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I had moved away from my second home of Georgia to live in the midwest from 2012-2017. Now that I'm back in GA I'm tossing around this idea of buying a bit more seriously. Previously, discussions around this topic seem to leave me questioning whether it's the best move for me or not. Honestly, I have never been able to determine that despite plenty of reading through the "rent vs. buy" debate threads.
One of my closest friends who I trust with advice about money has really been putting the pressure on me so to speak in terms of buying recently. His stance is that, at 38, I seriously need to consider buying as a step towards building assets. In addition, rental rates have increased dramatically in my city and we are in agreement they will continue to go up; he believes I should lock myself into something now while I still can as people are being priced outside of the area I live in quickly.
A few things about me:
-Currently car-less. Hate being in traffic so living far out is not an option. Willing to buy a used car if I move to a neighborhood where I need one. (I work from home so right now I've been fine without one but I live in a car-centric city with EXTREMELY bad traffic issues.)
-Job is pretty stable...been here 4 years and considering staying as long as I can at this point. So I have no plans to switch jobs or careers at this time. I do have about a 5 month emergency fund at this time in case of job loss fyi.
-I prefer newer places to older places; don't care about space.
-To be honest, I don't really want roommates but to get closer to financial independence I would be willing to consider them.
-Keep in mind, as mentioned, I work from home right now.
With all of the above said, I was thinking there were 2 "strategies" I could take when it comes to buying:
Option 1 ("Go Low"): Buy a cheap 1 br/1 ba condo, say ~130k max. Pros: Get to live alone, less space to clean/furnish, lower utilities. Price point is only 1.4 times my salary. If I find something in this range it will be in the city which is where I prefer to live. Cons: Will be extremely hard to find at this price point. Won't be much space for entertaining although I don't entertain much anyways. Will likely be an old condo. Might not be suitable for a dog (want to own one day).
Option 2 ("Go Higher"): Buy a larger space, say ~230k max. Likely would be a 3 br/2 ba townhome. Get a roommate or two. Pros: At this price point, would be a newer place. More space. Flexibility of having roommates cover most of mortgage (but could still cover on my own). More suitable for a dog. Cons: Living with roommates (no duplexes in my city so the best I could probably do is get a property with a basement suite but even that is highly unlikely at this price point). Price point is 2.5 times my salary. More space to clean/furnish. Utilities will be higher. Larger space=barely living in the actual city; perhaps even a bit outside of the city (=going back to driving and TRAFFIC).
My friend says "Go Low". He says I could always rent the condo out if I had to move (for employment reasons for instance). He feels I won't really commit to the roommate thing and believes cheaper is better as that means more money to invest and not spend on the mortgage.
The major risk I'm trying to hedge against is job loss. I still have to pay the mortage on my own with Option 1. Option 2 is a contender because I see it as a means of providing a way to cover myself in the event of job loss. In addition, having a roommate cover most of the mortgage would lower what I pay towards housing significantly below what I'd be paying via Option 1.
I tend to overthink things and get analysis paralysis. I don't know what is the best route to consider. Thoughts...?
I'm pretty fiscally conservative myself and I plan to go low, but not a 1 bedroom condo, I'd say shooting for something like a 2 bed/2 bath. So you have enough room to not hate yourself by feeling like you're still living in an apartment. Plus a 2 bedroom is good future proofing so you'd stay for a while. (Hopefully with an attached 2 car garage would be perfect, you can use for storage, or maybe a day you'll have your own car)
2 bedroom townhomes shouldn't cost much more than a 1 bedroom, though that's location dependent.
You could buy something that even though you might not like how it looks, you can always renovate and make it your own. It just makes it cheaper cause more than likely, the price of a newly renovated/built townhome will almost certainly cost quite a bit more than your outdated one.
I'm pretty fiscally conservative myself and I plan to go low, but not a 1 bedroom condo, I'd say shooting for something like a 2 bed/2 bath. So you have enough room to not hate yourself by feeling like you're still living in an apartment. Plus a 2 bedroom is good future proofing so you'd stay for a while. (Hopefully with an attached 2 car garage would be perfect, you can use for storage, or maybe a day you'll have your own car)
2 bedroom townhomes shouldn't cost much more than a 1 bedroom, though that's location dependent.
You could buy something that even though you might not like how it looks, you can always renovate and make it your own. It just makes it cheaper cause more than likely, the price of a newly renovated/built townhome will almost certainly cost quite a bit more than your outdated one.
In regards to the bold, you literally just said the same exact things my friend said.
