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Old 12-06-2012, 01:20 PM
 
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I determine the area and resell long before I ever start to determine the amount to buy.

1st - look at the area you want to live. Look at the trends - appreciating, or depreciating?
2nd - Look at the demographics - Are the current residents the type of people you want to live around?
3rd - Look at schools - in resell, even if you arent having kids, unless your in the $1MM range, schools matter
4th - Look at houses and determine what is desirable for that area.

Once you have done this, you can see the range of properties that you want. Then you decide whether or not you really want to buy now, or wait until you can get what you want...if your not going to be happy with your choice - Rent.

The area/demographics/school matter the most in buying/selling houses...once that is figured out the economics is next.

Is it a house or an investment? Is it long term or short? Do you have a better investment for the money? Is the other investment inflation protected? etc.

Personally I started spread sheeting every single bill/tax/expense I had 4 years ago...I keep a long running average and I know what my average is...I like to keep total fixed expenses mortgage,insurance,cars,student loans, etc below 40% of after tax pay. That leaves plenty of cash for food/gas/entertainment.

I would not want to be leveraged past 50% of after tax money...l
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Old 12-07-2012, 01:26 PM
 
Location: Houston, TX
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I figure between 2.5 and 3 times what my gross income is EXCLUDING bonuses.
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Old 12-08-2012, 07:10 PM
 
Location: In America's Heartland
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Settle for the lesser house. Settle for used cars. Settle for a fully funded emergency fund.

I suggest a house payment of no more than 25% of your monthly net income and take extra cash to pay off the house ASAP. Learn to live on less now, so that you can one day live a life in your later years free of fear that you may outlive your stash of cash.
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Old 12-10-2012, 04:25 PM
 
Location: At the corner of happy and free
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Don't forget to take into account the property taxes and homeowners insurance. Those will go up rather proportionately to the home's value, and in some states can be very expensive. I've owned several homes in the $300-400K range, and depending on the location have had property taxes of $8500/year, and homeowners insurance of $4500/year.

And of course, heating and air conditioning a larger home costs more.

Only you can decide if you want to spend that much on your house, or if you'd rather have plenty of money left for vacations and other life experiences, saving for retirement, etc.
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Old 12-11-2012, 06:41 AM
 
837 posts, read 1,795,281 times
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Quote:
Originally Posted by TimbrSS View Post
Relocated to a new area for work about a year ago, and it's time to buy a house. Trying to determine how much to spend. We are a couple in our mid 30's, no kids or plans for kids right now. 1 dog. Household income $150k. No debt. We have $100k for a down payment. Trying to figure how much is reasonable to spend on a house.
How would/did you handle this situation?
My advice: spend enough to be in a good neighborhood, never buy the most expensive house on the block, never buy the least expensive house on the block.

Long version: We bought ~900K, mortgage about 350, rest equity. Our monthly payments are around $2,000 all in.

Few things I've come to realize since:
* Manage the payment amount to be comfortable on one salary. We obviously put equity in, but we also kept our payments quite low. As my income has increased, this low payment has become less and less of a hassle. Those that 'stretched' are just now getting to a 'comfortable' amount. We've started toying with the idea of just paying off a year's worth of mortgage payments with part of my bonus every March.
* Make one extra payment each year. This will shave years off your mortgage. Seriously. You wont believe the impact it has.
* Location, Location, Location. Part of the premium I paid was for being in a good school district and being in a location that facilitates an easy commute to work (DC is known for having awful traffic). The home I'm in has staying power -- DC is a bit unique that there's a number of natural bottlenecks around the city that cannot be moved (namely a river and a very limited number of bridges that, for the most part, cannot really be expanded); that bottleneck has fueled premiums for anything near or in the city and thats unlikely to change anytime soon.
* Take the time to contest your property tax assessment. Its worth the effort. We shaved nearly $2,000 off a year by demonstrating that the assessed value was way off.
* Finishes can be changed, location cannot. Kitchen is not remodeled? Big deal. Get your wife comfortable with this fact and you can save a LOT. New granite might cost you $5000, the house with the new kitchen will cost you $50,000 more. Our home is surprisingly modest for its price - we have for instance no bathtub, the kitchen was last remodeled in the 1970s, the house had no grounded outlets when we bought it, it had no blinds, no canned lighting, the bathroom is hot pink, etc. All of these things can be fixed in time. We still have no bathtub for our kids (this one sucks w/ 2 kids), we still have a 1970s kitchen... but we chip away at the projects each year when the bonuses come in.
* You need less space than you think. There was once a study done by some economist (wish I could find it) that demonstrated that people often chose an extra bedroom over a shorter commute but the utility gained from the extra bedroom was near zero, whereas the utility gained from a shorter commute was substantial and sustained. Perhaps and obvious point, but I've seen a lot of people buy bigger homes just for the sake of some guest room that gets used once a year, if that.
* If you do plan to have kids... a yard goes a long way to making kids happy. It doesnt have to be big, but a little outdoor space helps.
* If you can get a decent home for $150K and have it paid off in a year or two, that will do wonders to your financial situation. Round here, $150K would buy you a tear-down in an undesirable area of town; but perhaps in your situation it doesn't.

