Am I rushing my first house purchase?

[berserk77]

So to get things started I'm a 24 year old male looking to move out of my parents house. I recently got a career level job downtown in a nearby city and I want to be within biking distance to work and main street. Upset that I couldn't find an apartment that was suitable within my price range, I decided to check out houses. I found a house on the other side of town for $80k that looked alright on the outside and was close to DT albeit in an odd location, it's only 900 sq feet but I'm single and don't need much. After calling the realtor that night I looked at it the next day and was surprised at the big back yard and how nice the interior was! Hardwood floors, fresh paint, immaculate white trim. I told the realtor that it's perfect and I want to put an offer down so I'm waiting to meet up with a lender which should be no problem even though most of my cash is tied up in my roth ira.

This all happened in the span of 5 days. Last week I hadn't even thought about purchasing a house and now I'm about to get a loan. The excitement is hard to keep down. I could have this paid off in less than 6 years conservatively! I feel like it's just too good to be true.

Am I missing something?

[deborah]

Go out tomorrow and look at as many of the other houses that are available in the area as possible. You are new to the city, new to the area, and possibly don't really know the market. I bought my house the first weekend I had really been looking, but I looked at houses in the city before that, and I looked at 32 houses in my price range in that one weekend, so I was happy with the decision. There is always another house out there that you will like. While you are looking at houses, you could mention the house you plan on buying to another agent or two and see what their reaction to the area and the price is - since they are a competitor, they will be down on it, so you should get interesting feedback. Also I assume that you are going to make it subject to inspection... but I am not from the US, so I don't know what the mandatory stuff is, and what are the good extra things to do.

[Abe]

In addition to the above advice, if recommend getting an inspection before going through the Roth IRA paperwork and selling funds. It is required by the mortgage company anyway and getting it done sooner will help you figure if the house is a good deal or not. What are the ages of the roof, AC, heater, appliances? Are they all in good workng order? What about the exterior and internal structure? Those are all big ticket items that are often overlooked by first time buyers. How long has the house been on the market? If longer than average, ask the realtor to figure out why.

[sandandsun]

I would only buy a house if I could afford 20% down- to avoid PMI... that's 16k in this case, so I would gather that first...

[lakemom]

It would also be a good idea to hang out/wander around/drive around the neighborhood and the route to work at the times of day you would be using it.  It would be sad to buy a house and find that biking to work won't work due to having a safe route.  Likewise pennywise/pound foolish if you find out the drug dealers and hookers are on every street corner from dusk until dawn.  KNOW the neighborhood(s) you are considering moving to inside and out before plunking down a big down payment and signing up for 15 (30) years of payments!  Finally, get with the realtor and look at a dozen or so houses that are in the same/similar neighborhoods at the same/similar listing prices.  You may find that you didn't find a gem but an overpriced nice house.

[frugaldrummer]

Yeah, and what exactly is"odd" about the location? Will it be hard to resell because of this?  Remember the rules of real estate buying....location,location, location.

Also, are there two bedrooms so you could have a roommate to help pay it off? If not, a $100k house with 2 bedrooms might be a better deal than an $80k house with one bedroom.

Third thing....if this house is already fixed up, there's no room for sweat equity. If you have the skills and vision, a cosmetic fixer can be a great way to build immediate equity.

[MaryInMichigan]

First, congratulations to your parents for raising a Mustachian who had a Roth before a "career-level" job! If you're really itching to get out of their house, maybe look for a craislist share?

Second, at least get an inspection (not the same as the appraisal the mortgage company will want): home-sellers (banks and rehabbers in particular) will slap on paint and carpet as cheaply as possible and only fix what shows. Attend the inspection and get your inspector to talk about what s/he is seeing and thinking.

Third, you probably are rushing. I'd wait till next December-March (fewer retail buyers to compete with over winter and the holidays). Meanwhile, save to avoid withdrawing from your Roth, and educate yourself. Draw a circle around your job with your desired radius, then drive/bike/walk within, to get to know neighborhoods and bike routes. Talk to people in their yards; talk to business staffers; the letter carrier knows a lot.

Finally, you could think of this as the first step in a real estate investment program. Look for a house that would make a good rental when you're ready to move on -- # of bedrooms, baths, kitchen, location count most. Your public library will provide a free education. Google and join the local Real Estate Investors Association to learn a lot more. (You'll meet local wholesalers who bird-dog good deals - don't pay money to "gurus" for "bootcamps.")  Good luck!

[ysette9]

How much is your income and how much do you have saved up for a down payment and emergency fund? How would purchasing this house impact your monthly cash flow?

[berserk77]

Thanks for the replies everyone. I read all your posts and hope I answered your suggestions.

