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I'm also a bit curious how the OP suddenly incurred $100k in expenses that couldn't be cash-flowed out of income. If this is something that plausibly could happen again, OP needs to keep renting so the money will stay liquid.
I'm 25, have about 130k saved, and make about 80k a year before taxes- And can use/save most of that.
Pretty decent, but the problem is houses in my area(outside Boston) is insane. Where I live now, most single story homes that would at all be to my standards for a purchase are 450-600, with the more ideal ones I'd actually be happy with are 800k-1.2, obviously with higher ones being closer to the city.
I can't decide if I should just be saving like a madman to afford my dream home, or buying a nice single story, and then later upgrading it.
My main concern about that however is that from what I've heard, upgrading houses is a crapshoot in terms of getting what you want/unreliable builders.
Appreciate any and all advice from this community.
Before I say anything you are quite a guy (I assume you're a guy by your screen name) to save up $130,000 by age 25. I can't manage to save more than $1000 and I'm old enough to be your mother!
How close to you want to be from work? Are you considering a townhome? If you have an end unit there will only be someone on one side and nobody above you. Do you have anybody you trust to give you referrals for renovation projects?
Good luck it sounds like you have a good head on your shoulders.
Very important: Make sure you get a home with a full basement and an attic that you can get into. Vitally important for adding things in the future and making repairs. Stay away from homes with no attic access. Stay away from homes on slabs or with 2-3 ft crawl spaces as the only access under the floors. Basements are a huge positive factor for storage and utility needs.
They don't seem sexy or dreamy but trust me, your basement and your attic are very good friends.
It all depends where in the country you live. Here in the SF Bay Area a 2-3 ft. crawl spaces means a raised foundation and that the home has perimeter heating, which is something so wonderful I doubt I could do without it. I hate forced air from the ceiling down onto my face. Plus, it's much, much noisier. Furthermore, slab foundations, especially tiled, are extremely harsh on the legs.
I'm also a bit curious how the OP suddenly incurred $100k in expenses that couldn't be cash-flowed out of income. If this is something that plausibly could happen again, OP needs to keep renting so the money will stay liquid.
It was a personal expense spent on my own choosing. I am generally very tight fisted with my funds and an expense like that or even a portion of that would never come up again.
Before I say anything you are quite a guy (I assume you're a guy by your screen name) to save up $130,000 by age 25. I can't manage to save more than $1000 and I'm old enough to be your mother!
How close to you want to be from work? Are you considering a townhome? If you have an end unit there will only be someone on one side and nobody above you. Do you have anybody you trust to give you referrals for renovation projects?
Good luck it sounds like you have a good head on your shoulders.
I work from home so I am not too worried about that, just don't want to be much further from the city. Definitely not a town home and I need a decent bit of garage or basement space for some equipment.
No one I know right now for renovation projects unfortunately
Buy an apartment. It's the rigt size for you now, and later when you want a house you'll be in the property market so you'll have any equity growth yo boost your home deposit. If there's no or little equity growth you can rent out the apartment.
Problem is I need some space for equipment and don't want to deal with neighbors anymore than I really need to.
I work from home so I am not too worried about that, just don't want to be much further from the city. Definitely not a town home and I need a decent bit of garage or basement space for some equipment.
No one I know right now for renovation projects unfortunately
If you work from home, consider the home office deduction. It's a powerhouse of a money saver. Most people don't research it thoroughly and don't realize how much this can save you. As long as you document properly, you can generate some really good tax savings, on top of your deductible mortgage interest and property taxes. Study up on this.
I'm 25, have about 130k saved, and make about 80k a year before taxes- And can use/save most of that.
Pretty decent, but the problem is houses in my area(outside Boston) is insane. Where I live now, most single story homes that would at all be to my standards for a purchase are 450-600, with the more ideal ones I'd actually be happy with are 800k-1.2, obviously with higher ones being closer to the city.
I can't decide if I should just be saving like a madman to afford my dream home, or buying a nice single story, and then later upgrading it.
My main concern about that however is that from what I've heard, upgrading houses is a crapshoot in terms of getting what you want/unreliable builders.
Appreciate any and all advice from this community.
My personal thought: I always value location, location, location. Which means, I would rather compromise on other things if I get *really* good location in return. But this is just me.
The flip side is to buy further away - but personally, I would only do this if the house is a brand new construction.
My other thumb rules are that payment towards the house should generally not exceed 30% of your net income. If you feel strongly that your income will increase significantly over the next few years (and it often does for someone in their late 20s), you could stretch the house payment to as much as 50% of your monthly "on hand" income. Especially since you seem to save phenomenally well, which indicates that you are quite frugal in your lifestyle.
And the other thumb rule I have is that if the payment towards the house matches rent, and if I plan to stay in the same place/location for at least a few years, buying is always better than renting. Making payments towards the house means you are adding equity towards the house. After 20 years as a renter, you would have nothing to show for it, but as a home owner, you would have owned all or most of your house.
People warn about cost of repairs etc, but I also feel they are often overblown. Or are more significant if you buy a fixer upper. But hey, if you have to spend 30k repairing your fixer upper, chances are you also bought it 50k less.
Finally, the most important point. Interest rates are at a record low.
10 years ago, interest rates were 6.5%. Today's rates of 3.5-4% have actually never existed and represent record low interest rates. And by buying a house today, you have the chance to *lock in* on this rate - guaranteed to not increase for the next 30 years.
And this era of low interest rates will not exist for more than a year or so. The Fed simply cannot sustain it forever. I know I sound a bit like I am hyping up this point, but I genuinely feel this to be true and I am only a home owner myself.
For what it is worth, in many other countries, there is nothing called "fixed rate". Even so-called fixed rates are benchmarked against the national prime lending rate set by the central/federal banks. So in other countries, if you get a 4% fixed rate, it can very well go up to 8% over time. US on the other hand guarantees that you are locked into this rate. And that too for the next 30 years - which is quite phenomenal if you think about it.
I've been pre approved for 3.6% without shopping around so I don't think securing the lowest possible rate will be much of a problem- I started building my credit as early as possible- and I have zero debt having bought my car in cash and paying off credit cards each week. Basically my on hand cash and income will be the only limiting factors which is the good news.
I'm not super afraid of repairs unless they are both truly essential and cripplingly expensive. This is one of the reasons I would prefer not putting down all my savings if possible though. I would have a roommate at my place taking away 700 of the mortgage each month(for the time being, of course) which would be nice too, but obviously thats not something to factor in, and should just be viewed as a pleasant perk for as long as it is the case.
I agree on location. Seeing as I have only been making significant money for roughly 6-8 years and have been able to save up well despite A. Paying rent B. Buying a car and C. my large 100k+ expense(which again isn't something which would be spent again) I feel like I could save the money to upgrade pretty realistically. If I chose to sell or rent at some point the location is definitely the most relevant thing as well. I am starting to lean towards finding a single story place with just enough space for my equipment, and that is new/modern enough to both appeal to me and not be falling apart, that is in a good location and take it from there. I need to research/talk to more people about the process of upgrading homes to be totally confident in these plans, but thats my current thinking.
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