Author Topic: Buy or Rent in the DC area?  (Read 4909 times)

The 585

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Buy or Rent in the DC area?
« on: January 28, 2017, 07:46:58 AM »
Since I began my career several years ago, I've saved up a little over $50k in sidelined money (Ally high interest account at 1%) in hopes to use as a down payment on buying a place to live. However, now I'm looking to stay in the DC area for a little while because the pay is great and I see early retirement as an easily achievable goal here.

But the key tradeoff-- places in DC/Northern VA are freaking expensive! Even tiny condos in decent areas are $300k+ with high monthly condo fees. Not to mention, property taxes can quickly eat away from the 'stache. Is it better to just keep renting and continue to invest my extra income? I currently live and split rent with GF who has similar financial goals. My investments have recently reached $100k and have no debt.

Looking for advice from people in similar situations who may live in high cost of living areas. And what should I do with the $50k?!

Thanks!!

tralfamadorian

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Re: Buy or Rent in the DC area?
« Reply #1 on: January 28, 2017, 10:16:10 AM »
http://www.nytimes.com/interactive/business/buy-rent-calculator.php

Most probably in your area, renting would be preferable.  Invest cash in VTI/VTSAX.

Mr Mark

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Re: Buy or Rent in the DC area?
« Reply #2 on: January 29, 2017, 12:05:02 AM »
http://www.nytimes.com/interactive/business/buy-rent-calculator.php

Most probably in your area, renting would be preferable.  Invest cash in VTI/VTSAX.

+1

In high cost areas renting is often a great strategy. You can think of it as taking advantage of landlords who aren't even coming close to a 1% rental rate. Crunch the numbers. As there are only 2 of you and you are young and unmarried, presume child free, you're pretty flexible at this stage in your life, so take advantage of it. Focus on getting a small place with no commute and lots of subsidised facilities (free gym? Pool? nice grounds or nearby park for relaxing in?).

Metric Mouse

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Re: Buy or Rent in the DC area?
« Reply #3 on: January 29, 2017, 12:18:55 AM »
http://www.nytimes.com/interactive/business/buy-rent-calculator.php

Most probably in your area, renting would be preferable.  Invest cash in VTI/VTSAX.

And if ER is the goal, Renting allows one to be much more flexible when it is time to pull the plug.

HawkeyeNFO

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Re: Buy or Rent in the DC area?
« Reply #4 on: March 11, 2017, 03:18:29 AM »
I've owned property in the DC metro area and lived there for many years.  At your point in life, I recommend renting.  Primarily to maintain flexibility.  The transaction costs of buying and selling real estate are tremendous, and I've seen very nice homes stay on the market in the area for oever a year, even at fair prices.  No, that's not the norm, but it does happen.

AMandM

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Re: Buy or Rent in the DC area?
« Reply #5 on: March 11, 2017, 04:58:00 PM »
I own a SFH inside the Beltway in MD, but I would rent if I were in your shoes.  Especially, I'd try to find a rental from a private individual so I don't have to pay for all the overhead (lobby, fitness center, elevator, etc.).

zonar808

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Re: Buy or Rent in the DC area?
« Reply #6 on: March 11, 2017, 10:46:55 PM »
Rent.  Just property tax alone is 1% which is more than my rent.  I rent a room on craigslist for $650 and have two other roommates in 4 bedroom house on two levels. 

Ocinfo

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Re: Buy or Rent in the DC area?
« Reply #7 on: March 12, 2017, 08:55:34 AM »
Live in DC and I rent. Have been able to easily move several times when wife got new jobs to keep her commute less crazy. I definitely wouldn't buy a condo. They're building tons of new units so there are a bunch of nice new ones so the older ones aren't appreciating much.


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MishMash

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Re: Buy or Rent in the DC area?
« Reply #8 on: March 12, 2017, 11:14:19 AM »
Rent, and if you buy, don't buy in a condo association.  I have WAY too many friends that have been hit with 5 figure "special assessments" in the past couple of years to cover things like roofs, parking deck repairs, foundation repairs etc.  That's on top of their 500-800 a month condo fees.

If you find a job outside the beltway it's cheaper, we have a 3 bed townhome, with a small yard for gardening, for the cost of a 1-2 bed condo in a decent area of DC, no condo fees, and our HOA is only 75 a month in Fairfax County.  I wouldn't live here if I had to commute into downtown DC on a daily though. 

