First house for a young man

[tronde]

Question to bluescull:

I can see why you and your family fear for financial trouble in China. My understanding of the Chinese economy is that it does not follow the "western rules of economy" if you look at the government level because the government as an entity does not see money as a goal in itself. I know that one of the most important goals for the government is to remain in office, and money can be a tool to achieve just that so it is importat that way. But just to save up a huge pile of money is not importat in the same way as it is in the West.

So - how big losses for a Chinese citizen or family will they allow? I guess a large group of pepole can be rather difficult to handle if they loose a lot of money because of something as abstract as large scale economy?

Will your money actually be more safe in the american housing market than within China? If the Chinese economy really goes bust it will for sure affect most western countries too.

The point is not China is going down, on the opposite, it how it prevents this. China prevents political instability by locking in money within the boarder, so that if someone wants to take arm, others will turn him in in fear of losing their own government issued certificates, such as money, house certificate and car titles.
It will make my future investment harder if I plan to stay in US forever, so I prefer to get my money out before the total capital control is in place. That's it. As for economy total collapse and its ripples, I don't see any immediate risk of that.
And since US has an average APR of 15% and I have no interest in pure capital investment, I figured that by buying a house it can preserve the value of my money better, at least better than putting it in bank.

Then I understand.
Yes, I agree that a house with no loan is safer than the bank. As long as you own both the house and the land (as I understand is your goal) the house will most likely survive a lot of financial trouble. Just make sure you have a proper insurance on it, and don't cheap too much on maintenance.

[cdev]

You should know that planners, who often are in the know about such things, expect a lot of less expensive neighborhoods to be redeveloped via eminent domain in the coming years as cash pressed towns attempt to increase their tax bases (its likely to be futile, though because whatever systemic problems are happening, to kill malls, etc, are unlikely to reverse themselves for a community that builds more malls where affordable housing used to be. )

A legal decision in 2005 made it legal for towns to take peoples property and give it to developers simply because the developer has some kind of idea that they find attractive. That is I think a huge mistake because its just inviting corruption.  If your neighborhood or home is taken by eminent domain its typical for people to get less than their true replacement value for them, also its the pre-improvement value. 

What you see in China where holdouts manage to stay for years with a big mall being built around them would not happen. In that respect, homeowners" in China (despite them only owning the land for 99 years or whatever) actually have more rights than Americans now.

[Nusa]

Will your money actually be more safe in the american housing market than within China? If the Chinese economy really goes bust it will for sure affect most western countries too.

Money in cash form almost always loses value, no matter what currency you have it in. You need to invest to keep or gain value. Having assets in more than one market is usually safer than having it in a single market. Even if the house loses value, he still has a place to live and it remains a long-term asset. And property taxes may fall, making it cheaper to live. His family background gives him experience in property investment and management, even if not in this country, so he's not going into it cold like most first-time home buyers. I think he'll do ok overall.

[cdev]

Tronde,

Here in the US it emerged that several banks - big banks, were actively committing fraud so that more people would be foreclosed on so they could take the entire asset. They totally got away with it.


It was their word against the banks and the banks got away with it. Even when one very large US bank was forced to pay a settlement, it worked out to around $300 per family foreclosed on. They had paid off their mortgages or made the payments on time they were supposed to - but still lost their homes.

 How much was their compensation? 

This was in a case where the bank was officially declared "Guilty" and there was no debate that they had deliberately pretended families who had managed to get their payments in on time, often having gone to great trouble to get that money, had failed to.

the bank abused their power and the trust people had put in them to declare them in default and foreclose on the houses which often then went to ruin, not being occupied they became flooded or targets of metal thieves, etc,. often serving as a magnet for homeless people and destroying the value of other homes in their communities..

How much did the banks have to pay for this behavior? So little as to be almost less than nothing.

The bank was forced to pay a settlement that worked out to a very small sum, of which the lawyer who brought the class action lawsuit got around a third. The payment was a few hundred dollars per family.

[cdev]

Blueskull,

It seems as if everybody in China are essentially renters then, maybe?

How much is the mortgage, rent, etc, that people have to pay in Chinese cities and towns?

How large of a percentage of income is it on the average?

[tronde]

Tronde,

Here in the US it emerged that several banks - big banks, were actively committing fraud so that more people would be foreclosed on so they could take the entire asset. They totally got away with it.


It was their word against the banks and the banks got away with it. Even when one very large US bank was forced to pay a settlement, it worked out to around $300 per family foreclosed on. They had paid off their martgages or made the payjments they were supposed to but still lost their homes. How much was the compensation. the bank as forced to pay a settlement that worked out to a very small sum, of which the lawyer who brought the class action lawsuit got around a third. The payment was a few hundred dollars per family.

