Tag: t_homeAppreciate

home/school location: 2 things I can’t sacrifice

Posted on by tiger40490

Each family has key constraints and hard limits to flexibilities. You see similar hard limits when you do yoga poses 🙂

Some can’t accept small space; some can’t accept old houses; some can’t accept above-avg schools.. The more things you can sacrifice (the more flexible), the stronger you are.

However, be honest.

  • —- for single living
  • 1) can’t accept long commute
  • 2) dirty street? Bushwick standard was barely acceptable
  • —- For the family
  • 1) can’t sacrifice street cleanliness or safety
  • can’t sacrifice freedom of selling, but this is rarely an issue.
  • academically above-average schools? I feel I can accept
  • commute? I choose to accept it as sacrifice for the family
  • size? I feel 90% TPY size is acceptable. When kids grow up we can move.
  • restrictions on renting out? I would accept very grudgingly.
  • slow appreciation? perfectly acceptable. Look at my #2-1173
  • —- for the school
  • 1) can’t accept bad influence or poor commitment/enforcement by school
  • can’t sacrifice safety but rarely an issue.
  • academic standard as measured by standardized benchmarking? I don’t worry too much.

##condo^house #index page

Posted on by tiger40490

Key points:

  1. In a real shortlist, a house and a condo generally differ in condition (age) and location. House size tends to be larger. However, for comparison, let’s normalize:
  2. at the same location, for the same condition and (living area) size, houses offer more or less double the appreciation potential (due to land) and also x% higher psf due to yard, basement, attic, etc. (If total running cost is lower for a house, then additional y% psf.) These features command x% additional psf due to supply and demand. On the demand side, it seems most buyers value them more than I do, so it’s actually SILLY for me to pay that extra x% rather than 0.5x%.
    • For illustration, consider a home in a “happening place” with galleries, pubs and restaurants, so there’s 10% psf premium, but I want to avoid that premium
    • For illustration, homes in top school districts might command 50% psf premium, but the bachelor would avoid that premium
    • For illustration, homes close to transportation hubs command z% psf premium, but some drivers prefer privacy and space, so they should avoid paying the premium

— advantages of condo

  • smaller price tag at the same location. See i always prefer small investments, esp. property
  • size —- many smaller units like 1200 – 1500. Smaller price tag
  • street cleanliness —- at the same standard, a house often costs more.
  • age and condition —- most of the houses I have seen are low-end and very old wood structures
  • maintenance —- see my post maintenance cost: landed^condo
    • water pipes, heating equipment, wiring … less to worry about
  • often no stairs
  • Smaller range of variations in condition, quality, value.. —- fewer variables; more boundaries set by the condo. I see this as an advantage not limitation. Most of the decent “houses” are luxury by my standard.
  • renovation budget? —- probably more predictable and lower for condo. If a house of the same size requires the same renovation budget, then the house probably has a bigger price tag.
    • initial set-up cost —- and uncertainty thereof
  • pool, gym, playground
  • backyard? I see it less as an advantage, more as a burden, though kids may like it
  • gated community, feels safer
  • probably lower electricity, heating …
  • often concrete, rather than wood

— advantages of independent houses

  • easily collocate with tenant, either MFD or SFH with a back entrance.
  • tax + HOA ? —- (60% sure) in Bayonne I feel overall house is better for the same size + location + condition. See my post pTax^condo fee
  • no rental restrictions by committee
  • for the same usable size,
    • appreciation based on land
    • expansion potential? I have seen many examples, but every house I have seen has too many rooms than I need.
    • lots of storage space like basement, attic, after you spend some money and time working on them? I won’t need so much space. They encourage a wrong life style
  • wood is easier to modify with a contractor.
  • condo mortgage approval is harder and mortgage rate could be higher (in theory) so resale could be harder.
  • condition? often less luxury and more modest, leading to smaller psf price
  • maintenance —- you have cheaper options
  • less restrictions on re-layout? I won’t need it.
  • often more parking space

2well-known benefits@buy`SDXQ #le2YJL

Posted on by tiger40490

Hi JunLi,

Thanks for sharing your two points about the benefits of buying a top school district home. Two points are easy to remember!

A) If I own a home in a top school district, my kids will go to those good schools rated 8-10.

B) The home I buy is likely to appreciate over the period until we graduate from high school. Easily sell at a profit.

I’d like to put on the critical thinker’s hat.

