Author Topic: Should I Buy a House?  (Read 623 times)

PrairieBeardstache

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Should I Buy a House?
« on: February 11, 2019, 01:54:19 PM »
This seems like one of few places I could have an objective discussion about this as my peer groups response is more along the lines of: "Of course you should, you're just throwing away money!". I'm having trouble deciding if now is a good time for me to buy a house, however. I've mostly considered houses to be lifestyle choices, not financial choices. I'd value the thoughts and opinions of this community.

Here's my present situation as briefly as I can put it:
- 35, single, no dependents
- I make roughly $175k/year including bonus
- Travel a _lot_ for work
- Spend a lot of time with friends when home and would like to host more as I'm getting older
- I have a car hobby that's stuck with me for the last two decades

Present living situation:
- Renting a loft downtown for $570/m (this is crazy cheap where I live, the place next door is $1,500 and not as good)
- Monthly parking downtown $290 (I pay more per square foot for my car, so anti-mustachian)
- Storage for hobby car $55/m
- Electricity ~$50/m
- Internet $90/m

On top of that, the standard living expenses. Less mustachian than many here but I live well within my means.

I have a car loan (see above comment about car hobby) that won't last much longer and I won't be getting another, I could make the car last a decade and I have another car for fun. At the moment my savings is a meagre $3500/m, some to a company RPP, the rest to an emergency fund (past situation depleted it and I've had to start over, c'est la vie) but I should have that back to 'normal' in a couple of months. I understand this is vague but I hope it's enough.

Reasons I'm considering buying a house:
- I want a space for my cars
- I like to do renovations
- I want to host friends at my house

Reasons I'm considering not buying a house:
- It's expensive
- Living in a cheap place offers me a _lot_ of freedom

Houses in my area can be had for $280-350k for a small 1,200sq. ft. bungalow that needs some work (which I'd be fine doing myself). $400-600k for the houses the Keeping Up with the Joneses first-time buyers buy.

Really, that's it. I don't have very strong points for either side and therefore at a bit of an impasse. Dear reader, what would you do and what am I not considering?

nereo

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Re: Should I Buy a House?
« Reply #1 on: February 11, 2019, 02:08:42 PM »
using the "rent vs buy" calculator available here is a good first step in making an informed decision
https://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html

Compared to your current living situation it seems unlikely that you will be financially better off buying vs staying where you currently are.  however, you have to ask yourself whether your current living situation is sustainable (e.g. can your current 'car hobby' continue with rented space?).  IF you can 'tough it out' for another few years you will find yourself in a MUCH better financial situation.  Since you did not include your current assets/NW it's hard to know whether this would be a game-changer for you or just make your finances a bit more robust.

The other area that gives me pause is that you describe a life with a lot of travel and mobility. As someone who has had a similar career and also been a homeowner - owning a home will add complexities in your life you currently do not have.

PrairieBeardstache

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Re: Should I Buy a House?
« Reply #2 on: February 11, 2019, 02:20:30 PM »
Thanks, Nereo. All of the Rent vs. Buy calcs will tell me I'm better off renting in my current situation, this is the primary reason I've been doing it for so long.

My NW is recovering from a failed business and years of lower income. I hold no debt other than the car loan.

Re: Is it sustainable? I struggle here a bit. No, it won't be sustainable with the hobby and I've considered buying a shop outside of the city just to store and work on the cars. Cheaper than a house.

Can you describe some of the complexities I may not be considering? Other than mowing grass and shoveling? What else am I not considering? I'd love to have a dog but can't due to my travel, for example.


nereo

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Re: Should I Buy a House?
« Reply #3 on: February 11, 2019, 02:35:46 PM »

Can you describe some of the complexities I may not be considering? Other than mowing grass and shoveling? What else am I not considering? I'd love to have a dog but can't due to my travel, for example.
Well once you own a home you have to maintain it - both to prevent costly bills down the road and (often) to keep neighbors from complaining.  There's the raking and shoveling of snow you mentioned, but also periodic painting, keeping your trees trimmed and other, largely cosmetic exterior aspects.  But the real challenges are the much larger and often unanticipated (or at least difficult to schedule) repairs.  When the water heater breaks, or an appliance goes on the fritz or the roof gets damaged (or just needs replacement).  It's partly the cost, but it's also a fair bit of your time that - right now - is covered by your landlord.  I've found that I have to spend at least one weekend each month on average just to keep my home in reasonable condition, outside yard-work. It's certainly not consistent - some months I do basically nothing except clean, while there are months when I need to replace a doorjam that's swollen shut, repair sections of the wall that mice have chewed through, or paint (all things I've had to do recently).  Every so often (like a few times each decade) you'll be hit with a 4 or even 5 figure bill, like when some drunk idiot plows over your fence late one night but doesn't stick around, or when you discover a sink has been slowly leaking for several days (?) and has ruined both your vanity as well as the subfloor and ceiling below it (also real-life occurrences).

