Rent a studio to save money or 1-bedroom that is twice the cost but in my "dream" area?

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Shald
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Rent a studio to save money or 1-bedroom that is twice the cost but in my "dream" area?

Post by Shald » Thu Jun 25, 2015 1:17 am

Hi Bogleheads,

I am trying to decide between two different apartments to rent. I'd like to know your opinions before making my decision. My monthly gross income is about $11,000 (net $6,600).

Option #1: $1,000 studio condo. I am single and don't need a lot of space, so the small size is not an issue for me. The studio is in a good area and I will save a lot of money by renting a studio instead of a 1-bedroom. But there is a slight chance that my sister might move to my state and would need to stay with me temporarily for a few months until she settles down. If that happens, the studio will be a squeeze for sure.

Option #2: $1,950 1-bedroom condo with a den. This condo is located near the water front where I want to buy a home in the near future and I will possibly even buy a unit in the same condo complex if the right one comes along. By renting this unit I will be able to experience the neighborhood firsthand before commiting to buy and if I end up buying a unit in the same condo complex, I will already know what it's like to live there. Also, if my sister ends up moving here, we can probably get by in a 1-bedroom. Obviously this unit is nearly twice as expensive as the studio above, so that gives me a pause.

As I am writing this out, the answer is becoming more obvious to me, but I'd like to know bogleheads' opinions. Thanks!

Edit: Due to possible bubble in the local housing market, I might decide not to buy after all, in which case the longer I end up renting, the more significant cost the $1,950 rent will end up if I go with Option #2.

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Sunflower
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Re: Rent a studio to save money or 1-bedroom that is twice the cost but in my "dream" area?

Post by Sunflower » Thu Jun 25, 2015 1:58 am

You'll get different replies, but the main question in my mind is does the "better" apartment fall under rent control? In the longgggg run it may be a better decision. Of course, if you're planning on moving around ....

Years ago, I found a one-bedroom apartment in a decent neighborhood. Still there, very happy, and paying way, way, way below market rent. I'd have to move out of the city if I lost it (or have roommates, yuck!). Still, I greedily think how nice it would have been if I could have gotten a two-bedroom apartment (renting a one-bedroom was tough enough at the time).

Shald
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Re: Rent a studio to save money or 1-bedroom that is twice the cost but in my "dream" area?

Post by Shald » Thu Jun 25, 2015 2:08 am

Unfortunately, no rent control is allowed in my state, so both housing prices and rents are going through the roof, and part of me feels that the only way to protect myself financially is to rent the smallest and the cheapest place possible to weather the market, which is why I'm considering Option #1. But another part of me feels that life is short and I should enjoy it a little by living in a nicer place.

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Re: Rent a studio to save money or 1-bedroom that is twice the cost but in my "dream" area?

Post by dolphinsaremammals » Thu Jun 25, 2015 5:02 am

Since you may be saving for a home, I'd go with the cheaper option, assuming it's a neighborhood you're okay with. Sis can use a sleeping bag, which will also motivate her to find a place of her own sooner :D

jsims
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Re: Rent a studio to save money or 1-bedroom that is twice the cost but in my "dream" area?

Post by jsims » Thu Jun 25, 2015 5:41 am

Just for kicks, have you looked at the HOA association of the condo? Oftentimes they can pretty difficult to live with or are an ill fit for your lifestyle. They can be so ultra customized for a particular community and there can be surprises. Right now you are footloose and fancy free, and an association can present a significant impediment if life throws you a curve ball of change. They have a LOT of rules. I'd start by reading that, there may be some clause in there which could cause you second thoughts due to their limitations.

truenorth418
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Re: Rent a studio to save money or 1-bedroom that is twice the cost but in my "dream" area?

Post by truenorth418 » Thu Jun 25, 2015 7:15 am

When I was 36 years old, I downsized from a 2 bedroom townhouse condo to a 300 sq ft studio. My friends and family teased me, but, after taxes, housing related expenses were my largest expenditure category, and 11 years later I had saved enough to retire at the age of 47.