Like you guys said my realtor wants me to continue looking at other houses and to be ready to walk away from this one. The location is odd to me because it's in a small cul-de-sac off a high traffic road with lots of business and a big church. It's also 2 minutes from a large casino and 2 minutes from the freeway. I don't have much of a down payment saved because I really wasn't even thinking of buying a house until last week when I realized I could pay one off in 5 years and live "rent free". I have about 5k liquid and 4k in my roth ira which I might add is less than 2 years old. I'll be bringing home about $3200 a month shortly so I don't think the payments will be an issue. It's a 2br 1ba but I'm really not interested in a roommate at this point. I didn't even look at condos. Also I'm thinking about withdrawing from the roth ira anyway because the new job is union with a very strong pension plan.

[MrMoogle]

I made the mistake of buying a house when I was your age.  Here are a bunch of reasons not to:
http://jlcollinsnh.com/2013/05/29/why-your-house-is-a-terrible-investment/

I wouldn't do it again.  It's something society has said is a good thing, but they also say CC debt is normal. 

Also, if you're mustachian, are you going to get the number of years to get a full pension?  Keep the Roth IRA, it's a much much better investment than a house.

[berserk77]

I made the mistake of buying a house when I was your age.  Here are a bunch of reasons not to:
http://jlcollinsnh.com/2013/05/29/why-your-house-is-a-terrible-investment/

I wouldn't do it again.  It's something society has said is a good thing, but they also say CC debt is normal. 

Also, if you're mustachian, are you going to get the number of years to get a full pension?  Keep the Roth IRA, it's a much much better investment than a house.

I've tried to become as mustachian as possible in the past 2 years or so but now I'm not so sure I'm interested in retiring early. Partly because I can't find a female with similar ideals but now also because this job gets better and better as you stay at it. In 20 years I'll be sitting on my ass all day telling people what to do getting as much OT as I want plus 6+ weeks of paid holiday. I wouldn't mind staying on the grind if I could enjoy it.

[deborah]

I've tried to become as mustachian as possible in the past 2 years or so but now I'm not so sure I'm interested in retiring early. Partly because I can't find a female with similar ideals but now also because this job gets better and better as you stay at it. In 20 years I'll be sitting on my ass all day telling people what to do getting as much OT as I want plus 6+ weeks of paid holiday. I wouldn't mind staying on the grind if I could enjoy it.

You are 24 - 20 years is almost your total life as you remember it! It may seem like people don't change in their adult life, but what you are like at 24 and want at 24 is not the same as at 44! How do you really know that you will enjoy your current job for that long - or that the company will still be in business - or that what makes the job enjoyable will still be there in 20 years? The culture can change, the people do change (even just to join another company), and your job will change. If you are getting a pension it is a big company, but there are a number of big companies that have gone out of business recently, so you are aware that the big ones fall too.

People often haven't found their partners at 24 - there is a lot of time before you, and you are in a new city, with new women to find.

[MrMoogle]

I made the mistake of buying a house when I was your age.  Here are a bunch of reasons not to:
http://jlcollinsnh.com/2013/05/29/why-your-house-is-a-terrible-investment/

Normally I would agree with you, but $80k!? With something that cheap, I think there's very little reason to rent, even if renting might be marginally better financially.

That's still $90 per square foot, which is around the going rate where I lived.  There's still better options to rent.  He's just started working.  Even if he loves his job now, in a few years there might be a better employment option, and may want to move.  If he wants to do the landlord thing, then I'd probably change my mind, and then this could be a good place to rent if he chooses to leave. 

I absolutely loved my first job the first 3 years, the 4th was ok, but the last two were horrible.  It can start out promising, but things do change, and being tied down to property can become expensive. 

Being FI doesn't mean you have to retire early, but it does buy peace of mind.  If I got fired tomorrow, it would suck, but I wouldn't have to worry about paying my bills next month, or even next year. 

You don't have to find someone as mustacian as you as long as they are open to new ideas.  Many people are interested in not working for the next 40 years, they just don't know what to do about it.

6+ weeks of paid holiday is nice, but retired people have 52 weeks of "paid" holiday.

[berserk77]

I'm not getting down about it but this job is probably the best I'll ever do since I'm uneducated and have a lengthy criminal record. I've only recently started getting my shit together. The job is unionized skilled labor that tops out at ~60-70k a year with full benefits and pension. The company just picked up an 8 year contract and has been going strong for almost 150 years. I'm very interested in being a landlord, even if it's just to my younger family members at first.

[deborah]

I'm sure you've put all that behind you. I have a family of five cousins, none of whom went to college. All of them have had very successful careers, and several of them are FI. Although people with more education tend to do better, and have better paying jobs, there are plenty of uneducated people who do better than plenty of well educated people. However, often uneducated people believe that they cannot do as well as others, and that they cannot get a better job later on - and that is a self-fulfilling prophecy!

To have got where you are at 24, you have done extremely well, and I am sure you will go far. If you want to, you can get educated, but that isn't always necessary. Just don't be in an enormous rush to do things (like buying a house).