$75,000 cash on hand - buy a house or buy 2 cars in cash? (Phoenix: 2014, leasing)

[kent_moore]

Hello guys! First of all I'd like to say I enjoy Phoenix very much. Been here for a month now and everything seems nice, weather (so far), the friendly people, the nice job I have. I can live here longer. I am not really bothered by the weather in summer, all the amenities are very accessible. By the way, I moved here from Singapore. And I thanked all those who people who helped me here. I have another dilemma and I have few months left to decide.

I am trying to create a budget for me and family (who will be coming in August). The basic things we need, that will be a affect our major financial decision, is the house and 2 cars (we are fine with 2012-2014 pre-used models). I am the only one working so we have a very limited cash flow.

Based on my preliminary assessment, I have 2 options to consider.

Option 1: I'll buy a house ($300K, DP of $60K and monthly mortgage* of $1300) and mortgage my 2 cars, at the end of the month, I will have an expected savings of X.

Option 2: I'll rent a house for a year (budget $1600 per month) and fully pay 2 cars** (total of $42K), at the end of the month, I will have an expected savings of X+$300.

--------------------------

Option 2 will give me more savings and more cash will be left from my current savings. But I felt like renting a house, even for temporary, is a waste of money and it is more expensive. In addition, it may even be harder for us to save DP should we decide to buy our own house in the future, probably we need to wait for 2-3 years.

There might be some other factors that I am not seeing at the moment hence, I need your help guys to enlighten me inorder to maximize my both my income and my current savings.

Thank you in advance!

*based on zillow assessment.
** 1 sedan and 1 SUV with 3rd row seats.

[lewdog_5]

I'm not sure option 1 makes sense as leaving you with only 15k liquid seems pretty low. You always have to think about an emergency fund of about 6 months and that surely isn't enough for monthly bills and having two car payments to pay for.

Not sure where you are at for age and retirement either, as that should play a part in your decision.

Other options include less DP or buying a less expensive house or car. I don't think either of those scenarios is that attractive financially.

[Jkgourmet]

1. Zillow estimates are crap. The ONLY numbers that matter is what houses have actually sold for in the last 3 months. Deals that closed.

2. How long are you going to be staying in the area?

3. Renting is defiantly NOT "wasting your money". You and your family gain many things by renting: Time
(no maintenance), no worries about repairs or new appliances, a\c etc (it's the landlord's problem), flexibility (you can leave for another area so quicky), and many other positive benefits.

4. You need to consider cheaper cars. If one vehicle is going to be driven less than 12,000 per year and you've got great credit, consider leasing one vehicle for 36 months (NOT longer, NOTHING down, only look at cars with high residual values - Honda civic, Honda accord, Hyundai sonata, Toyota Camry, Toyota Corolla).

[kent_moore]

Originally Posted by lewdog_5

I'm not sure option 1 makes sense as leaving you with only 15k liquid seems pretty low. You always have to think about an emergency fund of about 6 months and that surely isn't enough for monthly bills and having two car payments to pay for.

Not sure where you are at for age and retirement either, as that should play a part in your decision.

Other options include less DP or buying a less expensive house or car. I don't think either of those scenarios is that attractive financially.

Oh, thanks for your opinion. That's worth considering.

I am 33, married with 3 kids

[lewdog_5]

Originally Posted by kent_moore

Oh, thanks for your opinion. That's worth considering.

I am 33, married with 3 kids

Instead of focusing on housing price, focus on housing needs. How much space do you want/need. That determines what areas of the city to look for houses that meet your needs. Most people hate commuting so a relatively close distance to work would allow you to find a radius and look for homes that meet your needs in that area. 300k in Scottsdale is very different from 300k in Glendale. That's why you should determine your housing needs and must-haves and meet with a Realtor before deciding anything financially.

My wife and I rented for our first two years here. Best decision we ever made. We were able to save a good chunk of change for a down payment and still leave us with enough in savings. Renting gives you an exact budget to follow as the unexpected costs of homeownership are always higher than you expect.

Best of luck.

[kent_moore]

Originally Posted by Jkgourmet

1. Zillow estimates are crap. The ONLY numbers that matter is what houses have actually sold for in the last 3 months. Deals that closed.

