Author Topic: How much house?  (Read 1366 times)

le stache

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How much house?
« on: September 01, 2013, 11:49:58 PM »
I'd like some advice on how much house to buy. I've been searching for several months and have had a hard time narrowing my search. As a single female I can buy something small that leaves me with a large amount if money to stash each month. I can also buy something a little larger while interest rates and housing prices are low, which would limit my savings just a bit but may allow me to live and grow into that house as I hopefully marry and have a family (I have a solid job and family members in this city so I plan to stay).

I am used to having a lot of leftover money at the end of the month that I like to put away in savings, and I would like to make financial decisions now that will allow my eventual family to reach FI. Having a larger home with a low interest rate that I work to pay off quickly may help with that more than buying a modest home and saving a lot of cash now. A great larger house just came on the market in a nice neighborhood, but it is more house than I currently need and I've pretty much decided to pass. Looking at other houses for sale I realize it really is a good house for the price, so I'm having second thoughts. Any advice?

gooki

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Re: How much house?
« Reply #1 on: September 02, 2013, 12:45:33 AM »
Tough call without specific numbers.

If it was me, I'd buy a slightly larger house and rent out one or more of the rooms.

marty998

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Re: How much house?
« Reply #2 on: September 02, 2013, 02:06:38 AM »
I see houses as an investment, and for that reason I think I will always have more house than I need.

Always think of what you will do with a place after your circumstances change and you move on to something else. If at any point you are going to keep it as a rental, get your structure right and buy something that is going to be attractive to tenants. e.g. a shoebox studio is not going to work in an area with lots of young families etc

Dee18

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Re: How much house?
« Reply #3 on: September 02, 2013, 06:01:11 AM »
Think about whether you would actually want roommates and carefully evaluate the extra upkeep of the larger house.  Also, a two bedroom house could house a family for quite a while. ( Can youtellfrommycomments that I am ready to downsize?)

Jules13

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Re: How much house?
« Reply #4 on: September 02, 2013, 08:15:47 AM »
I would by a smaller house that I could work on paying off quicker.  Then, when/if you marry/have a family, you can upgrade to a larger house if needed by selling or keep it as an investment and rent out to another single.  Might depend on the neighborhood too.  In my 'hood a small house is a great investment because rentals are extremely hard to come by and people are clamoring to get into the neighborhood (hip spot and all that).

Spudd

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Re: How much house?
« Reply #5 on: September 02, 2013, 08:19:46 AM »
If you think you'll be meeting someone/getting married within the next 5 years or so, I would just keep renting. That person may already have a house, or may not like the house you chose for some reason. Selling costs a lot in realtor fees.

sleepyguy

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Re: How much house?
« Reply #6 on: September 02, 2013, 09:30:09 AM »
My general mortgage rule is 1.5-2x salary

Sometimes not feasible on certain areas though.
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pattertall

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Re: How much house?
« Reply #7 on: September 02, 2013, 09:44:29 AM »
If you are set on buying (and have already run the numbers on renting vs buying), I'd recommend looking into a modest 2 bedroom house.  This will provide some flexibility for the future, and if you are willing to have a roommate now it will likely be substantially better for your immediate cash flow than a smaller 1 bedroom where renting a room is not an option.

In my case, I ended up with a 2 bed, 2.5 bath ~1300 square foot house and rent out the other bedroom for 1250, which covers just over 60% of the mortgage + property tax.  I found that the income from the roommate dramatically outweighed the extra cost of "upsizing" from 1 to 2 bedroom.  Since I'm fine with havin a roommate for now, this made the decision easy for me.  In fact, I likely would not have purchased at all (would have kept renting) if I didn't choose the 2 bedroom since renting is a bit cheaper than owning in my area (DC).  If I was doing it all over again, I'd do things very similarly but probably look for a place that is about 20% smaller.

This is in a high COLA, but it might still make sense to look into this approach if you are in a lower cost area near a city where there is a market of people looking to rent your extra room.

Frankies Girl

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Re: How much house?
« Reply #8 on: September 02, 2013, 11:01:44 AM »
You don't say what your age is, what your savings and housing prices are. All the info is that you're a single female and you like the area and plan to stick around.

Buying a house is fine in these circumstances, but you're also going to have to consider the costs of home maintenance, taxes and insurance. You'll have to buy appliances, yard equipment and find a good handyman or figure out how to do basic repairs yourself.

If you plan on getting married and having kids, that's also a consideration of how much house you might need... but you have no way of knowing right now if that's a year off, or 5+ years. That is a whole bunch of uncertainty to base a house purchase on, so honestly, if you're really set on buying a house, I'd buy a modest sized one instead of a larger one that you think might be your forever home. You will be paying more taxes for a larger home, and utilities to heat and cool the house, and wasted space that you might use in the future is no reason to go bigger.

In my case, it's a damn good thing we didn't buy more house than we needed in the beginning (we did a "starter house"  - a small 1300sf in a decent neighborhood) thinking we were going to have a bunch of kids and get a larger house once we outgrew this one... but no kids, so that didn't happen, and boy would that have been a waste of money if we had started out with a larger house. What we have now is perfect for us and will be until we retire.

But in your circumstances, I'd say keep renting, and look for the "perfect" house that would be comfortable for you and down the line, maybe another person. If you end up having kids, you can always look at a larger home at that point, but no use paying out a large amount of money now on your maybe/someday kids before they're hatched. ;)

I frequently have no idea what I'm talking about. Like now.

le stache

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Re: How much house?
« Reply #9 on: September 02, 2013, 12:10:39 PM »
Thank you all for taking the time to respond.  It means a lot to me to have your advice.

My gross annual income is 52,000.  Between me and my employer I have $1017/mo automatically contributed to 403(b) and a Roth, and then I try to save anywhere between $700-1500 each month in addition.

The large home I referred to is listed for $209,000.  I would offer $200,000 and put 5% down, which would make my PITI, PMI, and HOA fees $1300 per month (estimating high-my credit is good so it might be more like $1250).  I would rent a basement room for $400/month and could possibly rent a second basement room as well. Utilities and gas would average $200/month.  The home was built in 1999, and I don't anticipate a lot of immediate repairs.  The home is 2800 sq/ft.  Reasonable rent for that house would be about $1300/mo.

Based on your comments and my current feelings, I'm leaning toward renting and waiting for a more modest 2- or 3-bedroom house that has been at least partially updated.  I do plan on being married in a few years, and that will change things quite a bit.  Thanks again.

Daleth

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Re: How much house?
« Reply #10 on: September 02, 2013, 01:28:21 PM »
Think about whether you would actually want roommates and carefully evaluate the extra upkeep of the larger house.  Also, a two bedroom house could house a family for quite a while. ( Can youtellfrommycomments that I am ready to downsize?)

Also, consider buying a duplex that's set up in such a way that it wouldn't be too difficult to turn it into a single-family home if you wanted. Then you can rent out the other side (or other floor) for as long as you want, until you have a family that has grown enough to need more space. That's easier than having roommates in your own house.

As a general rule, upstairs-downstairs duplexes are easier to convert than side-by-side ones, but there are certainly exceptions, and if you found a side-by-side in an area you really liked vs. an upstairs-downstairs in a less optimal area, it'd probably be worth the potential added difficulty of converting.