Author Topic: Where to buy a house??  (Read 1689 times)

ThirdTimer

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Where to buy a house??
« on: October 29, 2015, 04:06:08 AM »
My husband and I live in the DC suburbs. We currently rent a 1-br condo for $1475/month, but think it may make sense financially for us to buy a house. We are planning to have kids in the not-too-distant future, so we'd be looking for 3-br houses. We have two neighborhoods that we're considering, and are trying to decide which plan makes the most sense.

1) Buy in our current neighborhood. A 3-br house here would cost roughly $500k, but gives me a 4-mile commute that I can do either by bike or bus (20-25 mins either way), and my husband a 10-mile commute that he does by car or electric bicycle. Moving closer to work is not sensible, as we live just to the east of a major park, and 3-br houses on the west side of the park (closer to both our offices) are in the $750k-$2mil range. This neighborhood is OK in terms of access to grocery, libraries, and schools, but not ideal. (All located within 2 miles, but require using less-than-optimally-bike-friendly roads.) Most friends are located 3-5 miles from us.

2) Buy in a neighborhood 3 miles east of here. A 3-br house there would cost roughly $400k. This neighborhood would put both of us 3 miles farther from our work. There aren't good public transit options from this neighborhood to my office, so I would switch to a mostly car commute with an occasional bike day, which means I would incur all the usual costs of car commuting, plus I'd have to pay for parking at my office ($125/mo). My commute would then be 20-35 mins by car, depending on traffic, or 45-50 mins by bike. Husband's commute would take about as long by car, and increase by 5-10 mins by e-bike. However, while this neighborhood is less convenient for our jobs, we like it a lot for other reasons. Most of our friends live in this neighborhood, it's got a lot of low-traffic roads that are easy to get around on by bike, and it's got a supremely-conveniently located grocery store, library, and schools. It's the kind of place that would make it easy for us to let our hypothetical future kids bike around the neighborhood on their own, and where it would be easy to pop by our friends' places by bike or foot on little notice.

3) Buy in our current neighborhood, and then when it's time to retire, sell and move to the other neighborhood. We're on track to retire 8-10 years from now, so this is not too far off. If houses in both areas were $400k, this would definitely be the option I'd choose, but I'm hesitant to tie up so much money in a house. I make $110k and my husband makes $100k, and combined we spend about $65k, including our current rent, so we could "afford" the higher mortgage payment, but there'd be a real cost to us in terms of higher property taxes for the time we're in the house, plus the extra money tied up in the house would presumably be yielding a lower return in terms of appreciation than it would in the stock market, plus the transaction costs associated with selling the first house and buying the second one, plus it makes me uncomfortable to have so much money tied up in such a non-diversified asset. I tried running the numbers to see what the real cost would be to us (see attached spreadsheet), and using moderate assumptions, it works out to be about $2-3k per year (which is about what we'd be saving in transportation costs), plus the cost of the additional transaction of selling the first house and buying the second one, which is obviously a lot. My mother-in-law is a real estate agent, so she may cut us some sort of a break on her commission from the deal, but it's hard to know how much that would be and I don't want to rely on it.

So, what would you guys do in our situation? Are there other, better options that I'm not considering? Flaws in the assumptions I'm making? Other factors we should be considering?

p.s.: Regarding our jobs, obviously, there's no way to know if we'll stay in them until we retire. My husband loves his job, and plans to stay with his company as long as he can, which will probably be until his boss retires and closes up shop. His boss is already in his 60s, but seems to love running his own company, so really hard to predict when this will happen. I only started my job recently, but all signs point to this being a great place to work and a place where I could be happy for a long, long time. Since we both already make really good money, we're not really looking to job hop to increase salary so much as stick with jobs that offer us good quality of life as long as we keep enjoying them. Also, we're both in tech-y jobs, and most of the jobs in that industry around here are either in the western suburbs or in DC proper...there's not a lot in the more eastern suburbs where we'd like to end up living. So it's likely that even if we moved jobs, we'd be better off in the more western house.

p.p.s: The prices we quoted for each area are rough ballpark numbers for the low end of what's realistically available in each neighborhood. We are planning to take our time and hopefully be able to pounce on a good deal when it comes along, but according to Zillow, the lowest price a house sold for in our neighborhood in the last year was $475k, so it's unlikely we'd be able to get much lower than the numbers I quoted above.

p.p.p.s: I don't think it would make sense for us to keep the first house and rent it out. One of the bigger houses in the neighborhood, which would probably sell for $700k+, is currently listed on Zillow to rent for $2950/month, so I don't think it would meet the 1% rule.

p.p.p.p.s: I wouldn't be easily able to bike the 7 miles from the cheaper house every day, bc a couple times a week after work I go somewhere that's too far to bike, but is easily accessible from work by car or public transit, & the DC metro doesn't let you take your bike on the metro during rush hour. So I'd drive at least a couple days a week, which means I'd end up buying a parking pass, as parking is $15/day or $125/month. 

pbkmaine

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Re: Where to buy a house??
« Reply #1 on: October 29, 2015, 05:57:30 AM »
I vote for 4) Stay where you are. A one bedroom will work fine while your hypothetical child is hypothetically small. Buy a house only when necessary.

sfb

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Re: Where to buy a house??
« Reply #2 on: October 29, 2015, 06:20:52 AM »
I live in Alexandria and currently rent a 2 bedroom apartment, but I've owned houses in Arlington and Alexandra.  I also think you should wait until your first child is on the way. 

GoldenStache

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Re: Where to buy a house??
« Reply #3 on: October 29, 2015, 07:23:22 AM »
If you are thinking about retiring in 8-10 years, why would you want to stay in the DC area after you retire? That 400k-500k house is going to cost you 5-7k (depending where exactly) a year in taxes.  I live here and am looking forward to buying a house that will not cost over $500 a month in taxes.  I also hate traffic and the concrete jungle and am looking forward to spending more time in the woods/mountains when I get the chance to.  YMMV 

Could you retire in 6 years if you worked hard at it?
The reason I say 6 is that you could get a house in a crappier school district that your child/children will never have to attend.   

By the way.. you rock.. $210k income with only $65k spend

ThirdTimer

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Re: Where to buy a house??
« Reply #4 on: October 29, 2015, 11:31:50 AM »
Yes, we've considered staying put as well, since we could definitely last another 2-3 years in our current place, as any children are currently hypothetical. :) The NYTimes rent vs. buy calculator suggests that we'd definitely come out ahead buying a $400k home over continuing to rent (buying would be equivalent to renting at $839 - $1,411 / month, depending on your assumptions about stock market returns & house appreciation), whereas staying in our current place is roughly equivalent to buying a $500k home ($1,012 - $1,727 / month, depending on assumptions). Buying would give us more space for the same or smaller price tag, but renting does give us extra flexibility, since we don't even know if these hypothetical children will actually materialize.

We definitely plan to stay in the area after we retire. We're blessed with an unusually strong and wonderful network of close friends and family who are rooted in the DC area (mostly settled in that neighborhood a few miles to our east), and we're more than happy to work an extra few years to be able to continue to live close to them. We actually moved back to DC from a cooler and cheaper city because we missed the awesome community we have here so much.

BTW, for locals who know the area, we live in Silver Spring, and our jobs are in Chevy Chase and Potomac.