Starting later in life... should I buy a home?

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Topic Author
Shald
Posts: 181
Joined: Mon Feb 02, 2015 4:02 am

Starting later in life... should I buy a home?

Post by Shald » Tue Jun 02, 2015 1:08 am

Hello Bogleheads,

I am in mid-40's and finally starting to get my act together with my finances. Wish I had started earlier, but better late than never. I am single with no kids and below is my financial situation:

Retirement account 270K
Cash 200K
Salary 100K
No debt

I am currently renting an apartment for about $1,600 but considering buying... or should I? How much house can I afford? I am planning to stay in my area for next 5 years, but seeing that a similar one-bedroom condo that sold for ~250K 2-3 years ago now going for over 380K gives me a pause about buying now. Your advice would be appreciated. Thank you.

toblerone
Posts: 132
Joined: Thu Mar 07, 2013 11:42 pm

Re: Starting later in life... should I buy a home?

Post by toblerone » Tue Jun 02, 2015 1:23 am

More info would help, like monthly expenses, savings rate, etc to determine whether it's a good idea for you right now, financially. See "asking portfolio questions" and post in that format.
Overall it looks like you can buy a home now, if you want to buy a home. Is $380k your target price? With a down payment of $200k and a 15 yr fixed your PITI would be close to your current monthly rent, but there will be other expenses you didn't have as a renter.

eddu
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Re: Starting later in life... should I buy a home?

Post by eddu » Tue Jun 02, 2015 1:32 am

My short answer is No. Buy only if you really think you'll enjoy owning a home but be prepared for the costs.

I bought a condo when I was single at 32. You'll get a lot of same advice with regards to buying a home but based on my experience, a lot of this you don't really understand until you actually do it.

5 years is too short to keep a home just due to the transactions costs alone. Besides, if you are always looking to sell it, you won't enjoy the feeling of having your own place.

Will you save money over renting? Probably not. After factoring in transactions costs, maintenance costs, property taxes, lost opportunity costs, you won't believe how much owning a home costs.

Any plans to get married/have kids? If yes, wait after till you have kids before buying. Condo will be too small then and you'll want to find a good neighborhood with good schools.

Topic Author
Shald
Posts: 181
Joined: Mon Feb 02, 2015 4:02 am

Re: Starting later in life... should I buy a home?

Post by Shald » Tue Jun 02, 2015 2:29 am

toblerone wrote:More info would help, like monthly expenses, savings rate, etc to determine whether it's a good idea for you right now, financially. See "asking portfolio questions" and post in that format.
I'll check "asking portfolio questions" and see if I can provide more information.
toblerone wrote:Is $380k your target price?
My target price was about $250K when I started looking but the price has shot up so quickly that I don't see anything desirable in that price range any more. I think I need to increase my target price to at least $300K to find a decent 1-bedroom condo in my area of interest, but even then the pickings are extremely slim right now.

Topic Author
Shald
Posts: 181
Joined: Mon Feb 02, 2015 4:02 am

Re: Starting later in life... should I buy a home?

Post by Shald » Tue Jun 02, 2015 3:04 am

eddu wrote: Will you save money over renting? Probably not. After factoring in transactions costs, maintenance costs, property taxes, lost opportunity costs, you won't believe how much owning a home costs.
It's definitely cheaper to rent than buy in my area, but rents are increasing rapidly and I also find myself desiring some sense of stability that comes from homeownership, so I'm willing to lose some money when it's time to sell, but of course, I don't want to lose *too much* money, hence my hesitation.
eddu wrote:Any plans to get married/have kids? If yes, wait after till you have kids before buying.
No plans to get married/have kids.

Topic Author
Shald
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Joined: Mon Feb 02, 2015 4:02 am

Re: Starting later in life... should I buy a home?