It's all about what your objectives are. If you want the bigger place, get it. If you want financial freedom, save and invest your money instead.

Saving$
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Re: Rent a studio to save money or 1-bedroom that is twice the cost but in my "dream" area?

Post by Saving$ » Thu Jun 25, 2015 7:48 am

This really depends upon factors not included in your post.
1. Are you maxing out all tax advantaged space? (401k, Roth IRA, HSA, any other savings vehicle your employer offers?)
2. What are your other monthly expenses? (student loans, car loans, etc.) or how much else are you saving each month?
3. Have you already saved the down payment for a condo?

If the answers to the above are no and none, then go for the studio. If the answers to the above are all yes and you could still save every month, then absolutely rent the condo before buying into the building. Spend the year getting to know your neighbors and the scuttlebut on the condo association. Don't believe everything you hear, but you should get a sense of whether there are problem occupants (you don't want to buy a condo where their behavior will affect you) and if the association is well run or dysfunctional.

2stepsbehind
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Re: Rent a studio to save money or 1-bedroom that is twice the cost but in my "dream" area?

Post by 2stepsbehind » Thu Jun 25, 2015 8:00 am

What is the cost to rent a one bedroom without a den?

billern
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Re: Rent a studio to save money or 1-bedroom that is twice the cost but in my "dream" area?

Post by billern » Thu Jun 25, 2015 8:37 am

What would it cost to buy the condo you would like in your desired area? What does that translate to in monthly payments, including association dues? Have you saved up enough for a 20% down payment?

I'm in a similar position with regards to income and cost of living. Spending almost 1/3 of your take-home pay on rent is significant. I prefer to rent a less expensive apartment. An extra $1K a month adds up. I'd much rather have an extra $1K a month to save or spend as I like.

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Re: Rent a studio to save money or 1-bedroom that is twice the cost but in my "dream" area?

Post by Spirit Rider » Thu Jun 25, 2015 8:51 am

I'm as frugal if not more than most Bogleheads, but I say go for option #2. With option #2 your monthly housing expense is still < 20% ($1950 / $11,000). That is by no means excessive, in fact it is probably below the vast majority of Americans.

A mantra here is Live Below Your Means (LBYM). For someone making $130K+/year, this is entirely within your means. There is a big difference between being frugal and being miserly. Option #1 is being misery.

I have lived in studio apartments and one bedroom apartments (the den is a bonus). There is a BIG difference in livability. You spend a significant portion of your day where you live, LIVE!

Rayandron
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Re: Rent a studio to save money or 1-bedroom that is twice the cost but in my "dream" area?

Post by Rayandron » Thu Jun 25, 2015 9:17 am

I would also go with the 1 BR compared to the studio. First, you can definitely afford it on your income while still saving a very healthy amount for retirement. Second, the knowledge of whether you truly love living in what you think might be your "dream area" is worth the difference in rent since you'll be using that information when trying to decide whether to buy a condo in that area, possibly even in the same condo complex. That is super valuable information! Finally, since you're renting, if you go for the more expensive option and later decide it isn't worth it, you can always move to the cheaper studio in a year once your lease is up.

Gropes & Ray
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Re: Rent a studio to save money or 1-bedroom that is twice the cost but in my "dream" area?

Post by Gropes & Ray » Thu Jun 25, 2015 10:00 am

Similar to what Saving$ said, you need to plan you other savings and spending and see what is left for housing. If you have to eat cat food and turn down every invitation to hang out with friends, then living in the dream area won't be as much fun. But if you can save for retirement, emergencies, large purchases, etc. and still have money for the occasional concert, bar trip, etc. with the nicer apartment, then it's a reasonable expense. It's just a matter of prioritizing, with savings as the top priority.

easye418
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Re: Rent a studio to save money or 1-bedroom that is twice the cost but in my "dream" area?

