The Money Mustache Community
Learning, Sharing, and Teaching => Real Estate and Landlording => Topic started by: mareofnight on July 07, 2015, 08:16:53 PM
-
I've been in Rochester, NY for half a year now, and I'm trying to figure out whether I should buy a house next year and how much I should plan to spend on it.
Current rent is about $800/month total for my roommates and I, with no utilities included except for hot water. I might be getting lower heating costs because of being the middle unit of a 4plex. It's 3br with a living room, and two of the bedrooms are directly under the roof and pretty small. This place has just about the lowest rent per-bedroom in the "good part of the city" that I've seen, probably because the building is ugly and looks a little run-down inside.
I'd like to settle in this area for a while (no plans to leave, but who knows), though I might have to move if I loose my job. I also don't see myself wanting to switch to a "better" house anytime soon. The NYT calulator says that with a 110k house and my current rent, buying is better if I can stay in the area at least 3 years. That seems like a reasonable gamble to take. (I also like that price point, because I could pay off the mortgage in about 6 years while still investing a bit, and I could get the rest of the down payment within a few months.)
So the big question is how to figure out whether I'll find what I'm looking for at that price point. The two cheapest neigborhoods I'm looking at have median sale prices of 80k and 120k respectively, and both are safe working-class neighborhoods, one with mostly singles and one with lots of families. Some of their houses look a bit shabby on the outside (old paint jobs on the wood siding, and very occasionally a boarded up window) but nothing really falling apart, and most of the yards are decently well-kept. Most of them were built around 1920, some older.
I'm really just looking for something without any urgent or difficult rennovation needed (no issues with wiring, mold, plumbing, foundation or basement flooding). I'd fix any cosmetic issues at my own pace when I have time for it. Is there any way to find out how common cheap, problem-free houses are, besides attending a bunch of open houses? Just from the information on the neighborhood, how hard would you expect it to be to find something good? I ask in this forum rather than general ask because I'm hoping your knowledge about how to judge a market would be helpful.
General advice about whether this is even a good idea is also welcome, of course.
I was also thinking a bit about getting a duplex and living in half. I don't particularly want to be a landlord, but I'd consider it. Most of the multi-family homes for sale in these neighborhoods barely pass the 1% rule. From browsing real estate forums, it looks like the best oppertunities for profit are in slightly rougher parts of town where I'd rather not live myself.
-
Couple of comments:
+ If you have job instability, then buying is not a safe option....except ofcourse if you have a good emergency fund. Look into my blog for an example.
+ The housing market in many areas of the country have reached 2007 peaks and in some areas have passed the 2007 prices.
2007 prices were bubble prices. So, check your target home purchase area and compare the prices for 2007 and now.
If at or above 2007 prices, then you should be ready to stick it out for atleast 6 years...a reasonable time for a boom->bust->boom cycle.
In addition, try the following two videos and the spreadsheet that can be downloaded. These will give you a bit more configurable options than the NYT calculator.
+ Khan Academy Renting vs Buying
https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=2&cad=rja&uact=8&ved=0CCkQtwIwAQ&url=https%3A%2F%2Fwww.khanacademy.org%2Feconomics-finance-domain%2Fcore-finance%2Fhousing%2Frenting-v-buying%2Fv%2Frenting-versus-buying-a-home&ei=2X6gVYekJ8H0oASwuqNA&usg=AFQjCNEuH4iIgUmiEZJoO7IC1223Uk_rOQ&sig2=zGF5IWXJFw2uW6vFkz-uOg&bvm=bv.97653015,d.cGU (https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=2&cad=rja&uact=8&ved=0CCkQtwIwAQ&url=https%3A%2F%2Fwww.khanacademy.org%2Feconomics-finance-domain%2Fcore-finance%2Fhousing%2Frenting-v-buying%2Fv%2Frenting-versus-buying-a-home&ei=2X6gVYekJ8H0oASwuqNA&usg=AFQjCNEuH4iIgUmiEZJoO7IC1223Uk_rOQ&sig2=zGF5IWXJFw2uW6vFkz-uOg&bvm=bv.97653015,d.cGU)
+ Khan Academy Renting vs Buying detailed analysis (spreadsheet)
https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=3&cad=rja&uact=8&ved=0CDAQtwIwAg&url=https%3A%2F%2Fwww.khanacademy.org%2Feconomics-finance-domain%2Fcore-finance%2Fhousing%2Frenting-v-buying%2Fv%2Frenting-vs-buying-detailed-analysis&ei=2X6gVYekJ8H0oASwuqNA&usg=AFQjCNGsalhzuxL2jbPt4tAwxZFfPtEALw&sig2=EfkownQY8zPUbffXGdyoCA&bvm=bv.97653015,d.cGU
Hope that helps.
-
You wouldn't happen to work at Lenel would you?
It is true, the rougher areas tend to make the most profitable rentals, whereas the prize properties do not in most cases.
I would have preferred to buy a duplex myself. Or a four-plex even in the right neighborhood. More doors for the same loan amount, and it's likely that the rent from the other unit/s will pay the mortgage and then some.