Hi everyone, this post's main question is regarding whether or not I should keep renting despite my current location raising my rent for the second time (seems to happen on an annual basis), or to take control of my housing costs by looking to purchase something.
Here are the details:
- My initial rent was $1075. A year later it jumped to $1125, and starting in May it will increase to $1175.
- New tenants are paying $1475 for the same 1bd 1ba.
- I expect my rent to increase each year until it reaches the market rate, probably by $50 annually since that was the amount both times so far.
- Other 1 bedroom places are renting for similar rates, so moving to another apartment would not save me money. The same is true for 2 bedroom places. I'd pay just as much as I'm paying now, but then have the headache of living with someone else.
- I anticipate living in this area for the next decade or so... and my down payment should be large enough that if I need to move and rent it out I will have forced a positive cash flow.
Can I pay it? Yes. It increases my target FI amount by almost $20k. Following the 4% rule it will take a stash of $352,500 to fund that housing cost forever. I have made some awesome spending cuts, but cannot easily cut another $50 out of my budget to offset the increase in rent. I do have a side hustle, which could absorb the extra expense but it is not ideal.
In addition, I just transitioned from a high paying temp position to a lower paying permanent position (job security and benefits), so I am kind of feeling the frustration of making less money and being at the mercy of a landlord.
I like the idea of buying something because it puts a deadline on how long I'll have an expense for, whereas rent is forever -- and appears to be increasing. Buying a house would definitely increase my monthly housing expenses, but I'd be paying myself in the form of equity rather than simply spending $X each month.
I am open to the idea of buying something and then renting out a room or two, but not sharing an apartment with someone. Places in my area would cost me between $400k - $500k. I am battling with the idea of taking the $40k I have in a taxable brokerage account and using it as a down payment. The idea of having to rebuild what took me nearly two years to stash is challenging, especially given that due to a lower income I won't be able to save as many dollars per month even though adjustments to my spending will keep me around the same savings rate.
Last stats:
Accessible cash (non tax advantaged): 50k
401k/IRA: $5,500 (will add another $5k annually, then 2nd year at job I get a 100% match so it will jump to $10k/yr in 401k contributions)
So, should I start shopping for a home? Save for a larger down payment? Or just shoosh and accept my rent increases as they come until my rent hits the market rate?