Post by Shald » Tue Jun 02, 2015 3:19 am

toblerone wrote:More info would help, like monthly expenses, savings rate, etc to determine whether it's a good idea for you right now, financially. See "asking portfolio questions" and post in that format.
I looked at "asking portfolio questions" and it would take me a while to put a list together, but I currently save between $2,000 - $3,000 a month after the rent and monthly expenses are paid.

dgdevil
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Re: Starting later in life... should I buy a home?

Post by dgdevil » Tue Jun 02, 2015 3:31 am

Stability/homeownership is over-rated these days, and I'm not even sure it's accurate. It can be a real ball-and-chain.

How about the benefits of flexibility/renting? You seem to have a pretty good thing - decent savings, good cash flow, no obligations (marital or financial). A lot of people here will be envious. If you're comfortable where you are, why not stay? If you're not comfortable, maybe there are other rental opportunities, even as rents go up?

But if you're going to go to the trouble of buying - and let's not underestimate "trouble" - I would go with a 2 bdr condo, which of course raises your price range.

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max12377
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Re: Starting later in life... should I buy a home?

Post by max12377 » Tue Jun 02, 2015 5:13 am

I'm around the same age and single as well. I've owned 2 houses over my lifetime. The first was a financial winner, the second was a financial loser. In both cases, though, I always felt like I was wasting my time cutting the grass, pulling weeds, hiring contractors, painting... Renting gives me freedom to do what I want. I do understand the desire for stability. I resisted renting after I sold my first house simply because it was hammered into me that renting is throwing your money away. I now look at renting as hiring my own personal Jeeves. Now Jeeves cuts the lawn and fixes stiff that breaks. I just show up and keep the inside clean which is super easy.

What I stated above applies to a house, of course. Since condo's are what you are speaking of, you don't have the maintenance issue, so here's my take on them. If you find a place you really like and can see yourself living there for 5 years plus, it might be ok. The consideration here is high transaction costs to get in and get out. So if you get in and find you hate it, it's likely a hit financially to get out. You lose the flexibility of being able to move across town after a year without incurring substantial costs. And who knows if the market will be right when you want to sell. At the moment flexibility wins for me so I continue to rent for now.

In summary - my take is buying is fine if you feel it fits your lifestyle but do it for the right reasons. When I walk by really expensive homes and see people pulling their weeds, doing expensive renovations, etc I just think how lucky I am to have freed up my time from caring for a plot of earth and a pricey box of wood. I've become quite the minimalist lately and it feels great.

Good luck!

mikeast
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Re: Starting later in life... should I buy a home?

Post by mikeast » Tue Jun 02, 2015 6:09 am

I'm a home owner now and I don't really like it. Constant maintenance, yard work, gutter cleaning, money spent at Lowes, taxes, flood insurance, worry. When is my 15 year-old furnace going to die ? Will this be the year we get another major hurricane ? etc I am not cut out to be a homeowner. I love the freedom that comes with renting--knowing that you can leave with a month or two notice and no strings attached. Are YOU cut out to be a homeowner ?

saladdin
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Re: Starting later in life... should I buy a home?

Post by saladdin » Tue Jun 02, 2015 6:17 am

No, especially if rent is cheaper. I would be pouring money into retirement/savings and worry about buying a home way down the road. Home ownership is not the bees knees.

Topic Author
Shald
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Joined: Mon Feb 02, 2015 4:02 am

Re: Starting later in life... should I buy a home?

Post by Shald » Tue Jun 02, 2015 12:47 pm

Thank you all for the responses. I am surprised at the almost unequivocal recommendations that favor renting. Is it because of my time frame of 5 years? If I plan to stay for 7-10 years, does that change your recommendation?

Topic Author
Shald
Posts: 181
Joined: Mon Feb 02, 2015 4:02 am

Re: Starting later in life... should I buy a home?

Post by Shald » Tue Jun 02, 2015 12:48 pm

dgdevil wrote: I would go with a 2 bdr condo, which of course raises your price range.
A 2 bdr condo costs about 100K more than a 1 bdr. Does it really make sense to tie up another 100K for that second bedroom I'd love to have but don't really need?

dgdevil
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Joined: Sun Feb 20, 2011 1:42 pm

Re: Starting later in life... should I buy a home?

