Housing: rent or buy in Denver?

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columbia409
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Joined: Fri Jul 16, 2010 12:36 am

Housing: rent or buy in Denver?

Post by columbia409 »

Greetings from Colorado.

Here's my situation: I'm 43, single, no kids, 350K retirement, 125K taxable investments, 290K liquid, no debt of any kind. Salary is 205K with bonuses of around 50K annually. I live well below my means.

I like and work in suburban Denver. Have worked for the same company for 15 years, and have been in Denver for five years. I currently rent a townhouse in a nice complex in an ideal location for me. I like my situation.

Dilemma: shall I continue to rent or purchase a comparable condo?

I'm paying $1,600 a month for rent. It will likely increase to $1,800 in my next lease. Denver rents continue to rise.

I'm under contract for a condo about 25 minutes away from work, but still in a desirable location. My monthly mortgage payment would be approximately $1,600 including HOA. I'd be putting $60K down, plus approx $10K for closing costs, moving, and some minor improvements (selling price is $228K). APR on a 15 year mortgage will likely be 3.3%. I still have a few hurdles to clear and a few outs: inspection, appraisal, HOA financials, etc.

Other than my job, I have no ties to Colorado and no family here. I do like the area, and will be here for at least two more years.

It's a seller's market in Denver, and I had to come in over asking price, which seems to be the norm. The condo I'm purchasing is priced 30% above its selling price less than a year ago, although the current owner has made many upgrades (remodeled kitchen, bathrooms and new flooring).

I admit that I've fallen into the trap of "I need to buy a home" thinking. Rents are on the rise. And, presumably, the Denver real estate market will continue to be strong for many years.

Back to my original dilemma: shall I continue to rent or purchase a comparable condo? The thought of shelling out $70K makes me a bit nervous, as I'm very careful with my money. Also, it's likely the appraisal will be lower than the sales price.

Thanks in advance, fellow Bogleheads, for your wisdom and advice.
Louis Winthorpe III
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Re: Housing: rent or buy in Denver?

Post by Louis Winthorpe III »

It makes no sense to buy something if you aren't sure you'll be staying there beyond two years. If you were to buy and leave the area a few years later, you'd lose too much in commissions and the costs of moving. If you find out a few years from now you'll be there long term, it sounds like you'll still easily be able to buy something then.
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BolderBoy
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Re: Housing: rent or buy in Denver?

Post by BolderBoy »

foster72 wrote:Back to my original dilemma: shall I continue to rent or purchase a comparable condo? The thought of shelling out $70K makes me a bit nervous, as I'm very careful with my money. Also, it's likely the appraisal will be lower than the sales price.
In what part of Denver is the "under contract" condo?

Would the rent increase you are anticipating be $300 more than one year ago?

The Denver housing market seems to go hot/cold rhythmically. It is sizzling hot now. It might still be in two more years and you wouldn't lose money, but...
stlutz
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Re: Housing: rent or buy in Denver?

Post by stlutz »

With an income of $250K/yr., either option would be considered financially conservative in your situation. Assume either of these worst cases:

a) You buy the condo, move in 2 years, the housing market drops and you take a $50K loss.
b) You stick around for another 10 years, continue to rent, and rents go up 8% every year.

I don't know that I see that either of these puts you in a bad situation assuming you continue to have a very high income.

Live where you want to live.
stan1
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Re: Housing: rent or buy in Denver?

Post by stan1 »

Is there anything special about the condo that would set it apart if you were selling into a buyer's market and there were 100s of other similarly priced condos up for sale in the Denver metro area? Is it an end unit or nothing above/below? View? 3 bedrooms? Private garage parking? Walking distance to light rail or a grocery store? Likewise, are there any detriments like freeway noise, poorly maintained neighborhoods, or industrial businesses?

You can't change the location so that's the first criteria I use. As others have said you are talking about buying a condo that costs less than your annual income. If you will be happy in the condo go for it.
Warning: I am about 80% satisficer (accepting of good enough) and 20% maximizer
poker27
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Re: Housing: rent or buy in Denver?