Someday, those bankers will pay.

I have read "Who Stole the American Dream?".
https://www.amazon.com/Stole-American-Dream-Hedrick-Smith/dp/0812982053

Seems to be quite OK with the the facts, at least as we see it from Europe.

Since bluescull can't get any kind of loan, the house should be rather safe from the banks as long as he also owns the land.

[coppice]

Blueskull,

It seems as if everybody in China are essentially renters then, maybe?

Suppose I lived in some town on the outskirts of a medium sized but significantly nicer than average city like Shanghai or Shenzhen. (i.e. the New York or San Francisco of China) How much is the mortgage, rent, etc, that people have to pay while they live there?

How large of a percentage of income is it on the average?

Large numbers of people buy their own home in China. Prices vary a great deal with location. Shanghai and Shenzhen can be very expensive. An apartment in the up market parts of the Shekou district of Shenzhen can be 150k RMB per square metre.

[cdev]

That's
22048.12 US Dollars per square meter

[Nusa]

That's
22048.12 US Dollars per square meter

Or about $2000/square foot, and he did specify "up market parts". The Central Park South area of New York City is more expensive than that with a median of $2500/sq ft. If you want to buy in the Ritz-Carlton building, it could go up to $10,000/sq ft.

[cdev]

Autonomous cars may change driving substantially because people will be able to sleep or do other things. This may qualitatively change the relative merits of in city versus suburban or rural living, and/or living in different parts of the country or even planet in ways we likely have no idea of now. We wont know until it happens.

[rstofer]

Since bluescull can't get any kind of loan, the house should be rather safe from the banks as long as he also owns the land.

Owning the land is traditional.  Oddly, owning the mineral rights below the surface isn't.  That's just one of those things to look for.  I doubt that it matters but who knows?

The problem with owning the house outright is that Bluescull takes all the risk.  Yes, there will be some kind of insurance but that doesn't cover downturns in the economy or downturns in local housing costs.  Having 100% equity doesn't seem like a good thing until you are older and less able to make mortgage payments.  Also, he loses the mortgage interest deduction.

The interest deduction isn't a reason for buying a house but it certainly enters into the math.  If your marginal tax rate is, say, 35%, then in the early years when the mortgage payment is nearly all interest, the .gov is making 35% of your house payment.  Basically, the deduction reduces your income subject to taxation and, as a result, you pay less taxes.  Of course, you are still paying the interest.

In the bad old days of the '80s, when mortgage rates were up around 18%, the math got very interesting!

https://finance.yahoo.com/blogs/just-explain-it/why-mortgage-rates-matter-152241574.html

[tronde]

We had 100% interest deducting in Norway too. It ended with a lot of smoke in 1987/88. Lots of people lost their homes. Now we can deduct 24% of the interest.

What is the best of having a loan or to pay cash is never known before the loan is fully paid back.  If people invest in something just because they can save on taxes it will quite often end up with a bigger loan because it gives the impression of the thing being cheaper. It is a lot of psychology involved in this.

For bluescull this does not matter. If he want a house he will have to cash out. As I understand him, this house is meant to preserve as much as possible of his savings and to give him a roof above his bed. He also think he can get some money from chinese students to help with the expenses. That makes sense for me. He knows best how he will share his home with other people, and I think chinese people look different on how to share a place to live than what western people does. If he finds home-sharing to be OK, it can give him money to pay for the fixed costs of owning a house.

The biggest uncertainty for him will be how long he can stay in the US.

[WastelandTek]

Tronde,

Here in the US it emerged that several banks - big banks, were actively committing fraud so that more people would be foreclosed on so they could take the entire asset. They totally got away with it.


It was their word against the banks and the banks got away with it. Even when one very large US bank was forced to pay a settlement, it worked out to around $300 per family foreclosed on. They had paid off their mortgages or made the payments on time they were supposed to - but still lost their homes.

 How much was their compensation? 

This was in a case where the bank was officially declared "Guilty" and there was no debate that they had deliberately pretended families who had managed to get their payments in on time, often having gone to great trouble to get that money, had failed to.

the bank abused their power and the trust people had put in them to declare them in default and foreclose on the houses which often then went to ruin, not being occupied they became flooded or targets of metal thieves, etc,. often serving as a magnet for homeless people and destroying the value of other homes in their communities..

How much did the banks have to pay for this behavior? So little as to be almost less than nothing.

The bank was forced to pay a settlement that worked out to a very small sum, of which the lawyer who brought the class action lawsuit got around a third. The payment was a few hundred dollars per family.

This is a bit off topic, but bears repeating.  I personally know people who MADE THEIR PAYMENTS and got swept up in the mass forclosure rubberstamp shiteshow anyway.  Bloody thieves, hanging is too good for them.