Post by easye418 » Thu Jun 25, 2015 11:25 am

Shald wrote:Hi Bogleheads,

I am trying to decide between two different apartments to rent. I'd like to know your opinions before making my decision. My monthly gross income is about $11,000 (net $6,600).

Option #1: $1,000 studio condo. I am single and don't need a lot of space, so the small size is not an issue for me. The studio is in a good area and I will save a lot of money by renting a studio instead of a 1-bedroom. But there is a slight chance that my sister might move to my state and would need to stay with me temporarily for a few months until she settles down. If that happens, the studio will be a squeeze for sure.

Option #2: $1,950 1-bedroom condo with a den. This condo is located near the water front where I want to buy a home in the near future and I will possibly even buy a unit in the same condo complex if the right one comes along. By renting this unit I will be able to experience the neighborhood firsthand before commiting to buy and if I end up buying a unit in the same condo complex, I will already know what it's like to live there. Also, if my sister ends up moving here, we can probably get by in a 1-bedroom. Obviously this unit is nearly twice as expensive as the studio above, so that gives me a pause.

As I am writing this out, the answer is becoming more obvious to me, but I'd like to know bogleheads' opinions. Thanks!

Edit: Due to possible bubble in the local housing market, I might decide not to buy after all, in which case the longer I end up renting, the more significant cost the $1,950 rent will end up if I go with Option #2.
#1 rule of the BH: Always sacrifice your life for money and so you can enjoy your old age and body in retirement.


:twisted:

Jokes aside....You make plenty of money to pay $1,950 for a cush condo. Go with what will make you happy.
Last edited by easye418 on Thu Jun 25, 2015 11:29 am, edited 1 time in total.

CFM300
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Re: Rent a studio to save money or 1-bedroom that is twice the cost but in my "dream" area?

Post by CFM300 » Thu Jun 25, 2015 11:27 am

Shald wrote:My monthly gross income is about $11,000 (net $6,600).
What are you deducting to arrive at the net? I hope savings and health insurance premiums as well as taxes. Regardless, what percentage of your gross are you saving?

easye418
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Re: Rent a studio to save money or 1-bedroom that is twice the cost but in my "dream" area?

Post by easye418 » Thu Jun 25, 2015 11:32 am

truenorth418 wrote:When I was 36 years old, I downsized from a 2 bedroom townhouse condo to a 300 sq ft studio. My friends and family teased me, but, after taxes, housing related expenses were my largest expenditure category, and 11 years later I had saved enough to retire at the age of 47.

It's all about what your objectives are. If you want the bigger place, get it. If you want financial freedom, save and invest your money instead.
WOW. I assume no kids and no wife? Props to you for living in a tiny, efficient box and on your early retirement. What a goal.

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englishgirl
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Re: Rent a studio to save money or 1-bedroom that is twice the cost but in my "dream" area?

Post by englishgirl » Thu Jun 25, 2015 11:47 am

This is truly looking at apples and oranges. I would be looking for a middle ground - a true one bedroom (no den) that is about $1500 and as close to your ideal neighborhood as you can.
Sarah

dolphinsaremammals
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Re: Rent a studio to save money or 1-bedroom that is twice the cost but in my "dream" area?

Post by dolphinsaremammals » Thu Jun 25, 2015 12:20 pm

easye418 wrote:
truenorth418 wrote:When I was 36 years old, I downsized from a 2 bedroom townhouse condo to a 300 sq ft studio. My friends and family teased me, but, after taxes, housing related expenses were my largest expenditure category, and 11 years later I had saved enough to retire at the age of 47.

It's all about what your objectives are. If you want the bigger place, get it. If you want financial freedom, save and invest your money instead.
WOW. I assume no kids and no wife? Props to you for living in a tiny, efficient box and on your early retirement. What a goal.
I get slightly envious when I look at photos of the microlofts in the Providence Arcade. Downsizing "stuff" and maintenance work.

sawhorse
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Re: Rent a studio to save money or 1-bedroom that is twice the cost but in my "dream" area?

