Author Topic: Should I buy a house?  (Read 3103 times)

lifeinhd

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Should I buy a house?
« on: September 15, 2015, 06:23:06 PM »
Hi Mustachians! Thought I'd run this by you before I make any big decisions.

I live in the NoVA area and make $47k. I currently rent a room for $475/mo. However, I was browsing and came across probably the only affordable house in NoVA-- 3.7 miles from work, <1k sqft, 3 brs, and only $165k! The location is MUCH better than my current location, in terms of access to work, grocery store, Costco, and family, but despite the low price I can't help but think of all the drawbacks. I made a pro/con chart here: https://i.imgur.com/iK64RoY.jpg

With my salary and spending levels, I can handle a 15 year mortgage with ease, while still saving $1041.67/mo in my SIMPLE IRA (enough to max it). The house will need some renovations, but after those are complete (via sweat equity of course) I can get two roommates which should bring in at least $900/mo total.

What occurred to me is while some people aspire to be homeowners, I don't really care either way. However, I have some goals that are best met via homeownership, such as being able to do my own repairs/renovations, or having space for project cars, or eventually having no house payments. So my reasons for purchasing are more lifestyle and less financial.

One major downside is I only expect I would live there for at most 3 years. After that I would either sell, or rent out via a property manager, depending on the market.

I see housing as an expense, not an investment, so I expect to lose money no matter what I do. The idea, of course, is to minimize the loss, while still accounting for lifestyle preferences.

What do you guys think? Buy the house, or continue to enjoy my easy renter's life?

Kroaler

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Re: Should I buy a house?
« Reply #1 on: September 15, 2015, 06:29:59 PM »
I didnt do any cost evaluation, so dont pay too much attention to what I say.
 Right off the gate you say you only plan to stay at max 3 years.Generally I think its agreed that one should stay longer to recover transaction cost.  Id enjoy the care free rent life and pursue your career with the ability to stay mobile and liquid to pursue better opportunities.     

Having a garage for project cars will probably cost you money in the long run lol. 
« Last Edit: September 15, 2015, 07:58:59 PM by Kroaler »

pbkmaine

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Re: Should I buy a house?
« Reply #2 on: September 15, 2015, 07:33:43 PM »
There are considerable buying and dwelling costs with a house. Realtors commissions in selling at 6%, for example. Those transaction costs generally make it not worth it to buy a house if you plan to live there less than 10 years or so.

kite

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Re: Should I buy a house?
« Reply #3 on: September 16, 2015, 06:28:04 AM »
If you can't live in it 10, 20, 30 years from now, it's probably the wrong house. 

I think ownership totally rocks.  Buying in my early 20s so that I owned my residence free and clear by my 40's was the best financial move  I could have made.  For the rest of my life, my housing expenses are minimized compared to my still-renting peers.  The main point though is that this house will suit me for the rest of my life.
If you already know that house probably won't be right for you 3 years from now, I'd urge you to skip it. 
« Last Edit: September 16, 2015, 08:48:02 AM by kite »

Guesl982374

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Re: Should I buy a house?
« Reply #4 on: September 16, 2015, 07:12:29 AM »
Sounds like with a couple of roommates you might breakeven/make a small amount of money. The question to ask yourself is "do I want to be a landlord?" That way, if/when you move in 3 years what do you think the numbers will look like from a rental perspective.

OR

You could focus on finding a rental that will cash flow to the point of covering your rental expense in the better area.

fitfrugalfab

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Re: Should I buy a house?
« Reply #5 on: September 16, 2015, 07:36:30 AM »
I also live in NoVA and we're closing on our first place this Friday. IMHO there are far more pros than cons with renting when living in NoVA. The ONLY reason we decided to purchase instead of continue to rent is because we found a condo with basically the same amenities as our apartment and it's a steal for the area. We also plan on holding to this property for a long time. Homes in NoVA are usually old and need a ton of repairs. On top of that, like you pointed out in your pros and cons list, you'll be responsible for maintenance and taxes which will add up. From your post it sounds like you live in Fairfax. If you don't plan on being in that area for more than 3 years, I would continue to rent and continue building your bank account. If you end up staying longer than 3 years, there will always be options to purchase homes in the future since there is a huge flood of people selling their homes and moving closer to D.C.
« Last Edit: September 16, 2015, 11:41:53 AM by fitfrugalfab »

humbleMouse

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Re: Should I buy a house?
« Reply #6 on: September 16, 2015, 11:40:58 AM »
My favorite from that Pros list is "Drive opposite the sun."  looolz it has never crossed my mind that would be a factor in where to live! 

About your question: I wouldn't buy the house. 

FIRE me

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Re: Should I buy a house?
« Reply #7 on: September 16, 2015, 11:53:21 AM »
Don't buy. 3 years or less is way too short an ownership period.

One exception might if you were willing to rent it when you move out instead of selling. I'm no landlord, but I'd guess with a 15 year mortgage on it, you might have a hard time breaking even on cash flow (not counting equity gained) if you rented it.

AlanStache

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Re: Should I buy a house?
« Reply #8 on: September 16, 2015, 12:04:21 PM »
If you are comfortable being a land lord then buying sooner than later is probably good as interest rates will likely only go up. 

There may be a reason that house is available or others have not snapped it up.

Few weeks ago I went from a condo to a house and over the week or so after closing I easily spend 2k on stupid shit I needed.  +1k at homedepot for tools/stuff i never needed before, plant clippers/mower/ladder/new door locks/herbicide/pestiside/etc. nothing fancy just the basics.  Also you may need kitchen stuff, microwave/dishes/table/etc dont underestimate what it might cost to set up your own home. 

But to answer your question: no you probably should not buy now.  That one line about 3 years basically answers that question-unless you want to be a land lord and understand what that takes.  In that case you need to look at this as an investment property with a 30 year loan. 

lifeinhd

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Re: Should I buy a house?
« Reply #9 on: September 16, 2015, 07:39:21 PM »
Thanks for all the replies guys! I don't mind being a landlord, though I'm more indifferent than excited. If I were to rent it after I move, I'd likely have a management company do it. I would of course rent both spare bedrooms out while I own it, for a total of $900/mo, though not until after I completed renovations.

I went to the bank today and they offered 3.25%, which is pretty damn good. However, when he added in the PMI I'd be paying for only putting down 10%, the debt-to-income ratio was 38% @ 15 years, which is a little too high to be approved. A 30 year would be just under 30%, but what requiring a 30 year says to me is "you cannot actually afford this place." I already have a meeting with the realtor in place, which I intend to go to, but it'll just be an exercise in house touring I suppose. Unless I make a low ball $100k offer and it's approved, hehe.

I think I'll try to get the best of both worlds: rent in the better area. I'll likely pay a bit more, but I think it'll be worth it. I'll keep my eyes peeled.
« Last Edit: September 16, 2015, 07:43:47 PM by lifeinhd »

Jeremy E.

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Re: Should I buy a house?
« Reply #10 on: September 16, 2015, 08:23:33 PM »
http://www.mrmoneymustache.com/2015/07/27/rent-vs-buy/
If you have to ask, you should probably rent.