Author Topic: Should I buy a cheaper house?  (Read 3192 times)

austindude

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Should I buy a cheaper house?
« on: December 03, 2013, 02:32:08 PM »
I'm kind of new to these forums. I've read some of MMM's essays so I think I understand his personal finance philosophy. This is a dilemma that doesn't seem that clear-cut to me.

About me: I am a single, 30-something male who works in software development. I bought a new construction house in a hot area a couple years ago and I believe I have the opportunity to sell and use the proceeds to buy a house in a cheaper neighborhood while reducing or perhaps eliminating my mortgage. If I do this, I will be missing out on potentially greater appreciation in this urban neighborhood, but I am also capturing this unusual appreciation of the past couple years(who knows if that will continue). I am not totally sure where I would end up but am considering moving farther north, away from downtown and in the direction of my job.

Besides the geo-arbitrage potential, I am really sick of noisy neighbors and most of the things I need to use require driving several miles anyways. The traffic is sometimes pretty awful, especially during festivals and conventions that often happen nearby.

My total payment (inclusive of PITI & property taxes) is currently about $1700/mo, mortgage $232,000 and my realtor suggests listing it for $420 - 470k.

Houses in the areas I am considering range from $150 - 350k; the farther out from the city center, the lower the price.

One of the neighborhoods I am considering would be considered suburban - there is no real town center and I would have to drive everywhere, but I am very tempted because I could come out ahead financially. Ditching my current place and buying there could free up over $1000/mo in cash flow. However, I'm not sure it would be worth the lifestyle tradeoff. I like the idea of living close to what I need. I don't go out much, though, so being close to bars and trendy restaurants doesn't really seem worth the increased cost. I drive most places (groceries, gym, office, etc), where I currently live anyways.

I need some help thinking about this.

Thoughts?

Frankies Girl

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Re: Should I buy a cheaper house?
« Reply #1 on: December 03, 2013, 02:49:11 PM »
You actually sound like the kind of person that would get more benefit out of renting than owning a house. I'm not sure what size house you currently have, but upwards of a 2 bedroom seems like a whole lot of wasted space for one person that you're having to maintain, heat/cool and pay property taxes on... just something to throw out there.

As you are unsure of what sort of area you really like, why not look around for a really nice apartment that is half of what your mortgage is now, and rent for a year? If you end up liking the general area, then maybe consider something more permanent, but if not, check out another area.

I'd also consider looking for an area that is close to your work and has other amenities within walking/biking distances like a grocery and other type of things so you can further reduce the need to drive everywhere...

If your financial picture is good overall, I wouldn't think taking a year or two to try out some areas would hurt your long-term goals.


austindude

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Re: Should I buy a cheaper house?
« Reply #2 on: December 04, 2013, 02:20:46 PM »
Thanks for your reply, Frankies Girl.

It's not a bad idea (renting an apartment) but I decided a couple years ago to buy a house for a few reasons:

1) This city is not favorable for renters due to supply/demand imbalance, tight vacancies and rapid rent increases. Actually, I was forced to move out of the first apartment I was in when I moved to Austin after the lease was up because the landlord decided to renovate the unit (and raise the rents).
2) I hate having common walls due to noise issues, so that limits my choice to houses only (buying or renting).
3) The market here has been appreciating every year consistently for some time. I have actually had the experience in the past of selling a residence, then renting and watching the prices take off beyond sane levels (back when I lived in a bubble area). My timing back then was terrible.
4) Tax and other benefits of ownership over renting.
5) I'm pretty sure I want to stay here, and at least have a toehold in the property market (rent the place out) should I decide to do long-term travel or something. That way I can benefit from appreciation even if I'm not here, and I am hedged against rising property values if I become a renter again.

For those reasons I plan to buy not rent.




austindude

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Re: Should I buy a cheaper house?
« Reply #3 on: December 04, 2013, 02:21:36 PM »
I'm also considering using my equity to buy a duplex and live in one unit.

That has more upside in terms of building financial independence, obviously.

bentonmadisn

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Re: Should I buy a cheaper house?
« Reply #4 on: December 23, 2013, 04:19:55 AM »
Your issue resides between your convenience and your cash saving you like having every store near by your house but also want to have a quiet neighborhood as you have depicted it would be advisable to search for a cheaper house not far away in the north direction but a little away from your current house so that you would reside in a much quitter place and also everything you need would be available in a very close proximity.
This tips would help you.
     

fodder69

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Re: Should I buy a cheaper house?
« Reply #5 on: December 23, 2013, 07:09:25 AM »
Living closer to what you need is always a good lifestyle choice. You will probably end up happiest if you balance distance to work and distance to things like the grocery store, etc. The time you spend driving to places is going to get old pretty quick.