Migrator Soul

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Re: Buy or Rent in the DC area?
« Reply #9 on: March 17, 2017, 06:44:33 AM »
I'll go against the grain and say buy. However, look in the areas your co-workers tend to cringe away from. For example, I work downtown DC, and commute via metro. Federal/military employees get subsidized metro fare, so I ended up buying a house in Capitol Heights MD. Most people cringe away from that area, but I found it to be no different than any other area, with the exception of the odd wandering drunk from the liquor store. Houses out there are cheap for a renovated 3br 2.5 bath like mine. I got mine for 230k, and I rent both back bedrooms out for 700 flat. Covers my mortgage/escrow completely, so I all I am out is utilities. However, to make DC work, you need to both optimize your usage of the metro benefits the government shells out, live close to one, and buy in a transitioning neighborhood. Look at where major developers are buying up land, and buy a renovated house out there. Or, go hard mode, and buy a foreclosed house, fix it with a 203(K) loan, and have instant equity. The only real complaint I have is that this area is a food desert, but several grocers are a 10 minute drive away at most.

donta1977

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Re: Buy or Rent in the DC area?
« Reply #10 on: March 24, 2017, 01:03:21 AM »
Whenever you are faced with a tough financial or life decision, always focus on your end goal or objective to lead you to the best answer. Your ultimate
goal is FIRE early. You are only 26 with $100K saved in investments...great job! The next question you need to answer is what is your FIRE number. Is it
$300K, $500K, $1M. Only you can answer that. If you are looking to get to FIRE as quickly as possible, keep your life and lifestyle as agile and lean as
possible so you can maximize your savings potential. Based on your goals, I don't think it would be the wisest decision to dump $200-$300K in a primary
residence in the volatile DC market. Keep living in a high-income area and ensure your lifestyle is far below your means. Save/invest everything you can in
interest-earning investments (IRAs/401Ks/Brokerage Accounts). I would keep 6 months of living expenses in a liquid account and dump the rest of the $50K in investments.
If you like real estate as an investment (and as a way to diversify), you could take that $50K and purchase in a single family home or multi-family unit
(duplex/tri-plex/quad). Put $25K as down payment on the right $100K property and finance the rest. If done properly, you should have $300 per month
in net profit (after mortgage, insurance, taxes, prop mgmt, repair estimate, vacancy estimate, Cap Ex). This comes out to $3600 per year earned on a
$25K investment (14.4% ROI).   

makinbutter

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Re: Buy or Rent in the DC area?
« Reply #11 on: March 26, 2017, 08:48:35 AM »
For the benefit of anyone reading this, it's clear that this is either a shill post, a canned post, or some other cockamamie nonsense.  Donta, the OP asked about Washington, D.C., where a duplex (or heaven forbid, triplex) is probably in the 1MM+ range.  If you want, you could maybe pick one up in Trinidad for 600k.  Better hope Trinidad gentrifies!!

Whenever you are faced with a tough financial or life decision, always focus on your end goal or objective to lead you to the best answer. Your ultimate
goal is FIRE early. You are only 26 with $100K saved in investments...great job! The next question you need to answer is what is your FIRE number. Is it
$300K, $500K, $1M. Only you can answer that. If you are looking to get to FIRE as quickly as possible, keep your life and lifestyle as agile and lean as
possible so you can maximize your savings potential. Based on your goals, I don't think it would be the wisest decision to dump $200-$300K in a primary
residence in the volatile DC market. Keep living in a high-income area and ensure your lifestyle is far below your means. Save/invest everything you can in
interest-earning investments (IRAs/401Ks/Brokerage Accounts). I would keep 6 months of living expenses in a liquid account and dump the rest of the $50K in investments.
If you like real estate as an investment (and as a way to diversify), you could take that $50K and purchase in a single family home or multi-family unit
(duplex/tri-plex/quad). Put $25K as down payment on the right $100K property and finance the rest. If done properly, you should have $300 per month
in net profit (after mortgage, insurance, taxes, prop mgmt, repair estimate, vacancy estimate, Cap Ex). This comes out to $3600 per year earned on a
$25K investment (14.4% ROI).   

Ocelot

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Re: Buy or Rent in the DC area?
« Reply #12 on: March 27, 2017, 07:16:06 AM »
Another solution: buy in Baltimore. Houses are super cheap and while there is a commute, probably 40 mins-ish, that's less than the congested roads in Virginia can be, plus house prices are rising steadily so you're likely to make a profit in the long run. My wife and I just picked up a rental property in Pigtown right next to the 95 for sub-$100k which is, frankly, nicer than our own home. There is also train service to DC which takes a similar time and costs $7 each way.

twbird18

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Re: Buy or Rent in the DC area?
« Reply #13 on: March 30, 2017, 06:37:41 AM »
Another solution: buy in Baltimore. Houses are super cheap and while there is a commute, probably 40 mins-ish, that's less than the congested roads in Virginia can be, plus house prices are rising steadily so you're likely to make a profit in the long run. My wife and I just picked up a rental property in Pigtown right next to the 95 for sub-$100k which is, frankly, nicer than our own home. There is also train service to DC which takes a similar time and costs $7 each way.

I agree with Ocelot, especially if commuting via the train is an option. Traffic in the entire DC area sucks, spending an hour reading or napping on the train is much more relaxing, at least I enjoyed it the 6 months I in DC. DH is starting his PhD at Hopkins this fall so we're looking into purchasing a house in Baltimore even though my commute back to Gaithersburg is going to be terrible 1/3rd of the time(yeah, shift work). We considered a variety of options for where to live come this fall & even though this will increase my commuting costs/time, the cost of a mortgage in a decent area of Baltimore is lower than the cost of renting something 1/2 the size anywhere else.