027- Seth Jervis of Signature Properties

September 9th, 2011

Episode 27- Seth Jervis

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http://twitter.com/MoneyPlanSOS Steve Stewart

I have to respectfully add my comments that could be construed as being an argument, but it needs to be added to the discussion:

Mr. Jervis used the example of renting at $500 a month, a total expense of $18,000 for 3 years of renting. He compared this to buying a $100,000 home with a mortgage (it was implied since the discussion was not centered around living in a property with no payment) in a Kingsport location that appreciates at 6% annually (which is awesome!) gaining $18,000 in value/equity – a $36,000 swing. I can agree with those numbers. But what needs to be added to the discussion are the expenses of owning a home:

When you Rent: You are not responsible for repairs and maintenance of the property (other than keeping it clean and not destroying the place). A dripping faucet, leaking water heater, broken air conditioner – these are expenses that renters do not have to deal with. In many cases the monthly rental cost may include some utilities like electricity, water, trash, and some places even include wi-fi and/or cable.

When you Own: A monthly mortgage payment does not include those things noted above – you pay it all on top of the monthly obligation. When this is not taken into consideration before signing the loan documents then people can become “House Poor” (I talked a lot about this in my recent podcast “House Poor Are You?”). A majority of their income goes to the monthly mortgage, repairs, and maintenance and leaves little (or less) room for savings or wealth building.

I agree that home ownership has MANY benefits, but when you look at them you will quickly find the majority are not financial: they are comfort, safety, security, and personalization. Tax deductions and equity are financial benefits but when you net-out the annual expenses of utilities and repairs you will find that the gap is not as large as implied.

Mr. Jervis did speak about showing his clients houses that are not at the apex of the bank’s pre-approval amount (which we know from the past decade has been overly generous). I appreciate him saying that out loud and would venture to guess he probably agrees with me. It just wasn’t included in the podcast.

Greg, thanks for having a comments section so that people like me can voice their thoughts!

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