Author Topic: Buying a house the Mustachian way  (Read 7874 times)

thedayisbrave

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Buying a house the Mustachian way
« on: January 03, 2015, 07:35:28 AM »
Classic head v. heart battle here.  As of right now I have two options as I see it:

A) 2 bed, 2 bath town home.  Middle unit.  Has all the upgrades I need - hardwoods, back splash, etc.  Has more curb appeal and a teensy bit more centrally located.  Could have one roommate at ~$400.  Price: $144,000 (would likely try to get them down to $140K).

B) 3 bed, 2.5 bath town home.  End unit.  Has hardwoods in kitchen, carpet in dining/living.  10 years older than A.  Still decent but more in a student community than young professionals.  Could have two roommates at ~$400 each, $800 total.  Price: $135,000 (would likely try to get them down to $130K).

With my new career in real estate, my income for the first few years is not guaranteed.  I have adequate reserves, but option B is tempting because it would mean I'd barely have to touch any of it, and could thus save a large amount of my income (think 75%+).  Don't factor bank financing into any of this.  I haven't seen B in person yet, but will try to on Monday. 

I will say, my home is my sanctuary.  Last year I was somewhat miserable because of one roommate who always was home - he was in the kitchen when I wanted to cook, was watching TV loudly when I wanted to study, etc.  In those moments I just reminded myself of the rent checks that were coming in and I got through it.  But I think it's a matter of roommates because the year before that, I was actually friends with my roommates and we had a great time - we'd go out to eat together, go to concerts, etc.  So as long as I find some roomies that are aligned with my lifestyle, I think I'll be fine.

I estimate that I'll stay 5-7 years - I'm 24 and single right now, but I do have to keep a potential SO/family in mind.  With that, B would be easier to shove into my rental portfolio as it would likely be right at the 1% rule which I'm ok with. 

Thoughts appreciated :)

Michread

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Re: Buying a house the Mustachian way
« Reply #1 on: January 03, 2015, 08:08:27 AM »
Nope.  Rent don't buy.  If you don't like the roommates in the apt move out.  Renting is much more flexible and safe until your income life is more stable.

Guffeyjon

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Re: Buying a house the Mustachian way
« Reply #2 on: January 03, 2015, 08:09:45 AM »
I like the sound of place B. Being in a college prime area will help find room mate, it's cheaper, and has greater income potential. My question is why are you only asking to lower price by 2.7% and 3.7%? Find the bottom price, and I feel place B will become a much better deal then the newer place.

TerriM

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Re: Buying a house the Mustachian way
« Reply #3 on: January 03, 2015, 08:40:34 AM »
Where are you located?  Is the market in your area bubblicious?  If so, you might consider waiting to buy.  If not (if you're still recovering from the recession), then buying and renting is a great option.

One thing to look for with the townhouses is whether you'll be allowed to rent it out after you move out.  You might want to keep it as a rental, and my understanding was that some places had a limit on how many units could be rented out.

Bob W

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Re: Buying a house the Mustachian way
« Reply #4 on: January 03, 2015, 09:50:00 AM »
Unless you're paying cash, rent.

Cassie

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Re: Buying a house the Mustachian way
« Reply #5 on: January 03, 2015, 01:28:45 PM »
The price difference between the 2 is not really that significant except one place allows you to have 2 roomies instead of one.  If you need to rent to others to make your bills seems like you might want to wait to buy.

bluecollarmusician

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Re: Buying a house the Mustachian way
« Reply #6 on: January 03, 2015, 01:38:23 PM »
Worth considering the value of the area, and value of 3BR vs. 2BR.  Generally lots of factors in a decision like this so only you can know for certain what is worth it. 

TerriM

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Re: Buying a house the Mustachian way
« Reply #7 on: January 03, 2015, 03:17:56 PM »
The price difference between the 2 is not really that significant except one place allows you to have 2 roomies instead of one.  If you need to rent to others to make your bills seems like you might want to wait to buy.

