Graduate school: Rent or buy? (Minneapolis, St. Paul: 2015, affordable apartments, foreclosure)

[1stpontiac]

I think the biggest issue with all of this is that grad school is an uncertain proposition. I've seen enough grad students quit, get fired, or have major funding issues that I'd hesitate to recommend that an MS student commit to a house unless your SO has a normal, steady job.

[xandrex]

Originally Posted by golfgal

The OP said he had a lot in savings but whatever. Then, finding an apartment in a nice area for $900/month is going to be an issue. You can buy a house for less than you can rent these days. Property tax credit on a rental in that price range is going to be minimal if anything, a few hundred dollars at best.

It is very easy to find a safe apartment for $900 a month, even a two-bedroom! I had many options in safe neighborhoods near the U. In the end, my roommate and I opted for a slightly more expensive place because it offered a lot of space (and because I got a rent deal last summer). But the company I was renting from--who has safe, clean apartments and a responsive staff--had plenty in the $900 range for two-bedrooms. A roomy one-bedroom was well below the $900 (and all of this is in the University area, which has inflated rental costs).

As for the rental tax credit, I can assure you that it is not minimal. I'm receiving over $1000 back from the state through it. That's a significant chunk...greater than 13 percent of the rent I paid during the year.

[j30fini]

Wow, thanks for all the helpful insight! I didn't expect this many replies. I appreciate everyone's input, and I read each post. My apologies for not being able to directly reply, as I've been quite busy lately.

I have to admit, I'm leaning much more towards the renting side of the debate. I think, as someone who likes to be frugal, etc., it's hard to see money not be "invested." But, deep down, I do feel buying would be a big risk right now. Not only from a financial standpoint, but timing wise. When I graduate, I would hate to turn down potential opportunities throughout the country because I am tied to an area.

My girlfriend and I have looked extensively throughout the Roseville area (I will be mainly on the St. Paul Campus), but have also found some nice complexes in St. Louis Park. Quickly, for those that have gone to grad school here, do you think it would become wearing not being near campus? That is my only concern about widening our geographical area.

I do want to thank everyone for your replies. All were very nice, well written, and insightful!

[xandrex]

Originally Posted by j30fini

My girlfriend and I have looked extensively throughout the Roseville area (I will be mainly on the St. Paul Campus), but have also found some nice complexes in St. Louis Park. Quickly, for those that have gone to grad school here, do you think it would become wearing not being near campus? That is my only concern about widening our geographical area.

I can't speak about grad students (I finished my undergrad last year), but my roommate is a Ph.D. student at the U. From what he has told me, he has enjoyed being nearby. He's not a super urban type or anything (so it isn't about living in the city or anything like that). But many students live nearby, which helps when working on projects together (of which he has had several), cohort gatherings (they seem to get together for drinks and seem to have decent friendships with each other), and generally just being close to campus for an easy commute. The last thing you want to worry about when you have class, GA work, and endless studying is a 30+ minute drive through traffic to get home.

If you're going to be mostly at the St. Paul campus, might I recommend the St. Anthony Park neighborhood? It's right next to campus there and is quite nice. I have friends over there who get a great deal on their rent (St. Paul rent is definitely cheaper than Minneapolis rent) and it's quiet and leafy, but still within walking distance to campus. Another option is the family co-op housing. I'm not sure if you qualify, but I have a cousin who lives in them with his girlfriend and their daughter...very cheap and pretty nice (their 2-bedroom goes for maybe $730 a month or something like that?).

[uptown_urbanist]

I didn't attend grad school at the U, but I did not live in or near my graduate program, although it wasn't a long way away, either. It wasn't a big deal, as I came in in the morning, stayed all day, then went home at night. And from my experience knowing a lot of grad students at the U, a lot of them don't live right on or even right near campus. Driving to campus is a major hassle and expense, so I'd live somewhere where you can conveniently either walk, bike, or take the bus (there are a lot of express buses that make it really easy, although that's primarily a M-F option). You can check the schedules online, but they run express buses out to St. Louis Park, although then you'd have to hop on the campus connector to get over to the St. Paul campus. I think your idea to focus on Roseville or that direction does make more sense. And right around the St. Paul campus (the St. Anthony neighborhood mentioned above) is quite nice and very quiet. I think being really close to school would be really nice (I loved it the one time I could walk to work in five minutes! Nothing beats that kind of convenience), but assuming you're not thinking of taking on an astronomically long commute I don't think you'll find things too lacking if you live farther away, either. And thinking about it, if you do drive, St. Paul campus parking is much easier and cheaper than the Minneapolis campus, if you went that route.

[dadr]

Originally Posted by j30fini

I think, as someone who likes to be frugal, etc., it's hard to see money not be "invested." But, deep down, I do feel buying would be a big risk right now.