Post by sawhorse » Thu Jun 25, 2015 12:44 pm

Is there a difference in terms of neighborhood safety, commute times, and convenience in terms of getting to the grocery store and stuff?

My husband and I chose to spend more on rent because we both wanted easier commutes and the ability to take public transportation. The decision has been good in some ways and bad in others. Since I'm now unemployed and mostly homebound due to medical problems, having a nicer apartment is good for me because I have to spend so much time here. The downside is of course the rent and the fact that the easy commute for me is irrelevant now.

123
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Re: Rent a studio to save money or 1-bedroom that is twice the cost but in my "dream" area?

Post by 123 » Thu Jun 25, 2015 12:48 pm

Having been young once I would vote for the 1-Bedroom unit, you can afford it.

There are two issues I think that also worth considering, both are social in nature, might turn out to be important to you or maybe not. The first is how either of the choices fits in with similar choices by your friends and the social groups you hang out with. Does one choice blend-in more then the other? I say this because I was part of a group of 5 friends after grad school who frequently hung out together. It turned out that 3 of us ended up separately buying homes within a six-month period. There's sometimes a group-think maturity where individuals mature and make decisions that align with their peer group, they're not copying each other, just growing/maturing along the same path.

The other issue involves social hosting. If you have friends over to drink beer and watch sports (baseball, football, etc) a studio just doesn't have the room to make too many guests comfortable.

Go for the 1-bedroom and party hard.
The closest helping hand is at the end of your own arm.

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Re: Rent a studio to save money or 1-bedroom that is twice the cost but in my "dream" area?

Post by Caduceus » Thu Jun 25, 2015 1:17 pm

How much time do you spend indoors? Most young professionals spend most of their time at work and more than half their time at home sleeping, when you really think about it. Weekends are often spent outdoors except for maybe during the winter months, when people stay indoors more. So when it comes down to it, unless you are retired, you don't spend too much time in your house.

There are two different decisions here. One is how much housing to consume (whether to live in a biggger or smaller place) and the other is how to finance it (rent or buy). You will almost always come out ahead by consuming less housing; whether to buy or rent a given property is however a toss-up depending on the assumptions (how long you live in it, interest rate, etc.)

Given the facts of your circumstances, I would opt for Option #1. But if it really does make you that much happier to live in a bigger place, you can certainly afford it too. Any money you save now means a bigger downpayment on your eventual dream place.

Shald
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Re: Rent a studio to save money or 1-bedroom that is twice the cost but in my "dream" area?

Post by Shald » Thu Jun 25, 2015 1:18 pm

Thank you all for the replies. The comments have been very helpful and given me some food for thought. To answer some of your questions, I am maxing out my retirement accounts and have saved enough for a down payment for a future home. I am currently renting an apartment for $1,600 (but moving out because it's noisy) and saving about $2,000 a month after all living expenses are paid. If I take a larger 1 BR, my monthly saving will be reduced to $1,600. With the studio option, my monthly saving will increase to $2,600.

Ideally I'd like to find a middle ground and get a smaller 1 BR with no den, but the going rate for a smaller 1 BR in my target area has gone up to about $1,800, which isn't too much lower than the $1,950 one with a den I am looking at.

Right now I am leaning toward getting the 1 BR with a den to get a better feel for the neighborhood and the building I am interested in buying in the future and to get the "waterfront living dream" out of my system by experiencing it for a year. After a year, I will either love the area/building and buy a home there or decide that it's all overrated and move to another area.

Thanks again, everyone.

easye418
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Re: Rent a studio to save money or 1-bedroom that is twice the cost but in my "dream" area?

Post by easye418 » Thu Jun 25, 2015 2:25 pm

Shald wrote:Thank you all for the replies. The comments have been very helpful and given me some food for thought. To answer some of your questions, I am maxing out my retirement accounts and have saved enough for a down payment for a future home. I am currently renting an apartment for $1,600 (but moving out because it's noisy) and saving about $2,000 a month after all living expenses are paid. If I take a larger 1 BR, my monthly saving will be reduced to $1,600. With the studio option, my monthly saving will increase to $2,600.