[cdev]

Because of my shortwave listening hobby when China sent in the tanks to crush (literally) the protesters in June 1989, my friend and I were among the first Americans to protest here in the US. On that day (maybe 500 people by the end of the day) and the next (30000) I met a lot of Chinese students who were protesting for democracy.

I still have a bunch of flyers I was given that day, Most were in both Chinese and English. I could scan them in.

[mrpackethead]

Invest in Oscilloscopes. Its the future.

[vodka]

Depends on income and family background and location. A poor kid making little money in a big city will likely to rent for life, and a rich kid in a remote town making some good income may end up with multiple houses.
Depending on cities, a 100 square meter house can be rented from $150/mo all the way up to more than $1k in a big city.
Generally this number is in the ballpark number of 1/3~1/2 for mid income people and ~1/4 for high income people. For low income people, they usually share rooms with others to further reduce cost of living (it's common to see a 3B room to be shared by 3 low income families, or for single people, sometimes up to 12 guys per single bedroom).

.

15K$ for a flat or by unifamiliar house? 
Here , we are arriving a exorbitantly price rent, the average 1500€/month  for an old house of 50 meter per square(begining S.XX) .The problem is many people of middle classes have to live like soviet commune. I think that we haven't arrived as the chineses of 12 people by room , as much 4 or 5 people by room.

On my sample contract it made this clear: minerals are my property, but I'm not allowed to explore them. Therefore, if government wants to explore it, they have to buy my house at a significantly higher price, but I can't explore it, neither do I care to do this.
for (int i=0;i<=INT_MAX; i++)
    printf("I CAN'T GET LOANS!\n");

Until that the goverment declare his owner land as "Good of National Interest",so they expropiate his land and they will recompense with small change.  Here , we have a theme park "Port Aventura" when it was built , the  autonomic goverment expropiated the lands to 450 owners. The swines declared  all the lands as "Good of National Interest". Today, the owners follow reclaiming a fair recompense.
http://www.lavanguardia.com/local/tarragona/20170320/421042372763/expropiados-portaventura-preparan-peticion-conjunta-revalorar-terrenos.html

[coppice]

Invest in Oscilloscopes. Its the future.

I can't see I need any better a scope than my fully loaded msox6004a.

Give it a little time. You'll change that opinion. 

[basinstreetdesign]

My 2 cents:
We bought a house here in Ontario 5 years ago and here's what saved our asses:
Get your chosen prospective property inspected by a REPUTABLE house inspection service.  One that will produce a report binder with photos of all things that they inspected (electrical, water, ground water, sewage, structure, fire safety, roofing, cladding, etc).
This service may cost you $400 or so but can steer you away from a money pit.  It did for us.  And it will be VERY educational about all things property-related.

[VK3DRB]

6. Most Chinese landlords don't have a formal rental agreement at all, we accept cash only, to make sure this is untraceable.

What? A country of tax dodgers and cheats, eh? Sounds like pre-1949 is repeating itself. The Chinese should learn a lesson from the Greeks to see what happens if you don't pay your taxes. Governments should crack down on tax cheats and given them harsh penalties like confiscation of their assets and jail time.

Our biggest tax cheats in Australia are companies like Chevron who cheat Australians big time. Our government caught up with the crooks... http://www.abc.net.au/news/2017-04-21/chevron-faces-massive-tax-bill-after-ato-court-victory/8460874

[tooki]

There is much more to this than that, what's happening is a system has been created that lets rich people rip off the rest of the planet Especially in the US.

[...]

[/i]The people who made a killing should be made to repay the country from their own swiss bank accounts.

I know you say that as a flippant remark, but FYI, Swiss banks have been useless for rich Americans for years now. Not only have secret accounts been unavailable for a long, long time, but the more recent FATCA law makes it damned near impossible for American citizens (and their spouses, green card holders, etc) to open bank accounts outside of USA (or indeed even to keep existing ones). The financial services situation makes some things hellishly difficult for Americans abroad like me. (FATCA stupidly makes no distinction between a multibillionaire living in USA who wants a foreign account to hide assets in, vs someone who wants a "foreign" account because you freaking live abroad and need a local checking account for your salary to go in...)

P.S. cdev, I love your comments, but can you please stop using your homegrown, cobbled-together quote formatting, and instead just use the forum's actual quote tags? The latter ensure a consistent appearance of quoted text, including for users with alternative viewers like tapatalk.

