Author Topic: Small Condo vs. Large House  (Read 5475 times)

teltic

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Small Condo vs. Large House
« on: September 25, 2015, 01:32:44 PM »
I'm 24, looking to buy a place.

I'm trying to think long term.... Should I buy a small condo to live in for 5-10 years, then buy a house when my family gets too big for my condo... Or buy a house and my family will grow into the size of the house.


The benefit of buying a condo is my expenses would be lower obviously... and I could rent it out when I do buy the house later in life....

But maybe its smarter to just buy the house?

DaveR

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Re: Small Condo vs. Large House
« Reply #1 on: September 25, 2015, 01:42:43 PM »
Maybe neither. Houses/condos aren't really an investment. Your money can work harder for you in other places.

If you just have to have someplace to call your own, Condo. Why? No need to pay for something today (extra space, maintenance costs, etc) that may not be right for you down the road. Life happens. It's best to focus on "enough" today.

frugaliknowit

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Re: Small Condo vs. Large House
« Reply #2 on: September 25, 2015, 01:51:37 PM »
Probably neither.  Buying more space than you need is wasteful.  Buying a condo and hoping to trade out of it 5-10 years from now is not a great plan (risky).  I would just rent as cheaply as possible.

teltic

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Re: Small Condo vs. Large House
« Reply #3 on: September 25, 2015, 02:07:34 PM »
Hmm... Well lets pretend I'm getting married so the days of living in parents basement is over...

I've always thought renting doesn't make sense... But maybe it does if the cost of renting is low enough?

Quickly looking around craigslist, I can find an condo for $800 a month (HOA included). (I live in Bountiful, Utah, 84010).
I could buy a condo (same neighborhood as that $800 listed) for $100k.

Or I could buy a house for 250k, with 3 or 4 rooms, in anticipation of a future family.




teltic

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Re: Small Condo vs. Large House
« Reply #4 on: September 25, 2015, 02:08:47 PM »
Also If I were to buy a condo to live in for 5 years... My plan would be to rent out the condo, making it more of an investment.

thedayisbrave

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Re: Small Condo vs. Large House
« Reply #5 on: September 25, 2015, 02:16:36 PM »
Do you already have a family or is this just a 5-10 year plan? Lots can happen in the meantime.

What I've done so far (I'm 25) is buy cheap condos and live in one room while renting the rest.  I'm on my 2nd one.  I think this may be the last condo I buy as an investment and live in, though.  I just got a full-time job that's 50 miles roundtrip (not every day) so I'm thinking of moving a bit closer to work once I settle in and make sure I like it.  I'd like a house, but eh.. I can wait.  So we'll see.

If you were to buy the condo and rent it out later, what would your projected income vs. expenses be? Might want to take a hard look at those before considering.  If the #s pan out (look at 1% rule, 50% rule, etc and check out Bigger Pockets) and you eventually WANT to become a landlord (or if the property makes enough that it cash flows after property management which, let's face it, it should either way whether you use a PM or not), then I'd pull the trigger.  If the rental #s don't make sense, I'd probably just continue renting and stashing.

Lady Fordragon

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Re: Small Condo vs. Large House
« Reply #6 on: September 25, 2015, 02:19:06 PM »
I agree with the other posters.  No need to buy more than you currently need because you never know what life has in store for you.  Besides you can always upgrade if you need to and by that time you'll have a nice investment portfolio built from not buying that much larger house.

justajane

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Re: Small Condo vs. Large House
« Reply #7 on: September 25, 2015, 02:22:22 PM »
Why don't you buy a cheaper or smaller home? I'm not sure why it has to be either a small condo or a large house. There are options in between. 2 bedroom/1 bath homes don't appreciate as much as 3/2 homes, but they appreciate more than condos. And you can marry and have kids in a 2/1 home. We did. Kids are small for quite a long time.

The biggest questions are - what is your income? Do you plan to stay in the area?

ShoulderThingThatGoesUp

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Re: Small Condo vs. Large House
« Reply #8 on: September 25, 2015, 02:31:35 PM »
Don't buy until you have a clearer life plan.

teltic

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Re: Small Condo vs. Large House
« Reply #9 on: September 25, 2015, 02:34:22 PM »
I make 40k a year, going to school to get my masters in finance at the University of Utah.  They claim average student will get $67500 starting salary (I'll finish spring 2017). 

I plan to be in this area for the rest of my life (davis county area).  I just like the area and how close it is to salt lake.  I assume most of my future finance positions will be in Salt Lake City (20 minute commute).

Maybe buying a house with an unfinished basement would make sense.... so I could expand when I need more space?

Ricky

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Re: Small Condo vs. Large House
« Reply #10 on: September 25, 2015, 03:12:45 PM »
If you plan on staying there your whole life - a house might not be a bad idea. It's a forced savings account for most people. You just need to do the research and calculate where/what type of housing you want to live in and figure out which is cheaper for you.

If buying is cheaper, but only slightly so, you still may be better off renting something cheap as others have suggested and investing the rest. From what I can tell, there's low inventory in SLC and you're going to have a hard time finding cash flow rentals within city limits, so you might look outside the city, if at all.

