Author Topic: Buying a Cheap House as a Young Person  (Read 4387 times)

sbryant31

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Buying a Cheap House as a Young Person
« on: March 06, 2014, 04:35:13 PM »
Hi there. I'm a very young person just starting my investing journey. I'm about 1 year out of college, I have saved about $40,000 and I have it in different investments (lending club, IRA, precious metals, and more.) I've always wanted a house, but I always thought they were for people with 5-10 years of work experience. I'm really looking for someone to convince me that that is the case and that I shouldn't think about buying a house.

In terms of savings, my total "investing money" per month comes out to about $2400.

The situation:

I'm about to move to a small (and inexpensive) college town where I'm going to start telecommuting (to keep my old job.) I feel like if I'm going to be telecommuting, I'm going to want a home office that's not my bedroom. I've always just rented rooms, so I haven't been able to have an office. I feel like having an office/workstation is extremely important to stay focused, so renting a room is out.

I have a lot of mustachian hobbies (such as building things, engineering, woodworking, and gardening) that require tools, a workshop, and the ability to get a place messy. It also requires a yard! I also have a habit of annoying my roommates with constant band practices. I have been neglecting these things for the past couple of years since I haven't had my own place and I'm starting to get sick of it.

I see a lot of foreclosed (cheap) houses in the $50-$70,000 range that look pretty decent. I don't care about bells and whistles, just sanitation and utility. I know with $2400 per month to spend it seems like something I can afford, but the question is not whether I should afford it but rather whether it's a good idea to invest in a cheap property.

I have about $20k cash and by the time I plan on looking for a house I'll have more like $30k cash, so I could afford to fix it up.

Should I bother looking for deals or just rent?

Milspecstache

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Re: Buying a Cheap House as a Young Person
« Reply #1 on: March 06, 2014, 07:15:19 PM »
It sounds like you are in a good position to begin looking for a home to purchase.

As far as the money test, you would need to provide rental estimates of what it would take to meet your needs and then purchase costs of the houses to buy to meet your needs.  Those numbers are what help you make the best financial decision.

KingCoin

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Re: Buying a Cheap House as a Young Person
« Reply #2 on: March 06, 2014, 09:53:12 PM »
Do you plan on staying in the area for the long haul?
Is buying more economical than renting (http://www.nytimes.com/interactive/business/buy-rent-calculator.html)?

If yes to both, go for it. If you're handy, you might even make a go of scooping up foreclosures and renting them out to college kids. You might even want to buy in a location that's conducive to subsequent renting for just this purpose.

If you don't know the area, it never hurts to rent for a year to get to know the lay of the land and scout homes.

MDM

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Re: Buying a Cheap House as a Young Person
« Reply #3 on: March 06, 2014, 10:03:44 PM »
If you don't know the area, it never hurts to rent for a year to get to know the lay of the land and scout homes.

Great advice.  Unless you prefer to buy in haste and repent at leisure.

Milspecstache

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Re: Buying a Cheap House as a Young Person
« Reply #4 on: March 07, 2014, 09:41:39 AM »
Before I buy/rent I always walk the surrounding streets at night.  Gives me a better picture of the area.

MrCash

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Re: Buying a Cheap House as a Young Person
« Reply #5 on: March 07, 2014, 09:44:06 AM »
Before I buy/rent I always walk the surrounding streets at night.  Gives me a better picture of the area.

Also, talk to delivery guys in the area (like pizza delivery guys).  They will know where all of the problem areas are.

ketchup

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Re: Buying a Cheap House as a Young Person
« Reply #6 on: March 07, 2014, 10:14:33 AM »
I bought a house for $18,500 two years ago (I was 20 then).  It's a one-bedroom, 500 square foot place in decent shape (older but in good repair, did some improvements myself), near some bad areas, but in a pretty-OK area.  We moved out of it a year ago, rented it out, and now we're renting a bigger place in a nicer area with four (soon five) people total, splitting everything.  I'd do it all again, but it was a lot of work.

Also, talk to delivery guys in the area (like pizza delivery guys).  They will know where all of the problem areas are.
This.  Definitely, this.  One of my roommates delivers pizza, and he could talk to you all day about every neighborhood of their delivery area.  The good, and the bad.

soccerluvof4

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Re: Buying a Cheap House as a Young Person
« Reply #7 on: March 07, 2014, 12:15:18 PM »
Postal workers can be a good resource too and tell you about change over and stuff in the neighborhood since they get there change notices.

MrCash

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Re: Buying a Cheap House as a Young Person
« Reply #8 on: March 07, 2014, 12:26:10 PM »
Postal workers can be a good resource too and tell you about change over and stuff in the neighborhood since they get there change notices.

What's change over?

soccerluvof4

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Re: Buying a Cheap House as a Young Person
« Reply #9 on: March 07, 2014, 12:45:26 PM »
Postal workers can be a good resource too and tell you about change over and stuff in the neighborhood since they get there change notices.

What's change over?

People moving in and out and how the neighborhood is turning over or not.

MrCash

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Re: Buying a Cheap House as a Young Person
« Reply #10 on: March 07, 2014, 12:46:28 PM »
Postal workers can be a good resource too and tell you about change over and stuff in the neighborhood since they get there change notices.

What's change over?

People moving in and out and how the neighborhood is turning over or not.

Ahh.  Thanks!

Mr Mark

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Re: Buying a Cheap House as a Young Person
« Reply #11 on: March 11, 2014, 11:00:34 AM »
Plus if you buy a cosmetically distressed place, fix it all up with some input of sweat equity, the capital gains are tax free if you live there 2 years or more (up to 250k per indiviual) .  The worst house in the best neighborhood.  And land is really where the real estate long term value is  - the stuff on top is a depreciating asset, the land will never go away.

Thegoblinchief

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Re: Buying a Cheap House as a Young Person
« Reply #12 on: March 16, 2014, 08:41:03 AM »
Get a good home inspector. Know what you're looking at yourself to avoid paying an inspector only to find "show stoppers" on the inspection.

Realize that banks will almost never accept a lower offer on foreclosures, so only visit ones that the price is acceptable even with a worst-case inside.

Look at how long the house has been vacant. The longer it has been vacant, the greater chance of disrepair, especially with plumbing if you live in a cold climate.