Post by dgdevil » Tue Jun 02, 2015 1:10 pm

Shald wrote:
dgdevil wrote: I would go with a 2 bdr condo, which of course raises your price range.
A 2 bdr condo costs about 100K more than a 1 bdr. Does it really make sense to tie up another 100K for that second bedroom I'd love to have but don't really need?
Better resale? But you'd have to do the math to weigh the pros vs. the cons. I am your age range, but I guess my useless junk collection outweighs yours.

Topic Author
Shald
Posts: 181
Joined: Mon Feb 02, 2015 4:02 am

Re: Starting later in life... should I buy a home?

Post by Shald » Tue Jun 02, 2015 1:40 pm

max12377 wrote:I'm around the same age and single as well. I've owned 2 houses over my lifetime. The first was a financial winner, the second was a financial loser. In both cases, though, I always felt like I was wasting my time cutting the grass, pulling weeds, hiring contractors, painting... Renting gives me freedom to do what I want. I do understand the desire for stability. I resisted renting after I sold my first house simply because it was hammered into me that renting is throwing your money away. I now look at renting as hiring my own personal Jeeves. Now Jeeves cuts the lawn and fixes stiff that breaks. I just show up and keep the inside clean which is super easy.

What I stated above applies to a house, of course. Since condo's are what you are speaking of, you don't have the maintenance issue, so here's my take on them. If you find a place you really like and can see yourself living there for 5 years plus, it might be ok. The consideration here is high transaction costs to get in and get out. So if you get in and find you hate it, it's likely a hit financially to get out. You lose the flexibility of being able to move across town after a year without incurring substantial costs. And who knows if the market will be right when you want to sell. At the moment flexibility wins for me so I continue to rent for now.

In summary - my take is buying is fine if you feel it fits your lifestyle but do it for the right reasons. When I walk by really expensive homes and see people pulling their weeds, doing expensive renovations, etc I just think how lucky I am to have freed up my time from caring for a plot of earth and a pricey box of wood. I've become quite the minimalist lately and it feels great.

Good luck!
Thank you. I am a nomad at heart and have thoroughly enjoyed the flexibility of renting over the years, which allowed me to move to various parts of the country as well as overseas without having to worry about selling. Recently I have fallen in love with the waterfront area of my town and found myself thinking "I could retire here". It was like never being interested in marriage but one day meeting someone and thinking "I could marry this person". :) So, I am in this for the long haul but also aware that this can end up costing me financially, so I am trying to make an informed decision.

Topic Author
Shald
Posts: 181
Joined: Mon Feb 02, 2015 4:02 am

Re: Starting later in life... should I buy a home?

Post by Shald » Tue Jun 02, 2015 1:42 pm

mikeast wrote:I'm a home owner now and I don't really like it. Constant maintenance, yard work, gutter cleaning, money spent at Lowes, taxes, flood insurance, worry. When is my 15 year-old furnace going to die ? Will this be the year we get another major hurricane ? etc I am not cut out to be a homeowner. I love the freedom that comes with renting--knowing that you can leave with a month or two notice and no strings attached. Are YOU cut out to be a homeowner ?
I know I'm not cut out to be a single-family home owner (no yard work or gutter cleaning for me), but I can probably manage being a condo owner.

Topic Author
Shald
Posts: 181
Joined: Mon Feb 02, 2015 4:02 am

Re: Starting later in life... should I buy a home?

Post by Shald » Tue Jun 02, 2015 1:45 pm

saladdin wrote:No, especially if rent is cheaper. I would be pouring money into retirement/savings and worry about buying a home way down the road. Home ownership is not the bees knees.
I was wrong about rent being cheaper. The NY times rent vs. buy calculation shows that the cost for owning vs. renting is almost identical after 5 years for my situation.

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