Post by poker27 »

Your obviously doing awesome for yourself, financially speaking. I would take $ out of the equation, and do what would make you happier. If you would enjoy being a homeowner more then renting, go ahead and buy. If you prefer your townhouse and renting, keep on renting.

I do agree 2 years is too short for buying to make sense, I would be aiming for 5+ years.
icefr
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Re: Housing: rent or buy in Denver?

Post by icefr »

http://www.nytimes.com/interactive/2014 ... lator.html

If it were me with your numbers, I would probably pay cash for the condo and enjoy it until I wanted to move and then sell it and not worry about the numbers. Two years is a bit tight though - I'd prefer it if you were wanted to stay closer to 5 years.
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columbia409
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Re: Housing: rent or buy in Denver?

Post by columbia409 »

BolderBoy wrote:
foster72 wrote:Back to my original dilemma: shall I continue to rent or purchase a comparable condo? The thought of shelling out $70K makes me a bit nervous, as I'm very careful with my money. Also, it's likely the appraisal will be lower than the sales price.
In what part of Denver is the "under contract" condo?

Would the rent increase you are anticipating be $300 more than one year ago?

The Denver housing market seems to go hot/cold rhythmically. It is sizzling hot now. It might still be in two more years and you wouldn't lose money, but...
The condo is in Centennial/DTC in a development that is 21 years old. On a price-per-square-foot basis, I would own one of the most expensive units, due to its high asking price and upgrades. Overall, the unit is much nicer than most other units in the complex.

Rent increase in the current location will likely not be that high -- more like 10%.
Saving$
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Re: Housing: rent or buy in Denver?

Post by Saving$ »

foster72 wrote:The condo is in Centennial/DTC in a development that is 21 years old. On a price-per-square-foot basis, I would own one of the most expensive units, due to its high asking price and upgrades. Overall, the unit is much nicer than most other units in the complex.
None of the above three issues is ideal financially. Do you REALLY like the place, as in it has ideal layout, amenities, etc?
However, the biggest issue is a 25 minute commute. Think long and hard about this - you are spending an hour a day - 4% of your time - commuting.

Given your situation, you have the luxury to make this more of a lifestyle decision than a financial decision. Consider looking for either a condo within walking distance to work, or, if I you really don't mind the drive, a single family home or fee simple townhouse. You are giving up time in the commute and autonomy in getting involved in a HOA.
letsgobows
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Re: Housing: rent or buy in Denver?

Post by letsgobows »

not sure this helps, but I bought a house in Centennial 2+ years ago and im very happy. the rents in Denver are getting very ridiculous. 5 years ago, my rent was $900/mo. the same unit is now renting for $1,600.

however, the difference in the market 2 years ago till now has been huge. like you said, currently, you need to go in above list price to have a shot. when I purchased, i was able to get the seller to pay all closing costs plus $4k in concessions. not sure how much longer the market will be on the up, if you decide to move in 2-3 years.
harrychan
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Re: Housing: rent or buy in Denver?

Post by harrychan »

You need to make a decision on what you want to do beyond 2, 4, 6 years then you can decide if you should buy.
This is not legal or certified financial advice but you know that already.
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BolderBoy
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Re: Housing: rent or buy in Denver?

Post by BolderBoy »

foster72 wrote:Rent increase in the current location will likely not be that high -- more like 10%.
If you are only planning to remain for 2 years, I'd keep renting. Maybe keep renting up to 5 more years. Beyond that I might be inclined to buy. My home value in Boulder took a dive in 2008 and only this year has the assessor bumped the value back to where it was in 2007.
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yukonjack
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Re: Housing: rent or buy in Denver?

Post by yukonjack »

A tough note for a buyer in the Denver market...I just read where Realtor.com just listed Denver as the hottest RE market in the U.S. That being said it is still nowhere near as high as the east or west coasts. I personally think that you are in a comfortable position to go either way.
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