the counter argument that the renters have been saving and investing the difference between PITI, doesn’t mean that this is not a completely valid criticism of your analysis. I know several couples that are strapped for cash because they’re dumping it all into the mortgage. And they act like saving for children’s education and their own retirement is some sort of “luxury” that they just can’t afford right now. This is nuts.

You obviously haven’t seen the recent foreclosure stats. Sorry, but the banks won’t be lending to these folks any time soon. But you can keep hoping for a reflated bubble.

“Our kids are gone, I don’t need a yard, my wages are mine to spend as I see fit not to dump in a stream of upgrades and repairs and and endless upwards spiral of taxes on a house. No”

Uhh you pay the taxes when you rent, your pay for repairs when you rent. The rental market has been crazy lately, but in past rental markets the taxes go up, your rent goes up. Repairs are typically priced into the cost of the rent.

I also get the benefit of writing off interest, and p taxes.

But second, no matter how you trade something, the tax consequences will be the same. Now there might be something you could do to try to hide the transaction, and not report it, but I wouldn’t recommend that as a course of action. In fact, I’d strongly advise against it.

By Kary L. Krismer @ 57:

Not to pick on anyone in particular, but for many people that would presumably be never, and so yes, they would be renters forever. As long as someone values owning real estate less than most other people, real estate will always be overpriced to them.

Except that going forward, lenders aren’t willing to go along with the people who value real estate more than they value their financial health. And a whole lot of people valued real estate so much that they won’t be able to borrow ANY money for the next 5-7 years. That pretty much cuts out most of the folks who valued real estate more than us bubbleheads. :-)

Well that’s one possible future, but probably an unlikely one. Banks are very unlikely to give up opportunities to make money loaning money to people. That’s what they do. That’s why people with 10 credit cards who are carrying $45,000 of credit card debt used to be able to get an 11th card. That might not be possible now, but I strongly suspect it will be possible again in the future. The banks play the odds, and part of the odds are what I call the musical chair part of lending, where one bank jumps in and then gets paid off when another one jumps in.

http://finance.yahoo.com/news/Best-Places-to-Live-usnews-15476164.html?.v=1

say it isn’t true.

I/we are neither sellers nor buyers. I read this site for entertainment and to gauge the economics of Seattle and the US in general.

At any price, for any kind of tax deduction or incentive, or in any kind of market, at any kind of interest rate, I/we will NEVER again buy property in this country.

I could care less whether the neighbors respect me for being an owner nor disrespect me for being a renter.

NEVER again in my lifetime will I:
repave the driveway
pay to re-roof a house
buy a new hot water heater
replace worn out appliances
install a new septic tank
fight the tax assessors office

I/we have owned several properties in several states over the last 25 years. I will never again be fleeced by the real estate industry, government, property market, or repair contractors. Free! We are free of all of that and if I have to live with landlord white walls and the renters inability to keep horses an mules in my bathroom as I see fit–so be it. Who cares?

Our kids are gone, I don’t need a yard, my wages are mine to spend as I see fit not to dump in a stream of upgrades and repairs and and endless upwards spiral of taxes on a house. No, no more. Cabinets can be old, new, white. Countertops can be granite, laminate, concrete–I don’t care. Just_don’t_care.

The American dream has lost its grip. However I can live cheaply and move to make more money is my primary interest. The less I own the better off I am.

If as I suspect, there are more people like me in the ‘market’, the US real estate industry is in for a very serious long term crash. We don’t need you any more and we’re done paying our dues.

A room is a room is a room.

RE: mukoh @ 94 –

Collectibles used to be one of my main investments.

You may be implying that private sales are non taxable events. Like wine, once some one buys it, and drinks it, it’s gone. In that case the collectability is lost forever.

Tax is a cheap price to pay for verifiable funds and property.

You need to sell to another collector for the coins to have value. That collector needs to show where the coins came from, like a pedigree.

The kid down the street may think a coin is cool, but to get real dollars you need to sell to some one with money. People with money like to be sure the coins come with a bill of sale to show they are come by legally.

Exactly…except I think that the IRS doesn’t care if it’s a private sale. They still want their money.

I’m a coin/change/metal collector/hoarder myself and personally would prefer NOT to run afoul of the IRS if/when I sell my “hoard”. In fact, I’m having trouble locating the receipts for some of it and it’s quite disconcerting. It’s not that I’m worried about anyone wondering how I “came on to it”…I just don’t want my cost basis to be ZERO. :::grumbles:::

I’m betting that some of the jobs that are created by the .gov will be IRS jobs to get all the people that have “Ebayed” their collectibles over the last 5 years to pay up.

The government wants people to consume, not collect.

Collection slows the velocity of money. That’s why we have forced obsolescense with many of the things that people consume. Look at electronics…be it computers or home entertainment gear. The junk from China is almost seemingly made to cr@p out as soon as the warranty is up.

Collectibles used to be one of my main investments.

You may be implying that private sales are non taxable events. Like wine, once some one buys it, and drinks it, it’s gone. In that case the collectability is lost forever.

Tax is a cheap price to pay for verifiable funds and property.

You need to sell to another collector for the coins to have value. That collector needs to show where the coins came from, like a pedigree.

