Hello mustachians,
My husband and I are currently renting a house that we absolutely hate. The only things we like about it are location (reasonably close to work and walkable to a few things, in a not-so-walkable area), cost ($975/month, which is way below market), and the fact that it's a single-family house with a fenced in backyard for the dogs. However, we hate the layout, it is falling apart and the landlady doesn't really respond to maintenance requests, and I have some suspicions that there are mold issues. We really want to leave, but our options for leaving seem limited. Last summer, we attempted to find another place to rent and it did not go well. To rent a house nicer than our current one, we would be looking at about $1600/month or higher.
Other relevant information: We have been focusing on paying back my student loans aggressively. I graduated in 2011 with over 80k in loans and have them beaten back to just under 30k. My husband owns a house in the suburbs that we recently invested 10k into and are working on selling. If it sells for listing we should net about 20k from the sale. Other than that, we have about $10k in a savings account. We earn a combined $125k right now, but that should be increasing to closer to $150k shortly. We are not currently interested in retiring early. We have no kids but plan to in 2-3 more years. Other than the mortgage (which will be paid off when we sell the house) and my student loans, we have no debt. We have 2 dogs and a cat, which have contributed to our renting woes.
These are the options I currently see:
Option 1: Stay put until we pay off my loans and we save up a 20% down payment to buy a house
Pros: Most frugal option. We could pay off my loans quickly (probably within 6 months after we sell the house).
Cons: This could take a few more years and meanwhile we are stuck in a house with problems. Our rent situation is month to month, so we could be forced to come up with a plan B within a month if our landlady decides to sell.
Option 2: Rent a more expensive house (about $1600/month)
Pros: Could put off buying a house while still feeling more comfortable. We could potentially get out of our current place quickly.
Cons: Huge increase in rent. Would slow progress towards goals of paying off my loans and buying our own house. Also there is no guarantee that we could even find a good place to rent in the current market. A lot of places just collect app fees from everyone before deciding (seriously!).
Option 3: Buy our own place as soon as we can (estimate about 250-400k, probably would take about 6 months to save up to a 10% down payment)
Pros: We wouldn't have to worry about rent increases. We would be building equity in a house. Houses in our area seem to be gaining value quickly.
Cons: This would delay paying off my loans. The housing market might be inflated, in which case we could lose money. A 10% down payment might not be ideal. We would have all of the costs that are associated with home ownership.
I know that Option 1 makes the most sense from a financial perspective, but if we REALLY want to leave our house, which of the other two options would be less bad in our situation?