 I actually dont' mind it, but it can be a time drain.  Whether you are ok with that is a personal decision.

teltic

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Re: Should I Buy a House?
« Reply #4 on: February 11, 2019, 02:45:03 PM »
- Renting a loft downtown for $570/m (this is crazy cheap where I live, the place next door is $1,500 and not as good)

This alone, tells me to rent instead of buy.

I totally get your want to buy a house.  I'm house hungry right now... but in general, everything is overpriced (stocks & real estate).  I would say to keep milking that $570 a month opportunity and wait until there's a market correction, then buy. :)

PrairieBeardstache

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Re: Should I Buy a House?
« Reply #5 on: February 11, 2019, 02:55:04 PM »

Can you describe some of the complexities I may not be considering? Other than mowing grass and shoveling? What else am I not considering? I'd love to have a dog but can't due to my travel, for example.
Well once you own a home you have to maintain it - both to prevent costly bills down the road and (often) to keep neighbors from complaining.  There's the raking and shoveling of snow you mentioned, but also periodic painting, keeping your trees trimmed and other, largely cosmetic exterior aspects.  But the real challenges are the much larger and often unanticipated (or at least difficult to schedule) repairs.  When the water heater breaks, or an appliance goes on the fritz or the roof gets damaged (or just needs replacement).  It's partly the cost, but it's also a fair bit of your time that - right now - is covered by your landlord.  I've found that I have to spend at least one weekend each month on average just to keep my home in reasonable condition, outside yard-work. It's certainly not consistent - some months I do basically nothing except clean, while there are months when I need to replace a doorjam that's swollen shut, repair sections of the wall that mice have chewed through, or paint (all things I've had to do recently).  Every so often (like a few times each decade) you'll be hit with a 4 or even 5 figure bill, like when some drunk idiot plows over your fence late one night but doesn't stick around, or when you discover a sink has been slowly leaking for several days (?) and has ruined both your vanity as well as the subfloor and ceiling below it (also real-life occurrences).

 I actually dont' mind it, but it can be a time drain.  Whether you are ok with that is a personal decision.

Gotcha. The non-financial part of this is a positive for me, I like to do the work. Updates/repairs/etc. make me feel useful outside of my regular work - partly why I still work on my cars, for example. I actually do all of this at my loft (it's not a regular condo style loft with a landlord that does all of the work, I do it myself). The downside is the extra cost associated with the repairs, it would be an order of magnitude larger than I spend now.

rubybeth

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Re: Should I Buy a House?
« Reply #6 on: February 11, 2019, 02:56:51 PM »
Can you describe some of the complexities I may not be considering? Other than mowing grass and shoveling? What else am I not considering? I'd love to have a dog but can't due to my travel, for example.

Well, with buying you're on the hook for everything from burst pipes to a new roof when the time comes. All the regular maintenance of a house, plus any emergency costs. And there are also property taxes which usually go up every year, and insurance (also, usually goes up). You're also paying for all utilities (some rentals cover some costs--like my apartment covered the cost of garbage since there was a dumpster but now we pay for garbage service at our house). Also, anything that wasn't caught on the inspection is now your problem--for us, we knew about most of the issues but a couple have cropped up that aren't a big deal, but will take time/money to fix.

I prefer the Michael Bluejay rent vs. buy calculator since you can factor in a lot more costs: https://michaelbluejay.com/house/rentvsbuy.html

I was in a similar situation to you--wanting more space for hobbies and entertaining, but having stupid cheap rent. DH and I waited a long time to buy. We are very happy with our house, but our house was quite a bit less than the low end of what you quoted. We pay more to have the house than we did in rent, but we host a lot of gatherings and cook at home more vs. going out (much better kitchen), and we have the space and privacy for hobbies.

PrairieBeardstache

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Re: Should I Buy a House?
« Reply #7 on: February 11, 2019, 02:57:54 PM »
- Renting a loft downtown for $570/m (this is crazy cheap where I live, the place next door is $1,500 and not as good)

This alone, tells me to rent instead of buy.