For (B), actually many non-school-district homes appreciate faster. It depends on your horizon. Over 5Y, I think some school district homes don’t appreciate a lot; whereas some non-school-district property appreciation can be faster. Over a 10Y horizon, I agree a school district home is very likely to appreciate. I see very stable demand from many, many parents not only immigrants [1] and Asians.

How many years do I want to live in such a school district? Until my kids graduate from high school? Well, that may be too long for my liking…

[1] Immigrants are unfamiliar with the education system so naturally many of us go for the best-known top schools. Safety in well-known brands. On average, local parents tend to be more confident and are willing to accept “lesser-known brands” like schools rated 7 and below.

For (A), I agree it’s better if my kids can go to a top-rated school. The rating and ranking is 100% academic benchmark-based (as illustrated in my previous mail) and it does correlate with quality of the learning environment.

Overall, I feel A) is more certain than B). In other words, higher probability of realizing the benefit.

However these two benefits come at a price.

  1. One of them is longer commute. It eats into family time and time for rest.
  2. Another drawback is bigger financial commitment. I would have to cope with 600k [500k ~ 800k range] rather than a 250~400k price tag in a non-school district. It ties up more of my free cash. It entails higher pTax and mortgage monthly burden. With my single income, I can afford up to 500k only, so 600k is burdensome, and truthfully “beyond my means”.
    • Probably the pricier home is bigger or better, but I don’t need such a big home actually. It’s luxury I can hardly afford.
  3. Most such locations require more driving than my favorite locations — walkable communities with kids and old folks on the street. I may get used to more driving.

Since the two benefits come at a hefty price, I need to re-evaluate the benefits. For (A), I explained to a few friends that what I care about is conducive learning environment and esp. engagement of the young mind. I believe many 6 or 7 rated schools provide that. So the value of (A) is lower for me.

Academic benchmark is not my target and I deliberately play down its value, in defiance to mainstream Chinese/Indian conventional wisdom. In a top school, my kids are likely to perform better on standardized tests, but not necessarily happier or get more “engagement”. I have heard of isolated, anecdotal incidents of kids switching from average schools to top schools and suffer. They drop to the lower half of the class. They study under overload, and have less time for extra-curriculum programs which could otherwise engage their mind — what if one program is their true interest?

I urge all parents to take a critical look at academic benchmark performance. A friend pointed out that at middle school level, parents have more influence than the school. If my son is able to score 80/100 in a top school but only 70/100 in an average school, then we parents could perhaps push him to 80/100 even without the top school.

As you and many friends pointed out, ultimately, focus should NOT be academic benchmark or branded university. Focus should be the individual child, as a different individual from other children. The best learning environment for “majority of children” could be different from the best environment for my daughter. Specifically, for my kids, a particular 5/10 school may be a better environment than an academically driven top school. For example, the high school in south Edison, NJ is rated 5/10 but I believe it has lots of Chinese and Indian students and probably has good peer influence.

I try to be objective and incisive. I don’t want to unfairly play down the two benefits or exaggerate the drawbacks. I hope today I have done a fine job.

No doubt I have strong opinions. Unavoidable! These are important questions and have direct impacts on my children’s future and my family life. To join the same “rat race” as my fellow immigrants, and pay the hefty prices of a top school district … could be a burdensome decision.

Lastly, it’s prudent to rent in whatever school district for a while before buying.

(land-oriented)property investment ]U.S.

Posted on by tiger40490

Update — I need current income more than windfall!

Property investment can take a long time. If you can’t wait, then you may be disappointed, and it is better to focus on rental income in addition to appreciation.

  1. I believe Alan Shi who said that capital appreciation is based on land size not square footage of the “superstructure”. Therefore it’s lower for non-landed properties, unless it’s a very urban location, where only high-rises are available — JC waterfront, NYC…
    1. Kenneth Lemus (bofa) also agreed that the appreciation is mostly due to the land
    2. However, the land appreciation can take decades, perhaps longer than your lifespan!
  2. You can get a rough estimate of the 2 components in the valuation of a landed house by looking at the construction cost (perhaps 200k) vs the total price (perhaps 450k).
  3. Alan pointed out the superstructure (like a car) can only lose value over time; but land appreciates, over a longer timeframe like 20Y. In most cases, the land appreciation dwarfs the superstructure depreciation. However, in some cases the land and the location depreciates!
  4. I watched fixer upper. With a rundown landed property, you or next buyer could find contractors to tear down and rebuild [1] the “superstructure/上层建筑”, so the real thing that she bought is actually 1) location and 2) land size.