Ideally I'd like to find a middle ground and get a smaller 1 BR with no den, but the going rate for a smaller 1 BR in my target area has gone up to about $1,800, which isn't too much lower than the $1,950 one with a den I am looking at.

Right now I am leaning toward getting the 1 BR with a den to get a better feel for the neighborhood and the building I am interested in buying in the future and to get the "waterfront living dream" out of my system by experiencing it for a year. After a year, I will either love the area/building and buy a home there or decide that it's all overrated and move to another area.

Thanks again, everyone.
+1, such a finite period of time, don't sweat over a year.

newbie_Mo
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Re: Rent a studio to save money or 1-bedroom that is twice the cost but in my "dream" area?

Post by newbie_Mo » Thu Jun 25, 2015 2:42 pm

Studio. when your sis do come to your city, you can choose to use the money you have saved to help her settle down, or just get crowed for couple months.

DH and I used to live in a studio when we were students, definatly doable.

joelly
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Re: Rent a studio to save money or 1-bedroom that is twice the cost but in my "dream" area?

Post by joelly » Thu Jun 25, 2015 4:39 pm

I'd choose studio.

It seems meaningless to me to double the rent just because your sister will be temp-living with you.

My bro used to live in NY and I came to live with him temporarily. He lived in a studio apt near the uni. It's fairly tiny he warned me so I brought along a sleeping bag. I ended up sleeping in his bed and he slept in my sleeping bag. That was 1999. I still have the sleeping bag and we have some very amazing story to tell our family. :beer

EDIT: forgot to mention that I was living with him for about 3 mos before I settled down. :sharebeer

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Re: Rent a studio to save money or 1-bedroom that is twice the cost but in my "dream" area?

Post by Rebecca_S » Thu Jun 25, 2015 6:12 pm

I would do the 1-bedroom. Getting the chance to test drive the exact same building and neighborhood before you purchase is invaluable and your savings rate is high. If you were just scraping by then my choice would be different.

Hulu
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Re: Rent a studio to save money or 1-bedroom that is twice the cost but in my "dream" area?

Post by Hulu » Thu Jun 25, 2015 6:24 pm

I'd pick whatever allows you to achieve more. Time is short so I'd personally take the studio bc I dont have stuff and I have financial goals that could use the help.

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Re: Rent a studio to save money or 1-bedroom that is twice the cost but in my "dream" area?

Post by investor1 » Thu Jun 25, 2015 7:12 pm

Shald wrote:Thank you all for the replies. The comments have been very helpful and given me some food for thought. To answer some of your questions, I am maxing out my retirement accounts and have saved enough for a down payment for a future home. I am currently renting an apartment for $1,600 (but moving out because it's noisy) and saving about $2,000 a month after all living expenses are paid. If I take a larger 1 BR, my monthly saving will be reduced to $1,600. With the studio option, my monthly saving will increase to $2,600.

Ideally I'd like to find a middle ground and get a smaller 1 BR with no den, but the going rate for a smaller 1 BR in my target area has gone up to about $1,800, which isn't too much lower than the $1,950 one with a den I am looking at.

Right now I am leaning toward getting the 1 BR with a den to get a better feel for the neighborhood and the building I am interested in buying in the future and to get the "waterfront living dream" out of my system by experiencing it for a year. After a year, I will either love the area/building and buy a home there or decide that it's all overrated and move to another area.

Thanks again, everyone.
Given all of this and what you posted earlier, I'd go with the one bedroom. You can afford it easily, and the advantages of getting comfortable and getting to know your neighbors in the building you want to live in longer term seems nice. You can even get to know people that live in units you'd like to live in. If they consider selling and know you want to buy, they might forego realtors and sell to you for cheaper.

Are you really max'ing out your 401k? Are to contributing $53k between you and your employer?

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Re: Rent a studio to save money or 1-bedroom that is twice the cost but in my "dream" area?

