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This is indeed my first home, and I know that there will be a lot of other maintenance tasks aside from your typical utilities bill.
As a full-time student, I do have a very active social life, but I don't think owning a home would impose on it. It would restrict me from trying to live in different areas, but at the same time, I don't think I would want to move around. I much prefer to get my stuff in once and leave it there for a few years rather than having to move from place to place annually.
My main reason for considering buying is because I know I will be in North Carolina for at least 3 years, more if I get my MD. I figured I'd be paying about the same, maybe a bit more, on a monthly basis if I buy a property and rent out part of it to roommates. And like rcarrillo said, I'd be paying for something that I'd own (eventually) rather than simply throwing money into rent that I won't ever see again.
At the same time, I guess an important concern would be whether or not this is a good time to buy a house. If the closing costs, real estate agent fees, etc. will exceed what I would in theory save by paying for ownership rather than renting, then perhaps renting would be a better move. Any thoughts?
I've been looking Davis Park in Durham, which is about 20-25 minute commute from UNC an 15 minutes from Duke. From my research, it seems like this community is expanding.
Any other advice would be much appreciated, thanks guys!
Hi,
I see the same "throwing money away on rent" many times.
What many folks forget is that you are buying service when you rent from a good landlord.
A/C blows, roof leaks, water heater dies, I call the office, and Katie's crew comes on the gallop to fix it for me. They always forget to leave a bill too. Repairs are on the house.
Go away on holiday. No worries there. Alarm systems with monitoring part of the rent.
With the busy life you will have in your first years as an MD, do you really want the responsibility of a house? Once your money kicks in, you'll be able to buy a really good one if that's your choice.
Thank you House Lady and saturnfan for the advice. I think both of you had really great points.
Since I have such limited knowledge of the area and environment, I think my safest bet will be to live on campus for the first year at least. I think by the end of next year, I'll know what my future plans are (whether or not I'll be in NC for an extended stay > 3 years). That will probably be better in terms of deciding whether or not the benefits of buying a home then will outweigh renting.
Saturnfan, you're completely right, I guess the headaches of dealing with home-owner tasks could occupy a significant amount of time. Besides, the rental costs in NC is definitely less expensive than what I'm used to in Chicago, so it won't be as much of a "throwing money away"... The only sad thing about an apartment is that I won't get that "home" feeling knowing that I'll probably be moving out of where I'll be staying after a year... oh well. That's the life of a student.
Thank you House Lady and saturnfan for the advice. I think both of you had really great points.
Since I have such limited knowledge of the area and environment, I think my safest bet will be to live on campus for the first year at least. I think by the end of next year, I'll know what my future plans are (whether or not I'll be in NC for an extended stay > 3 years). That will probably be better in terms of deciding whether or not the benefits of buying a home then will outweigh renting.
Saturnfan, you're completely right, I guess the headaches of dealing with home-owner tasks could occupy a significant amount of time. Besides, the rental costs in NC is definitely less expensive than what I'm used to in Chicago, so it won't be as much of a "throwing money away"... The only sad thing about an apartment is that I won't get that "home" feeling knowing that I'll probably be moving out of where I'll be staying after a year... oh well. That's the life of a student.
Thank you everyone for your inputs! =)
I've been in the same apt 3 years and just renewed the lease.
You don't have to move every year unless your needs change.
Wow, I'm actually agreeing with Saturnfan on something : ) I think renting for you, at least for the first year, is a good idea. At this stage of life, you never know what might come next and what your future will be. And if you're going to school and working, it won't leave much time for 'house stuff' like yard work and fixing stuff.
you're not comparing apples to apples, KCfromNC. The rent on a home that is in the same complex, is the same size, condition, etc. averages about the same to rent as it does to buy. There are many actual examples of this as so many of our neighborhoods have rentals in them, especially townhome complexes around campuses.
You forgot to figure the savings on income tax from the sizeable deduction of the interest and taxes on a purchased home. If you are paying about 20% to the state and feds then a house payment of $1200 would yield around $200 per month in tax savings, presuming you have income.
Also, a roommate or two can pay most of your mortgage. I had a client that bought a townhome in the Brier Creek area a couple of years ago. It was a three level with three bedrooms and three baths, perfect for sharing. There were homeowner dues, but if they include exterior maintenance that is less work for you and your homeowner's insurance is about half of what it would be normally. This young man lived in the house for about $400 a month, after his roommates' rent was collected. Not bad, huh? He actually sold his at a profit after only two years, too, although that is certainly not guaranteed.
