Author Topic: Advice needed on buying first house  (Read 5856 times)

mrblue

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Advice needed on buying first house
« on: June 26, 2013, 03:15:47 PM »
I am a recent college grad (23 yo) working full time and making $59,000 gross per year. My father helps each of his children buy their first house. He will be contributing 150k. My father has recently purchased a foreclosed house for ~70k and is willing to give it to me and use the remaining 80k for house improvement (the house needs a lot of love). We would be doing all the improvements ourselves (father is a contractor). In the end I would own the house outright. My question is would it be a better financially to do that, or to use the 150k to buy a more expensive house while interest rates are still low?

I would like to live close to work, and the house my father purchased is roughly an hour drive to and from work in rush hour. 

Thanks!

Another Reader

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Re: Advice needed on buying first house
« Reply #1 on: June 26, 2013, 03:30:38 PM »
Let him fix up and sell that one.  Maybe help him to learn some skills that will help you with your house.  I would take the $150k and buy close to where you work, as long as you think you will be at that job or in that area long enough to justify the transaction costs.

Spork

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Re: Advice needed on buying first house
« Reply #2 on: June 26, 2013, 03:37:19 PM »
I can't speak for if the fixer upper is the right house or not for you... A lot of that is emotional... or geographical...

But I think the idea of getting a fixer upper and putting in sweat equity AND having a professional teach you how to do it is a huge gift that you will use for the rest of your days.   If the house is (more or less) what you want: take the cheaper house and put your sweat and heart into it.

A house that YOU work on is so much more than one that "just is".  This is a whole lot of why places like Habitat for Humanity force sweat equity on the new owners.

[ I don't have/won't be having kids... but I always thought this would be exactly how I would "give" a kid a car.  I would go in halfsies on a beat up junker when they were 13ish and we'd rebuild it together until they were of legal driving age.  I think it would give them more skin in the game and make them think twice about everything they do. ]

George_PA

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Re: Advice needed on buying first house
« Reply #3 on: June 26, 2013, 05:01:38 PM »
First of all wow, your parents are nice to be giving you some serious cash like that.  I didn't get anything from my parents, except a suitcase to get my stuff out of their house.  I had to save my money very very slowly over time, paycheck by paycheck.

Anyway for your question, it really depends on how dedicated your are to working on the place. 

Renovations take huge amounts of time.  So if you choose the fixer upper, most of your weekends and evenings will be spent working on the house not relaxing too much.  This renovation could take 2 or 3 years since you will have so little free time to do the work if you are working fulltime 40 hours per week with your regular job.  This might be too much stress for you to handle, it can be done, but usually, you want to slowly work up to this level of dedication.  To be honest, its possible but it is a very rough and brutal life, so just know what you are getting yourself into.
   


mrblue

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Re: Advice needed on buying first house
« Reply #4 on: June 26, 2013, 07:48:01 PM »
It is possible to work at my current job for the rest of my career.  There is plenty of room to move up the ladder, and a possible path to ownership if I am dedicated enough (not sure on that one yet). 

I am leaning towards using the 150k as a downpayment for a nicer house with less work needed and that is close enough (bikeable) to work.  I figure with that much money down, my mortgage payment could be less than 1,000 per month on a ~300k house. 

My father would still help me with renovations on a new house as he is set to retire within the year and will need things to keep him busy, so there is the opportunity for me to learn quality construction skills.

SwordGuy

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Re: Advice needed on buying first house
« Reply #5 on: June 26, 2013, 08:21:29 PM »
Not sure where you live, but a less expensive house, closer to the $150,000 price point, will help you reach FI very quickly!  A $300,000 house will slow you down by more than the $150,000 difference!

Plus, fixing up a house with your dad would be a great bonding experience.  (Or a hellish one, depending...)

Rural

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Re: Advice needed on buying first house
« Reply #6 on: June 27, 2013, 06:14:09 AM »
The price difference would be a major point in your favor if you went with the fixer-upper, but not with an hourlong commute over several years. How likely is this to be your forever house and forever job?

pom

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Re: Advice needed on buying first house
« Reply #7 on: June 27, 2013, 06:35:10 AM »
Not sure where you live, but a less expensive house, closer to the $150,000 price point, will help you reach FI very quickly!  A $300,000 house will slow you down by more than the $150,000 difference!


This is good advice! Why do you want a nicer house, is there anyone that you want to impress? I would be more impress with someone that owns his small house than someone that lives in a bigger house that the bank owns. Anyway bigger house = more heating, more repairs, more taxes, more stupid lawn to mow.

Just my 2 cents.

Rebecca Stapler

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Re: Advice needed on buying first house
« Reply #8 on: June 27, 2013, 07:45:49 AM »
I would not buy a house an hour away from my work if I could afford something closer, and the fact that your dad will help you with renovations on another place -- not just the one he already bought -- gives you the best of both worlds.