I totally get your want to buy a house.  I'm house hungry right now... but in general, everything is overpriced (stocks & real estate).  I would say to keep milking that $570 a month opportunity and wait until there's a market correction, then buy. :)

It does seem like the market in my area has begun to turn which is also making me consider it. I have several friends who are real-estate agents. They're all telling me the same thing: last year homes above $500k stopped selling, this year it seems that those under $500k are taking longer and sometimes sitting for months. Two years ago there were bidding wars and houses selling the day they went on the market.

I suspect if rates increase there will be a lot of willing sellers. I live in Canada. Where I live I suspect the majority of people with $400k mortgages cannot afford them.

nereo

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Re: Should I Buy a House?
« Reply #8 on: February 11, 2019, 05:11:37 PM »
I prefer the Michael Bluejay rent vs. buy calculator since you can factor in a lot more costs: https://michaelbluejay.com/house/rentvsbuy.html


Thanks for the link - nice resource.

Finances_With_Purpose

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Re: Should I Buy a House?
« Reply #9 on: February 12, 2019, 10:01:35 PM »
I love living in a house, but I'm convinced you should avoid it.  Two reasons:

1.  Time cost.  You travel a lot.  Living in a house is time-consuming.  There's mowing.  Repairs.  Handymen.  Annual maintenance.  Etc.  It's more expensive than renting, by far, and more time-consuming.  You're always deciding whether to fix X or pay someone else some ungodly amount to do the same (and then figure out *when* to do that).  Plus there are all kinds of extra expenses you wouldn't have when renting - those little extras you want now that the place is yours.  I wouldn't recommend it.

2.  Your rent is crazy cheap.  Stick with it.  A house seems like a *really* bad financial move.  If anything, upgrade the place you rent slightly.  (Though if it costs much more, maybe not...that rent is hard to beat.) 

Car storage and hosting can be done elsewhere and way, way cheaper.  Cater in, rent a nice room (apartment meeting areas, local venue?), and so on once or twice a month and you'll *still* come out way ahead.  Financially, it's not even close.  Once you factor in time, it's not worth it at all if you travel a lot. 

Telecaster

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Re: Should I Buy a House?
« Reply #10 on: February 12, 2019, 11:57:00 PM »
I'm going to offer up a somewhat contrary point of view:  The decision to rent or buy is not only a financial decision, it is a lifestyle choice.   

You like working on cars, so having a shop right there where you can do some garage therapy whenever you want is worth something.  I don't know how much, but something.  You want to have friends over, that's worth something too. 

One thing rent vs. buy calculators don't include is sweat equity.  That's hard to figure, but that's worth something too.  Spending a few years fixing up a place might push the arrow closer to "buy." 

Those "somethings" are, like I say, are hard to figure.  But they aren't nothing.  If your goal is to get to FIRE pronto, then obviously you should keep the loft.  But from what you've said getting a house would be a lifestyle upgrade. 

JLee

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Re: Should I Buy a House?
« Reply #11 on: February 13, 2019, 07:46:58 AM »
Remember the transaction costs if you ever decide to move.

Renting? Easy.

Selling? Say goodbye to a fun-car sized pile of cash...

Lmoot

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Re: Should I Buy a House?
« Reply #12 on: February 13, 2019, 10:17:41 AM »
I travel and own a house. Not hard, depending on where you live; renter-friendly areas are best, so I would consider ideal location for renter if you decide to buy. When I did some long term travel, I leased my house out to friends I knew were looking for a place.

Yes houses are upkeep, which is why I bought a fixer upper and over a few years replaced everything (electrical, plumbing, roof, AC....). I'm good on most of those now for at least a decade, other than minor service once a year or every other year. You also get a lot of control over what to repair, and for how much. You seem handy and like you would be able to put in a lot of sweat equity; those are the type of people, IMO, who are most likely to come out ahead in homeownership.

I am very lazy, bought a house at 25, and still have that same house (that I'm renting out now to other friends), nearly a decade later. People put as much or as little work into homeownership as they want. I'm right in the middle probably. I hate mowing, so I don't have lawns. Simple as that. I've accepted my true nature which is that aside from growing some produce, I'm not much of an ornamental gardener, so I grow native, self-maintaining and sustaining plants, and don't mind a little overgrowth. Most of the annoying domestic crap I don't like doing, are things I'd have to do in a rented space also.
« Last Edit: February 13, 2019, 10:20:47 AM by Lmoot »

JLee

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Re: Should I Buy a House?
« Reply #13 on: February 13, 2019, 03:36:20 PM »
I travel and own a house. Not hard, depending on where you live; renter-friendly areas are best, so I would consider ideal location for renter if you decide to buy. When I did some long term travel, I leased my house out to friends I knew were looking for a place.

