Author Topic: Home Buying Situation  (Read 1596 times)

ep

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Home Buying Situation
« on: February 25, 2014, 07:21:54 PM »
Hi all. I live in an expensive city with my wife and we're currently renting for $1700/month. The home we're currently renting is a GREAT deal and very undervalued, but it's not our favorite place in the world (but we're not complaining, we have a driveway, nice kitchen, washer dryer, etc... all luxuries for where we live). We will likely move closer to family (different state, somewhat cheaper homes) in 2+ years which has held me off from looking at homes in my current area.

However, I wanted to just explore some options and see if it would make financial sense to purchase a home (would love to start growing equity), even if I may not live in that home for a long time. We are totally okay staying in our current rented place if that's the most sensible option. Some considerations/numbers:

- Currently have $30k saved for down payment (savings acct, essentially liquid)
- Putting aside ~$4k/month for down payment
- Place for just wife and me would be minimum $350k, probably closer to $400k (expensive area, need to be close to public transportation)
- Multi-family would probably be $600k min. Am very open to the idea of a multi-family (would be pretty easy to find tenants due to our network)
- If we moved, we would probably have no trouble renting out the place if we decided to hold on to it for a little while, and have friends who could manage it for us
- Area is constantly appreciating in home value, close to public transportation and universities

I'm not really sure if I know all the considerations to be able to make a decision on this so some help and things to think about would be great.
For instance, at which point does equity trump the amount sunk into closing costs/broker fees/etc? Is it fair to think of it as 1:1? We don't have that much saved up for a down payment yet, but we are high income earners and saving a lot now, so would it make sense to pull the trigger on something we found that we liked and take some PMI for a short while? How much will PMI affect us if at all?

Just to be clear again, I would love to buy a house, but only if it makes sense. Just want to make sure I'm not throwing away potential money by not considering home buying, even at this early stage. Thanks!

Eric

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Re: Home Buying Situation
« Reply #1 on: February 25, 2014, 08:26:16 PM »
Does it make sense to buy over renting in your expensive area in general?  Start there.  Although with your short time frame, I think there's generally zero chance you'll come out ahead by buying.

http://www.nytimes.com/interactive/business/buy-rent-calculator.html?_r=0

If it leans towards renting, build your equity in the stock market with, well, equities.