[tooki]

Hi all. This thread is to ask opinions about buying my first house.
As I'm progressing in my degree program, I'm about to graduate, and I'm expected to stay as a postdoc for at least 2 years. Depending on future situation, I may stay as a faculty, or I may leave and find a real job.
I plan to buy a house, for both investigation and to reduce cost of living. As someone might have heard, economy bubble is collapsing in China, and my parents' want me to buy a house in US as a safe deposit in case Chinese currency collapses. In the meantime, here (RDU metropolitan), real estate's value gains about 10% each year, while tax is only 1.03% (Raleigh city+Wake county), besides evaluated taxable value of houses is overall lower than their real market value.
So, long story short, I have $260k on hand (my parents sold one of their apartments used for renting, and I sold my 2 small houses for renting, both in China), and my parents can get me another $10k~$20k if REALLY needed. I plan to buy a small townhouse in Raleigh/Cary, NC with this money.

My questions:
1. Should I spend all the money (read: ALL) on a house that leaves me no money at all (maybe a few k$ in checking account, but that's it), or should I buy a cheaper house and spare some money in case of emergency? Right now I have 2 choices: a $270k house, including all costs, and a $220k house, including all costs, both townhouses, both are of similar 1700 sqft construction area, both have 1 garage+2 front door parking, the more expensive one has 3 bedrooms (so the rest 2 rooms can generate renting revenue) and is built in 2012, while the older one is a 2006 house with 2 giant bedrooms (despite giant, a single bedroom is worth the same from a tenant's eye).
2. I can generate ~$500 per month revenue per bedroom, and that means each year, I can make $12k from the $270k house, and $6k from the $220k house. Factoring in that, which one is my best choice?
3. Should I buy a house from the first place? I do NOT have a green card or H1B. I'm on F1 visa, but I'm sure if working in university, I have 100% chance to get H1B if my OPT runs out. In the meantime, I have confidence to get 100 paper citations (which qualifies me EB1 NIW green card program).

Inputs are very appreciated, as I'm about to pull the trigger very soon.

I agree about stabilizing the visa situation first. The US government is currently showing ZERO hesitation to renege on promises, so until you have the green card in hand, don't even THINK of relying on merely the promise that you qualify.

I'd also advise you to buy a detached home if at all possible; in NC this is eminently doable. (My dad lives in Durham, right at the border to Chapel Hill so I know the area a bit.) Townhouses suck, especially in USA where walls are thin. And they're likely to be under an HOA. Detached houses can still be readily found without HOA.

[tooki]

there is a perception that the corporatocracy is deliberately letting public education die so they can shift resources to foreign student programs and overseas guest workers

Well, many (state owned) funding sources actually prefer American students, but the point is most Americans don't really like STEM.
They seems to have more interest in either a normal, low income but steady life, such as a clerk, or really high income top of the human hierarchical jobs, such as lawyers, doctors or investors.
For instance, in our facility, we have ~100 students, mostly PhDs, with a few masters and postdocs. We have about 1/3 Indians, 1/3 Chinese and 1/6 Koreans and Japanese, while the rest 1/6 are Americans and Europeans.

Whoa now, hold on a minute.

It's not that Americans and Europeans aren't interested in STEM. It's that the populations of India and China are HUGE compared to ours. Given a similar percentage of people interested in STEM, you will easily outnumber us.

Add to this the fact that many Americans cannot afford to go to university, regardless of interest in the subject, and it's no wonder that Americans aren't the majority. China's wealthy people alone (to which you belong, given the circumstances you describe) are enough to outnumber American STEM students.

[rstofer]

Until that the goverment declare his owner land as "Good of National Interest",so they expropiate his land and they will recompense with small change.  Here , we have a theme park "Port Aventura" when it was built , the  autonomic goverment expropiated the lands to 450 owners. The swines declared  all the lands as "Good of National Interest". Today, the owners follow reclaiming a fair recompense.

In the US, it's called Eminent Domain and it's part of the 5th Amendment.

No person shall be held to answer for a capital, or otherwise infamous crime, unless on a presentment or indictment of a Grand Jury, except in cases arising in the land or naval forces, or in the Militia, when in actual service in time of War or public danger; nor shall any person be subject for the same offence to be twice put in jeopardy of life or limb; nor shall be compelled in any criminal case to be a witness against himself, nor be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation.

The problem is the definition of 'public use'.  The law was often used to obtain land for roads and highways - clearly to be used by the public.

Public use was degraded public purpose by the Supreme Court such that government agencies can use eminent domain to seize property and then give it to private developers:

http://www.sgrlaw.com/ttl-articles/837/

There probably isn't even public access much less public use!

[cdev]

As real, wealth creating businesses dry up or move their operations overseas, its replaced by churning activities which milk positions of influence for tax money.

[Psi]

my parents' want me to buy a house in US as a safe deposit in case Chinese currency collapses.

What if the US currency collapses