Author Topic: Wise to buy?  (Read 3614 times)

GR

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Wise to buy?
« on: August 17, 2014, 07:24:49 AM »
Hello members,

This is your typical buy vs rent question. We are a family of 3  - me, wife, and a 3 year old.
We've been renting for quite a few years and home ownership never appealed to me until rents
started going up recently. Doing my numbers, am of the opinion that perhaps the time has come to buy.
I would like your input and see if am on the right track (affordability plus buying over renting).

* House hold income: Somewhere between 150K to 170K depending on the year.
* No car debt, no credit card debt, no student loan
* Credit score almost 800 for both of us
* That gives us an interest rate of 4.0% or 4.125%, where I avoid the origination fee.
* Current rent - $1119 for a 2 bed 2 bath, about 1200 Sqft. Rent has gone up from $865 to $1119 in the last two years and I dont see it slowing down, the area is bubbling.
* Proposed house price - $280,000. Down payment 20% to avoid mortgage insurance. Monthly P&I works to $1,085 ($770 I and $315 P), which is lower than my rent. But I am aware home-ownership comes with other costs like Taxes and higher insurance.
* Property Taxes ~ $3,000/yr or $250/month.
* Home Insurance  ~ $100/month.

Footnotes:

1) The numbers seem to make sense to me and make me think now is the time to buy.
2) We live in the South so general cost of living is not a big burden and we are semi-mustachian.
3) Not too badass but no chickens either.
4) Also, am aware that maintenance costs need to be factored in but at the same
time I am not accounting for any reduction in my taxes either (in spite of interest plus property taxes).
5) It's a 4 bed 3 bath house, so almost double our current living conditions.

Would love your input.

alsoknownasDean

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Re: Wise to buy?
« Reply #1 on: August 17, 2014, 08:08:03 AM »
Have prices changed much? Will they change?

Could you get a smaller place for less?

If you add the interest, taxes and insurance you're pretty much line-ball with renting anyway.

How long do you want to stay in the area?

GR

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Re: Wise to buy?
« Reply #2 on: August 17, 2014, 08:13:41 AM »
Answering the questions in same order:

* Tough to answer this, my decision to buy has been fueled by increasing rents, increasing cash in the bank. I've got a reasonable amount invested in stocks, so I am looking at some real estate exposure now.
* Yes, perhaps. But the point below is making me think of sticking with this one. I am getting a bigger space. Family might grow with one more kid in the future, plus visiting parents who might stay 6 months every other year. Pus, this is a fairly family oriented neighborhood and I've seen houses > 2200 Sqft sell faster than the ones lesser than that. The smaller ones are either 1700 or 1800. Am (planning) getting a 2400.
* Yes, agreed.
* No real plans to move, unless employment forces us but this is near Atlanta, GA. So employment should not be an issue in this neighborhood.

SunshineGirl

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Re: Wise to buy?
« Reply #3 on: August 17, 2014, 11:45:08 AM »
I'd rent another year or two. That way, you'll know better if you plan to extend your family, and you'll be that much closer to your child being in kindergarten. I feel strongly that a person should buy in the best school district, most walkable neighborhood possible.

If you were dying to buy, then I'd say go ahead now, but you don't seem to be, and the cost of home ownership will be more than the increase in rent, plus you lose flexibility/mobility.   

GR

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Re: Wise to buy?
« Reply #4 on: August 17, 2014, 11:48:15 AM »
Thanks for the input. Yes, best school district we've got but not the best walking score. But I get to WFH almost 90% and Wife's office is like 3 miles. So we are okay there.

And you are right, not really desperate to buy, just that this seems like a nice deal.

surfhb

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Re: Wise to buy?
« Reply #5 on: August 17, 2014, 12:26:49 PM »
Have prices skyrocketed in that area recently?   Maybe hold off too see where the market goes.....buy low, sell high?   

For example,  I wouldn't buy a home in OC , Ca right now since were just about at the same prices before the bubble burst in 2008/09

Markets go up and down....maybe hold off for right now

rmendpara

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Re: Wise to buy?
« Reply #6 on: August 17, 2014, 12:48:41 PM »
The market could go up/down/sideways, but you never really know.

Unless you believe RE is way overvalued, trying to time the market is pointless. At the end of the day, your home is not an investment. It is a place to live that hopefully maintains its value (1-3% avg appreciation per year). If it does that, and you stay for 5+ years, then you've come out on top vs renting in most situations. Of course, anything can happen, so it's a risk you have to consider.

With a $150k income, a $280k home is far from unreasonable, and you can very comfortably handle any expenses that come your way (assuming it is still in good condition).

$1119 rent vs $1120 mortgage expenses (770+250+100) seems very reasonable. The kicker will be maintenance costs, which can vary quite a bit (and are very random from year to year) depending on property condition and your luck. Assuming a 1% maintenance reserve, to think of when budgeting, it's another $233/mo or so that you will likely end up paying eventually. You could go 4 years with nothing, and then bam HVAC repairs set you back $3k. Judge the property condition along with the price and expected costs and you should be fine.

GR

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Re: Wise to buy?
« Reply #7 on: August 17, 2014, 01:40:17 PM »
rmendpara - Agreed, am not worried about price fluctuations, its the same with stocks. The property is 7 years old and I just got my agent's and appraisal feedback. They confirm everything looks good and are in top condition. The inside looks spotless based on our visit. Leaning towards closing out this deal.