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[Barnimal]

ok i've been kicking the idea around in my head to sell my place and rent for awhile but the woman just doesnt think its a good idea. We bought at 159k and now the place is worth 300k+ we're in los angeles where homes are rediculiously overpriced. Why would i wanna sell you may ask?

I honestly think the housing market is going to start to level off. They are building tons of homes out here and what i see happening in a couple years is an excess of new homes as well as a shitload of forclosures from people who got in over there heads.

My idea is to sell while the market is hot still, throw the money in a savings account and just rent for a couple years and let the money earn interest. Now this is where i need help understanding something. When a bank says they give say 3% APY interest on savings accounts (i think ING direct gives something like 3%) is this money earned per month? i mean if i threw 100k into a saving account would it gain 3k a month in interest or is that 3k over a year?

Im sure it has to be the lower but i keep thinking in credit card terms how when u borrow, if its so and so interest per month on the borrowed money it accumulated to a shitload over a year. does it work the opposite way too? since the bank is in essence borrowing your money?

 

[FreakyFink]

APY = Annual Percentage Yield

And if you know you're not going to touch the money for a couple of years, why not put it into a CD (Certificate of Deposit)? 1-year CDs are about a point higher (4.25% APY) than money market and savings accounts right now.

 

[keeblerdrow]

I thought this thread was gonna be about Money Talk. The single most uninteresting and yawn-inducing radio show on the dial. It's hosted by Bob Brinker, the most boring radio personality I've ever had the disprivilege to listen to. God, I hate Money Talk. It's the only thing on on Sundays and it makes me flip over to *shiver* FM radio.

 

[lexy]

If I were you, I'd consult a competent financial advisor about this. In fact, you should get the opinion of several advisors.

Is renting a house really cheaper than paying mortage in LA? That's sad.

 

[Groder Mullet]

Do NOT throw that much money into a savings account. The piddly interest they pay you isn't even worth your time. Talk to an advisor and have him get you into something fairly conservative. You'll do much better going this route.

 

[Fatghost]

Generally speaking, you'd be better off owning a home than renting.


However, if the following factors hold:


1. The capital gain on your house is tax free (if you have to pay tax on the increase in value, you're probably better off to let the money stay in the house as an unrealized capital gain where it can appreciate long term without triggering tax).


2. You can handle a downsize to renting a smaller place/buying a smaller place as far as lifestyle goes (ie: you don't have kids, you don't plan to have any for a while, you can rent somewhere nice and without having to endure an extra long commute, your wife won't kick your ass for moving, etc.)

3. You can tolerate to be a renter or be downsized for at least 5 years in the event of a serious market downturn (ie: your investments tank) or a real estate market upswing (ie: after you sell, property values continue to climb).

4. You have a competent financial advisor and a clear plan for the money. ie: you don't throw it in a chequing account and make it a giant toys and vacation fund, you don't just throw it into hot stocks, you don't just stick it in some low yield government bonds, etc.

5. You understand that this strategy could be fairly risky and that while there is a potential for gain, there is also a very real potential for loss, particularly in the short term.


If everyone of these factors hold, it might be worth doing. Just keep in mind though that homeowners tend to win out in the long run over renters.