Post by Rob5TCP » Thu Jun 25, 2015 7:59 pm

My second apartment in NY was Tudor City; it was 9 x 19; a Murphy pull down bed, no kitchen just a microwave, refrigerator and a sink.
I loved that place. It was across from the UN and in the middle of everything. Two nights a week 5/6 kids would keep their doors open and hang out on the floor. It was like being back in my college dorm (I was 24/25 when I moved in).

I bought it when it went co-op and stayed their 5 good years. I was out 2-4 nights a week. After five years I started a business and was able to move
to a location downtown where it was almost 900 square feet from 195 square feet. Second building was not nearly as much fun; but it has suited me well as well as running my software business from here.

I don't regret the years I spent in the small studio.

PS I saved quite a bit compared to what a one bedroom would have cost (about 2 1/2 times).
Last edited by Rob5TCP on Thu Jun 25, 2015 8:48 pm, edited 1 time in total.

Shald
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Re: Rent a studio to save money or 1-bedroom that is twice the cost but in my "dream" area?

Post by Shald » Thu Jun 25, 2015 8:46 pm

investor1 wrote:Are you really max'ing out your 401k? Are to contributing $53k between you and your employer?
Yes, I contribute up to the max allowed and get the maximum matching by the employer. Curious why you ask? Does the amount look too low/high?

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Re: Rent a studio to save money or 1-bedroom that is twice the cost but in my "dream" area?

Post by Rosebud » Thu Jun 25, 2015 10:02 pm

Go with the one bedroom in the area where you might want to buy. Twenty-eight years ago I wanted to buy a condo on the shoreline of the San Francisco Bay (I live in the East Bay) and while I was trying to find one to buy, ended up renting a studio in the same complex. The six months I rented the studio taught a huge amount about different locations in the condominium complex. I rented on the second floor and realized how incredibly noisy the people above me were. My unit faced North and things didn't dry very well and there was very little direct sunlight. Six months later I found a unit for sale on the top floor that was over a swimming pool and faced West over the bay towards San Francisco. It turned out to be a very quiet, peaceful, sunny location and I've lived here very happily for 28 years. If I hadn't lived in the studio for 6 months, I would never have known what little things to look for when it came time to buy.

It doesn't sound as though the one bedroom would strain your budget and you might just as well be happy with your living quarters. Best wishes for a successful choice!

Shald
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Re: Rent a studio to save money or 1-bedroom that is twice the cost but in my "dream" area?

Post by Shald » Thu Jun 25, 2015 10:17 pm

Rosebud wrote:Go with the one bedroom in the area where you might want to buy. Twenty-eight years ago I wanted to buy a condo on the shoreline of the San Francisco Bay (I live in the East Bay) and while I was trying to find one to buy, ended up renting a studio in the same complex. The six months I rented the studio taught a huge amount about different locations in the condominium complex. I rented on the second floor and realized how incredibly noisy the people above me were. My unit faced North and things didn't dry very well and there was very little direct sunlight. Six months later I found a unit for sale on the top floor that was over a swimming pool and faced West over the bay towards San Francisco. It turned out to be a very quiet, peaceful, sunny location and I've lived here very happily for 28 years. If I hadn't lived in the studio for 6 months, I would never have known what little things to look for when it came time to buy.

It doesn't sound as though the one bedroom would strain your budget and you might just as well be happy with your living quarters. Best wishes for a successful choice!
Thank you for sharing your experience. I am currently renting a condo and initially was interested in buying a unit in this complex. After living here for over a year, I learned a lot of things about the condo (noise, bug issues, poor cell phone receptions, etc.) and decided not to buy in this building. Had I not lived in this unit, I probably would have put in an offer when a couple of units came up for sale.

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Re: Rent a studio to save money or 1-bedroom that is twice the cost but in my "dream" area?

