Rent in safer neighborhood or buy in less safe one?

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aristotelian
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Re: Rent in safer neighborhood or buy in less safe one?

Postby aristotelian » Sun Jul 16, 2017 7:20 pm

+1, wait until you can buy in the safer neighborhood. In addition to safety itself being a good thing, your house will be a better investment. I would also guess that the schools are better, although that is something you should check. Buying a house is too big of a decision with your kids' well being on the line, it is not just about finances and not "throwing away money on rent". You do not want to be stuck with a 30 year mortgage on a house you don't really want.

Limoncello402
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Re: Rent in safer neighborhood or buy in less safe one?

Postby Limoncello402 » Sun Jul 16, 2017 7:24 pm

I bought my first house (age 28) in a marginal area because I could not afford the nicer area that I really wanted to be in--the one so close to my work that I could walk. I stuck it out 20 years during which the neighborhood got worse and worse. Finally I got out as I was truly scared for my life and moved to the area I wanted to be in. Had to take a mortgage again to afford it (I had paid off the earlier one) and had to fix up the house (an old one) starting from scratch, just the way I fixed up the one in the bad neighborhood. I regret to this day that I did not bit the bullet, even when I was poor and just starting out, to buy a decent place in an excellent neighborhood. And I don't even have kids--that's definitely a game changer.

kjvmartin
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Re: Rent in safer neighborhood or buy in less safe one?

Postby kjvmartin » Sun Jul 16, 2017 9:08 pm

OP HERE: Many great replies and I'm appreciative. Some have been a good reality check. I have been torn between the "old folks" living in the "old neighborhood" who say "no way" and the others who say it'd be snooty to buy a house for $250,000 when you can live much cheaper. My own mother still lives in one of the poorer areas and is bit of a champion of the community, so when I try discuss plans to spend 1/4 million on a house, she thinks it's absurd. There are truly few/no options for us in the 180k range. Everything shot up over $200k.

I made a prior thread about taking out a 401k withdrawal (no loan available) to finance 20% down on a house, vs putting 5% down. The "rent vs buy" cost calculator that was linked here was a very helpful tool. Even if I invested the difference, I'm hundreds of thousands of dollars behind if I rent and buying becomes profitable after just 4 years.

Taking $50,000 out of my 401k does not seem so bad. I've got 1x my salary in there at age 33. I know I'll have to maintain increased contributions to catch up, but I truly feel like this is the best course of action and will likely take action very soon to locate a house in a good area hopefully closer to $200k than $250k. I am so uncomfortable with a $1500 house payment, I think this is the only plan that makes much sense for me.

Going to dwell on this idea for a week or so. Thanks again.

madbrain
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Re: Rent in safer neighborhood or buy in less safe one?

Postby madbrain » Sun Jul 16, 2017 10:23 pm

staythecourse wrote:That doesn't prove any point at all.


It disproves the statement that you think that all home buyers are looking for the same thing. Some want to live dense cities, and some don't.

What is the rate of increase in value of the houses in safe areas in the San Jose area? If your's has doubled then my guess those areas have increased SIGNIFICANTLY more.


I would say it's about the same rate of appreciation citywide vs my individual property, we really got a deal buying a foreclosure on a huge place.
Not the same rate of appreciation for every home in the neighborhood.

Anyway, our home itself is in a fairly safe neighborhood, there are just less safe neighborhoods not too far at ground level. If we walked one mile, we would be in those areas.

If it was more desirable then developers would be buying these huge lots and subdividing them to smaller lots and selling them off.


One side of the hill, previously completely empty, has attracted a developer. It has six large brand new homes built on tiny lots, very close to each other, without any view of the bay unlike my place. Makes no sense to me in a non-walkable neighborhood. Will be curious to see when they sell and at what price. It's been a few months.

Everything else being equal, of course people would buy in a safer neighborhood, but everything else is not equal.

We were previously living in a small townhome, in a somewhat urban area of Silicon Valley, with a common wall and extreme proximity to neighbors. HOA was a problem even with just 8 homeowners. Ratio of renters to owners caused issues when trying to sell the place and sank the deal once - 3 renters out of 8 was too high for the lender.
We now have a place far enough from anyone to play music at night, that can easily accommodate not just my old 5'6" grand piano but a 9'2" and an 8' harpsichord.
We now sit 25ft away from the home theater screen as opposed to 12ft before in the townhouse. And it's in a room specially built for that with no windows (no light leak).
There was a hot tub which we could not have put at the other place.
We also have solar panels we would not have been allowed with the HOA in a townhouse.

