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I am actually thinking of buying a townhouse. I have rented apartments for 11 years, and I am thinking of owning in the near future. I am 37 years old, single, never married, and no kids. I don't really need a large house because I live alone. Any advice would be greatly appreciated.
I am actually thinking of buying a townhouse. I have rented apartments for 11 years, and I am thinking of owning in the near future. I am 37 years old, single, never married, and no kids. I don't really need a large house because I live alone. Any advice would be greatly appreciated.
Don't take on more space than you need - it's a waste of money. You should prioritize emergency, vehicle replacement, and retirement savings over having more space.
Interesting, never thought of that. May you talk about this a little more?
A 3,000 square foot house in my area, for example, would go for about $600,000. If you paid cash for it or bought it and paid it off, you'd spend about $11,000/year on property taxes, $1,000/year on insurance, and likely another $6,000 annually on maintenance and repairs, plus $400/month ($4,800/year) in utilities. The total is $22,800/year or $1,900/month, and this is without a mortgage.
You can rent a 1,000 square foot apartment or condo in my area for $1600/month, including utilities.
So I think it's better to only have the space you need than to buy a house "in order to reduce your costs in retirement". It's cheaper to pay rent on a small place than to own a big one 3X the size, even if it's paid for.
Here's the number: in CA, 30-yr cost of ownership; started at age 28.
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Buy: 400K house, $320K loan, 80K down at 4% = $1773.56/mo including tax & insurance
Rent: 1,500/mo for same house
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Buy after 30 yrs: $630.5K + upkeeps, roof repairs, water heater replacements, HOA fees, etc = $680K or more
Rent after 30 yrs: $540K (1500*360 months)
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After 30 yrs, buying gets you a house at a cost of $680K or more.
After 30 yrs, renting gets you $555K cash in the bank (140K + 415K)
-----------(680k-540k = $140K saved)
-----------(80K down payment invested at 5.5% compounded * 30yrs = $415K capital gains)
********************
So at 58, your regular income will still allow you to rent, but with kids out of the nest, say you rented a smaller house for under a grand--stretching your regular income even further.
So just let your investment ride for another 30 years.
Now, at 88, you're still renting but your original $80K grew to $2.15 mil.
*In the investment world, a 5.5% rate of return is super conservative.
*80K down payment invested for 60 yrs at 7.5% -> $7.1 mil.
*"Renting is throwing money away": the renter comes out ahead, so must be Realtor propaganda.
*"Mortgage interest write-off is great": it'll harm you if it's less than $12,400 (standard deductions, filing jointly for 2014).
Overall, if you must buy, then buy a smaller house during your less-than-mobile years--young professionals are more mobile than ever, simply because the world is getting smaller...ahem...global economy.
Unless you bought your house in a very desirable area (so you could sell for max profits), then a duplex or four-plex will be vastly better investment vehicle than your "home." Or the stock market.
--------------------------------
Mortgage calculator that includes tax and insurance:
californiarealestatecenter.com/mortgage-calculator/index.htm#Mortgage Calculator
you have to love all these hypothetical situations folks come up with.
What is hypothetical about what I posted. Care to point them out?
Let's go one by one.
1. "400K house, $320K loan, 80K down at 4% = $1773.56/mo including tax & insurance"
After 30 years: 1773.56 x 360 mos = $638,418.60 excluding maintenance.
30 yrs of maintenance cost (and HOA fees [320*30 yrs = $9,600] if applicable) is what?
2. Rent: $1500/mo x 360 mos = $540,000.
If this is your contention, then how many (if any) of your tenants have rented from you for 360 straight months?
Do you allow for the possibility that, through out the course of 30 years, this person's rent could have fluctuated from below $1K/mo on the low side to $2.5K/mo on the high side?
3. "80K down payment invested at 5.5% compounded * 30 yrs = $415K capital gains."
The contention is the 5.5%? Hopefully some in the investment community here will weigh in.
4. Mortgage tax write off?
With a 320K loan at 4%, your mortgage only is $1,527.73, 42% is interest, so that is
1527.73 x .42 = 641.65 x 12 mos = $7,699.76 paid in interest per year.
Compare that to $12,400 (standard deductions, filing jointly for 2014).
I'm in a similar predicament with slightly different reasons for my hesitancy over home ownership. The idea of home ownership is nice and it seems like it's how a lot of people my age (late 20s) measure you up in terms of success. If you don't own a home, you're looked down on a bit.
Here are some of my qualms about purchasing a house:
*Time, energy, and money spent on maintenance. I'd rather be using my spare time on entertainment and relaxation.
*The job market is highly volatile these days. You need to be ready to pack it up at a moment's notice. But if you have a house, it's not like you can just leave it.
*Affordability. I make decent money, but it seems like every time I think about buying a house, the prices are way too steep for me. We're talking a minimum of $250,000 for a small SFH. That'd be really pushing it on my income. Frankly, I don't know how people do it here unless everyone's making $100k and I just don't know it.
Here are some reason why I would like to buy a house:
*Building equity. Can't do that with an apartment.
*Avoiding rapidly and ever increasing rents. The market for renters where I live is terrible. Rents go up a good $25+ every few months it seems.
At this point, I'm thinking my best option might be to purchase a condo. It'd probably be more in my price range and I wouldn't have to worry so much about maintenance issues. Now, if I can just manage to get that pesky down payment together.
you have to love all these hypothetical situations folks come up with.
What's wrong with that?
If I'm not planning to take a mortgage, am I not allowed to assume someone else is taking a mortgage?
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