Jschange

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Re: Small Condo vs. Large House
« Reply #11 on: September 26, 2015, 08:11:24 AM »
I would buy a 2 bed house or condo, have a roommate, but screen them carefully. This gives you the status and security of owning, but without being way over your space needs. It also gives you a human who will go get you ginger ale when you are suffering from a stomach flu.

The space is big enough that if you get married, you can give your tenant notice, and move your partner in. Or you can rent out the whole place and find a home together.

If you're planning a spouse and family, they will probably be delighted to join you in 'your home' but also want a say in choosing your forever home.

naners

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Re: Small Condo vs. Large House
« Reply #12 on: September 26, 2015, 08:53:39 AM »
You should check out the NYtimes rent or buy calculator to see if buying makes sense at all for you. It will also tell you whether it will pay off to say own a condo for 5-10 years.

mm1970

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Re: Small Condo vs. Large House
« Reply #13 on: September 26, 2015, 09:38:30 AM »
Also If I were to buy a condo to live in for 5 years... My plan would be to rent out the condo, making it more of an investment.
My boss does this.

Bought a condo when he had a wife and 2 kids.
Bought a  second 2BR condo when the market tanked.  Rents it for a profit.
Bought a single family home and rents the first condo (at a small loss when you consider the prop taxes).
Still net positive on the 2 condos.

Yankuba

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Re: Small Condo vs. Large House
« Reply #14 on: September 26, 2015, 09:45:15 AM »
You should check out the NYtimes rent or buy calculator to see if buying makes sense at all for you. It will also tell you whether it will pay off to say own a condo for 5-10 years.

Ditto

kib

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Re: Small Condo vs. Large House
« Reply #15 on: September 26, 2015, 09:48:01 AM »
You might also want to consider your lifestyle.  DH and I are in our 50s and kid free, but I like to garden and he has hobbies that involve cars and motorcycles. I hang dry my clothes.  We also have several pets.  Condo living can be cheaper and less hassle, but it's sometimes quite limiting.  I think the least limiting choice if you are buying would be a small home with room for expansion into the basement and/or attic.  But home ownership in general is a lot more work and eventual expense than renting; what you save in rent today you will probably pay in furnace replacement tomorrow. 

ShortInSeattle

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Re: Small Condo vs. Large House
« Reply #16 on: September 26, 2015, 11:10:29 AM »
Don't assume a large house is an investment for the future. We bought a big "forever home" in our twenties and sold it eight years later to move into a small condo because we wanted the city life. (didn't see that coming).

Basically it's hard to know what your future holds. People change, goals change, and so on.

I'd focus on what makes sense for your current circumstances. You can always save the difference and be well positioned financially to make changes in the future.

SIS

Sibley

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Re: Small Condo vs. Large House
« Reply #17 on: September 26, 2015, 12:06:46 PM »
If you buy a house, then you have to maintain it. Inside and out. If you don't do the maintenance, all sorts of bad things will happen. If you don't like doing that sort of thing then you'll just be unhappy doing it.

Condos have less maintenance, but still some. Also, some places have limitations on the number of units that can be rented out. And since there's an HOA, you may or may not like their rules.

Bottom line, until you *want* to buy a house/condo, rent. There's nothing inherently wrong with renting.

iris lily

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Re: Small Condo vs. Large House
« Reply #18 on: September 26, 2015, 12:52:32 PM »
Outside of very large metropolitan areas, condominium units are not good real estate "investments." Do your homework, don't let a real estate professional tell you how you will build equity etc. Renting can be so much smarter.

We saw our friends lose $100,000 on their condo in my Midwestern city, almost half of its value. And while the real estate market is bounding back around here, the saturated condo market is not.
« Last Edit: September 26, 2015, 03:25:36 PM by iris lily »

mozar

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Re: Small Condo vs. Large House
« Reply #19 on: September 26, 2015, 01:56:21 PM »
What does your hypothetical fiance want to do?

zataks

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Re: Small Condo vs. Large House
« Reply #20 on: September 26, 2015, 03:01:56 PM »
Have a look here http://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html

A lot of assumptions there but should give you a pretty good idea of the financial aspects of it.

That aside, I agree with others and think it's dumb to buy a house for a future family when you are that far off.

We're getting ready to sell our condo and buy a house for our future family.  But with us it is me and my wife, her mother, and our new baby boy.  (DW is due Tuesday so any time now).  We're in a 2 bedroom currently so want to after April (2 year mark on condo ownership!) and get into a place with at least a 3rd bedroom and a yard.  It will be expensive but renting a place like that here is probably ~$4000/month so we'll buy.  We also want it to carry us up to and maybe even through retirement as we love the area we plan on buying in.  So buying for the future makes a little more sense.

Maybe to put that in a little better perspective, I bought a house when I was 23.  Thought I'd be there 5 years easily and probably at least 10.  After 2 years I started looking for new jobs.  After 4.5 I moved ~250 miles away and it is near impossible to see myself returning.