Author Topic: Reader Case Study- Buy or Continue to Rent?  (Read 1522 times)

bma12

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Reader Case Study- Buy or Continue to Rent?
« on: February 08, 2016, 06:58:46 PM »
Life Situation: I am married with a newborn child. My wife and I are both 25 years old.

Gross Salary/Wages: Combined:104,000/yr

Pre-tax deductions: 2135/month  25,620/yr

Other Ordinary Income: 4500/yr

Adjusted Gross Income: 82,880.

Taxes: Texas has no income tax, but we do have property tax of 1.4%


Liabilities: Car Loan (450/mo) 20,000 left -- ATV (250/mo) 6500 left

We live out in the country in a rental home owned by a family member. Rent is 700 per month. We like living out in the sticks and want to keep it that way. Our original plan was to build a new home within 2-4 years depending on how the stock market treated my investments. The home we build will be a "forever home" built on family land that we cannot sell.  I have always kept an eye open for homes in the area to buy in the meantime but nothing has come up. Now a house just down the road from us is about to come up for sale. The asking price is 250,000. I need to know if it is worth it for me to buy the house. The house would give us a lot more space for my family and we would not have to worry about my landlord ending our lease (unlikely, but still possible).

If I buy the home, when would my break even point be vs paying rent? I figured with a 15 yr fixed I would have paid less in interest than I would have in rent at the 2.5 year mark.

The house I planned to build would be about a 350-400K home. As for our income, we gross around 105K a year right now, by the end of next year after my wife and I recieve some promotions due to certifications we are both on the verge of completing, we expect our gross family income to be around 125-135K, again, that is speculation.

Obviously buying a home would push back building a home, which is not a big deal as long as I am comfortable living in the bought home for up to 5-6 years while I save.

Should I buy the home? Should I get a 15yr or 30yr? Interest rates are 3.01 and 3.5 respectively.

One more thing, the house we live in is tiny, it is a 2/1 with no more room to grow. The house down the road is a 3/2 and over twice the size of my rented home.

Thoughts?
« Last Edit: February 08, 2016, 07:14:28 PM by bma12 »

GrowingTheGreen

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Re: Reader Case Study- Buy or Continue to Rent?
« Reply #1 on: February 08, 2016, 08:14:07 PM »

Mikila

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Re: Reader Case Study- Buy or Continue to Rent?
« Reply #2 on: February 08, 2016, 08:48:18 PM »
From the limited information you have shared, I think you should stay put.  That will facilitate your building more liquid savings vs. equity. 

Babies do not need much space.  Keep your housing costs to a minimum as long as possible.   

But, is that what YOU want?  Or are you dreaming of a larger home and hoping the numbers work?  Financial concerns are not the only ones. 

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