Also, for clarification purposes, please allow me to mention that by condo I mean "apartment style". I think there are regional differences in what people refer to as a condo. By townhome, I mean "a house that shares walls with the houses next to you".
You mention a condo with an attached garage, but to me that's a townhome. 2/2 townhomes are not common here. If I found a 2/2 townhome, it would not be near 130k. In addition, even a 2/2 condo would be hard to find at 130ish...at least in the city.
The major risk I'm trying to hedge against is job loss.
If this is even remotely real whether by YOUR choice or theirs... don't buy at any price.
Whether you buy or rent keep your housing costs low.
After payroll taxes/FICA etc and after pretax retirement account deductions...
(BOTH of which matter far more than buying) keep your rent/mortgage utility costs low.
Ideally that won't exceed one WEEKLY net check covering those MONTHLY housing costs.
Four key factors in your decision are: first time home buyer, who works at home, some concerns about job stability and single/alone/no transportation.
1) First timer: You will likely learn more about what you like/dislike (neighborhood, traffic, size, layout, noise, etc) from owning your first home. Therefore, you need to consider resale probability.
2) Work at Home: Since you will be spending most of your days there, look for a view and pleasant surroundings.
3) Concerns about job stability: (Depends on degree of concern) - Again, consider resale probability over short-term appreciation - in the event you need to move again in the near future.
4) Single/live alone/no car: Location near things you enjoy and transportation (which will likely locate you closer to town on a bus line or ??).
People have always used home ownership and appreciation to build equity and move-up in homes. This is particularly important when trying to break out of the rental cycle. The 2008 housing burst bubble was an anomaly and should not be overly factored-in, however, home ownership isn't for everyone (maintenance, repairs, limited move flexibility, prefer change over stability).
Analysis paralysis comes from not fulling trusting your own decisions and instincts. Paradoxically, one learns to do that by making and living with one's decisions. There is no 'silver bullet' that magically solves life's quandaries. Decide what you want to do and then make the best decision you can to accomplish that, based on weighing the important factors. Like everyone else, you too will occasionally make mistakes, but, if you learn from them, you will soon learn to trust your own decisions and instincts. Good Luck!
Plus a 2 bedroom is good future proofing so you'd stay for a while. (Hopefully with an attached 2 car garage would be perfect, you can use for storage, or maybe a day you'll have your own car)
actually, ill adjust my recommendation to suggest renting only. the small condo will only last so long so its better to have the flexibility of renting.
there is no need to buy a home to build your assets. homes arent asset trees that grow magically. it is the money you put into it plus appreciation that builds equity. you could put that money in another investment that grows and you will be increasing your wealth. dont feel obligated to buy because that is what some people believe is the only way to grow your net worth.
actually, ill adjust my recommendation to suggest renting only. the small condo will only last so long so its better to have the flexibility of renting.
there is no need to buy a home to build your assets. homes arent asset trees that grow magically. it is the money you put into it plus appreciation that builds equity. you could put that money in another investment that grows and you will be increasing your wealth. dont feel obligated to buy because that is what some people believe is the only way to grow your net worth.
In regards to the bold, when I spoke with my friend about this I did bring up the same point.
He basically stated that I needed to strongly consider buying as part of an asset building strategy...to consider my investments another piece. Basically, he was saying in order to have a balanced portfolio owning real estate should be a part of that.
Lastly, we have been having conversations lately about what retirement would look like for us and he has been pushing the home ownership thing with the reasoning that I should plan on having a paid off residence in retirement and that I don't want to reach 60 and still be paying rent or have a mortgage as my income will be lower then. This seems to be one of the bigger reasons he is a proponent of me owning....
If you haven't already contacted a real estate agent, you might want to and explain your situation. They can show you options that should sway you one way or the other. Also, there are always homes that come up for sale that are sold before they are officially on the market. The only way you'd find those would be via an agent.
When I was in my 20's - early 30's, I had a 1/1 apartment-style condo. It was a lovely little place that allowed me to live in a great area for a very low price. The low costs allowed me to save a ton of money. When I left but continued to own it, it was easy to rent. In that complex, the larger the unit the more the condo fee. While 2/2's are bigger, you usually will pay more in condo fees for the extra space.
Not saying you should, but in your shoes, I would choose the 1/1. I wouldn't want to have a roommate and I was happy with my previous 1/1. The 2/2 townhouse may be a better investment, but I wouldn't want to have to depend on having a roommate. You gotta do what makes you happy.
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