Post by 2tall4economy » Fri Jun 26, 2015 1:02 am

Friends don't let friends drink and drive, and they shouldn't let anyone buy condos. Terrible terrible terrible idea. Single family detached is always the better financial move, or, if those aren't available (which is only the case in Manhattan and Shanghai as far as I've experienced) you should rent and not buy because the owner clearly isn't financially savvy for buying (or its Chinese or middle eastern or Russian folks with more money than sense).

Oh, and this is a rental not a purchase, so get the studio and save money until you can buy, unless you're in Manhattan or Shanghai, in which case see above.
You can do anything you want in life. The rub is that there are consequences.

Shald
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Re: Rent a studio to save money or 1-bedroom that is twice the cost but in my "dream" area?

Post by Shald » Fri Jun 26, 2015 1:26 am

2tall4economy wrote:Friends don't let friends drink and drive, and they shouldn't let anyone buy condos. Terrible terrible terrible idea. Single family detached is always the better financial move, or, if those aren't available (which is only the case in Manhattan and Shanghai as far as I've experienced) you should rent and not buy because the owner clearly isn't financially savvy for buying (or its Chinese or middle eastern or Russian folks with more money than sense).

Oh, and this is a rental not a purchase, so get the studio and save money until you can buy, unless you're in Manhattan or Shanghai, in which case see above.
Can you be more specific about why you advise against buying condos? For people who don't want to deal with maintenance issues, aren't condos a decent option in the face of rents rising so rapidly?

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Rosebud
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Re: Rent a studio to save money or 1-bedroom that is twice the cost but in my "dream" area?

Post by Rosebud » Fri Jun 26, 2015 2:38 pm

Shald wrote:
2tall4economy wrote:Friends don't let friends drink and drive, and they shouldn't let anyone buy condos. Terrible terrible terrible idea. Single family detached is always the better financial move, or, if those aren't available (which is only the case in Manhattan and Shanghai as far as I've experienced) you should rent and not buy because the owner clearly isn't financially savvy for buying (or its Chinese or middle eastern or Russian folks with more money than sense).

Oh, and this is a rental not a purchase, so get the studio and save money until you can buy, unless you're in Manhattan or Shanghai, in which case see above.
Can you be more specific about why you advise against buying condos? For people who don't want to deal with maintenance issues, aren't condos a decent option in the face of rents rising so rapidly?
When deciding whether to buy a house or a condo, there are many different factors to take into consideration. Many years ago I was married and had a family and buying a single family home was ideal for us. Now that I am single, owning a condo has been a far better experience. Something I've read many times over the years is that, while purchasing a home is certainly a financial decision, it's primary purpose is a place to live. Some times the value goes up, other times it drops. There are huge variances in condos depending on location, quality of construction, size of unit and complex, management and maintenance. The San Francisco Bay Area has had fluctuations over the years where sometimes it has been a rental market and other times it has been a market for condos. Right now rentals are through the roof and developers are concentrating on building apartments instead of condos. A number of years ago, it was a condo market. Other areas of the country have their own economic cycles.

The advantages of a condo for me, in the complex where I live, have been: Great location, on site security guards, multiple swimming pools, tennis courts, large areas of landscaping that are professionally maintained, trash pickup and water are included in HOA fees, as is maintenance of common areas. Modest single family homes have become very costly. There have been a number of couples who have been neighbors in my complex and when they have had children, stayed here for a little while, then purchased single family homes.

There are condos that are poorly constructed, poorly managed and there can be problems with single family homes. You need to decide what you are looking for and what works best for you. Certainly the financial side is a huge consideration, but the bottom line is you want to find some place to live that serves your purposes. I wanted something with facilities, great views, nice places to walk and also public transportation and easy access to the amenities of a large city. Write down a list of exactly what would make you happy in a home and let that guide your decision. If you spend very little time at home, then the location and amenities might not be important to you, but if your living space is important, then take that into consideration. Whether you decide to go with a studio, one bedroom, condo or single family, you need to do due diligence on the property, talk to neighbors and then make your move.

Hope you find something great, whatever you decide.

