I'll start off by saying that buying a house was a more long-term prospect for me prior to a unique opportunity arising. I'm fairly happy with my current urban neighborhood of old rowhouses. This enables me to walk to work in about 7 minutes. I have a reasonable monthly rent payment for a mediocre 1BR apartment.
To cut to the chase: my father found a foreclosure in a desirable suburb that he would like to buy and fix up. After discussing it, we realized it would be a good fit for me for a few reasons:
-4.8 miles (13 minute drive, 20-25 minute bus ride) to the office;
-5 minute walk to the bus stop;
-1,100 square feet, which for a single guy like me is a reasonable size;
-Small yard, would require minimal maintenance;
-Walkable neighborhood.
Now, the house needs a lot of work. If we buy it, one foundation wall will need to be removed and re-poured. My father has done this on prior flips and knows a good contractor for the job. The home also needs a new roof and we would like to rip up the ugly old carpets, refinish the hardwood floors underneath, remodel the kitchen, and paint throughout.
After accounting for these expenses my father would be able to sell it to me at cost, which would be around $120-$125K. Comparable homes in that town sell for $150-$175k. He is a mortgage broker and calculated a ~$1,000 month mortgage including taxes and insurance. No PMI.
Here are the case study notes:
Market Value: $150K
Original Purchase price: $85K ($120K after reno)
Original Mortgage Amount: $120K
Interest Rate: 4%
Mortgage Term: 30 yrs
Term remaining:
Amount remaining on mortgage:
Gross Rents:
Mortgage: ~$1,000
HOA costs: None
Some personal facts:
-27 year old single male;
-Current net income is $2,868 per month and will be approximately $3,500 month starting in December;
-Debt: $26,000 student loans @ 4.5%, $215 per month. I'm employing the "debt avalanche" method to pay these off;
-Savings: $6,000;
-After a mock-up of my current budget with some adjustments I have a $900 surplus each month. At the new salary of $3500/month, the surplus is nearly $1,550.
-Current rent: $750.
I wouldn't really consider any other home at this stage in my life but the gift of instant equity and the reasonable mortgage have forced me to think. It's in a neighborhood I like and is small enough that it will require minimal upkeep. Also, taking care of the big problems during the reno could mitigate any Murphy's Law related incidents.
What do you guys think? Thanks for the input.