Author Topic: Should I buy a house?  (Read 2695 times)

rollingstone

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Should I buy a house?
« on: June 09, 2013, 02:58:25 PM »
I'm trying to figure out if I should I buy a house.

Factors against buying: I'm not sure if I can or should stay in the area. I have lived in the mid-Atlantic area for 4 years. It wasn't planned. I was going to leave after grad school but I kept getting temporary contracts so it seemed better to sit tight and relocate when I found a more stable job. I eventually landed one with the preeminent firm in my field, but surprise (!) it is also based here. My project ends in 2014 and there's no guarantee that I'll have another job (not that anyone at work is saying there won't be; we might get new projects). There are a lot more companies in my field near DC, so if I get a job with one of them, I'd definitely want to move (it is currently a 2-hour commute). In addition, I work in a global field and I would really love to be posted overseas if given the chance (it's also a fantastic career and salary boost).

Factors for buying:  I want to get married and have kids in the next 4-5 years (I'm 30). I want to plant a garden with fruit trees. I want to start feeling committed to a place and cultivate a community. Housing prices in my area are really low now since there are a lot of foreclosures and short sales. There are lots of homes selling for $60-80K in a safe and green neighborhood within 30 minutes walking distance to work; some are in better condition than others but I can also afford about $20k in renovations. I am thinking of looking for a house such that I would pay about the same $535 in monthly mortgage, taxes, and insurance that I am currently paying for rent. There's a big rental market in my area so I am thinking of renting out two bedrooms in a 3-bedroom house for about $500 each and keeping 1/2 saved or invested for home maintenance or renovations and 1/2 for early retirement.

Is it too good to be true? It could be; I'd have to go to more open houses and talk to realtors and inspectors. But I guess if I were to find a place that fit this criteria, should I make the leap? I'm not in a relationship, nor do I have tight ties here, so I'm very mobile. But would definitely love to have these ties soon. I just feel that it's hard to get to know anyone well when they and I both I feel/wonder if I have one foot out the door. I'm thinking that I could make this a home and if I need to move, keep it as a rental or sell it at a profit.

I guess I'm wondering if it's worth the investment (financially and effortwise). The other option is to divert all that energy into getting being valued at work (and thus having a stable job) or finding a partner. :) 

I'm sure I'm not the first early-career person with these choices and trade-offs to consider. It would be great to hear how you made the choices you did. Thanks for your thoughts and advice, fellow Mustachians!

frugalfranny

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Re: Should I buy a house?
« Reply #1 on: June 09, 2013, 04:32:56 PM »
Hi, We didn't buy our first house until we were married, so I can't help you in that regard, but I think that you might want to consider taxes into your financial picture. Especially as a single wage-earner with no dependents, you are likely to gain some tax advantages to buying a house in addition to the other financial gains. In your case, it sounds like the worst case scenario is that you buy the house and then decide to move. So the other thing you need to consider are closing costs. Those are just the fees you pay to buy the house. I've heard it takes 2-5 years to recoup closing costs on a house, but with the low interest rates, and if you are renting out bedrooms and getting a tax advantage, then this might happen much quicker. You would need to crunch the numbers.

I'm sure others have more advice, but those are the two things that you didn't mention that came to mind when I read your post.

aj_yooper

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Re: Should I buy a house?
« Reply #2 on: June 09, 2013, 05:31:52 PM »
I would not buy a house if I were in your situation: your contract job may end, you may be given a new location by your company, or you might decide to leave the area.  Banks would ask you to clarify your finances if you did decide to apply for a mortgage so do a financial checkup on yourself now to see how you are doing financially-emergency fund, credit card and car debt, student loan debt, assets, savings, investments.  Figure out some more of your goals.

SunshineGirl

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Re: Should I buy a house?
« Reply #3 on: June 10, 2013, 12:28:02 AM »
I also would not buy a house in your situation. Does your town have any community gardens? If so, you could get your planting done that way.

cerberusss

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Re: Should I buy a house?
« Reply #4 on: June 10, 2013, 01:37:43 AM »
You should buy a house when a) it makes sense financially to do so, in lieu of renting and b) when you settle down. The costs of buying a house are pretty high, and you don't want to run the risk of endless commuting to your job because you can't sell your house due to price drops.

I'm wondering if it's worth the investment (financially and effortwise)

This may sound like nitpicking, but a house is not an investment. An investment means there's an expectation of gain.
« Last Edit: June 10, 2013, 02:24:56 AM by cerberusss »

tomsang

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Re: Should I buy a house?
« Reply #5 on: June 10, 2013, 10:20:28 AM »
You should buy a house when a) it makes sense financially to do so, in lieu of renting and b) when you settle down. The costs of buying a house are pretty high, and you don't want to run the risk of endless commuting to your job because you can't sell your house due to price drops.

I'm wondering if it's worth the investment (financially and effortwise)

This may sound like nitpicking, but a house is not an investment. An investment means there's an expectation of gain.

A house can be a great investment if the math supports the purchase. I know a number of people that only manage their rental houses for income.  Real estate has made more wealthy people than virtually any other career.  The difference is when you are buying a house, you are looking for a good low maintenace rental house vs. your perfect ideal house for a life of living.