Last, homes near campuses turn over fairly well no matter what. Students (or their parents) buy them, then at the end of their stay sell them, and the process is repeated over and over.
Nevertheless, since the money is about a break even proposition, it is really a lifestyle choice.
You are so correct with this. Also, one thing anti-buy people forget to include is the fact that you are paying some principal in your mortgage payment, which you are not in rent. So when all the calculations are done, one must also include that they are paying themselves money with a mortgage, along with getting the tax break, along with getting 5 times the return on investment due to the fact that you gain equity increase for 100% of the value of the home for only putting down 20%.
It's a complete no brainer.
Now the anti-buy people will chime in saying that it costs $75,186.29 per month in repairs.
you're not comparing apples to apples, KCfromNC. The rent on a home that is in the same complex, is the same size, condition, etc. averages about the same to rent as it does to buy. There are many actual examples of this as so many of our neighborhoods have rentals in them, especially townhome complexes around campuses.
I was just going by the numbers the OP posted. He did say $900 in rent and 200-250K for a house.
Quote:
You forgot to figure the savings on income tax from the sizeable deduction of the interest and taxes on a purchased home. If you are paying about 20% to the state and feds then a house payment of $1200 would yield around $200 per month in tax savings, presuming you have income.
I'd be skeptical that a master's student is going to have enough income to be able to take advantage of the tax deductions.
Quote:
Also, a roommate or two can pay most of your mortgage.
A roommate would also pay for half of the 2BR apartment he was comparing against.
And how much more repair is he going to have to do when he sells if he's been sharing the house with 2 or 3 other college students?
Quote:
Nevertheless, since the money is about a break even proposition, it is really a lifestyle choice.
I'd caution him to run the numbers to make sure it really is a break even proposition first.
You are so correct with this. Also, one thing anti-buy people forget to include is the fact that you are paying some principal in your mortgage payment, which you are not in rent. So when all the calculations are done, one must also include that they are paying themselves money with a mortgage, along with getting the tax break, along with getting 5 times the return on investment due to the fact that you gain equity increase for 100% of the value of the home for only putting down 20%.
Out of the $33,600 you pay in P&I to the bank on a 180K loan at 6.5%, you end up with less than $3800 in equity at the end of the 2 year period. Add in 200 a month in taxes, insurance, and HOA, and you're throwing away over $34K to get $3.8K in equity.
Assume $5K closing costs, 150 a month in taxes, break even rent versus buy, 4% annual appreciation, 6% commissions when you sell, you lose about 1% a year on the investment. Hardly a "no brainer".
To the OP - again, run the numbers for yourself. I know you've decided to rent for a year, but you'll eventually be in this situation. Most of the collective wisdom about buying houses makes sense if you're staying 5-10 years, but it's a lot more tricky if you're going to be moving around more frequently.
you need to look at actual facts.
Masters programs often give salaries to students because they teach lower level courses and/or participate in research. Those salaries are low, so any tax savings is significant.
I realize that you were using the rent and home price given by movingstudent, but the two were not comparable. Comparable properties, as I pointed out, will end up being a wash between buying and renting. I have "run the numbers" for many, many clients on this exact scenario, some of those were students. Most sell coming out about even. The students and parents buy knowing this. They just want to have the freedom and privacy that being a homeowner gives. It also sets up a very nice FICO score for them if they make their payments on time, which most do with automatic withdrawals.
A house in that price range is almost always going to have three bedrooms, thus three rommates are quite possible. The maintenance, as I said, for townhomes would be the exterior. You would hardly expect to find graduate students spray painting the outside or or doing any damage, and in fact, that is true. Even undergraduates (and he is going to have the luxury of approving these roommates) rarely damage property. I have rented to students since 1994 and they have been better tenants by far than some of the "families". I could tell you some stories
You are so right that he needs to look at many factors, but they need to be the real deal and include all considerations.
Last edited by House Lady; 03-16-2008 at 09:14 AM..
Reason: sp
MovingStudent, I'm going to side with renting. I am not suggesting this because you're a student, but mainly because I think whenever you move to a new town, it's always a good idea to rent first until you get a feel for the area. Some people (especially families with children) can't do this because they want their kids to be settled. You don't have any commitments like that, so you can be flexible. Embrace this! Enjoy it! Rent - for at least 6 months or a year - and just get to know the area. If you still want to buy a home after getting to know the area, then you can take your time & buy a house you really like. And if you want to keep renting, then you can still do that, too. Good luck!
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