Author Topic: Buying a house in Colorado-the long game  (Read 2003 times)

patch45

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Buying a house in Colorado-the long game
« on: December 23, 2017, 09:00:44 AM »
Hey all-

I'm 25, live in Denver, and somewhat recently realized I might not want to live anywhere but Colorado (besides maybe extended travel) for a long time. This made me think, "Hey, maybe I should think about buying a house", but I'm not really sure how to proceed from here. I definitely don't have the $80k in cash to make a down payment on a home around here, but there are more considerations as well:

The good
- I make 90k as a software developer with less than 2 years professional experience, hopefully that number can continue to grow
- I'm able to save maybe 75% of my take home pay, though all of that money goes straight into mutual funds, much of it in a 401k that I cannot withdraw from. I do have some in an emergency fund, some in a Roth IRA from which I could withdraw principle, and some in a taxable account
- My bank has a high yield savings account that gets 2.5% APY given certain conditions are met (they are)
- I'd be fine with being a landlord to friends in a multi-bedroom house to offset some of the costs
- I would enjoy the process of working on a house, though I don't think I'd like the amount of time it chews up

The not as good
- Homes in Colorado are expensive, and I'm nervous to buy a house I don't want to live in for decades if prices are inflated right now
- I don't know exactly where I would want to live when I'm older. I think I want a family, and maybe I'd like to have them a little further from the city. Maybe I'd even like to be in a medium-sized mountain town. But right now I enjoy my 15-20 minute bike commute to downtown Denver
- I like to travel, have quit a job before to backpack for 5 months straight, and it's very likely I do that again. So might not have a job while I have mortgage payments

Any general strategies?
Have any of you earmarked a certain amount from each paycheck to slowly build up a down payment? Or would you recommend just cashing out a chunk of a taxable account when the time comes?
How do you strike a balance with where you want to live at 25 and where you might want to live at 40?

Thanks!

zolotiyeruki

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Re: Buying a house in Colorado-the long game
« Reply #1 on: December 25, 2017, 07:48:06 PM »
Do you *really* want a home? And what is driving that desire?  Is it just because of the "if you're going to be in location X for more than Y years, it makes more sense to buy" rule of thumb?  How do rents compare to the mortgage payments?

patch45

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Re: Buying a house in Colorado-the long game
« Reply #2 on: December 26, 2017, 08:18:50 AM »
Not right now, but I think probably within 5 years. It's some combination of wanting to have a stable place in a city that I love, wanting a place to be able to eventually raise a family, wanting to be able to work on a house that belongs to me (I've wanted to do more woodworking but haven't wanted to invest in bulky tools when I'll probably move every year), and the financial aspect as well.

On a $400k house looks my best guess after some Googling is that the monthly payment would be $1800 (including mortgage, property tax, and insurance, but not including maintenance or repairs). I pay $600/mo in rent, so if I rented out two rooms to friends for the same monthly price that I pay right now, that part of it would be a wash

COEE

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Re: Buying a house in Colorado-the long game
« Reply #3 on: December 26, 2017, 02:09:43 PM »
In your shoes, I'd wait.

You don't particularly sound like you're ready to settle down.  As a software developer, you'll probably be doing some job hopping for a few years also (You've got 2 years of experience - are you looking yet?).  Who knows where a new job will take you.  You don't sound like you have a significant other, you're concerned that prices are inflated, you have a good paying job, with low rent.  Why on earth would you want the time suck of home ownership?

zolotiyeruki

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Re: Buying a house in Colorado-the long game
« Reply #4 on: December 26, 2017, 02:26:53 PM »
It's not just the PITI and utilities you're paying, it's also the maintenance and repairs you pay for.   You're mowing the lawn, paying for furnace or A/C repairs, fixing other stuff when it breaks, etc.

Metta

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Re: Buying a house in Colorado-the long game
« Reply #5 on: December 26, 2017, 03:01:36 PM »
Denver's real estate market is pretty volatile over time and right now it appears to be bubbly, so I would wait for that reason.