[1] at any budget you have

–Like in Singapore and HK (and Beijing, BGC, the Bridge…), high-rise condo can have capital appreciation too, if the location is such that only high-rise is possible. I have a tendency to emphasize and focus on condo appreciation because

  • my investment experience in Beijing and south east Asia
  • subconsciously I avoid driving (like I avoid fatty food or weddings), so I much prefer walkable communities with many shops and trains. Such locations tend to have no landed homes and only high-rise apartments.
  • rental demand is much higher in those prime locations
  • I don’t like to deal with repairs myself and rather pay a condo fee.

–In the cold light of day, I have to agree with Jack He that “In the same location, given the same unit size like 1500 sqf, a landed home always has higher value than an apartment“, because

  1. the landed asset gives owner more freedom and control.
  2. when it comes to repairs, you can do it quickly or slowly (delay just like condo), nicely or economically
  3. basement, garage, yard space all have utility value. All derive from the lot size.

–Give up appreciation! Among the many personal preferences, I may have to pick one to let go. It may have to be appreciation.

In reality, if I buy in a SD or CC1 location, appreciation is likely, but within such a location, one unit might have comparatively lower appreciation potential, perhaps due to age, structure, or ethnic make-up etc.

Walk-up is less popular but perhaps OK.

Su (Taiwan) said “pick the ranch with higher appreciation potential, if you feel indifferent about everything else”. Big “if” in most cases! For example, houses have higher potential but requires more maintenance (See maintenance effort(I hate it): house^condo)

–My tentative conclusion — In terms of investment, given my limited budget, tiny rental condo in a popular location can be justified -vs- a landed home in a remote township [1]:

  • condo could appreciate faster or less steadily than a remote landed house, over 15Y
  • condo fee vs pTax? Not sure. Jack He said condo wins.
  • rental income depends on location. A popular location may have more condos than houses.
  • given my existing property investments (mostly in popular locations), I don’t have to sacrifice short term needs for long term investment returns, esp when the long term gain may not materialize in my lifetime.

[1] Bayonne landed house is a rare combination of landed investment near the city.

Lisa’s aunt (Mrs Huang) pointed out that in a down turn, a good location won’t drop much. I think when the market heats up, the good locations tend to rise faster — compare TPY vs Admiralty. I believe her when she said that you can improve the “superstructure” but you can’t improve the location. However, XR said his location didn’t appreciate much. West Windsor didn’t either.

##[17] top SDXQ: what r we pay`4

Posted on by tiger40490

–Update in 2020: Q: What does a school district mean to me?
A: It means level of drug prevalence.
A: It means motivation level among fellow students.
A: I don’t care that much about benchmark score

SG average school is possible a 7/10 (possibly 10) school district in terms of benchmark and discipline. Similarly, California schools often has higher academic standard than NJ school districts.

Why do I spend so much on U.S. top school districts (housing, private schools etc) when Singapore is cheaper and better?

Buyers bid up home valuations. According to my friend  Paul Meduna, when buyers pay the pTax (or rent) in such a school district, they are paying to be entitled to the local high school.

They put a high value on the SD not only because they put that value on the local high school. I guess their kids may not enroll in that high school (but Paul disagrees). Even if they do, that school may not be suitable for them (too competitive?)

For me, the high school is not the most important thing I pay for. In addition to the high school, buyers put a value on

Conventional wisdom equates top school district rating to superior learning environment.

It’s difficult but conceptually, I want to separate the academic benchmark element from the conducive environment, because these are two separate benefits you pay for.

Most of the costs we pay for top school districts are perceived as a price to pay for benchmark performance.  Common parent psychology.

To put it more bluntly, what if the pTax + home price premium (+ longer commute) only “buy” a modern, well-equipped (like in movies) conducive learning environment with many special programs [1], but without the superior academic performance? It could happen if the students don’t put in more effort than students in other schools. I doubt any parents would accept the deal.

More funding doesn’t automatically improve academic performance. At high school level, student’s effort is the #1 factor, followed by 2) abilities 3) parents + teachers.

Schools are rated by benchmark tests, but test score is not always correlated with funding — some very poor schools in China produce better exam takers than the affluent schools. Therefore, you are really paying for an environment and system geared towards test scores.

[1] those ECA programs, even the academic ones, may not directly help the benchmark tests.

For me, I want to pay for a conducive environment, not benchmark performance. An above average school might provide that, at a huge saving.