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It may or may not make financial sense for everyone. However, there are other things to consider beyond the ability to make a profit or what rate of return you could get elsewhere. We all need a place to live and we all need to pay for it. Some people don't mind renting, others hate it. I am in the second group.
We are closing on our house later today (yay!). We are in a position where we need to move soon, whether it was buying a house or finding a house to rent. I have done the apartment thing and I am done with that. Ugh. I have looked at rental houses in the area we are buying. Rents for smaller houses are more than our house payment will be (including taxes and insurance). We have multiple animals and always will. The rental market in our area is very pet unfriendly. If we could find a place that would allow our dogs, cat and parrot, it would most likely be a trailer or far from town and we would be paying a lot extra in pet fees.
I have rented with dogs for many years and I don't want to do that anymore. I want the freedom to make my own decisions. I have had some really bad experiences in the past with apartment complexes and managers. For us, it makes more sense to buy.
However, we are buying below our means, which makes a big difference.
I forgot to say there are other math considerations you need to factor in.
You want to have a year or two of living expenses in cash on hand in emergency savings so being a home owner in your scenario will increase the amount that you are currently saving. Or should be.
What does 150K get you in Houston? Is it a one bedroom condo? Or is it a 3 bedroom house? Are you comparing apples to apples?
I bought my first home as a single woman when I was 32. I bought a 2BR/2BA condo with the idea that it would be easy to take in a roommate if I wanted or needed to. It never came down to that but eventually, I had a child while living in that condo and appreciated the extra room very much.
It also sold at a tidy profit and provided a down payment for my next home. I sold that one last summer, again at a nice profit, and have now moved into new construction which is pretty much as close as I am realistically going to get to my dream home. Climbing the property ladder was the only way I was going to get here, particularly since I live in a city where a comparable home rents for more than my mortgage, property taxes, HOA and HO insurance combined and that was the case in my previous home as well.
Now that doesn't mean buying a house is right for *you* and it may not be. But even just running the numbers, I think you are not making the right comparisons.
DING DING DING. The bolded section was my train of thought.
I'm 25 y/o female and recently closed on a $150k house. It's 3 bedroom 2.5 bathrooms. My mortgage is $908.91. I have successfully rented out both spare bedrooms (one $550 all inclusive and another is $650 all inclusive). Not only do I not have a mortgage to pay, but I have about $300 profit each month as well. When I am ready to have a family, I have the extra room, while still building equity. Additionally, the house was a foreclosure so it appraised for almost $200k. When it comes time to sell, I will hopefully earn that $50k profit that I can use towards a down payment in another house.
OP, I would rerun some numbers, and ultimately rethink your decision. Some people wait until they're married and that's fine. Or, if you have the funds now, why not build some equity and get yourself settled before meeting the right person?
DING DING DING. The bolded section was my train of thought.
I'm 25 y/o female and recently closed on a $150k house. It's 3 bedroom 2.5 bathrooms. My mortgage is $908.91. I have successfully rented out both spare bedrooms (one $550 all inclusive and another is $650 all inclusive). Not only do I not have a mortgage to pay, but I have about $300 profit each month as well. When I am ready to have a family, I have the extra room, while still building equity. Additionally, the house was a foreclosure so it appraised for almost $200k. When it comes time to sell, I will hopefully earn that $50k profit that I can use towards a down payment in another house.
OP, I would rerun some numbers, and ultimately rethink your decision. Some people wait until they're married and that's fine. Or, if you have the funds now, why not build some equity and get yourself settled before meeting the right person?
It's not just the mortgage. You also have to factor in taxes, repairs, and lost earnings on the time you spend and capital you invest.
If you are a renter, and you want to stay living in your rented house or rented apartment, the landlord has the upper hand on whether you can stay long term. You lose the freedom to choose whether you will live there once the lease expires. This is a nice freedom to have. Except for some rent controlled areas which are very few locations with this rule.
Renting: Landlord could require you to move out once your annual lease expires. You are stuck moving even if you want to stay there.
Owning: There's no landlord that's going to tell you that you must move because the owners want to live there, or because they decided to sell the rental and the new owner wants it vacant.
It's not just the mortgage. You also have to factor in taxes, repairs, and lost earnings on the time you spend and capital you invest.
I have no lost earnings. I work a salaried full time job and time spent on my home is not time I'd be spending working. Plus I enjoy working on my home, it's a hobby for me. Unless you are saying that any time you spend on other activities besides work needs to be counted as lost earnings, your argument makes no sense.
And given current interest rates, I think that the prior poster's $908 per month includes mortgage and taxes. Plus possibly a very minimal down payment so not a lot of capital tied up.
You can be against home ownership, but your position loses credibility when you fudge the numbers to make that argument.
I have no lost earnings. I work a salaried full time job and time spent on my home is not time I'd be spending working. Plus I enjoy working on my home, it's a hobby for me. Unless you are saying that any time you spend on other activities besides work needs to be counted as lost earnings, your argument makes no sense.
And given current interest rates, I think that the prior poster's $908 per month includes mortgage and taxes. Plus possibly a very minimal down payment so not a lot of capital tied up.
You can be against home ownership, but your position loses credibility when you fudge the numbers to make that argument.
I did not fudge anything, though I did forget to mention that the lost earnings are zero if you enjoy it and would not otherwise be working. This is a very fair point.
It really depends what makes sense and what lifestyle you want. I bought first home at 23 and since then my husband and I have bought/sold and lived in a few others. One on acreage, two on golf courses, near the beach, etc. Anyway after 10 years and a cross country move we are 100% over home ownership. We have zero problem renting and have more than enough in the bank to do whatever we want. Freedom. We chose a nice apartment complex with great amenities and can call maintenance to fix anything. We were just so over the constant need to fix something in a home.
Anyway, not sure if we will rent forever or buy again or what but at this point in life it is the best option for the lifestyle we want. Its not ALL about trying to invest in a home. Then its just a burden. We also make more in the stock market and always have.
So, while its smart to run numbers and think about home ownership, you also need to take into account your lifestyle. Are you handy? Do you like projects? Because it helps if you do when owning.
My good friend has always rented. He makes 7 figures a year as a portfolio manager for a billion dollar company. He's always said (along with Warren Buffet) that homes are bad investments. But he's a bachelor so travels often and wants the freedom. Maybe to the very financially savvy its a bad choice. Who knows though. Just go with your comfort level.
If you are a renter, and you want to stay living in your rented house or rented apartment, the landlord has the upper hand on whether you can stay long term. You lose the freedom to choose whether you will live there once the lease expires. This is a nice freedom to have. Except for some rent controlled areas which are very few locations with this rule.
Renting: Landlord could require you to move out once your annual lease expires. You are stuck moving even if you want to stay there.
Owning: There's no landlord that's going to tell you that you must move because the owners want to live there, or because they decided to sell the rental and the new owner wants it vacant.
On the other hand, as an owner, if you do end up needing to move (say for a job relocation), you have a house to sell. Much more time and money is needed for that than for moving as a renter.
I had a two friends who bought two family homes and rented out both sides. The basements do not have a CO and can't be rented but nothing to stop a single owner from carving out a small apartment and living there themselves. They were both cash cows
Just cause the basement could not be rented does not mean the owner could not use it.
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