Any general strategies?
Have any of you earmarked a certain amount from each paycheck to slowly build up a down payment? Or would you recommend just cashing out a chunk of a taxable account when the time comes?
How do you strike a balance with where you want to live at 25 and where you might want to live at 40?


On the question of knowing where you will want to live at age 40 when you are 25, you can't. You will almost certainly be a different person in fifteen years. You will probably be a different person in seven years. What you can know is that your 40 year old self will want to have enough money to buy what he wants. So you can stash money for him. I wouldn't suggest buying a house for him, though.

SwordGuy

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Re: Buying a house in Colorado-the long game
« Reply #6 on: December 26, 2017, 03:37:03 PM »
From what you say, and where you are on life's journey, I would not suggest buying a house unless it will make you money when you do NOT live in it.

If it's a solid rental property investment, go for it.  If it can't pay for itself with you in it, don't.

All it's going to take is meeting that special someone who totally derails what you thought you would be doing.   And at that point, the house might just become unwanted baggage if it won't pay for itself plus make a profit.

Lmoot

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Re: Buying a house in Colorado-the long game
« Reply #7 on: December 26, 2017, 05:02:40 PM »
 If you can, and are willing to rent it out, and can find a good deal, I don't see why not. Age shouldn't be a factor when purchasing a house. I bought my house at 25, eight years ago. When living in it was no longer needed, I've been renting it out. I'm currently staying with family to help out, but fully intend on returning one day. 

I too like to travel as long term is I can get away with. In fact, that's what prompted me to rent my house out to some coworkers. I quit my job and went to Africa for two months. I get attached to places and am close with family in the area, and I really love the idea of having a home base. It makes me feel free to bounce around and travel here and there, knowing that I always have "my place". Of course, this only works because I am in a good rental market and quality potential renters come to me. In 5 years of renting I haven't had tenant issues, and I've never had to advertise; but I have been lucky. There's nothing wrong with planning ahead and making moves if you have a clear indication of your plans. Don't let anyone tell you that just because you're young, you won't know what feels right. If something comes along that forces you to change plans, if it's worth it you'll figure it out. But definitely have a back up plan…and the most obvious one with real estate is rental potential.

zolotiyeruki

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Re: Buying a house in Colorado-the long game
« Reply #8 on: December 26, 2017, 06:27:22 PM »
On the question of knowing where you will want to live at age 40 when you are 25, you can't. You will almost certainly be a different person in fifteen years. You will probably be a different person in seven years. What you can know is that your 40 year old self will want to have enough money to buy what he wants. So you can stash money for him. I wouldn't suggest buying a house for him, though.
That's a really good point.  If you buy a house looking forward to getting married and having kids, you're making a pretty sizable bet that 1) you *will* get married and have kids between now and then, 2) the house will be exactly what you (and your spouse) will want, and 3) the housing market is going to really appreciate fast. #1 and #2 are both impossible to predict, and while the market will probably appreciate between now and then, exactly how much (#3) is again impossible to predict.

Lmoot

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Re: Buying a house in Colorado-the long game
« Reply #9 on: December 26, 2017, 07:25:25 PM »
In reading the OP's follow up replies... I agree with others: don't buy house at 25 that you expect to work for you when you're 40 with a spouse and kids.
That is making a whole lot of assumptions. That your partner would want to stay in that area, and that they  wouldn't want to have a say in purchasing the house, or that they may even have their own house they prefer. Plus it seems like to purchase a house for a family, as a singleton, is a bit of a waste of today's dollars. If you're gung ho on owning property, get a property that will fit your current needs that is within a reasonable price range. If such a property doesn't exist in your desired area, stick to renting.

martyconlonontherun

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Re: Buying a house in Colorado-the long game
« Reply #10 on: December 28, 2017, 11:08:05 AM »
Im 29, and I had totally different views on what I wanted when I was 27.5. I'm sure it will change when I'm 32. I bought a house where I could put 20% down and wouldn't be in a position of being under water/losing money if I sell it 2 years based on a job change. Too many of my friends bought a house based on what they thought they would grow into to only realize it was too expense, too constricting, or just in the wrong side of town. A cheaper house usually means more flexibility and less risk.

