Hey Mustachians, lemme get your thoughts on this.
My fiance and I are thinking about buying an apartment together in Brooklyn sometime in the next year (maybe two). We could put 30% down on a $175K one-bedroom, or 20% down on a $250K two-bedroom. Assuming a 15-year mortgage at 3%, the monthly payments, including maintenance, would be $1,146 and $1,765; 30 years at 3.5% would be $850 and $1,282. As a comparison, we currently pay $1,600/month in rent for our two-bedroom, which is considered a good deal.
The NY Times Buy vs. Rent calculator says that we'd do better after two years on a one-bedroom, three years on the two-bedroom. We'd plan to live in this apartment for a minimum of five years and possibly much longer.
So, how much apartment should we buy?
From a need perspective, we only need one bedroom. And why buy more than we need?
On the other hand... a second bedroom gives us more flexibility. We could use the space as an office. Also, my fiance's mother visits New York frequently, and she could have her own room instead of sleeping on the couch or an air mattress. We could rent it out on Airbnb. If we left without selling it, a larger range of people might be interested (roommates, couples, young families) vs. for a one-bedroom (couples, some singles).
We could also stay longer in a two-bedroom when/if we have kids. But when/if we have kids, we would probably want to leave the city sooner or later.
What factors should we take into account in deciding how much apartment to buy? And, assuming that rates stay low, is there any compelling reason to get a 15-year over a 30-year mortgage? It's compelling to have everything paid off in half the time, but if we invested the difference, we'd probably come out significantly ahead over 15-30 years, right?
Please also make arguments for us not to buy. I'm sure that the New York real-estate market seems insane to most people. And the neighborhood we're looking at has seen a crazy run-up in value; in 2010 and 2011, they had the second-highest rate of appreciation in the entire city. That said, properties are pretty undervalued compared to the surrounding neighborhoods; in the neighborhoods immediately north and south, similar one-bedrooms are in the mid-$200Ks. We're not hoping to sell in five to six years with a huge payout, but we'd hope to make some gains vs. renting.