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I'm 24 and possibly thinking about buying over the summer...I just want to know if it actually makes sense for me to go that route. But I'm employed with a rural school district out in SWPA, and living with family until June. Specifically, I'm within driving distance of Morgantown WV and I'm considering a few condos within the area. I'd have enough saved for a 20% down payment and probably be looking at list prices of $100-$120k. Morgantown is currently doing very well economically and experiencing growth in medical and research fields. Combine that with the university setting and I can't see the housing market or economy going under for that area.
My main issue is that my salary really won't pick up on the step-scale until I'm closer to 30, so I have to try to make wise decisions in the mean-time. So I was thinking that it might be best to invest in a condo with a similar mortgage vs renting outright. I mean...as long as I'm able to sell the property some 6-10 years down the line for the same price as what I payed, in theory I would be saving more money than renting all those years at a similar rate, right?
Another issue that I face in being a beginning teacher lay in the fact that I don't really have the need or time for much space, as I'm always busy and running back and forth between home and school. I really don't spend much time around the house as is and don't need the extra space and chores to look after, which is where I'd rather have a smaller, easier to maintain condo throughout my 20s vs a SFH. I'm thinking condo for as long as I'm single(20s), and then I could sell in favor of a nice home after I'm married and on a higher salary step, but is that really a good idea though? Overall, is this a good move or would you suggest against this in favor of renting, scrapping together additional funds slowly, and then buying when I'm older?
I have a strong personal bias against condominium purchase for several reasons, though IF these can be ruled out you MIGHT still consider such a strategy.
#1 -- Condos give owners far less control of expenses and other costs that pretty much any other real estate. From routine maintenance to emergency repairs the assessments can be all over the map and when they rise if can be devastating.
#2 -- When it comes time to sell a condo the things that are outside your control, from what kinds of vehicles are in the parking lot to who your neighbors are to those who might have been in unit for far longer than you and are able to sell for far less than you can afford all make it much predictable as to what your gain might be.
#3 -- When the other condo owners are hit with economic hardships and too many units become rentals or foreclosures or vacant it can be all but impossible to finance the sale of your unit.
There are ways to overcome these problems, like being actively involved on the condo board, rigidly enforcing very strict standards and having deep enough pockets / enough equity to withstand economic downturns, but in my experience these would NOT apply to a younger buyer.
The college town aspect is a bit of a wild card -- while I know there are those that advocate condos as a cost effective alternative to the high price of residence halls, my experience is that most college students and their families have a lot of debt and do not make ideal purchasers of something that generally takes much longer than 4 years to pay off. If you choose to be a land lord in a college town it is VERY hard to screen tenants and track them down when they leave. Risks can be very high, though for those who specialize in serving the rental market in a college town they can devote the kinds of resources needed to minimize the downside...
If you really think that you will be renting for as long as 10 years it MIGHT make sense to buy something, but I would recommend shopping for the kind of property that would have broader appeal. Many college towns have a nice mix of starter homes that the college staff and junior faculty can afford and if they are compact enough you may find that the costs of hiring out any maintenance are lower than HOA costs at a condo. Even townhomes tend to have broader appeal as the young parents and such that generally can be found around a college town tend like living in something that seems a bit further removed from "dorms".
Saving for a big down-payment is always a good strategy, as when you have less than 20% or so to apply to a purchase you get hit with worse rates / PMI. The sliding scale of how much such factors such as future appreciation and rental increases can be weighed against future cost of money is always a bit of gamble. Renting for an extended time can be a viable alternative if it enable to live more frugally. One of the best tools to help with such a decision is available through a link at the NYTimes (be sure to realy play with the tool and set the initial conditions to match what you are looking) : http://www.nytimes.com/2007/04/10/bu...T_GRAPHIC.html
My main issue is that my salary really won't pick up on the step-scale until I'm closer to 30, so I have to try to make wise decisions in the mean-time. So I was thinking that it might be best to invest in a condo with a similar mortgage vs renting outright. I mean...as long as I'm able to sell the property some 6-10 years down the line for the same price as what I payed, in theory I would be saving more money than renting all those years at a similar rate, right?
Actually, not as much as you think if you're thinking a 30 year mortgage. Lenders massively front-load the interest on the Amortization schedule.
If you're not going to spend a whole lot of time in the condo, and are not an utter introvert, it might be worth thinking about getting at least a two bedroom (which will be easier to sell later) and getting a grad student or junior staffer/faculty type as a roommate to make it more affordable.
My main issue is that my salary really won't pick up on the step-scale until I'm closer to 30, so I have to try to make wise decisions in the mean-time. So I was thinking that it might be best to invest in a condo with a similar mortgage vs renting outright. I mean...as long as I'm able to sell the property some 6-10 years down the line for the same price as what I payed, in theory I would be saving more money than renting all those years at a similar rate, right?
Also, keep in mind that many things which control the price of local real estate are nation-wide or global issues. The lending environment, tax policy, and so on can all have an effect on the local market even though they're controlled at a national level. Just something to keep in mind as you assume, like everyone else did, that real estate is different here and can't go down.
Edited - Dang, Chet stole my link before I even posted it. Oh well, that must mean it's good.
My main issue is that my salary really won't pick up on the step-scale until I'm closer to 30, so I have to try to make wise decisions in the mean-time. So I was thinking that it might be best to invest in a condo with a similar mortgage vs renting outright. I mean...as long as I'm able to sell the property some 6-10 years down the line for the same price as what I payed, in theory I would be saving more money than renting all those years at a similar rate, right?
I agree completely with beachmouse, the interest payments are usually hugely front loaded on 30 year mortgages. Depending on the type of mortgage it is one could be paying less then $100 principle each month for the first year or longer on ones PITI payments. On top of that there are closing costs, which will require a good chunk of cash when both buying and selling the property. All things considered breaking even could be difficult.
Last edited by Randomstudent; 12-04-2009 at 11:50 AM..
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