2. How long are you going to be staying in the area?

3. Renting is defiantly NOT "wasting your money". You and your family gain many things by renting: Time
(no maintenance), no worries about repairs or new appliances, a\c etc (it's the landlord's problem), flexibility (you can leave for another area so quicky), and many other positive benefits.

4. You need to consider cheaper cars. If one vehicle is going to be driven less than 12,000 per year and you've got great credit, consider leasing one vehicle for 36 months (NOT longer, NOTHING down, only look at cars with high residual values - Honda civic, Honda accord, Hyundai sonata, Toyota Camry, Toyota Corolla).

Thank you! I will definitely stay here longer, probably 10 years or more. I have lived in 2 countries before US, cos of job relocation. Any idea about estimated cost of maintenance/repairs in a yearly basis?

The one I am using now is 2013 Honda Civic, it is a company leased car and they want to sell it to me (if I want to) once the lease expires.

I am also considering leasing cars, but we might need to travel around Arizona and nearby states in our first few months here, that would eat a lot of mileage.

[kent_moore]

Originally Posted by lewdog_5

Instead of focusing on housing price, focus on housing needs. How much space do you want/need. That determines what areas of the city to look for houses that meet your needs. Most people hate commuting so a relatively close distance to work would allow you to find a radius and look for homes that meet your needs in that area. 300k in Scottsdale is very different from 300k in Glendale. That's why you should determine your housing needs and must-haves and meet with a Realtor before deciding anything financially.

My wife and I rented for our first two years here. Best decision we ever made. We were able to save a good chunk of change for a down payment and still leave us with enough in savings. Renting gives you an exact budget to follow as the unexpected costs of homeownership are always higher than you expect.

Best of luck.

I know my housing needs already and based on the location and amenities of our choices, we have to pay $1600 monthly rental. Most, if not all, rental houses under $1500 are not so appealing to us. But I'm still searching further in order to get a good deal.

I am interested in Ahwatukee area (probably up north). We are fine with 3br house with our own private pool for the kids during summer. My office is very near to Sky Harbor Airport and my client is in Chandler (which i visit once in a week). I found some good schools there too so we thought it is a perfect location for us.

Thank you, i appreciate your help

[PhoenixSomeday]

If I had 75 large, I would not be dropping 42 of it on cars. 99.9% of cars depreciate, and they do so rapidly, especially in the first few years. Home value does have ups and downs, but by and large over the long term a house will appreciate in value.

Were it me, I'd keep the cheap cars I already have (as long as maintenance costs were not stupid), rent for a while, save the rest, and see how things go as I planned and researched and bided my time.

[like-2-hike]

If I were in your position, I would do the following:

• Rent for one year +/-. Use this time to determine where you and your family would like to be for the next 10 or so years.
• Buy the leased Honda from your employer when the lease is up (assuming a fair price). Should be very reliable and a great daily driver / short trip car.
• Buy a 2009 - 2012 lower mileage used SUV - price not to exceed $20k. If you won't put a ton of mileage on it, you could consider leasing a new SUV.
• Instead of paying cash for your cars, you may wish to consider financing them (at least partially) - rates are very low and you might be able to earn more investing the money.
• Save as much cash as possible - for unexpected issues (car repair, health issues, job loss) or to later use in part as a down payment on a home.
• Talk to mortgage lenders whenever you're ready (the sooner the better) to determine what (if anything) you need to do to make the home buying process smooth (any issues with credit report, down payment requirements, etc.). Also confirm if you can take advantage of mortgage options like 5% down conventional (w/ no PMI).

Good luck - I hope you and your family have a great time here!

[observer53]

Originally Posted by kent_moore

Thank you! I will definitely stay here longer, probably 10 years or more. I have lived in 2 countries before US, cos of job relocation. Any idea about estimated cost of maintenance/repairs in a yearly basis?

The one I am using now is 2013 Honda Civic, it is a company leased car and they want to sell it to me (if I want to) once the lease expires.

I am also considering leasing cars, but we might need to travel around Arizona and nearby states in our first few months here, that would eat a lot of mileage.

If you lease, you can rent a car for road trips you take in those first few months. Always deals to be found online, and you can save your lease mileage for "normal" driving.