Author Topic: Weighing options as a 1st time buyer  (Read 3616 times)

szymanski

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Weighing options as a 1st time buyer
« on: August 22, 2013, 06:06:51 AM »
Hi everyone.  I'm looking for my 1st home and weighing a lot of options.  I'd like your input or what mattered to you when you bought your first place (assuming no kids).  Did you just find the smallest house that met your needs in area you'd like to live or did you focus on return by buying a foreclosure or did you take a step towards building your rental portfolio by buying a house you could easily rent later?

I've been torn between two ideas:
 
1) buy a smaller, less expensive home that I could live in for a bit & maybe after a few yrs move but keep it as a rental

or

2) buy a more expensive house in an area w/fewer if any rentals with the idea of staying for a while & maybe down the road get into real estate investing
 
1) In general for this option, I've looked at 1300-1600 sq ft homes in good but not great areas or the school districts are good but not the best.

Ex: I've looked at a HUD home: 90s house 1.5 story 3/2.5 1632 sq ft list $75k w/$2-3k for repairs (plumbing didn't pass test & HVAC didn't pass test), side lot is next to a 4-way stop that gets a decent amount of traffic, one street over has crappier homes (like $100-115k), comps are around $140-145k on the same street but prices go over $200k for the 2000+ sq ft homes. 

Ex: Current rental/estate sale: 10-11 yr old 3/2 1364 sq ft ranch listed $149k next to a nice park, modern layout & mostly seems to need cosmetics, has a good elementary school.  It has been a rental for years, the owner passed away & the estate is now liquidating the properties.  His other property next door sold fast but this one has a tenant leaves the house pretty messy for viewings so it has probably turned away some buyers.  Old appliances, nothing done to landscaping, carpets are worn.  Comps in good shape sell for $145-160k.  Thinking it's very possible to get the price down quite a bit.  It currently rents for $~1100.

2) In general for this option, I've looked in my favorite parts of town which also happen to be in the best school districts & more expensive.  I could see myself living in this area for a long time but there aren't as many deals in this area & in general the sellers want max dollar as they've taken care of their property.

I've looked at split foyers which tend to be more in my price range but I kind of hesitant to buy a layout that doesn't seem to sell as well.  I've looked at ranches that are nice but very pricey from a price per sq ft perspective.

Thanks for the input.


gecko10x

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Re: Weighing options as a 1st time buyer
« Reply #1 on: August 22, 2013, 07:14:54 AM »
You haven't even mentioned your budget; I don't know how we can provide useful advice if we don't know what you can afford.

NumberCruncher

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Re: Weighing options as a 1st time buyer
« Reply #2 on: August 22, 2013, 07:18:20 AM »
Quote
1) buy a smaller, less expensive home that I could live in for a bit & maybe after a few yrs move but keep it as a rental

Why not buy a smaller, less expensive home and stay in it medium-term or long-term? 

I'm kinda biased because I'm in a high COL area, but 1300 sqft is over twice my current living area with husband. If we really wanted kids, I'm sure we could have a couple and be really happy with 1300 sqft.

gecko10x

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Re: Weighing options as a 1st time buyer
« Reply #3 on: August 22, 2013, 07:39:28 AM »
Regardless of budget, I will say the following:

We found that layout matters more than square footage. Our first house was ~1400  ft2, and was plenty of space, but we still felt very frustrated with it because of the layout. We had a ~100 ft2 closet because the space couldn't be used for anything else, and a ~200 ft2 playroom because we couldn't do anything else with it. In addition to that, the house was two small, square floors, meaning there was no separation/privacy. Our new house is 3 floors and the separation is much better.

Our new place is "only" 1900 ft2 (not much bigger than the old), but feels HUGE because the space is much better utilized. (I asked my father to guess the size after we moved in, and he guessed 2500-3000  ft2). Multi-use spaces make a big difference here: an in-kitchen dining room, but still enough space for a 6-8 person table, plus a 2-stool bar; an extra wide hall that looks awkward at first glance, but actually works quite well as an office with a very large desk; ~400  ft2 of under-garage, unfinished storage/work space; and a feature we love- the garage door opens directly into the kitchen, which is fantastic for groceries ;-)

szymanski

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Re: Weighing options as a 1st time buyer
« Reply #4 on: August 23, 2013, 05:13:50 AM »
You haven't even mentioned your budget; I don't know how we can provide useful advice if we don't know what you can afford.

Hi gecko

Up to $200k but I don't imagine coming even close to that

szymanski

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Re: Weighing options as a 1st time buyer
« Reply #5 on: August 23, 2013, 05:16:54 AM »
Quote
1) buy a smaller, less expensive home that I could live in for a bit & maybe after a few yrs move but keep it as a rental

Why not buy a smaller, less expensive home and stay in it medium-term or long-term? 

I'm kinda biased because I'm in a high COL area, but 1300 sqft is over twice my current living area with husband. If we really wanted kids, I'm sure we could have a couple and be really happy with 1300 sqft.

Valid point and my goal is to just buy enough space to meet my needs.  It's just that prices go up quite a bit for similar sq footage in the part of town I like.  FWIW I'm used to living in a 750 sq ft apartment.

gecko10x

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Re: Weighing options as a 1st time buyer
« Reply #6 on: August 23, 2013, 07:18:23 AM »
Comps in good shape sell for $145-160k.  Thinking it's very possible to get the price down quite a bit.  It currently rents for $~1100.

That doesn't sound like it would cash flow very well.

Unless you can find a deal on a place you think would cash flow well as a rental, I'd lean toward #2. It's just you, right? Find a nice place in a good location. My 2 cents.

mpbaker22

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Re: Weighing options as a 1st time buyer
« Reply #7 on: August 23, 2013, 08:07:37 AM »
Why not go for the best of both?
Does your area have any 2-family houses?  As a disclaimer, I have a sort-of fetish as of late for 2-family houses.  But I just bought one and the tenants downstairs will be paying my mortgage, taxes, and insurance.  I'll be paying for maintenance and repairs while living for 'free'.

Samsam

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Re: Weighing options as a 1st time buyer
« Reply #8 on: August 23, 2013, 08:23:46 AM »
Why not go for the best of both?
Does your area have any 2-family houses?  As a disclaimer, I have a sort-of fetish as of late for 2-family houses.  But I just bought one and the tenants downstairs will be paying my mortgage, taxes, and insurance.  I'll be paying for maintenance and repairs while living for 'free'.

That...is awesome, I want!

szymanski

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Re: Weighing options as a 1st time buyer
« Reply #9 on: October 02, 2013, 05:42:14 AM »
Updating...

I put a bid on the HUD foreclosure in my first post.  They really undervalued the house.  My bid was $96,500.  The winning bid was around $120k!  Wow.

The inventory is tight and houses in the good areas are selling within a few days.

I found a FSBO fixer upper in a good neighborhood but it's older styles.  Lots of split foyers.  It's a split foyer.  Looks a bit better than others from the road b/c the garage is in the back.  The schools are real good.  All brick 4/3 2400 sq ft for asking $137,500 (could get it for less).  I've watched the area's split listings.  They don't sell as fast.  One just sold for $170-175k.  Ranches in the same neighborhood go much faster.