Yes houses are upkeep, which is why I bought a fixer upper and over a few years replaced everything (electrical, plumbing, roof, AC....). I'm good on most of those now for at least a decade, other than minor service once a year or every other year. You also get a lot of control over what to repair, and for how much. You seem handy and like you would be able to put in a lot of sweat equity; those are the type of people, IMO, who are most likely to come out ahead in homeownership.

I am very lazy, bought a house at 25, and still have that same house (that I'm renting out now to other friends), nearly a decade later. People put as much or as little work into homeownership as they want. I'm right in the middle probably. I hate mowing, so I don't have lawns. Simple as that. I've accepted my true nature which is that aside from growing some produce, I'm not much of an ornamental gardener, so I grow native, self-maintaining and sustaining plants, and don't mind a little overgrowth. Most of the annoying domestic crap I don't like doing, are things I'd have to do in a rented space also.

What was your initial cost discrepancy between renting and buying?

When I bought my house in 2013, I was looking at ~$1200/mo in rent or a $140k house.  The OP is looking at ~$900/mo in rent or a $350k house.

Lmoot

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Re: Should I Buy a House?
« Reply #14 on: February 13, 2019, 04:52:27 PM »
I travel and own a house. Not hard, depending on where you live; renter-friendly areas are best, so I would consider ideal location for renter if you decide to buy. When I did some long term travel, I leased my house out to friends I knew were looking for a place.

Yes houses are upkeep, which is why I bought a fixer upper and over a few years replaced everything (electrical, plumbing, roof, AC....). I'm good on most of those now for at least a decade, other than minor service once a year or every other year. You also get a lot of control over what to repair, and for how much. You seem handy and like you would be able to put in a lot of sweat equity; those are the type of people, IMO, who are most likely to come out ahead in homeownership.

I am very lazy, bought a house at 25, and still have that same house (that I'm renting out now to other friends), nearly a decade later. People put as much or as little work into homeownership as they want. I'm right in the middle probably. I hate mowing, so I don't have lawns. Simple as that. I've accepted my true nature which is that aside from growing some produce, I'm not much of an ornamental gardener, so I grow native, self-maintaining and sustaining plants, and don't mind a little overgrowth. Most of the annoying domestic crap I don't like doing, are things I'd have to do in a rented space also.

What was your initial cost discrepancy between renting and buying?

When I bought my house in 2013, I was looking at ~$1200/mo in rent or a $140k house.  The OP is looking at ~$900/mo in rent or a $350k house.

I never rented as an independent adult. Before graduating college, I knew I wanted to buy a house (or more specifically I knew I didnít want to rent after years of sharing student apartments with at least 3 other people).  I lived with family for a year and a half, working and saving up for a house.

$350k is the higher end, but OP especially with skills and desire to reno, could get sub $300k (in their words). But it matters what the goals are and what the desired balance is between appeasing present day self and future day self.

OP can pay lower rent. But what canít they do?
- canít tinker with cars on site
- canít host gatherings
- canít do improvement projects in the home

The OP needs to decide if renting for cheap, is worth not having the other stuff. It was worth it to me to live almost rent free with family for nearly 2 years instead of getting my own place like my friends were. Either decision will mean a sacrifice.

PrairieBeardstache

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Re: Should I Buy a House?
« Reply #15 on: February 14, 2019, 09:28:27 PM »
The OP needs to decide if renting for cheap, is worth not having the other stuff. It was worth it to me to live almost rent free with family for nearly 2 years instead of getting my own place like my friends were. Either decision will mean a sacrifice.

I appreciate all the replies (just catching up after another trip!). You've all mentioned the majority of what I've been considering. On the financial side, it's really hard to beat what I have going. On the lifestyle side, it leaves some to be desired. If I could satisfy the former it would be an easy decision. I've been trying to make the latter work for 5 years, it's been alright but I feel like it's time to start moving on.

@Finances_With_Purpose you sound like me on Mondays, @Telecaster you sound like me on Tuesdays.

Perhaps I should work on making a house make the most financial sense as possible, and accept that I'm getting to the point that I care more about the lifestyle than I used to.

rubybeth

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Re: Should I Buy a House?
« Reply #16 on: Today at 08:10:55 AM »
The OP needs to decide if renting for cheap, is worth not having the other stuff. It was worth it to me to live almost rent free with family for nearly 2 years instead of getting my own place like my friends were. Either decision will mean a sacrifice.