As pointed out consider all costs when moving:
Previous rent for me was 1,150 a month/14k per year
My house has a 15 year mortgage at 950 a month + ~200/mth utilities+400/mth property taxes= 19k per year
I get about 7k of equity per year, so its a net "gain" of 2k if you don't factor in closing costs, moving costs etc.

Also, I probably spent $1k on new laundry unit and random stuff like showels and weed wacker. Spent multiple weekends doing lawn work and consistent home upgrade projects. If it was up to me, I would take the apartment lifestyle til we had kids.

In the long-run, your plan will probably work in getting you a ton of equity in a house. But there is a lot of risk and real costs of time/money when you are a home-owner.


Sun Hat

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Re: Buying a house in Colorado-the long game
« Reply #11 on: December 29, 2017, 08:38:21 AM »
I can't remember which book it's from, but I'll relate one tidbit of wisdom : don't buy more house than you'd rent. I'm guessing that you rent a modest place for $600, so don't be in a hurry to buy a fancier/bigger place now. If you look for a place that will work for you now, then you can either sell it down the line and transfer the equity or rent it out. (Edited to reflect the high cost of selling that martycon... reminded me of)

My advice: spend another year or two renting while putting aside a down payment. Spend that time looking checking out reasonably priced neighborhoods. Look for where your amenities are (grocery stores, transit, sports facilities), and what the crime rates are. From your workplace / downtown, look to see where the good transit lines run, so that you can include areas that are a bit further out in your search. Explore these neighborhoods on foot/bike in your free time to get a good feel for them.
« Last Edit: December 29, 2017, 05:16:13 PM by Sun Hat »

Cwadda

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Re: Buying a house in Colorado-the long game
« Reply #12 on: December 29, 2017, 08:47:13 AM »
A bit of a more unconventional approach:

Would you consider buying a multi family, living in one of the units, and renting the rest?  I've had big success with this strategy.

Some of the benefits:
1. You can buy one with as low as 3.5% down
2. Anytime down the road you can rent the unit you're living in. In essence, you have an investment property on your hands.
3. Multi families tend to perform better than a single family house (economies of scale)

martyconlonontherun

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Re: Buying a house in Colorado-the long game
« Reply #13 on: December 29, 2017, 09:15:17 AM »
I can't remember which book it's from, but I'll relate one tidbit of wisdom : don't buy more house than you'd rent. I'm guessing that you rent a modest place for $600, so don't be in a hurry to buy a fancier/bigger place now. If you look for a place that will work for you now, then you can either sell it down the line and transfer the equity or rent it out.

I'm a fan of building equity early, since I bought my first place (a cheap condo) at 25, and it worked well as a way to build equity that I shifted towards future homes when I moved.  I've also lived and traveled around the world, and would return to live in Colorado in a heartbeat if I could.

My advice: spend another year or two renting while putting aside a down payment. Spend that time looking checking out reasonably priced neighborhoods. Look for where your amenities are (grocery stores, transit, sports facilities), and what the crime rates are. From your workplace / downtown, look to see where the good transit lines run, so that you can include areas that are a bit further out in your search. Explore these neighborhoods on foot/bike in your free time to get a good feel for them.

Advice depends on where you are in your life. My wife and I would've rented 1k sq foot apartment, but not buy that size house. The short-term savings wouldn't justify the need to sell the house in 2-4 years as we get 1-2 kids. I think there is something to be said for not just buying a large house, but you can't buy a house without a 5-year plan to either rent it out or stay in it. Otherwise, you lose all equity in the selling and moving costs.

Sun Hat

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Re: Buying a house in Colorado-the long game
« Reply #14 on: December 29, 2017, 05:14:13 PM »
Marty - Good point!