The Money Mustache Community
Learning, Sharing, and Teaching => Real Estate and Landlording => Topic started by: Mustachecole on July 24, 2015, 08:52:49 AM
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I'm moving back to Rochester, New York from Washington, DC this fall. Was planning on renting a place while I pay back my gradschool loans. In looking in the housing the market there it looks like a good 1br apartment in a desireable area would cost me between 600-800/month. However, buying a house is very possible in the same areas for 100-150k, it is even possible to find a duplex in that price range. Looking for some advice as to what I should do as I don't want to add too much debt, but would like to make the smart finanical move.
Current Assets:
salary 85k +3.5k 401k match
74k in 401k balances (will be maxing out by sept for the first time ever!)
$4,600 in company stock (10% of paycheck goes into this program, should have 10k by time to buy in Dec 2015)
5k or so in checking and saving
3k from a side gig
currently own a condo in DC-real estate estimate 460k
Net 350/month renting out the condo after mortgage and condo dues
Old crappy car owned in full
Cell phone paid by work
Liabilities.
-355k on the dc condo mortgage mort at 3.25% but I am stuck paying pmi ($320/month) until 1/2018.
-12k on school loans @ 4.25%, these have been in deferal last 2.5 years as i went to grad school.
-53k on grad school loans @6.5. Havent had these start yet as i just graduated, was planning on refi'ing thru SOFI.
My initial plan was to rent and try to just crush my grad school loans in a year. But seeing that if i can scrap together 20% (20-25k) by selling stock and staying with my parents for a few months, I could buy a place and have a mortgage of less than 750/month is extremely tempting. Is going from 420k in debt to 520k in debt just a crazy move for a single income individual?
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Plan on renting it out long term ( at least next 4-5 years). The value is increasing and rumors of a nearby wholefoods doesn't hurt.
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Sorry it is currently rented and I am netting $350/month on it.
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I wouldn't, I'd dump the debt first. The deals will be there in a year.
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What can you get the % rate down to when you refi? Are you sure you want to stay in Rochester? Would you be willing to have a roommate for a year or 2? will they drop the PMI if you get your house reappraised? Or if you pay down the mortgage? Mine would drop if I did either, but I understand loans can be different.
Probably I would stay with my parents as long as we could all stand it, paying off the student loans ASAP. Then look at a duplex or a 4 plex. But compare some numbers - how much would PMI be? It might make the most sense to put 3.5% down and pay PMI so that you can be killing those student loans. Or a modest house with a roommate. And renting. But decide based on numbers. I think home ownership often makes the most sense where the houses are in the $100k range.
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My initial plan was to rent and try to just crush my grad school loans in a year. But seeing that if i can scrap together 20% (20-25k) by selling stock and staying with my parents for a few months, I could buy a place and have a mortgage of less than 750/month is extremely tempting. Is going from 420k in debt to 520k in debt just a crazy move for a single income individual?
Refinancing your student loans through SoFI are going to be huge (I have a link in the bottom of my signature). I got mine down from 6.55 to 3.3. You should do that immediately!
Meadow hit a lot of important points. I think it will really depend on what mortgage rate you are able to get. I really like the idea of being able to pay less on housing and at the same time you are building up equity. I personally am looking at buying a duplex right now so I can have my own home while also investing in a rental property. For me personally I am not overly concerned about taking on that debt as it isn't really a bad debt to have, especially since the first home is an income property for you.