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I’m 22 years old and a recent college graduate in my first job in the Chicago suburbs. I’m currently living at home, but am entertaining the idea of moving out and buying a condo. My parents are charging me $500/month for rent/food at the moment. My credit score is somewhere between 740 and 760.
I am in a stable job making $47,000 per year. I have zero debt and about $23,000 in savings / stocks.
There are a few two-bedroom condos in the area that are either being short-sold or just sold for between $40-48,000. I’m considering moving out and purchasing one of the condos. I would rent out the spare bedroom for around $400-450 (below market price, but to ensure I would be able to find another recent graduate who may not be able to afford the higher $800+ rents. HOA seems to include gas, water, and heat. Only utility would be Electric + internet.
This list below is assuming I take a $35,000 30yr mortgage at 4% and overpay $65/month (in essence a 15 yr mortgage with more flexibility). I would plan on putting $12,000-15,000 down on the unit. This does not include the possibility of a roommate which would then essentially add $400/month to my savings to $1,375 per month. 401K is 6% (employer matches 4.5% when I put in 6%, so yearly, that’s about $4,935 into my 401k). Once emergency fund hits $2,000, I will stop contributing and add $100 to savings.
Thoughts?
Mortgage 240
HOA 300
Utilities 50
Food 300
Gasoline 120
Cell 45
Car Insurance 75
Health Insurance 60
Emergency Fund 100
Internet 50
Savings 975
401k 235
Spend 300
Vacation Savings 100
i live in a city with a much lower cost of living than chicago and the few places for sale in that price range are in nowhere near liveable condition...either that or right in the middle of "the hood". usually both
i think you have a decent idea, esp when considering renting out the extra bedroom, but i think you should wait a year or two and go for something in a higher price range. its also a difficult thing to decide at your age because us 20-somethings tend to go through a lot of changes and move around a lot. condos tend to be difficult to resell and for all you know you could get a much better job offer in a different state in 2 years. you might actually be forced to go that route if you have any hope of seeing a salary increase above 3%.
The time to buy is now. Interest rates are very low. Make sure you get a good fixed rate without a prepayment penalty. Make sure the Homeowners Association isn't broke or at risk of going broke. Fight any and all tax assessments which could jack your property taxes up. Get onto budget plans for all of your utilities. Live a very frugal life until the mortgage is paid off in full.
Cash is king on condos now, as it is very difficult to get a loan. Small loans can be brutal, too. In some markets where SFRs have bounced back, condo prices are still way down. I bought a TH condo tht had sold in 2006 for 119K. The bank listed it for 78K. They took it to REDC a few times and I lowered my offer each time. I paid 22K. Zillow now says it is worth 47K, which is accurate, but it is a rental goldmine with a new Light Rail stop being constructed 400 yards from the front door. It grosses over 30%, and I will always be able to undercut "the survivors" who paid 120-150K. I lived in it for a year, perfectly acceptable. OTOH, I bought a house for less than 20K, that had been appraised at 135K in early 2008. Zillow says it is now worth 83K, but I will probably take 60K--tax free under the 2 year rule. Go in Low. And for all the people that say rent, I say I can't afford rent; tht's another reason to buy.........if you're living in it, it is a huge tax free dividend every month.
That's a puny mortgage amount that you will be able to payoff a lot sooner than 15 years. Seems almost a little too good to be true for he Chicago area. Is it in a safe neighborhood? If yes and you can get a mortgage then go for it. It will probably end up being a paid for rental property by the time you are 30.
I think it's a fine idea as long as the condo you buy is in an ok area and you really can get a reasonable loan. Sometimes it's hard to get a standard market loan on such a low mortgage. Be very certain you educate yourself on the HOA rules and any pending special assessments. In the condo world, there are often pending very huge expenses coming up ....maybe the whole roof needs replacing or an exterior or plumbing issue that can tack $20k+ invoices onto the annual HOA bill for every owner. More than a few new owners of condo units failed to do their due diligence only to learn too late that the prior owners bailed over the pending special assessments.
Personally, I think you should wait. I think it's great that you're budgeting and thinking ahead. I just see so many young people get a home, and then "life" gets in a way. Jobs end, people get relocated, relationships come up. I just think at 22 you are just starting your adult life and don't need the added stress that can come with home ownership. Just my two cents.
Personally, I think you should wait. I think it's great that you're budgeting and thinking ahead. I just see so many young people get a home, and then "life" gets in a way. Jobs end, people get relocated, relationships come up. I just think at 22 you are just starting your adult life and don't need the added stress that can come with home ownership. Just my two cents.
I think a 22 year old is an adult. It is one of the greatest problems in our society that we continue to encourage people to prolong their childhoods and then we become disappointed in hand-out self centered behaviors of the same group. People of all ages have major changes in their lives which cause them to abandon the courses they are on and leave, home, jobs and marriages..... I have bought several foreclosures and never was one of those properties owned by someone under 30 years of age.
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