Hello everyone,
New to the community and glad to have some thoughtful people here to help find a solution to my questions. I am 24, single, no children, and have been considering purchasing a condo within 6 months. I currently live at home and pay my own expenses plus $400 rent/month. Some other financial information:
• Income: Base of $33,800 +average bonuses ($5000/yr) and average commissions ($8,000-$10,000/yr) so about $48,000/yr+($3,000-$4,000 income from other sources), $50,000 is a good number.
• Savings: $40,000
• 401K: $20,000
• Stock investments/value: $10,000 (market value would permit me to sell at a loss of $5,000)
• No debt
• Excellent credit
• $300-$400 per month on personal expenses including food
I am looking at 2 bedroom and 2 bath condos or town homes in the $100-150K. I live in the suburbs of Los Angeles. The areas in my price range are not excellent but not particularly poor, I would characterize them as working class neighborhoods. My plan is to purchase a location with 20% down and finance the remainder while renting 1 room for about $500/month.
Assuming a sale price of $125,000 and 20% down, I would be financing $100,000. To minimize interest rates I am assuming a 15 year fixed rate at 2.6% which would be about $670/month. Some other facts and figures I have calculated.
Mortgage: $670/month
HOA: $250 - $400
Property tax: $1300/yr
Insurance: $600/yr
Maintenance: $1000/yr
All utilities including cable, internet, phone: $2000/year
Other large unrelated expenses: Gas: $800/year (bike to work mostly), insurance: $800/year
I've used a few online tools such as the New York Times rental/purchasing tool which have estimated a greater benefit for purchasing under my criteria from 2 to 4 years assuming $1000 rent elsewhere. 2 to 4 years is the current time frame for which I can reasonably say that I will remain in the area. I am assuming that it I will be able to rent it out for most of the time but even not factoring this in I can still comfortably make payments and still be able to save about $1000/month.
The objective is to have some more independence and build value through home equity. Yes I understand values on condos grow slowly but one can imagine that a mere 4 years ago units in this area sold for north of $300,000! One can dream...
So what do you all think?