Author Topic: Buying a house in growing city vs renting  (Read 1222 times)

zoochadookdook

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Buying a house in growing city vs renting
« on: February 18, 2020, 02:07:06 PM »
Hi all,

I just sold my former house up north and have been renting month to month with a coworker in my new location.

It sucks (the commute's an hour, the firend/coworker is....difficult to get along with in a at home balance, etc etc) so now that the house is closing- I'm looking at other options here.

This city is currently fairly decent for living costs. Lots of colleges, military bases and a good downtown.

I'm between buying a multi family/duplex and renting the rest/living in once (keeping as an investment long term if ever moving somewhere else) or renting a place for a year and just sort of seeing what happens. The counties in the area were top growing in the US last year and with all the current expansions it seems like this trend is going to continue.

I understand the time argument of staying in a home but as I'm looking for the investment side as well (vs just a single family to settle in) I figure there may be some other factors.

Relevent info:
Age 27
Single
Debt: None
Savings: $35k roth ira (5k more to max this year)
$4000 in HSA
$75,000 HYSA/Cash
$90K expected return on house sale after fees

In essence I have a sum of cash available for a down payment. I'm fairly handy with roofing/painting/normal housework.

I'm curious as how to assess the area/the market. Any tips from this sort of perspective/how evaluate the multiple variables when considering a house as a rental. I'm normally great with direct numbers but I can't help but feel a bit overwhelmed by all the things I don't know.

Any advice/reasources by the seasoned vets on here?

Thanks

lhamo

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Re: Buying a house in growing city vs renting
« Reply #1 on: February 18, 2020, 03:27:06 PM »
Need more information.

What would you be paying in rent on your own place?

What are the kinds of houses/multifamily units you are interested in typically selling for?  And  what would the projected rents be on the units you rent out?

Congrats on the sale of your other place -- looks like the move was the right choice on a lot of fronts!

SwordGuy

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Re: Buying a house in growing city vs renting
« Reply #2 on: February 18, 2020, 06:04:31 PM »
Do you know the correct way to calculate whether it would be a good rental property if you move out?

ysette9

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Re: Buying a house in growing city vs renting
« Reply #3 on: February 18, 2020, 10:04:21 PM »
Iím inclined to advise renting for a year close to work to really get a feel for what the area is like and how stable your job is.

By the way, it is good to see updates from you. Congrats on the impending sale and I hope the job is treating you well. Good luck.

Malkynn

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Re: Buying a house in growing city vs renting
« Reply #4 on: February 19, 2020, 05:46:12 AM »
I'm firmly in the rent for now camp.

You just went through some huge life changes that took a lot of emotional processing, and you upped and moved to a totally new city in the process.

You are young, in a new city, in a new job, building a whole new life. Take some time to get to know your new life and in many ways your new self.

Making optimal financial decisions is all well and good, but a financial decision is only optimal for you if it's serving your best life, and you don't even know what that life is yet.

Take some time, figure out what you really want your life to look like moving forward and *then* make large, relatively permanent financial decisions accordingly.

dd564

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Re: Buying a house in growing city vs renting
« Reply #5 on: February 19, 2020, 07:41:47 AM »
Hi all,

I just sold my former house up north and have been renting month to month with a coworker in my new location.

It sucks (the commute's an hour, the firend/coworker is....difficult to get along with in a at home balance, etc etc) so now that the house is closing- I'm looking at other options here.

This city is currently fairly decent for living costs. Lots of colleges, military bases and a good downtown.

I'm between buying a multi family/duplex and renting the rest/living in once (keeping as an investment long term if ever moving somewhere else) or renting a place for a year and just sort of seeing what happens. The counties in the area were top growing in the US last year and with all the current expansions it seems like this trend is going to continue.

I understand the time argument of staying in a home but as I'm looking for the investment side as well (vs just a single family to settle in) I figure there may be some other factors.

Relevent info:
Age 27
Single
Debt: None
Savings: $35k roth ira (5k more to max this year)
$4000 in HSA
$75,000 HYSA/Cash
$90K expected return on house sale after fees

In essence I have a sum of cash available for a down payment. I'm fairly handy with roofing/painting/normal housework.

I'm curious as how to assess the area/the market. Any tips from this sort of perspective/how evaluate the multiple variables when considering a house as a rental. I'm normally great with direct numbers but I can't help but feel a bit overwhelmed by all the things I don't know.

Any advice/reasources by the seasoned vets on here?

Thanks

There are a few ways to calculate projected return and also possible rent vs buy calculators.

