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Old 11-13-2012, 08:52 PM
 
1,510 posts, read 2,388,490 times
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My daughter is 25 working for one of the colleges in Boston. She has $50K for a down payment for a "home" but makes only $50K per year. Even with the down payment she would have $20K left in savings. No student or car loans. Could garner $800 per month in rent from a "roomate" that would help with the monthly payments. Looking at a unit in the $200 - 250 K range and staying for 3 to 5 years before she marries, moves on, etc. Rent appears to be in the $1,500 - 1,700 range if she goes that route. I am the Dad from PA and do not know the market and unsure on which way to advise as I see it as a "flip of the coin". What do you think....buy or rent?
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Old 11-13-2012, 10:08 PM
 
288 posts, read 631,447 times
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You should have her look into the Boston First Time Homebuyer program for low to moderate incomes. I think she might get extra perks like a lower down payment requirement, but the home would have be the owner-occupied for a set number of years before she could resell at a profit. There's even a Mortgage 101 program she should sign up for to get free financial literacy.

I got married, so I no longer qualify for that program because our combined income has disqualified us but I would have jumped on that given the chance. You should probably tell the forum what neighborhood she wants to buy in. If she buys in a shaky street in Dorchester (though the neighborhood is huge and has some really nice areas too), she's going to have a harder time breaking even in her short time frame. If she somehow found that kind of miraculously priced unit in South Boston, then she probably will sell it easily in the next few years, and certainly will more than get her money back by avoiding the high rent.
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Old 11-14-2012, 05:33 AM
 
374 posts, read 651,610 times
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Quote:
Originally Posted by caco54 View Post
My daughter is 25 working for one of the colleges in Boston. She has $50K for a down payment for a "home" but makes only $50K per year. Even with the down payment she would have $20K left in savings. No student or car loans. Could garner $800 per month in rent from a "roomate" that would help with the monthly payments. Looking at a unit in the $200 - 250 K range and staying for 3 to 5 years before she marries, moves on, etc. Rent appears to be in the $1,500 - 1,700 range if she goes that route. I am the Dad from PA and do not know the market and unsure on which way to advise as I see it as a "flip of the coin". What do you think....buy or rent?

Don't do it!

She should save her money and wait for a better time. I've advised people against such stuff in the past. However, no one has listened to me. The worst situation is being trapped in a 1 bedroom condo. Don't ever do such. No one I know can sell their condos for more than they paid.

FHA loans cost more. 3% down means that you have a large monthly payment. Who can spend 60%-75% of their income on occupancy? One month without employment can send you spiraling downwards.

Boston-area condos have these issues.

1) Always several units of the same type in the same complex are on sale. Prices are depressed.
2) Prices are too high when compared against housing stock.
3) Current condo build quality is subpar.
4) Condo taxes are too high; fees are too high.

You will never flip it for an outrageous amount of money. If you want to flip, then I would look for a really good house in a great neighborhood.

Bill
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Old 11-14-2012, 11:23 AM
 
Location: Brookline, MA
613 posts, read 2,299,477 times
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She needs to hold onto it for at least 5 years for it to make sense. If she decides to rent it in the future, will the rent cover the monthly payment (or come very close)?

Don't forget to factor in monthly condo fees into the mortgage and tax payment.

And remember, the seller is typically responsible for both the seller and buyer real estate commissions (between 4-5% total of the purchase price). So when she goes to sell, that's like 12,500 off the top (5% at 250K).

Think about it this way. I think current values have mostly stabilized and won't fall off, but values won't appreciate like they did back in 2004. She needs to realize that she may not be able to sell it in 3-4 years for much more than she paid and she needs to factor in the costs of selling and the costs that she puts into the property. If she can break even, that's not a bad thing, but that's the inherent risk of real estate.

