[Cambium]

Originally Posted by JayCT

An $1,100 rental would not equate to a $250,000 condo in any market. This condo would most likely be priced at around $110,000. Assuming a 10% down payment with a 30 year mortgage at 3.9%, the monthly mortgage payment would be $511. Add in $200 per month for taxes, $80 for insurance, and $175 for condo fees, the buyer would still be under $1,000 per month. And you should note that many "little things" like bug spray and even broken cabinet handles are the responsibility of a renter anyways. Add in your income tax savings, it is cheaper than renting. Plus at the end of 30 years you have an asset rather than a pile of rent receipts. Jay

So your saying take $11,000 out of your pocket for a downpayment which hopefully the bank allows just 10% of. 1 year of rent already gone.

How much is a washer and dryer these days? And I wonder if the roof will last 30 years until you own that "asset" . Chances are it wont be a brand new roof your buying into. And lets hope that driveway doesnt need to be repaved for 30 years too. Add em allll up.

If the OP can save $1000 a month renting. He/she will have $360,000 cash in 30 years. I wonder how much the condo would be worth.

[skel1977]

I lived off 42k a year for many years. Its doable. I didnt have kids or wife. I owned a condo and spent wisely.

[Philbert]

Originally Posted by Stylo

Keeping a place for 5 years and "paying it off" quickly doesn't really do you that much good. You won't get anymore out of it than you put in, because after all the closing and selling costs you're not making any money. It's not going to appreciate enough to matter.

Breaking this down further, the market value of the house/condo is independent from the size of the mortgage attached. The only return on money used to pay down the mortgage balance is the interest rate on the loan.

Using a mortgage rate of 4 or 5 percent, in a 25% tax bracket, gives you an effective rate of 3-3.75%. You're better off paying that down than keeping money in a checking account paying zero. But the long run return of the stock market is well in excess of the return from paying down the house.

This all assumes you have excess cash flow to allocate to either paying down the mortgage or investing elsewhere, which if buying a property around 3x of income, isn't likely to be the case.

[Philbert]

Originally Posted by Cambium

Forgot about the HOA fees. lol . Co-ops IMO should be non existant. Basically you dont own them. You only own a share of it and you're restricted from doing many things. Including picking your buyer.

Sooo many stories lately that the board turned down buyers and the sellers got stuck holding the bag for many more months.

My sister inlaw in particular. Listed co-op at awesome price. Found a buyer within 3 weeks! Waited 2 months to meet with board. Guy didnt have a job but was paying ALL CASH $190,000!

Co-op Board said Nope, you cant buy the unit. Sister in-law had moved out and now stuck with the place again. Relisted it. 7 months go by. Found another buyer, 3 more months go by to meet with board and close.

I understand the concept of co-ops but I dont like it from a buyer, seller, or investors standpoint of view.

selling a condo in general can be a pain. mortgage lenders have caps on the % of units that are being rented out, and now the entire building/development has to be FHA approved in order for a single unit to be purchased with an FHA loan. some condo boards will not apply for FHA approval and/or obstruct the process of a unit owner from trying to get the building approved. as you can imagine, this limits the potential pool of buyers and can depress prices further.

[Cambium]

Going further using Jays example. lol

$110,000 condo. 10% down is $11,000. So a $99,000 mortgage.

5% rate for 30 years. $531/mth. You will be paying about $80,000 in Interest alone! Did people forget the interest you have to pay?

So essentially you're paying $190,000 total for the "asset". I wonder how much it will be worth in 30 years. And dont forget the additional costs associated with owning; including tax rising over those 30yrs. lol
And dont forget that even though your paying for a $99,000 mortgage, in 10 years from now you'll still owe around $80,000.

I'd rent and try to save $1000 a month and have $360,000 cash in 30 years.