What price house do you feel you would need to buy in what location to feel like it's a suitable for your wants and needs?

You have a good amount of savings already, so your down payment could be enough to buy a solid house in most markets that you would not out-grow anytime soon.

If you know you are unlikely to move for at least a 2-3 year period, you are almost always going to be better off buying, especially if you have the idea that you would maybe turn the home into a rental property should you decide to move out of it in the future.


Also, owning your own house is far more attractive when seeking potential mates.

zoochadookdook

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Re: Buying a house in growing city vs renting
« Reply #6 on: February 19, 2020, 12:13:10 PM »
A few factors into play here:

1) I want a garage. All apartments/rentals around here start around 1000 with a garage. You can get super swanky by the city at 1200-1400  for a 800sq foot little spot.

2) I was looking 250-350k range. There's a lot of factors-mainly what type of actual home (way less duplexes/multi's to pick from in the pleasant areas-north of town). I guess my income comes into play here 65k/year (expect a raise fairly soon).

3) Calculating rentals I could probably hash out some numbers. Maintnance/vacancy/all that. I feel like there's a lot of underlying variences based on region, luck etc etc


lhamo

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Re: Buying a house in growing city vs renting
« Reply #7 on: February 19, 2020, 01:16:03 PM »
I think you should rent a place on your own for a year and see how you like living alone and decide whether or not you like the city/your job enough to buy a more permanent place in that location.  $1000-1500/month for a nice rental reasonable.  You will still have your cash stash so if you find a good fixer before your lease runs out you will have the money to put down on it and fix it up before you move in.

zoochadookdook

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Re: Buying a house in growing city vs renting
« Reply #8 on: February 19, 2020, 01:59:02 PM »
I think you should rent a place on your own for a year and see how you like living alone and decide whether or not you like the city/your job enough to buy a more permanent place in that location.  $1000-1500/month for a nice rental reasonable.  You will still have your cash stash so if you find a good fixer before your lease runs out you will have the money to put down on it and fix it up before you move in.

I was kind of running numbers for how much is "reasonable" to spend on housing month to month. Even looking around at little hole in the wall spots they fluctuate a ton on location and ammenities.

I used to rent a room out of my house month to month to students and it worked out pretty well. I guess that's where I see the descrepency.

Let's say I have a aparment 900/month (1200 after utilities and such plus down payment)
Vs a Mortgage 600/month (115k+utilities/prop tax/insurance $1200 month rolling the 85k of proceeds into a down payment on a 200k house)

1200*12= 14,400

maintnance on house 1%=2000

14,400
16,400

The house i rent half the year the spare until out (800). 800*6=4800.

Apt. 14,400
House 11,600

You can also write off interest on the house.

Cons-flexibility
-This is a big one. What if this what if that? I suppose buying a place with rentability considered (duplex etc) would mitigate this as the goal would be to keep it as a rental property regardless of where I chose to live.

Cons
Other fees associated with home ownership (selling etc-I helped FSBO a house last year but would consider getting my real estate license this year to mitigate those 6% fees yikes).
Time spent maintaining/unknown maintnance costs. The 1% doesn't cover the big driveway replacement or whatever they need.

I'm split as I plan on having my family in to visit on occasion and most of the apartments are 1 BR with a garage around 900 or so in the area I want.

dd564

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Re: Buying a house in growing city vs renting
« Reply #9 on: February 19, 2020, 02:18:02 PM »


I was kind of running numbers for how much is "reasonable" to spend on housing month to month. Even looking around at little hole in the wall spots they fluctuate a ton on location and ammenities.

I used to rent a room out of my house month to month to students and it worked out pretty well. I guess that's where I see the descrepency.

Let's say I have a aparment 900/month (1200 after utilities and such plus down payment)
Vs a Mortgage 600/month (115k+utilities/prop tax/insurance $1200 month rolling the 85k of proceeds into a down payment on a 200k house)

1200*12= 14,400

maintnance on house 1%=2000

14,400
16,400

The house i rent half the year the spare until out (800). 800*6=4800.

Apt. 14,400
House 11,600

You can also write off interest on the house.

Cons-flexibility
-This is a big one. What if this what if that? I suppose buying a place with rentability considered (duplex etc) would mitigate this as the goal would be to keep it as a rental property regardless of where I chose to live.

Cons
Other fees associated with home ownership (selling etc-I helped FSBO a house last year but would consider getting my real estate license this year to mitigate those 6% fees yikes).
Time spent maintaining/unknown maintnance costs. The 1% doesn't cover the big driveway replacement or whatever they need.