In terms of whether to get a bigger house or not, I think that depends on your priorities. Do you want to have a family? Do you want to live in the same place now that you will live in 20 years from now? Or would you be interested in renting it out if you do have a family and need more space? If it were me (and I know it's not, so maybe having a family is not something that appeals to you at all), I would consider buying either (1) a home for my family, with good schools and enough space for 2 kids, or (2) a place that's good for me now, at 23 (so, 1 or 2 bedroom apartment or condo or a duplex, in a young, trendy neighborhood), and easily rentable in the future when I move to somewhere that has more space and good schools. I would lean towards #2, because I don't like the idea of wasting space when I don't need it and it would be such a gift for your father to not just house you for a few years but to provide you with a lasting income stream.

Iron Mike Sharpe

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Re: Advice needed on buying first house
« Reply #9 on: June 27, 2013, 09:09:22 AM »
If you get a different house, keep your costs down.

$150K would have paid for my townhouse, closing costs, furnishings, a NEW car and some gas money left over.

freelancerNfulltimer

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Re: Advice needed on buying first house
« Reply #10 on: June 27, 2013, 11:32:16 AM »
If you get a different house, keep your costs down.

$150K would have paid for my townhouse, closing costs, furnishings, a NEW car and some gas money left over.

Maybe, but you don't know what prices are like where the OP lives/works.

mrblue

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Re: Advice needed on buying first house
« Reply #11 on: June 27, 2013, 12:54:38 PM »
Firstly, I would like to thank you all for the advice, very helpful and grounding at the same time.

As of now I don't plan on having kids, but that may change further down the line.  I really like the idea of buying a foreclosed house near work that my father and I could renovate, as we have not had much time to bond over the last 5 years due to his business and me being away at college. 

My father has roughly 200 apartment units and a few other rental properties, so that path (landlord) is also something that appeals to me as I have a very good source of knowledge and advice at my fingertips.

Another plus would be if someday I do change jobs/locations or want to have a family, I would have a house that would be 100% mine that I could rent out to help pay or possibly cover the mortgage for my second house.

Another Reader

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Re: Advice needed on buying first house
« Reply #12 on: June 27, 2013, 01:11:36 PM »
You are very fortunate!  In your shoes, I would look for a fixer close to work that would make a good rental once you move on.  And learn all you can from your father - this is a gift that will help you throughout your life.

olivia

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Re: Advice needed on buying first house
« Reply #13 on: June 27, 2013, 01:36:53 PM »
You are very fortunate!  In your shoes, I would look for a fixer close to work that would make a good rental once you move on.  And learn all you can from your father - this is a gift that will help you throughout your life.

Ditto!  I would get a house closer to work that you can work on with your dad.  What an awesome gift!

jamccain

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Re: Advice needed on buying first house
« Reply #14 on: June 27, 2013, 10:24:57 PM »
Not sure where you live, but a less expensive house, closer to the $150,000 price point, will help you reach FI very quickly!  A $300,000 house will slow you down by more than the $150,000 difference!

Plus, fixing up a house with your dad would be a great bonding experience.  (Or a hellish one, depending...)

I agree...don't overspend on a house...especially early. 

Micheal

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Re: Advice needed on buying first house
« Reply #15 on: June 28, 2013, 02:37:31 AM »
If I'm reading this correctly you will not be out of pocket for this house other than Sweat Equity?  One idea to pursue is take the house and fix it up and rent it, use the rent for the house to pay for the mortgage on the one closer to work, then once the mortgage is paid off you have a piece of property that nets you income rather than draining it and a house you live in that you can improve and sell or rent later down the line, rinse and repeat as neccasary.  Or fix it up and sell it to cover the rest of the mortgage on the 2nd house.  And if your father is willing to teach you how to do a lot of the renovation stuff this will I promise pay off later down the line, these are skills you will wish you had when you need to pay a plumber to fix a leak, or a carpenter to frame an addition, or a concrete guy lay the foundation for a new garage.  The skills that you will learn in renovation will vastly outweigh the cost of the renovation over a lifetime.  Just my 2 cents.

mrblue

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Re: Advice needed on buying first house
« Reply #16 on: July 12, 2013, 01:59:55 PM »
Thought I would update everyone. 

After some discussion with my dad, I will be taking the house he has previously bought and fix it up during this summer, hopefully moving in near the end of August.  In addition to the house, there will be a detached garage with a living unit above.


My plan as of now is to rent out the other two bedrooms in the house ($400/month/room) and rent the living space above the garage ($500-600/month).  Since I will have not house payment I am thinking I will have at least 70% of the rental income as profit. 

I will then save that money and money from the job to invest in another rental property and so on.  I am really looking forward to my path down the financial independence road, and will hopefully be there by 30!