2tall4economy
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Re: Rent a studio to save money or 1-bedroom that is twice the cost but in my "dream" area?

Post by 2tall4economy » Sat Jun 27, 2015 4:23 am

Shald wrote:
2tall4economy wrote:Friends don't let friends drink and drive, and they shouldn't let anyone buy condos. Terrible terrible terrible idea. Single family detached is always the better financial move, or, if those aren't available (which is only the case in Manhattan and Shanghai as far as I've experienced) you should rent and not buy because the owner clearly isn't financially savvy for buying (or its Chinese or middle eastern or Russian folks with more money than sense).

Oh, and this is a rental not a purchase, so get the studio and save money until you can buy, unless you're in Manhattan or Shanghai, in which case see above.
Can you be more specific about why you advise against buying condos? For people who don't want to deal with maintenance issues, aren't condos a decent option in the face of rents rising so rapidly?
The TLDR answer: I've been a real estate investor for 15 years, I've run numbers on thousands of properties, and I've never found a condo which beats a single family in the same town (across many many towns). And, I actually would prefer a condo to live in, in some of the places I've been, so the logic had to be very compelling to fight my natural inclination.

Longer answer: Three primary reasons, the first of which is less relevant to people who are buying their personal residence, the last of which is more relevant to people who are buying as a personal residence.

1) When you go to buy or sell a condo there will inevitably be other units identical to yours in 90% of their respects, which will set the price thresholds. There is no upside possible when you buy or sell (which is where you really make your money). Not so with single family. Also, 9 times out of 10, a single family will appreciate more than a condo. Not sure exactly why this is, but I've seen it happen many times. Over time, this drives the only reasonable argument I've heard for owning a condo, which is "I can't afford to buy a single family in the location I want", which still isn't a good excuse - I would tell you that you really aren't ready to buy yet and to rent until you can afford it (delayed gratification and all).

2) The main reason cited by people for a condo purchase are low maintenance and location. In every study I've done, it's always cheaper to hire someone to make the repair vs paying HOA to do it for you. Hate the effort involved in a 5 minute phone call to hire the maintenance person? Hire a virtual assistant at $2/hour to hire the maintenance. Still cheaper than HOA dues. As far as location goes, I kind of get that, but you're normally talking about adding 5 minutes to your commute (ie 1 or 2 blocks / stops farther than the condo to the downtown). Everyone has an additional 5 minutes to spare, and besides, it's healthier to be up and about for 5 more minutes per day.

3) Ownership aspects: single family have them, condos don't. By this I mean: backyards, privacy, woods, freedom to redesign or change the space to better work for you, freedom to paint, extend, etc...
You can do anything you want in life. The rub is that there are consequences.

truenorth418
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Re: Rent a studio to save money or 1-bedroom that is twice the cost but in my "dream" area?

Post by truenorth418 » Sat Jun 27, 2015 5:49 am

easye418 wrote:
truenorth418 wrote:When I was 36 years old, I downsized from a 2 bedroom townhouse condo to a 300 sq ft studio. My friends and family teased me, but, after taxes, housing related expenses were my largest expenditure category, and 11 years later I had saved enough to retire at the age of 47.

It's all about what your objectives are. If you want the bigger place, get it. If you want financial freedom, save and invest your money instead.
WOW. I assume no kids and no wife? Props to you for living in a tiny, efficient box and on your early retirement. What a goal.

Thank you. Yes, unmarried and child-free.

retiredjg
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Re: Rent a studio to save money or 1-bedroom that is twice the cost but in my "dream" area?

Post by retiredjg » Sat Jun 27, 2015 8:04 am

Shald wrote: I am currently renting a condo and initially was interested in buying a unit in this complex. After living here for over a year, I learned a lot of things about the condo (noise, bug issues, poor cell phone receptions, etc.) and decided not to buy in this building. Had I not lived in this unit, I probably would have put in an offer when a couple of units came up for sale.
Sounds like a good reason to rent the 1 BR, to get a better idea of whether you want to buy there or not.

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