On the other hand, there's no better way to own a house than to have other people pay for it.  I know multiple people in roomie situations who don't have to pay rent at all. 

EconDiva

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Re: Buying a house the Mustachian way
« Reply #8 on: January 03, 2015, 03:23:30 PM »
The price difference between the 2 is not really that significant except one place allows you to have 2 roomies instead of one.  If you need to rent to others to make your bills seems like you might want to wait to buy.

On the other hand, there's no better way to own a house than to have other people pay for it.  I know multiple people in roomie situations who don't have to pay rent at all.

Are you saying these people have bought a house and charged the roommate enough to cover the mortgage?

thedayisbrave

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Re: Buying a house the Mustachian way
« Reply #9 on: January 03, 2015, 04:51:44 PM »
The price difference between the 2 is not really that significant except one place allows you to have 2 roomies instead of one.  If you need to rent to others to make your bills seems like you might want to wait to buy.

On the other hand, there's no better way to own a house than to have other people pay for it.  I know multiple people in roomie situations who don't have to pay rent at all.

Are you saying these people have bought a house and charged the roommate enough to cover the mortgage?

That's been my MO for the past 3 years.  Yes, it can happen depending on # of bedrooms, market rent in the area and purch price of home.  Same idea as buying a duplex and living in one side.  It's why Option B is so tempting. 

TerriM

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Re: Buying a house the Mustachian way
« Reply #10 on: January 03, 2015, 05:27:02 PM »
The price difference between the 2 is not really that significant except one place allows you to have 2 roomies instead of one.  If you need to rent to others to make your bills seems like you might want to wait to buy.

On the other hand, there's no better way to own a house than to have other people pay for it.  I know multiple people in roomie situations who don't have to pay rent at all.

Are you saying these people have bought a house and charged the roommate enough to cover the mortgage?

Yes!  Roommates plural, but yes.

JLee

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Re: Buying a house the Mustachian way
« Reply #11 on: January 04, 2015, 09:51:23 AM »
The price difference between the 2 is not really that significant except one place allows you to have 2 roomies instead of one.  If you need to rent to others to make your bills seems like you might want to wait to buy.

On the other hand, there's no better way to own a house than to have other people pay for it.  I know multiple people in roomie situations who don't have to pay rent at all.

Are you saying these people have bought a house and charged the roommate enough to cover the mortgage?

I have roommate income of $1100/mo and a mortgage payment (including tax, insurance, and PMI) of $850. Yup, it is possible.

purplish

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Re: Buying a house the Mustachian way
« Reply #12 on: January 04, 2015, 12:33:20 PM »
The price difference between the 2 is not really that significant except one place allows you to have 2 roomies instead of one.  If you need to rent to others to make your bills seems like you might want to wait to buy.

On the other hand, there's no better way to own a house than to have other people pay for it.  I know multiple people in roomie situations who don't have to pay rent at all.

Are you saying these people have bought a house and charged the roommate enough to cover the mortgage?

I have roommate income of $1100/mo and a mortgage payment (including tax, insurance, and PMI) of $850. Yup, it is possible.

Yup I do this too! 

Cassie

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Re: Buying a house the Mustachian way
« Reply #13 on: January 04, 2015, 01:00:14 PM »
I know someone that also does this but what I meant was have enough $ to cover the mortgage for times when the rooms are not rented because this will happen.

JLee

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Re: Buying a house the Mustachian way
« Reply #14 on: January 04, 2015, 01:21:39 PM »
I know someone that also does this but what I meant was have enough $ to cover the mortgage for times when the rooms are not rented because this will happen.