I'm split as I plan on having my family in to visit on occasion and most of the apartments are 1 BR with a garage around 900 or so in the area I want.

Single family homes in nice neighborhoods are highly desirable as rentals.

I think the more you do the math and realize the benefits of paying down a mortgage, having the additional space, and the ability to flip it into a rental property down the road, the closer you will get to deciding to buy a nice house.

I would only recommend against buying if you didn't have ample funds to pay off some emergency repairs, but you seem to be pretty well set.

You will have far more flexibility in your lifestyle as you start to see appreciation of a large asset with the benefits of home ownership.

Also, as mentioned, any financial savvy future spouse will be more impressed with home ownership than someone renting.

zoochadookdook

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Re: Buying a house in growing city vs renting
« Reply #10 on: February 19, 2020, 02:54:35 PM »


I was kind of running numbers for how much is "reasonable" to spend on housing month to month. Even looking around at little hole in the wall spots they fluctuate a ton on location and ammenities.

I used to rent a room out of my house month to month to students and it worked out pretty well. I guess that's where I see the descrepency.

Let's say I have a aparment 900/month (1200 after utilities and such plus down payment)
Vs a Mortgage 600/month (115k+utilities/prop tax/insurance $1200 month rolling the 85k of proceeds into a down payment on a 200k house)

1200*12= 14,400

maintnance on house 1%=2000

14,400
16,400

The house i rent half the year the spare until out (800). 800*6=4800.

Apt. 14,400
House 11,600

You can also write off interest on the house.

Cons-flexibility
-This is a big one. What if this what if that? I suppose buying a place with rentability considered (duplex etc) would mitigate this as the goal would be to keep it as a rental property regardless of where I chose to live.

Cons
Other fees associated with home ownership (selling etc-I helped FSBO a house last year but would consider getting my real estate license this year to mitigate those 6% fees yikes).
Time spent maintaining/unknown maintnance costs. The 1% doesn't cover the big driveway replacement or whatever they need.

I'm split as I plan on having my family in to visit on occasion and most of the apartments are 1 BR with a garage around 900 or so in the area I want.

Single family homes in nice neighborhoods are highly desirable as rentals.

I think the more you do the math and realize the benefits of paying down a mortgage, having the additional space, and the ability to flip it into a rental property down the road, the closer you will get to deciding to buy a nice house.

I would only recommend against buying if you didn't have ample funds to pay off some emergency repairs, but you seem to be pretty well set.

You will have far more flexibility in your lifestyle as you start to see appreciation of a large asset with the benefits of home ownership.

Also, as mentioned, any financial savvy future spouse will be more impressed with home ownership than someone renting.

There's definitly a myriad of costs associated but I feel like flexibility can be managed if you think of it as a potential rental/asset not just a living space for yourself.

My want list includes a garage which seems near impossible to find in apartments around here unfortunantly.

You make a good point on single family homes as rentals. I may have to run the numbers vs a duplex that I could rent. I'm not ready to buy a multifamily and give up all the ammenities for a tiny unit but either of those options may work. I'm not really interested in the attractibility to a spouse (lol drive a $3000 purple honda fit) but good to know as well haha. 

ysette9

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Re: Buying a house in growing city vs renting
« Reply #11 on: February 19, 2020, 04:52:13 PM »
Just a quick nit: chances are you wonít be writing off the mortgage interest due to the latest tax reform. Most people now arenít itemizing but just taking the standard deduction. I expect you will fall into that category as there is nothing extraordinary about your financial life.

zoochadookdook

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Re: Buying a house in growing city vs renting
« Reply #12 on: February 25, 2020, 12:40:34 PM »
Just a quick nit: chances are you wonít be writing off the mortgage interest due to the latest tax reform. Most people now arenít itemizing but just taking the standard deduction. I expect you will fall into that category as there is nothing extraordinary about your financial life.

Got it. Nothing extrodinary whatsoever lol.

ysette9

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Re: Buying a house in growing city vs renting
« Reply #13 on: February 25, 2020, 02:21:55 PM »
Just a quick nit: chances are you wonít be writing off the mortgage interest due to the latest tax reform. Most people now arenít itemizing but just taking the standard deduction. I expect you will fall into that category as there is nothing extraordinary about your financial life.

Got it. Nothing extrodinary whatsoever lol.
Sometimes being boring is a good
Thing! Simpler tax returns, for one.
I canít wait for the day when we no longer itemize.