My wife and I are in the process of searching for our first home. We are both finishing our last year of a professional degree program and will start work full-time in September, leaving us little time to attend to home maintenance. We have looked at a variety of single family homes, and most recently looked at several co-op units, which seems like a good fit for us.
We discovered a delightful co-op development that we would like to eventually locate in. We are aware of the issues associated with living in a co-op, and have no problems with them. The problem is that the only unit that is available (besides two that we have ruled out for other reasons) is rather small -- 2 bedrooms and around 1350 SF. We plan to eventually have at least 2 children (around 5 years from now), so this would not work as a permanent solution, but could work while we are without children or before we have a second child.
So, do Bogleheads believe it is wise to invest in a "starter" unit now and then move 5-10 years down the road into a larger unit or house, or to buy a larger home now while housing prices are low? The unit is perfect besides its size, and priced attractively, so we are reluctant to let it pass us by.
Note that we live in an area where housing prices trail the nation's generally, and are not expected to appreciate significantly.
Starter v. Permanent Dwelling
Re: Starter v. Permanent Dwelling
I would rent for a while. We rented until we bought a home when we were in our late 30's. We already had a child before we bought. What's the rush?
Re: Starter v. Permanent Dwelling
Moving is a huge pain and something to be avoided - if possible. Save for the home and try to make it the right one the first time out.
Leonard |
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Market Timing: Do you seriously think you can predict the future? What else do the voices tell you? |
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If employees weren't taking jobs with bad 401k's, bad 401k's wouldn't exist.
Re: Starter v. Permanent Dwelling
I say wait until later. Doesn't sound like your ready to buy right now, and I think you would regret it later if you buy the co-op because you think you're supposed to now.
Wait until you both have your careers started, things are more stable for you guys, and you have more options. There's ALWAYS homes for sale, and there will be in a year or two also.
Wait until you both have your careers started, things are more stable for you guys, and you have more options. There's ALWAYS homes for sale, and there will be in a year or two also.
Re: Starter v. Permanent Dwelling
1350 sq ft is small? I think the Boglehead solution here is to buy the place and just make the two kids share a bedroom if and when it comes to that.
Re: Starter v. Permanent Dwelling
You need to ask yourself the following questions:
What is the current price to rent ratio for the type of houses you are look at?
Do you have preference in buying or renting other than financial reasons? If so, how strong is this preference?
What are you going to do with the extra money if you decide to rent instead of buy?
What is the current cost of the ideal place you would rent, and how much more, if any, are you willing to pay monthly or annually just to live in the house you are looking to buy?
To me, it is hard to predict the future house prices. It is hard to make a sound argue, in my opinion, that the house price right now is expensive or cheap. You might expect higher inflation in the next decade, which would drive nominal house price up (but this might also drive stocks up), but you might also expect interest rate to rise in the next decade, which might drive house price down as people would be less able to afford the monthly payments of their mortgage.
What is the current price to rent ratio for the type of houses you are look at?
Do you have preference in buying or renting other than financial reasons? If so, how strong is this preference?
What are you going to do with the extra money if you decide to rent instead of buy?
What is the current cost of the ideal place you would rent, and how much more, if any, are you willing to pay monthly or annually just to live in the house you are looking to buy?
To me, it is hard to predict the future house prices. It is hard to make a sound argue, in my opinion, that the house price right now is expensive or cheap. You might expect higher inflation in the next decade, which would drive nominal house price up (but this might also drive stocks up), but you might also expect interest rate to rise in the next decade, which might drive house price down as people would be less able to afford the monthly payments of their mortgage.
Re: Starter v. Permanent Dwelling
Thanks for all of the replies. We're going to keep waiting until the right place comes up. We've been renting the same apartment for 6 years now at a very reasonable rental rate, so there really is no rush. We're trying to keep emotions out of the equation. Thanks again.