The Money Mustache Community
Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: NeilB4Zod on July 20, 2013, 08:53:38 PM
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I recently graudated from college and started my first corporate job with an annual salary of $65K. Would now (or a year from now) be a good time to buy my first home? I have read that home prices are climbing, so I'm not sure if I should rent, save and invest money, and then buy later. Any advice is appreciated.
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Do you have a downpayment saved up? Do you have student loans to repay?
More information is needed, including your general location. Ie, if you are talking about buying in New York vs Montana?
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In process of accumulating downpayment, substantial student loan debt, located in Texas.
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Like you Neil, I am also 25. I also make ~65k/year.
That said, homeownership is a complicated subject. For one thing, it is NOT an investment, unless it is specifically an -investment- property. Anything else, and it is an expense(William Bernstein). Can you work it such that it is a lower expense than renting? Yes. If you buy a house and stack it with roommates(Millionaire by thirty), or if you buy apartment complexes/duplex's, then yes, you can come out ahead. Myself, I just closed(on the 17th) on a 210k property, which I will be sharing with 2 roommates. If I didn't have those roommates lined up, it is incredibly unlikely I would have bought property. I also have 0 student debt, and 100k invested(15k 401k, 15k ROTH, 70k taxable account).
I would seriously study the entirety of homeownership before going in on it. Do you want to continue living in Texas, and have to worry about dealing with your house if you were to leave? How about that student loan debt? Do you have enough funds to cover homeownership costs?(I bought my property from the bank, and spent 4600$ installing new appliances because the place only had a dishwasher and microwave, I'm spending 600$ on sunscreens for the windows, I have to buy blinds, etc. etc.)
Seriously understand that we Americans put too much damned emphasis on homeownership.
http://www.theatlanticcities.com/jobs-and-economy/2013/05/link-betweeen-high-levels-homeownership-and-unemployment/5520/
http://www.theatlantic.com/national/archive/2009/07/homeownerships-downsides/20368/
Are rates going up? Yes, that's a valid concern, but there's much more to it then that.
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To add more to my previous post, see this blog post:
http://jlcollinsnh.com/2013/05/29/why-your-house-is-a-terrible-investment/
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I second everything said above here. I'm 35 and I'm at my third house. I bought this house before discovering MMM and to be honest, I'm having several doubts. I think I overspent.
I now have a three bedroom house. This basically means we could have two kids. Although I can't look into the future, I doubt we'll receive another child. Thus now we have a 75,000 euro laundry dryer room. Yay... This means more taxes, more maintenance, more debt, higher insurance and less money for higher-yielding investments.
The other thing is that I mentioned to my girlfriend that this house may need to be sold after our daughter goes to college. The girlfriend said she didn't want to give up the luxury of this house. I remarked that it's a trade-off between working longer or less luxury, and that got her thinking.
The last thing is that since buying the house, prices have gone down about 10% which is okay since we're not financed to the hilt. But for a neighbor down the street, this meant taking a severe hit when they had to move due to a terminally ill parent that they wanted to move in with, in order to take care of her.
So my advice would be:
- see if renting is cheaper
- finance on one salary
- buy for the long term
- buy when you're settling down
- don't buy too big
- make sure to get a nice down payment
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Was thinking about buying an $80K property like this: http://www.realtor.com/realestateandhomes-detail/7512-Amber-Dr_Dallas_TX_75241_M82275-45746?row=7 . The mortgage payment would only be about $450/month which is less than a rent payment for an apartment.
Or maybe a fixer-upper is a better choice?
For the forseeable future, I'll focus on saving/investing and building up a cash emergency fund.
I'm not sure I'd like to give up the flexibility of relocating for work if did I buy a home here in Texas. Would it be possible to manage it as a rental property remotely in the event I chose to relocate for work? What do you think about hiring a property manager?
Thanks for all the great advice!
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The schools are poorly rated and the property taxes are around $180 a month. If you could get conventional financing with 20 percent down and a 4.5 percent interest rate, your payment would be $324 plus $180 in taxes plus $50 (a guess) for insurance, or around $554. How does that compare to rentals with the same poorly rated schools?
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Looks like a good buy. I reckon you could rent it for at least $1000/mo.