Author Topic: Case Study House or not?  (Read 891 times)

COeng

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Case Study House or not?
« on: July 25, 2018, 02:21:33 PM »
Hi everyone


I'm an engineer for a small company in south Denver, sort of the boonies. 24k in school loans, car paid off (my dad sells used cars so i buy wholesale from him). I make 80k a year and my spending is
1200 for rent
45 for internet
130 for cellphone (only verizon gets me service where i work and our computers are locked to shit so I can't even check my personal email at work. Still owe 200 on the phone but I'm not looking to upgrade)
350 for food
25 for supplements (I'm trying for a longevity diet and supplements i've researched should help. I resupply ever few months so 25 on average)
360 students loans


My take home pay is 4130 after taxes. My 401k is 4% of my pre tax take home and my company contributes 6%.


401k value is 28k, 9k in savings. I'm 29 and i'm in a highly stable job. Right now if I were let go my company would lose a few million and have a massively unhappy customer. Most people here have 30-45 years of expereince at the same company. The job is super stable.

The pay structure here is unique. I started 2 years ago at 63k and in 1.5 years jumped to 80k. I'm expecting a salary increase of 4k and a promotion at 31 or 32 whould should get me to 100k.AT around 36-38 I should be closer to 150k with bonuses.


My salary will double over the next decade so I don't think FIRE in 10 years is a good idea for me. Maybe like 15 years I could. Right now I'm planning to pay down most of the student loans and by debt free by 31. But I'm considering a house at a some point but denver is crazy expensive. Condos near me would run 280k for 1600 sq ft With 20% down o a morgage for 30 years. ZIllow shows my mortgage would be 1130. NOt bad. Taxes are 483 a month, HOA fees are 228 a month. Total comes to around 1900 a month. It's better then a two bedroom apartment but I'm still single so Idk how much a future wife would make.


Does such a house make much sense? It's nothing too big but prices here are outrageous and I'm inherently going to get whatever is open since the market is pretty much empty for new houses. They have houses at 1120 sq fet houses for 360k on the "cheap end" that require a some updates. No AC for one. Should i consider a house in the future or just give up and consider throwing spare cash into other investments?

ysette9

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Re: Case Study House or not?
« Reply #1 on: July 25, 2018, 02:33:21 PM »
Why do you want to buy a house?

“Everyone else is doing it” or “it is just what adults do next in life” are not good answers. :-)

You can check out The NY Times Rent va Buy calculator (google it) to run your own situation. Usually in higher cost of living areas it makes more sense to keep renting unless you are planning on staying for a good while.

COeng

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Re: Case Study House or not?
« Reply #2 on: July 25, 2018, 03:01:30 PM »
More space, I'm not a people person so I'd rather not have to hear neighbors at all. I'd like to paint my walls a different color replace the carpet toss the shitty stove. I guess I could move to a better place but spending an extra 400 isn't really worth it. I'd like an more automated home and more space for a wardrobe. I can't even BBQ at my apartment complex which frustrates me to no end. It's illegal in denver to have a non gas grill in most apartment complexes if not all. They can legally evict you within 3 days if you're rent is late which is just insane. They misread my check I wrote out to them and had a note on my door that i had 2 days before they could legally toss my stuff on the street. I'm in a fairly cheap place that's close to work (most apartment complexes aren't much cheaper then 1200).

Everyone else around me ARE buying a house and they have paid off houses worth 1  million and have at least 1 million + in retirement savings so it's not like they are living rough life. It's a dream job for the people that work here. Many work extra hours off the clock out of interest. Managers tell them to clock their time and have to kick them out of the office lol. We don't even get paid over time lol.

The NY times rent buy shows it's not worth renting over 1500 so basically as long as I only rent 1 bedroom apartments and never get married lol. Because I barely have enough room for bare bones living by myself if I met someone I'll 100% need more space. There are a few 2 bedrooms for 1500 if I get lucky at almost 900sq ft. Would  house be better in the long run? If i date someone making just minimum wage the combined pre tax would be anywhere from 120k to 200k+ Isn't there a case to be made for a house when its' 1.5x your salary?

Rubic

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Re: Case Study House or not?
« Reply #3 on: July 25, 2018, 03:05:25 PM »
1200 for rent
vs.
Quote
ZIllow shows my mortgage would be 1130. NOt bad. Taxes are 483 a month, HOA fees are 228 a month. Total comes to around 1900 a month.