For the price we paid, we could have had a 2000 sq ft single level home on a small lot at ground level on a busy street, in not so great condition, instead of the 4600 sq ft mansion we have. We won't be walking to any park or any business. But I can certainly say we would rather be where we are. Many mansions in Saratoga that will cost 2x the price for the same size home would not have the view that we have still.

MnyGrl
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Re: Rent in safer neighborhood or buy in less safe one?

Postby MnyGrl » Mon Jul 17, 2017 10:33 am

Hi, a few things to consider:

1) You mention that your older child has special needs. It depends on what those special needs are, but in my area, public schools have much better programs in place to deal with those, and many private schools won't take kids with particular needs (or are extremely expensive). So I would look into the school systems in your area before making a move. Homeschooling is always an option but might not fit the needs of your child, who might need more socialization and specialized instruction than a layman can provide. Also homeschooling would eliminate your wife's potential income for the next 13 years.

2) If you have a family, their safety is paramount. I live in a very high COL area and pay more than the recommended 2.5 or 3x number - there really isn't a choice in my particular area and situation. I choose to drive an old car and cut corners in other ways.

3) If your wife could potentially go back to work in a few years, that extra income might put you in comfortable reach of those more expensive areas.

If it were me I would continue to rent for another few years.

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Pajamas
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Re: Rent in safer neighborhood or buy in less safe one?

Postby Pajamas » Mon Jul 17, 2017 10:48 am

Limoncello402 wrote:I bought my first house (age 28) in a marginal area because I could not afford the nicer area that I really wanted to be in--the one so close to my work that I could walk. I stuck it out 20 years during which the neighborhood got worse and worse. Finally I got out as I was truly scared for my life and moved to the area I wanted to be in. Had to take a mortgage again to afford it (I had paid off the earlier one) and had to fix up the house (an old one) starting from scratch, just the way I fixed up the one in the bad neighborhood. I regret to this day that I did not bit the bullet, even when I was poor and just starting out, to buy a decent place in an excellent neighborhood. And I don't even have kids--that's definitely a game changer.


On the other hand, plenty of people have bought in "gentrifying" areas and have been very happy with their purchases, both as far as the neighborhood and price appreciation. "Good" neighborhoods can also decline. Real estate markets are very local.

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prudent
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Re: Rent in safer neighborhood or buy in less safe one?

Postby prudent » Mon Jul 17, 2017 11:07 am

Pajamas wrote:If you can afford to live in a safe neighborhood as opposed to one that is not safe, do so. I would not let renting vs. buying make that decision by default.

However, consider carefully whether a neighborhood is actually safe or not. Sometimes statistics can be misleading. For instance, it often appears that some neighborhoods in Manhattan are unsafe because the statistics are based on the number of residents and the neighborhoods have a lot of business activity so there are many more people physically in the area every day than actually live there. Many of the reported crimes may be shoplifting, attempted use of stolen credit cards, and similar crimes that don't have such a direct effect on people who live in the neighborhood as other types of crime might have. Looking only at violent crime statistics might be more meaningful. You also shouldn't make certain conclusions about the crime rate in a neighborhood just because of who lives there or what it looks like. You might be surprised at the amount of crime in what looks like a safe, middle-class neighborhood.

But given the statistics you quoted for the neighborhood you can afford to buy in, renting looks like the better option.


Something similar (misleading stats) is true for our suburb. Crime stats are reported on a township level. Our township is very large. One end is older, less affluent, has a lot of bars/retail. The other end is newer, less developed, all residential, and no retail. 80% of the crime is in the older section. The 20% of crime in the newer end is mostly mailbox vandalism and an occasional break-in, which based on what was taken and where it was kept, the police believe was usually the work of a family member (to get drug money). On paper our township has average crime rates, but in the newer section it's very, very low. We can see the police blotter online to verify.

staythecourse
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Re: Rent in safer neighborhood or buy in less safe one?

Postby staythecourse » Mon Jul 17, 2017 12:59 pm

kjvmartin wrote: OP HERE: Many great replies and I'm appreciative. Some have been a good reality check. I have been torn between the "old folks" living in the "old neighborhood" who say "no way" and the others who say it'd be snooty to buy a house for $250,000 when you can live much cheaper. My own mother still lives in one of the poorer areas and is bit of a champion of the community, so when I try discuss plans to spend 1/4 million on a house, she thinks it's absurd. There are truly few/no options for us in the 180k range. Everything shot up over $200k.

I made a prior thread about taking out a 401k withdrawal (no loan available) to finance 20% down on a house, vs putting 5% down. The "rent vs buy" cost calculator that was linked here was a very helpful tool. Even if I invested the difference, I'm hundreds of thousands of dollars behind if I rent and buying becomes profitable after just 4 years.