My only exception is:
You need freedom
You dont want neighbors on top of you
You can generate income from the property(or another)
You get a sweet deal(25-50% below MV)
You want the security of knowing you wont have to move based on landlords decision

[Stylo]

Originally Posted by skel1977

I lived off 42k a year for many years. Its doable. I didnt have kids or wife. I owned a condo and spent wisely.

When, though?

$42,000 in 2000 is $53,000 now.

[Philbert]

Originally Posted by Cambium

Going further using Jays example. lol

$110,000 condo. 10% down is $11,000. So a $99,000 mortgage.

5% rate for 30 years. $531/mth. You will be paying about $80,000 in Interest alone! Did people forget the interest you have to pay?

So essentially you're paying $190,000 total for the "asset". I wonder how much it will be worth in 30 years. And dont forget the additional costs associated with owning; including tax rising over those 30yrs. lol
And dont forget that even though your paying for a $99,000 mortgage, in 10 years from now you'll still owe around $80,000.

I'd rent and try to save $1000 a month and have $360,000 cash in 30 years.

My only exception is:
You need freedom
You dont want neighbors on top of you
You can generate income from the property(or another)
You get a sweet deal(25-50% below MV)
You want the security of knowing you wont have to move based on landlords decision

nobody is forgetting the interest - it's baked into the total cost of the mortgage, and the price of using leverage to buy something (that will hopefully appreciate).

the flipside is that rents will not stay level for 30 years. a fixed rate mortgage locks in the biggest component of your housing expense, whereas rents will rise over time.

the hypotheticals here are comparing rents with purchase options that have a similar monthly cost. but either way, if you have a spare $1,000 a month, you would be wise to invest it anywhere other than sticking it in the bank.

[Cambium]

Oh goodie. Look what just popped up on my thermostat. "Change Filter". Just in time to turn the A/C tonight/tomorrow. There goes my dinner. LOL

I Just remembered, need maintenance done on my A/C system. Goodbye $200.

Adddd itt allll up. lol

I hope the OP is soaking in all info from both sides. Some good posts in here from both aspects.

[breeinmo.]

I just want to say its very refreshing to see such a young person as the OP, planning their future. Kudos to you! And you knew enough to ask questions! You've gotten wonderful, helpful advice here, wanted to add we do have a real estate section also, if you want more opinions. Good luck in whatever you decide. I see both sides, but I'm in the buy a home camp. Just becareful where and what you buy.

[JayCT]

Originally Posted by Cambium

Going further using Jays example. lol

$110,000 condo. 10% down is $11,000. So a $99,000 mortgage.

5% rate for 30 years. $531/mth. You will be paying about $80,000 in Interest alone! Did people forget the interest you have to pay?

So essentially you're paying $190,000 total for the "asset". I wonder how much it will be worth in 30 years. And dont forget the additional costs associated with owning; including tax rising over those 30yrs. lol
And dont forget that even though your paying for a $99,000 mortgage, in 10 years from now you'll still owe around $80,000.

I'd rent and try to save $1000 a month and have $360,000 cash in 30 years.

My only exception is:
You need freedom
You dont want neighbors on top of you
You can generate income from the property(or another)
You get a sweet deal(25-50% below MV)
You want the security of knowing you wont have to move based on landlords decision

Come on now, the OP will save no where near $1,000 per month renting over buying. You are making up these numbers. And interest rates are under 4% right now and for the foreseeable future for that matter. And you are right, there are additional costs associated with owning but it is still no where near the $1,000 per month you quote. Also you forget that the rent will go up and it will likely go up a lot in the coming years as there is a shortage of rentals in this part of the country. Or that the landlord will want to sell the place and you have to move. Moving is not cheap either. Plus you can't do what you want with your home like paint a room purple without permission of the landlord.

Your post makes it sound like you are treating this as a business investment which it is not. You are buying a home for yourself and your family. There is more to it than just crunching numbers. That said, 30 years from now the OP like most people will likely be in a better position buying than renting. That said I am not advising the OP to buy. They are still young but that is their choice. Jay