I bought the house on my own income entirely. I could afford it, but this is much better. :P

thedayisbrave

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Re: Buying a house the Mustachian way
« Reply #15 on: January 04, 2015, 02:40:29 PM »
It's definitely a trade-off and I'm considering both options.  I've lived with my roommates my entire life & am the most content when there is some sort of friendship/bond.  Least content when it's just shared living with people who don't live the same way I do (blaring TV, late night cooking, etc.) This means I will have to be choosy.  I've had up to 3 at one time besides myself, so 1-2 seem more manageable also.  I will always have at least 1, until I get married because to me it is senseless to have 2 bedrooms in a home and only be using 1.

I can afford the house without roommates.  But good ol' Mustachian me is thinking - sure you'll have to live in a student complex AGAIN - but that's what people your age do.  And you will be building your stash the "steal wealth" way, to borrow a phrase from Joshua Kennon. 

I think what it comes down to is, I want to make sure I'm making intelligent decisions.  I don't want to get caught up in "ooh tile backsplash" and forget what my 5 year plan is.  But, at the same time, I usually always make decisions with an eye on maximizing profit - which is great for stash building - as long as it doesn't minimize my utility at the same time (by making me unhappy).

lostamonkey

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Re: Buying a house the Mustachian way
« Reply #16 on: January 04, 2015, 03:28:23 PM »
The idea of roommates is a non-starter to me. I find the concept insufferable and I'm willing to pay a lot of money to live alone.

If you're similar, it seems like rent versus buy is a red herring. You can just rent an apartment by yourself. Renting does not require you to have roommates.

I'm pretty similar. I would not enjoy living with other people for extended periods of time other than maybe a spouse/family sometime in the future. I also considered the buy a house, rent out rooms, and live rent-free idea but I realized building my long-term wealth and being FI a few years earlier is not worth me being miserable now.

JLee

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Re: Buying a house the Mustachian way
« Reply #17 on: January 04, 2015, 04:34:56 PM »
The idea of roommates is a non-starter to me. I find the concept insufferable and I'm willing to pay a lot of money to live alone.

If you're similar, it seems like rent versus buy is a red herring. You can just rent an apartment by yourself. Renting does not require you to have roommates.

I'm pretty similar. I would not enjoy living with other people for extended periods of time other than maybe a spouse/family sometime in the future. I also considered the buy a house, rent out rooms, and live rent-free idea but I realized building my long-term wealth and being FI a few years earlier is not worth me being miserable now.

It really does depend on the person - some people would be happier renting a little studio apartment themselves instead of having roommates.

I love my roommates, though - I'd be sad if any of them left, regardless of finances.

lostamonkey

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Re: Buying a house the Mustachian way
« Reply #18 on: January 04, 2015, 04:40:41 PM »
The idea of roommates is a non-starter to me. I find the concept insufferable and I'm willing to pay a lot of money to live alone.

If you're similar, it seems like rent versus buy is a red herring. You can just rent an apartment by yourself. Renting does not require you to have roommates.

I'm pretty similar. I would not enjoy living with other people for extended periods of time other than maybe a spouse/family sometime in the future. I also considered the buy a house, rent out rooms, and live rent-free idea but I realized building my long-term wealth and being FI a few years earlier is not worth me being miserable now.

It really does depend on the person - some people would be happier renting a little studio apartment themselves instead of having roommates.

I love my roommates, though - I'd be sad if any of them left, regardless of finances.

Yes, I completely agree. Some people would find living alone to be miserable. I think it depends on personality types and introversion/extraversion.

Mommyof2

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Re: Buying a house the Mustachian way
« Reply #19 on: January 04, 2015, 08:08:32 PM »
I would go with B but negotiate it lower.  Would work well as a rental later on as well.

thedayisbrave

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Re: Buying a house the Mustachian way
« Reply #20 on: January 04, 2015, 08:36:00 PM »
Oh- as a slight update- I found another unit in the same area that is a 3 bed/2 bath condo (not townhome)- about 300 sq feet smaller, but priced at $99K.  I'm going to take a look tomorrow.  Renting out 2 rooms at $400 (market rent) would already get me close to the 1% rule, and renting all 3 rooms once I move out would get me >1%. 

:)