Author Topic: single women mustachian newbie needs advise!!!!  (Read 2736 times)

cv

  • 5 O'Clock Shadow
  • *
  • Posts: 19
single women mustachian newbie needs advise!!!!
« on: April 25, 2013, 04:20:36 PM »
Dear fellow older wiser Mustachians,

I am in need of desperate advise.  I am a single women without debt, and has been practicing living on less than half my take home paycheck for the last few months.  I have a steady job in an area close to where the rest of my family lives. I am currently debating the time old question of Renting versus Buying, here's the scoop:

the city/neighborhood I would like to live is within 3 miles of work, where I commute by walk + bus.  The price of the houses in the area quadrupled over the last 30 years.  Based on estimate of the recent housing price (within 4 months), I should be able to put 60-70% down, intending to pay the rest off in 15 years.  The price of the houses have jumped 20% in comparison to a year prior.  I am hoping to buy a house with minimal wasteful space, but enough to share with a renter, to bring in (long term) extra income to keep up with inflation. 

I am just wondering if the 20% increase could be another bubble, and given my relative low rent (fixed 21% of take home income), should I wait and continue current course or jump on the wagon to own?

Thank you kindly for your wise and thoughtful response.

Joet

  • Guest
Re: single women mustachian newbie needs advise!!!!
« Reply #1 on: April 25, 2013, 04:24:54 PM »
I believe [generally speaking] that it can be demonstrably proven that renting is cheaper [over the long run]. Now you might get lucky and buy a property that appreciates above/beyond the cost/fixed costs/repair/maintenance costs/extra spending that being a homeowner entails but don't do it because owning "isn't throwing money away [sic]" each month, rather do it because home ownership/that lifestyle is something you want/need.

purely financially, over the long-haul, renting normally comes out ahead. If your property appreciates beyond all the extra costs of home ownership you were indeed lucky. But home ownership can be priceless.

Secondarily do you also see yourself living there for 7+ years? That's typically a break-even horizon for fixed transaction costs on the buy/sell side.

Buying because prices are bubbling around you [can't possibly go lower!] is probably the worst possible reason to buy now. Sorry if that sounds overly negative. Home ownership is a lifestyle choice, nothing more. Not an investment [my opinion], and in the long run, expected to be more expensive than renting.
« Last Edit: April 25, 2013, 04:26:27 PM by Joet »

cv

  • 5 O'Clock Shadow
  • *
  • Posts: 19
Re: single women mustachian newbie needs advise!!!!
« Reply #2 on: April 25, 2013, 04:27:34 PM »
Yes, I intend to live in the house I buy for hopefully forever.

Joet

  • Guest
Re: single women mustachian newbie needs advise!!!!
« Reply #3 on: April 25, 2013, 04:31:08 PM »
than it's a no brainer. buy it, I'm ignoring all other details on prices/rents/market/etc all. If it fits in your budget, buy it

StarryC

  • Bristles
  • ***
  • Posts: 283
Re: single women mustachian newbie needs advise!!!!
« Reply #4 on: April 25, 2013, 04:33:42 PM »
It sounds like you are looking to buy to live in the house for the next 5-infinity years, right?  And you can put 60% down?
I think a "bubble" only really hurts you if you are looking for a short term flip or are putting very little money down.  If it is a bubble, and it busts, you can wait it out if you are planning on staying.  Or, if you have to leave you lose your equity but you aren't trapped.

Is it a good investment?  I don't know, I dont' think the houses we live in should really be classified as investments.  But, I don't think you have to worry about the more common issues that are caused by a "bubble."  I would look at what the rent, right now, for similar properties is and what you as a renter in the area would be willing or expect to pay to rent it.  Also, long term, I'd look at the nearby resources (businesses, parks, roads, schools) to determine if you think they are on an upward trajectory.  If the neighborhood is going to be desirable and the rent is close to equivalent with the mortgage that is a good sign. 

Joet

  • Guest
Re: single women mustachian newbie needs advise!!!!
« Reply #5 on: April 25, 2013, 04:41:21 PM »
also it's probably worth mentioning [although I expect to be flamed on ethical grounds, and thats fair] that perhaps you dont want to put more than 20% down, if you are expecting a bubble to be a risk. FNMA/others have picked 20% for a reason---it's a sufficient risk hedge to the note-holder. Take the rest of your down payment over that amount and put it in equity markets/bond markets at a ratio that matches your risk tolerance/need for growth.

If the worst happens, you can always hand the keys over with only your 20% down and regular monthly payments [similar to rent] around your neck. Not the worst thing in the world.