Ouch.  It's really a no-brainer to continue renting and invest your savings.  Don't forget
that taxes and HOA fees only go up and let's not even get started on "special assessments"
from the condo association.

ysette9

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Re: Case Study House or not?
« Reply #4 on: July 25, 2018, 03:06:05 PM »
I realize things are different in CO where housing is relatively cheap and open space goes on forever when you look eastward, but to me 900 ft^2 for a single person is huge. We are comfortably in 1100ft^2 for four.

There are transaction, maintenance, and insurance costs, not to mention interest associated with buying. Is that more favorable than just spending an extra $400/month to get what you want? Also, I’d caution against buying something with a future life partner in mind who may not materialize, may not work, may have different tastes, etc. It may make sense to buy now but it may make more sense to wait until you have some key life factors nailed down.

COeng

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Re: Case Study House or not?
« Reply #5 on: July 25, 2018, 03:14:38 PM »
@Rubic

Oh, I didn't know that about HOAs and I never considered increasing taxes. Yeah I can totally see that eating up a lot of cash for no reason in the future.

@ysette9
Current apartment is like 700, I totally agree 900 for a single person would be big. 800 would be ideal since I have little storage space.

Yeah, you're right that it's better to get some things nailed down firs if I do intend to buy later on and that maybe paying for more space isn't a bad thing. I kind of feel ok where I live but I definitely want and can afford a bigger apartment. Yeah maybe i should consider upgrading someday.

formerlydivorcedmom

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Re: Case Study House or not?
« Reply #6 on: July 25, 2018, 03:39:26 PM »
Also remember that if you buy a house your commute may increase, leading to more costs/less time.

I bought my first house at 24, and it was a mistake.  It was supposed to be a "forever" home.  Husband got a job 3 hours away....so after 3 years we had to sell.

The third house, when I was 32, was also a mistake.  I was newly single and bought a house near my job and day care.  Literally the week I closed on the house I met my current husband.  He lived and worked an hour away....so a few months after we got married we sold the house and moved to a more convenient location.  If you think there's a chance you'll find a partner in the next few years...it might make sense to not buy now.

What you CAN do is start saving the "extra" that you'd spend on the house (or even a larger apartment).  Even if house prices continue to rise, you're savings should hopefully keep up.

ysette9

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Re: Case Study House or not?
« Reply #7 on: July 25, 2018, 03:45:14 PM »
My experience is similar. The first two places I bought were mistakes that I regret because I didn’t take sufficient time to fully consider my needs and reasons for buying.

Finances_With_Purpose

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Re: Case Study House or not?
« Reply #8 on: July 26, 2018, 12:00:15 AM »
1200 for rent
vs.
Quote
ZIllow shows my mortgage would be 1130. NOt bad. Taxes are 483 a month, HOA fees are 228 a month. Total comes to around 1900 a month.

Ouch.  It's really a no-brainer to continue renting and invest your savings.  Don't forget
that taxes and HOA fees only go up and let's not even get started on "special assessments"
from the condo association.

And maintenance.  And time + etc.  E.g., mowing, repairs, so on. 

marty998

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Re: Case Study House or not?
« Reply #9 on: July 26, 2018, 04:05:11 AM »
1200 for rent
vs.
Quote
ZIllow shows my mortgage would be 1130. NOt bad. Taxes are 483 a month, HOA fees are 228 a month. Total comes to around 1900 a month.

Ouch.  It's really a no-brainer to continue renting and invest your savings.  Don't forget
that taxes and HOA fees only go up and let's not even get started on "special assessments"
from the condo association.

And maintenance.  And time + etc.  E.g., mowing, repairs, so on.

I see this over and over again and this is not the right way of looking at it. Sure in terms of cash flow it is $1130 a month. But how much of that $1130 is principal and how much is interest?

The thing about principal repayments is that (1) you still have that amount in your asset column at the end of the month and (2) it slowly reduces your actual expense, which is the interest component.

After 30 years of renting you have nothing. After 30 years of paying a mortgage, you have an asset that gives you financial flexibility (sell, downsize, draw equity, etc etc etc).
« Last Edit: July 26, 2018, 04:06:53 AM by marty998 »

ysette9

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Re: Case Study House or not?
« Reply #10 on: July 26, 2018, 10:12:44 AM »
I think it is talked about that way because initially a large portion of the payment is interest, and most people don’t stay in their first real estate purchase long enough to pay off the mortgage.