I think you've got it. Buying for 2-3 years is not an investment-it's an automatic equity hole you have to get yourself out of. The 3 year rule of thumb is gone - I'd say 5 years minimum to,expect any return on your investment.

In the best case scenario let's say you put $5K down and have the seller pay all your closing costs on a $200K home. Then over 3 years you pay down $10K. You will still end up paying hundreds if not thousands more in utility and maintenance costs that you wouldn't have had with an apartment - water, sewer, heat, garbage (usually paid for in apartments but not rental houses), costs associated with lawn mowing, random small fixes, etc. This is even assuming you don't even have to do major repairs. Then you sell the house for a little more than you bought it, and after commission and fees (even if you don't pay the buyers' closing costs) you may just break even.

[golfgal]

Originally Posted by dadr

I think you've got it. Buying for 2-3 years is not an investment-it's an automatic equity hole you have to get yourself out of. The 3 year rule of thumb is gone - I'd say 5 years minimum to,expect any return on your investment.

In the best case scenario let's say you put $5K down and have the seller pay all your closing costs on a $200K home. Then over 3 years you pay down $10K. You will still end up paying hundreds if not thousands more in utility and maintenance costs that you wouldn't have had with an apartment - water, sewer, heat, garbage (usually paid for in apartments but not rental houses), costs associated with lawn mowing, random small fixes, etc. This is even assuming you don't even have to do major repairs. Then you sell the house for a little more than you bought it, and after commission and fees (even if you don't pay the buyers' closing costs) you may just break even.

Which is better than tossing $32,000 away in rent that you can't recoup at all, assuming they can find a place for $900/month. Water, sewer, etc. is built into your rent costs.

[uptown_urbanist]

Originally Posted by golfgal

Which is better than tossing $32,000 away in rent that you can't recoup at all, assuming they can find a place for $900/month. Water, sewer, etc. is built into your rent costs.

Why are you under the impression that you can't find an apartment for under $900? They are tons of apartments for under $900.

And yes, water, sewer, usually heat, etc., are built into your rental costs -- that's part of what makes renting appealing in short-term situations like this. You know what your costs will be, so no surprises. Breaking even in two-three years is really a best-case scenario. And I don't think you're factoring in whatever investment potential his down-payment -- which on a 200k house (that he won't be able to afford on a $900/month stipend anyway, but whatever) would be 20 - 40k -- would be in those couple of years if he's not pumping it into the house. No guarantees on that either, I guess, but there are other investment vehicles out there besides real estate. He's not "throwing away" rent -- he'll have somewhere to live, he'll have flexibility, and he'll have more time and money for his graduate studies.

And in two years, when he's ready to take jobs around the country, he's either going to have to give up opportunities, become a long-distance landlord, or deal with trying to sell his house fast. What if it takes longer than he'd anticipated and he gets stuck paying for an empty house AND a new place in his new home? What if when he finishes up his degree he wants to buy wherever he ends up, but is stuck with a house back here and therefore finds his options more limited?

This idea that renting is ALWAYS bad and that buying is ALWAYS good is what has led to so many people getting in over their heads with real estate.

[j30fini]

I think you all have hit the nail on the head. Ultimately, I don't want to have to play landlord via distance if I cannot sell after I graduate. Maybe I would be able to, maybe I wouldn't. There is definitely an inherent risk to it, that I don't think would be wise to take at this moment. I've been pretty good with my money and decision making up to this point, so getting through school without digging into my savings would be a huge plus. I guess I'd rather feel 100% comfortable in purchasing a house, knowing I plan to be in it for the foreseeable future. Also, I'd probably be able to afford a much better home. Wishful thinking? Possibly. I think reading everyone's opinion on this subject, as well as writing out my own views in my responses really has helped solidify which way I should go.

As for being close to campus, I'm still torn. I suppose I'm not really partial either way, but my girlfriend likes the SLP area better. Making her happy translates into a happy me, amiright?! Kidding. She likes how it is not in the "college areas", and you seem to get a little more apartment value for your dollar when compared to units closer to either campus. No shock there. I've had my college experience (Oregon State alumnus here!) and don't really care if I don't have that this time around. I do, however, understand the convenience factor of being close.

[xandrex]

St. Louis Park is a nice area and they do run buses from that area, so getting to campus by car, bus, bike (it's a distance, but the Cedar Lake Trail--our "bike highway"--runs right to SLP), etc.

I would think places like Roseville offer better deals than SLP, if only because SLP is a bit more hip, especially on the east side near the Minneapolis Chain of Lakes. For what it's worth, none of the area around the St. Paul campus or Roseville (or even parts of nearby Como neighborhood in Minneapolis) feel like "college areas". The St. Anthony Park neighborhood in St. Paul is more like a well-kept village. I don't know that I've ever heard any drunken college students stumbling. They're all out partying in Dinkytown.