I appreciate all the replies (just catching up after another trip!). You've all mentioned the majority of what I've been considering. On the financial side, it's really hard to beat what I have going. On the lifestyle side, it leaves some to be desired. If I could satisfy the former it would be an easy decision. I've been trying to make the latter work for 5 years, it's been alright but I feel like it's time to start moving on.

@Finances_With_Purpose you sound like me on Mondays, @Telecaster you sound like me on Tuesdays.

Perhaps I should work on making a house make the most financial sense as possible, and accept that I'm getting to the point that I care more about the lifestyle than I used to.

I think it's acceptable to want a house for lifestyle reasons and just know that the cost will be more than rent. I basically got eviscerated on a thread when I talked about wanting to live in a house (someone thought my budget was absolutely bananas and that somehow wanting to live in a house was a moral failing). But it's been great for the lifestyle reasons--hobbies, hosting, and increased privacy have all been major positives for me.

It wasn't easy finding a house we absolutely loved and that met our long list of criteria in our budget, but we eventually did and I'm much happier with the house than with renting. I looked at listings for many months before we even started to shop. Some things just weren't feasible in our apartment or even another rental (very limited rentals in our area and buying is cheaper than renting a house in our area, as well). We had a list of about 15 house preferences--everything from on-street parking for guests to layout preferences. We got just about all of them (the one thing our house didn't have is a fenced yard, but that wasn't absolutely necessary since we don't have kids or pets yet). I suggest making your list of "must haves" and what you're willing to tolerate in terms of updating and start looking at the housing stock while you save up a down payment. You have the option to not use the down payment savings on a house, but at least it would be an option.

MrThatsDifferent

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Re: Should I Buy a House?
« Reply #17 on: Today at 08:53:23 AM »
Read JL Collins and Go Curry Cracker for reasons to not buy.

You make quite a bit but it seems you donít have much in savings or investments. Maybe focus on building all of that up. If you stay single, whatís the point of having a house? You can host in your apartment too. Keep renting garage space for your hobby. Your mid 30s, most of your friends will be settling down, you wonít be doing a ton of hosting. Also, you travel a lot, apartments are easier to care for.

If I were you buying would be the last thing Iíd be thinking about. Get your stache back.

JLee

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Re: Should I Buy a House?
« Reply #18 on: Today at 09:14:47 AM »
The OP needs to decide if renting for cheap, is worth not having the other stuff. It was worth it to me to live almost rent free with family for nearly 2 years instead of getting my own place like my friends were. Either decision will mean a sacrifice.

I appreciate all the replies (just catching up after another trip!). You've all mentioned the majority of what I've been considering. On the financial side, it's really hard to beat what I have going. On the lifestyle side, it leaves some to be desired. If I could satisfy the former it would be an easy decision. I've been trying to make the latter work for 5 years, it's been alright but I feel like it's time to start moving on.

@Finances_With_Purpose you sound like me on Mondays, @Telecaster you sound like me on Tuesdays.

Perhaps I should work on making a house make the most financial sense as possible, and accept that I'm getting to the point that I care more about the lifestyle than I used to.

I think it's acceptable to want a house for lifestyle reasons and just know that the cost will be more than rent. I basically got eviscerated on a thread when I talked about wanting to live in a house (someone thought my budget was absolutely bananas and that somehow wanting to live in a house was a moral failing). But it's been great for the lifestyle reasons--hobbies, hosting, and increased privacy have all been major positives for me.

It wasn't easy finding a house we absolutely loved and that met our long list of criteria in our budget, but we eventually did and I'm much happier with the house than with renting. I looked at listings for many months before we even started to shop. Some things just weren't feasible in our apartment or even another rental (very limited rentals in our area and buying is cheaper than renting a house in our area, as well). We had a list of about 15 house preferences--everything from on-street parking for guests to layout preferences. We got just about all of them (the one thing our house didn't have is a fenced yard, but that wasn't absolutely necessary since we don't have kids or pets yet). I suggest making your list of "must haves" and what you're willing to tolerate in terms of updating and start looking at the housing stock while you save up a down payment. You have the option to not use the down payment savings on a house, but at least it would be an option.

Oh don't get me wrong...I get it. I wanted a house (and bought a house) for many reasons, and now I am renting and my car hobby has been dramatically impacted.  I would absolutely love to live in a house again, but the cost/benefit ratio just isn't there anymore.   Buying was cheaper than renting for me at the time but now, it's no longer the case.