Gotta run the numbers Dad.
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Old 11-15-2012, 02:43 PM
 
288 posts, read 631,447 times
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Yes, but this is the Boston housing market where rents cost much more than condo mortgages sometimes, especially if she can get a roommate to pay for half the mortgage and she's committed to staying in Boston the next few years. I have friends in Roslindale and South Boston who are single but found long term roommates, and they are doing incredibly well. Yes, they have to pay for a new boiler and such. But my husband and I are losing $1500 a month and building no equity, whereas all these singletons live in decent neighborhoods and certainly are going to more than break even within the next five years. Of course, the key is getting the steady roommate, the right down payment, and reasonable condo costs in the right neighborhood. Since she doesn't have kids, then she can be in the city fine and not worry about the school system.
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Old 11-15-2012, 02:46 PM
 
1,217 posts, read 2,587,799 times
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Quote:
Originally Posted by caco54 View Post
My daughter is 25 working for one of the colleges in Boston. She has $50K for a down payment for a "home" but makes only $50K per year. Even with the down payment she would have $20K left in savings. No student or car loans. Could garner $800 per month in rent from a "roomate" that would help with the monthly payments. Looking at a unit in the $200 - 250 K range and staying for 3 to 5 years before she marries, moves on, etc. Rent appears to be in the $1,500 - 1,700 range if she goes that route. I am the Dad from PA and do not know the market and unsure on which way to advise as I see it as a "flip of the coin". What do you think....buy or rent?
$200-250k ain't going to get you squat in the city. So not only will end up a small unit in a less desirable part of town, but you will now have to pay property tax, monthly maintenance fees, and repairs. At her income level, she will not have much left on monthly basis. It really only makes sense to buy if you plan to keep it for 5+ years and it doesn't even sound like she'll be around that long. Otherwise, as was pointed out, you will have to pay selling costs and the housing market is not exactly sizzling right now so I wouldn't be counting on huge gains from price appreciation. Net net, you might lose on the sale as opposed to not buying at all. She is better off renting at a reasonable rate and saving as much as she can. It's simpler, improves her quality of life, and makes financial sense given your time horizon. At that point, she'll have more money to put down and a higher income to buy something higher quality and will hopefully have more clarity on where she wants to be.
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Old 11-18-2012, 08:45 AM
 
Location: Bike to Surf!
3,080 posts, read 11,032,982 times
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I would buy now, try for a decent REO and get into the biggest thing she can afford, looking to the resale later. Interest rates are obscenely low, so if she's got decent credit, it's pretty much "free money."

IMO, the market is about to takeoff after bottoming out. Interest rates are low. Get in now or be left out in the cold. If we were going to stay here for even 3 years, we'd have bought a place 6 months ago.
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Old 11-18-2012, 02:06 PM
 
123 posts, read 244,683 times
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I think you will get a much better deal if you simply rent. At that age, I can't imagine why you would want to lock all of that money into a home. Plus it would be difficult to manage a $3K/month mortgage on $50K/year salary.
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Old 11-18-2012, 02:09 PM
 
123 posts, read 244,683 times
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Quote:
Originally Posted by sponger42 View Post
I would buy now, try for a decent REO and get into the biggest thing she can afford, looking to the resale later. Interest rates are obscenely low, so if she's got decent credit, it's pretty much "free money."

IMO, the market is about to takeoff after bottoming out. Interest rates are low. Get in now or be left out in the cold. If we were going to stay here for even 3 years, we'd have bought a place 6 months ago.
Interesting comment. What do you think will happen to the value of homes when interest rates go up? Do you think that perhaps, maybe, there is a slight chance that low interest rates are what is keeping the housing market afloat right now?
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Old 11-19-2012, 09:43 AM
 
Location: Norman, OK
3,478 posts, read 7,228,688 times
Reputation: 1200
Quote:
Originally Posted by Blueberry Pancake View Post
I think you will get a much better deal if you simply rent. At that age, I can't imagine why you would want to lock all of that money into a home. Plus it would be difficult to manage a $3K/month mortgage on $50K/year salary.
For a mortgage of $200K or so, no way is the mortgage close to that, even when accounting for taxes, fees, and insurance.

I agree with some of the comments in this thread, especially regarding timing and intent to stay in the city. Is your daughter familiar with Boston enough to know where she would want to live? If she doesn't, then she should rent first in a place she thinks would be good (commute, amenities, safety) and then decide from there. Interest rates aren't going anywhere for at least a year if not two years.

As far as finding a place for $250K or so, it is possible, but not in downtown Boston or Cambridge. Outside areas like Medford and some parts of Somerville would work, as would Quincy or Braintree (again, depending on where her job is, etc.). All of those areas are T accessible for commute (even commuter rail for some locales).
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