Last edited by chicagotodc; 12-11-2012 at 06:57 AM..
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Old 12-11-2012, 08:18 AM
 
Location: Raleigh, NC
2,541 posts, read 5,461,379 times
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Quote:
Originally Posted by SpeedyAZ View Post
In your situation, I'd say a $400K-$450K house is affordable and would be a wise investment. The way I think about it...you'll be living in the house for quite a while, why NOT buy something you'll be happy with in the long run?
This really depends on your area, but in this economy I would stick with lower end housing. Especially when considering the previous poster who said that median income is 125k, but housing prices start at 400k+. Situations like that are just waiting for another housing crash.

In my area, the lower end houses (200k-250k) are selling like hotcakes while the over 300k are still slow to move. Thinking of a large mortgage as an investment is foolish in my opinion.
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Old 12-11-2012, 12:45 PM
 
837 posts, read 1,795,281 times
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Quote:
Originally Posted by pegotty View Post
This really depends on your area, but in this economy I would stick with lower end housing. Especially when considering the previous poster who said that median income is 125k, but housing prices start at 400k+. Situations like that are just waiting for another housing crash.

In my area, the lower end houses (200k-250k) are selling like hotcakes while the over 300k are still slow to move. Thinking of a large mortgage as an investment is foolish in my opinion.
Amazing how much a difference area makes. Round here, anything under $700K would be instantly snapped up - in any condition, even tear down. Stuff under $1M usually sells within a month and things below $1.5M will generally sell in 90 days or less, unless they are just way overpriced for what they are. Its really only at the $2M+ range that things tend to take longer.
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Old 12-12-2012, 08:41 AM
 
Location: Scottsdale, AZ
4,472 posts, read 17,653,009 times
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Quote:
Originally Posted by pegotty View Post
This really depends on your area, but in this economy I would stick with lower end housing. Especially when considering the previous poster who said that median income is 125k, but housing prices start at 400k+. Situations like that are just waiting for another housing crash.

In my area, the lower end houses (200k-250k) are selling like hotcakes while the over 300k are still slow to move. Thinking of a large mortgage as an investment is foolish in my opinion.
As you said yourself, it really does depend on your location.

In chicagotodc's area, he's noticed a different trend.

In the Valley, homes in Scottsdale in the $400K-$800K-ish range are selling quite well while in Gilbert, homes between $200K-$350K seem to be doing very well. Once you get above $1 million in any Valley city, the sales are slowing. People with money are still buying homes but they aren't buying THE HOMES they were in the early 2000's. Baby boomers and retirees are still snapping up affordable properties; I used to work in real estate and have friends who work in it and the common sentiment is that retirees seem to have more money than ever. Of course this is purely anecdotal but recently there have been an influx of money into the Valley because retirees and soon-to-be retirees are seeing the VALUE in the current pricing and snapping up a winter home before prices climb higher.

I think if you have a mid six-figure salary, you could probably afford a $400K property without a strain on your budget. Unless you have some very expensive hobbies or other bills, a $400K mortgage payment isn't out of reach. The relationship between income and expenses isn't linear and after you hit a baseline salary that can comfortably pay necessary bills, the income above that mark can supplement a $400K mortgage.
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Old 12-13-2012, 09:37 AM
 
4,483 posts, read 9,260,901 times
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Quote:
Originally Posted by TimbrSS View Post
We've seen a few houses in nice areas that will meet our minimum requirements, in the $125k to $150K range. . . .
We've also seen some nice houses in the $400k range.
And what's in between? If there are decent houses in nice areas for $125,000, there must be some really good houses in the $200,000-$300,000 range.

Don't buy a big house just because you can. They don't clean or maintain themselves.
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Old 12-13-2012, 09:38 AM
 
Location: MO->MI->CA->TX->MA
7,022 posts, read 14,431,683 times
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Quote:
Originally Posted by jtur88 View Post
I bought the cheapest I could find that met my minimum housing requirements. Whatever it cost dictated how much I spent.
Exactly.. it's still gonna stay the same even if I were a millionaire.

Less money spent on housing = more money I can either enjoy by vacationing or invest for better returns in the stocks, bonds, and commodities.
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