Good idea buying a condo ? (Arlington, Fairfax: real estate, foreclosure, to rent)

[Stfranch]

Hello everyone !

I am at mid 20s and recently got a job in D.C Paying me 67k/yr.

My wife is still in college.

We are currently renting out an aparment for 1400/month in MD.

Because of tax deduction of paying mortgage interest,

I am looking into buying a small condo less than 300k.

I don't have good knowledge or any experience about tax and real estate.

is it a good idea to buy a condo in Alexadria?

I need your opinions guys

Thanks a lot

[boyd888]

You cannot afford a 300K condo on an income of $67K. Even with 20% down (very doubtful for mid 20s making 67K unless you have outside help), the PITI will be $1500 plus another $300+ a month in condo fees. If you only put 5% down your PITI plus condos fees could be near $2K a month.

Being that you are married and only make $67K you won't even have enough deductions to take full advantage of the mortgage interest deduction anyway.

I would keep renting and maybe consider buying when your wife graduates and gets a job and you know for sure you want to stay in the area.

[acgood]

Agree 100%. And boyd didn't even mention the possibility of kids in the new few years that could make you want to move again also

[Stfranch]

Originally Posted by boyd888

You cannot afford a 300K condo on an income of $67K. Even with 20% down (very doubtful for mid 20s making 67K unless you have outside help), the PITI will be $1500 plus another $300+ a month in condo fees. If you only put 5% down your PITI plus condos fees could be near $2K a month.

Being that you are married and only make $67K you won't even have enough deductions to take full advantage of the mortgage interest deduction anyway.

I would keep renting and maybe consider buying when your wife graduates and gets a job and you know for sure you want to stay in the area.

Hello Boyd,

Thanks for your insight.

I work for a private company paying me a little more than average and yes, I was planning to DP 20%(outside help.)

I had my first paycheck last week and it seemed I pay total around $250 for tax every week.

Being that, I thought loan amount of 240k(300k-20%DP) with <5% interest rate would make me pay about $1000 interest/ month.

Currently, I'm renting for $1400 and even though I am going to spend total of $1800/month for owning $300k condo, I am guessing the tax deduction gives me at least $400 advantage/month?

I just started having interest on housing and I don't know how this mortgage interest deduction works.

Your reply helps me a lot to get an idea and another one will be so much appreciated.

[ChristineVA]

Don't forget the condo fees which are pretty high.

I would never recommend buying a property at your age because it really locks you in about what future choices you have. I know you think you are settle now, but so much can change for you and I think it's best not to get tied down.

Depending on the market over time, condos can be *really* hard to sell and you could get stuck.

But again, I stress, check out what the monthly condo fee would be on top of your mortgage payment.

[slduvall]

Without teaching a tax lesson, which I'm totally not qualified to teach, I was wondering if you understand a tax deduction. This doesn't come out every month from your taxes, this is something you file for at the end of the year. You can only deduct your interest payments and qualifiying payments. It also isn't a one for one deduction - you paid $X a month and get $X back. That would be a tax credit. A % of the interest gets "paid" back to you.

And of course this all depends as someone else said, if you can use Schedule A to deduct any expenses. Also keep in mind that the deduction shrinks, rather than grows, as you pay more of the interest on the house. A quick look at Bankrate shows a savings of about $273 a month. This is due to the lower tax bracket you are in, as your income rises, so will your tax rate.

Is it a good thing to buy rather than rent, you bet, but only if you afford it and only if it puts you ahead of the game. This math doesn't seem to, with a $1300 mortgage, plus insurance, condo fees etc you are exactly where you would be if you just rented. Maybe even paying more. A $200K mortgage, with 20% down would make more sense.

[SandyJet]

condos generally only keep up with inflation and they are harder to sell than a single family home.

Unless you are in trendy Williamsburg or Soho they are not cash cows.

[HB2HSV]

Originally Posted by Stfranch

I am at mid 20s and ...,.

I don't have good knowledge or any experience about tax and real estate.
:

That is a given.

I admire your motivation which is to plan for your financial future by investing in owning your home, a great first step. However; I want you to think long & hard about home-ownership by asking you the following questions

Are you both willing to be equity-rich but cash-poor? This means sitting at home while your friends go on vacations, not able to have a rainy-day fund, etc?

What if you lost your job? Do you have 6 months of mortgage payments saved up? If not, can you say foreclosure?

Will you be able to afford raising children if one day you come home & your wife say "surprise!!!"???

If you can say "yes" to the above, I'd say "go for it"!! Because home-ownership is a very gratifying and you build equity in the long run. Nothing like being a home-owner teaches you better about responsibility 'cause you can divorce your wife but a home will need a "buy-out" which is harder to do.

[ameridreamNoT]

Originally Posted by HB2HSV

That is a given.

I admire your motivation which is to plan for your financial future by investing in owning your home, a great first step. However; I want you to think long & hard about home-ownership by asking you the following questions

Are you both willing to be equity-rich but cash-poor? This means sitting at home while your friends go on vacations, not able to have a rainy-day fund, etc?

What if you lost your job? Do you have 6 months of mortgage payments saved up? If not, can you say foreclosure?

Will you be able to afford raising children if one day you come home & your wife say "surprise!!!"???

If you can say "yes" to the above, I'd say "go for it"!! Because home-ownership is a very gratifying and you build equity in the long run. Nothing like being a home-owner teaches you better about responsibility 'cause you can divorce your wife but a home will need a "buy-out" which is harder to do.

what he/she said. I'd say keep renting for now 'til you have saved up enough for the DP as well as funds set aside for emergency. When purchasing real estate or a home to live in, don't go for condo since you're both married and if God gives you angels, you need to be able to have room for. Keep saving up and plan wisely on choosing a town house or single family home. By owning a town house or single family, it gives you a lot of advantages. You'll know when you actually own one.

[tysonsengineer]

Originally Posted by SandyJet

condos Housing generally only keep up with inflation and they are harder to sell than a single family home you shouldn't rely on it as an investment.

Unless you are in trendy Williamsburg or Soho they are not cash cows.

FTFY

Purchased housing is a reduction in cost otherwise spent on rent. It is not, or should it ever be, a form of speculative investment. Did we learn nothing? The type of housing is much less important than the location of the housing to whether it is hot/will sell. See lots of condos in Arlington/DC and Fairfax that have increased in value since 2008 while SFH in other neighborhoods are still well below 2008 levels. Either way, the increase in pricing is nice and all, but is so dependent on things that are completely out of your control, that you shouldn't rely on it for your calculus on whether to purchase or not.

Compare how much it would cost to rent (with escalation) versus how much a mortgage would cost. Add in the benefits of flexibility/mobility with renting, add in the benefits of equity/tax return on purchasing. Ignore future value possibility.