The kid down the street may think a coin is cool, but to get real dollars you need to sell to some one with money. People with money like to be sure the coins come with a bill of sale to show they are come by legally.

It stops at losses. You have the right to lose money. There is nothing that says you have to be good at business to be in business.

I’m going to tell a story about myself because it may put some perspective on my comments. Most of my Real Estate dealings are done through other people. My friend Dan once introduced me as the guy who got people to buy Real Estate for me. That’s true.

No mortgage lender, until recently, and never again, would make me a loan. I’m a high risk borrower who loses money.

I work all the time. Everything I do is for my business. My main business is David Losh. My dogs are tax deductible. I need them to protect my junk cars. My junk cars are tax deductible.

The tax code is the most cumbersome set of law in a country that has so many laws that what you are doing right now is illegal. You are, as you have pointed out before, doing something illegal, right now.

The beauty in all of this is that the law is selective. Laws are selectively enforced. Even if some one were to look at me, I have nothing. Most, if not all, of my business is done through other people. Why not? People are what matter the most.

ALWAYS REMEMBER AS TIM REMINDS US PAY TAXES ON ALL YOUR COINS, GOLD, SILVER, LIQUOR.

The rental number has been asked and answered. It’s an example.

I didn’t catch the answer before, but you were the gentleman sitting to my left at the meet up.

Very nicely done.

My first Real Estate sale was to a couple who had silver coins for a down payment. The husband kept claiming he had thirty thousand dollars in his closet.

By the time we got them out, sold them, and yes, paid taxes he had like $10K. It was enough for a $50K house near Green Lake, but it was a shock.

He had to pay taxes to show where the money came from. No lender likes having money appear from no where.

I’m sure it could be done…but Uncle Sam would get his cut regardless I’m guessing.

The gov seems to like to know the whereabouts of gold.

On a similar subject, the etf’s GLD and SLV are treated like the metal itself WRT taxes from what I have read.

If that’s the case, I’d be willing to bet that many of the people that traded in those ETFs will get a supplementary tax bill as they probably figured that it was the same as a stock.

I currently rent a 695/mth 1 bedroom in a 4-plex in Magnolia and it’s not in a alley. In fact it’s across the street from townhouses selling for more than 600K.

Not to pick on anyone in particular, but for many people that would presumably be never, and so yes, they would be renters forever. As long as someone values owning real estate less than most other people, real estate will always be overpriced to them.

Except that going forward, lenders aren’t willing to go along with the people who value real estate more than they value their financial health. And a whole lot of people valued real estate so much that they won’t be able to borrow ANY money for the next 5-7 years. That pretty much cuts out most of the folks who valued real estate more than us bubbleheads. :-)

Wow. You were fast.

I had no Idea that they had alcohol on that list. I just stocked up on a bunch of Stolichnaya…and I hardly even drink.

In 2005, when we were trying to decide whether to rent or buy, there were very, very few nice three-bedroom houses or apartments available in this city for less than $2200/month. We ended up renting, and I’m glad we did, but that’s a factor you have to keep in consideration: During a housing bubble, anything decent (and a lot of not-so-decent stuff) is for sale, not for rent.

That has been our experience as well here in Pullman. Houses that were renting for $1000/mo sold for $250k, and now the accidental landlords are trying without success to rent them out at $1500/mo (still alligators even at above market rents).

If you play by the rules…yup. Same goes for gold & silver bullion, art, antiques etc.

“17) How is the gain or loss upon sale treated for tax purposes?
For collectors and investors, rare coins are “capital assets” (see Internal Revenue Code Section 1221); therefore, any gain or loss upon their sale is treated as a capital gain or loss. Such gains or losses are reported on Schedule D of the individual’s Form 1040 tax return. “

http://www.usrarecoininvestments.com/investing/how_to_invest.htm#Q17

http://www.taxalmanac.org/index.php/Sec._1221

TITLE 26 > Subtitle A > CHAPTER 1 > Subchapter A > PART I > § 1 > (h) > (4) and (5):

(4) 28-percent rate gain
For purposes of this subsection, the term “28-percent rate gain” means the excess (if any) of—
(A) the sum of—
(i) collectibles gain; and
(ii) section 1202 gain, over
(B) the sum of—
(i) collectibles loss;
(ii) the net short-term capital loss; and
(iii) the amount of long-term capital loss carried under section 1212 (b)(1)(B) to the taxable year.
(5) Collectibles gain and loss
For purposes of this subsection—
(A) In general
The terms “collectibles gain” and “collectibles loss” mean gain or loss (respectively) from the sale or exchange of a collectible (as defined in section 408 (m) without regard to paragraph (3) thereof) which is a capital asset held for more than 1 year but only to the extent such gain is taken into account in computing gross income and such loss is taken into account in computing taxable income.

408(m) defines “collectible” as (emphasis mine):

For purposes of this subsection, the term “collectible” means—
(A) any work of art,
(B) any rug or antique,
(C) any metal or gem,
(D) any stamp or coin,
(E) any alcoholic beverage, or
(F) any other tangible personal property specified by the Secretary for purposes of this subsection.

Where or how you sell it would seem to only be relevant to the question of whether you can get away with not reporting it on your tax return.