Author Topic: Facepunch Needed on Home Purchase  (Read 2635 times)

swimmer21

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Facepunch Needed on Home Purchase
« on: July 21, 2013, 04:19:03 PM »
I'm currently in the process of being kicked out of my apartment by the city, which would have been completely prevented if my landlord had been a little more honest with us.

Here are my two housing options:

1) A nice three bedroom, 1 bath apartment, rented by a seemingly honest guy who just bought a house in the suburbs about 20 minutes away. Rent is $1200/mo and includes trash pickup (~$30/mo) and water.

2)I found a 4bedroom, 1 bath house for sale, in a slightly better neighborhood. The roof, basement, and construction all seems okay. The exterior is all in very good shape. However, it's being sold AS IS, including the 40 years of accumulated stuff (of next to no value) the prior occupants left behind. Carpeting would probably have to be removed from most of the rooms, and the hardwood floors underneath restored, the kitchen needs some kind of new flooring, and eventually the outdated stove and furnace would need to be replaced. Unfortunately my savings aren't really ready for this, so I can only comfortably afford a 5% down payment, which gives monthly payments for the loan (including taxes, mortgage insurance, and homeowners insurance)  to be about $1150 per month. I'm relatively handy and could do all the flooring work myself.


However, there's a small, chance I'll move away in 1-2 years. I would guess that market rent is about $1600 a month for the fixed up version of the house, with a few small improvements that would need to be done in order to get Certificate of Occupancy including the 4th bedroom, otherwise it would only be 1200-1300.

Will someone please provide a facepunch to convince me to not buy the house?

cdub

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Re: Facepunch Needed on Home Purchase
« Reply #1 on: July 21, 2013, 04:31:49 PM »
If you might move in 2 years rent. Buying a house isn't something you want to rush into.

KingCoin

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Re: Facepunch Needed on Home Purchase
« Reply #2 on: July 23, 2013, 06:23:45 AM »
Buying a fixer-upper/money-pit while personally undercapitalized is certainly a recipe for pain. If you were a contractor or otherwise had experience in renovations/flips, you might be able to justify it, but unless you're able to put a very precise numbers on how much it will cost you to renovate, how much time it will take you to renovate, and how much value you'll be able to add to the price, this seems like a fool's errand.

Rent, build up your 'stache, and go into a situation like this with confidence and financial flexibility. I promise this won't be the last dump available at a discount.

SunshineGirl

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Re: Facepunch Needed on Home Purchase
« Reply #3 on: July 23, 2013, 10:01:52 AM »
Rent, build up your 'stache, and go into a situation like this with confidence and financial flexibility. I promise this won't be the last dump available at a discount.

Amen!

Rebecca Stapler

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Re: Facepunch Needed on Home Purchase
« Reply #4 on: July 23, 2013, 10:06:47 AM »
Don't buy the house. You will need more $$ to be able to fix up all the problems that you will discover under all the accumulated crap. You're not in a position to buy. Continue to rent, accumulate a sizable down payment / renovation fund, and then pounce on the right opportunity.

fiveoclockshadow

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Re: Facepunch Needed on Home Purchase
« Reply #5 on: July 23, 2013, 10:14:28 AM »
I promise this won't be the last dump available at a discount.

Oh my goodness yes.  There are always trash properties available.

Look, you are being forced to move which means the move is unexpected and unprepared.  Then you find a fixer upper while you need to hurry up and move.  This creates false time pressure on the purchase.  Never make investment or large expenditure decisions in a rush.  It doesn't always end badly, but the more rushed the more likely you are to make a poor decision.  This is why all high pressure sales tactics are based on rushing the buyer.  In this case likely you are rushing yourself.

Take the rental, and after you are moved in then start thinking about owning.  Come up with a plan, explore the market and decide exactly what you want to get yourself into.  Then decide if you want to keep renting or buy and if the answer is buy spend time looking and learning.

Remember - real estate transactions are very expensive.  As a buyer these are mostly hidden from you, but when it is time to sell you are going to take up to a 10% hit on the transaction.  That means making a "wrong" buy decision will eventually cost you when you have to unload the property to buy whatever it was you should have bought in the first place.  That wrong move costs easily a years worth of rent.  So take your time and get it right the first time.