Taking $50,000 out of my 401k does not seem so bad. I've got 1x my salary in there at age 33. I know I'll have to maintain increased contributions to catch up, but I truly feel like this is the best course of action and will likely take action very soon to locate a house in a good area hopefully closer to $200k than $250k. I am so uncomfortable with a $1500 house payment, I think this is the only plan that makes much sense for me.

Going to dwell on this idea for a week or so. Thanks again.


If you can't afford the downpayment of purchasing and living in a nice area then why not just wait? Are you being forced out do your landlord wanting to sell? If not, then I would not make it overly complicated. Just start diverting some of the savings to a downpayment fund. If you are sweating over 50k (250 vs. 200) I don't think it is a wise move to stretch to make it happen.

Good luck.
"The stock market [fluctuation], therefore, is noise. A giant distraction from the business of investing.” | -Jack Bogle

LAR
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Re: Rent in safer neighborhood or buy in less safe one?

Postby LAR » Mon Jul 17, 2017 1:36 pm

Hold out for a steal of a buy in the better safer more expensive neighborhood. I am sure they still get their fair share of short sales, foreclosures and people that simply want to sell to the first bidder.

kjvmartin
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Re: Rent in safer neighborhood or buy in less safe one?

Postby kjvmartin » Mon Jul 17, 2017 1:39 pm

staythecourse wrote:
kjvmartin wrote: OP HERE: Many great replies and I'm appreciative. Some have been a good reality check. I have been torn between the "old folks" living in the "old neighborhood" who say "no way" and the others who say it'd be snooty to buy a house for $250,000 when you can live much cheaper. My own mother still lives in one of the poorer areas and is bit of a champion of the community, so when I try discuss plans to spend 1/4 million on a house, she thinks it's absurd. There are truly few/no options for us in the 180k range. Everything shot up over $200k.

I made a prior thread about taking out a 401k withdrawal (no loan available) to finance 20% down on a house, vs putting 5% down. The "rent vs buy" cost calculator that was linked here was a very helpful tool. Even if I invested the difference, I'm hundreds of thousands of dollars behind if I rent and buying becomes profitable after just 4 years.

Taking $50,000 out of my 401k does not seem so bad. I've got 1x my salary in there at age 33. I know I'll have to maintain increased contributions to catch up, but I truly feel like this is the best course of action and will likely take action very soon to locate a house in a good area hopefully closer to $200k than $250k. I am so uncomfortable with a $1500 house payment, I think this is the only plan that makes much sense for me.

Going to dwell on this idea for a week or so. Thanks again.


If you can't afford the downpayment of purchasing and living in a nice area then why not just wait? Are you being forced out do your landlord wanting to sell? If not, then I would not make it overly complicated. Just start diverting some of the savings to a downpayment fund. If you are sweating over 50k (250 vs. 200) I don't think it is a wise move to stretch to make it happen.

Good luck.


After fixed expenses on our budget renting there is $700 to spend on food, down payment savings, auto maintenance, household, gasoline, clothing etc. So if we have a $10,000 emergency fund and the downpayment + closing costs on a $250,000 house is $60,000... Even with the wife picking up RN shifts in the near future, how long are we waiting to fund our house? We were saving a fair amount when rent was $730, but, as someone posted before, there's no sense whining about it :happy rents and prices are what they are. Reality is I can either continue to endure raising rents while essentially treading water, or I can move to a more urban apartment and save some money, buy a house in that urban area, or drain my 401k to buy a decent house in a comfortable area.

kjvmartin
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Re: Rent in safer neighborhood or buy in less safe one?

Postby kjvmartin » Mon Jul 17, 2017 1:49 pm

LAR wrote:Hold out for a steal of a buy in the better safer more expensive neighborhood. I am sure they still get their fair share of short sales, foreclosures and people that simply want to sell to the first bidder.


The market is insane. Nothing stays on the market a day without multiple offers. Historic low of inventory for our area. My good friend is a RE Agent and was busy for the last couple years, but the problem now is too many buyers and hardly any sellers. This is unusual for a midwest rust belt metropolis.

We took a break from home shopping 5 months ago when our daughter was first born and in and out of the hospital. The last house we looked at, we scheduled a showing. They cancelled the showing (and all others) due to overwhelming demand and scheduled a 2 hour open house instead as the only way to see the property. The street was like an stadium after a concert. We waited 30 minutes in line to get into the house which was way too crowded. It was very common for me to see a new listing (I was getting an email blast every morning) and call the Realtor to schedule a showing only to find it was already pending by that evening. Regarding foreclosures/short sales, if you can believe this, there are 0 active foreclosure listings within a 20 mile radius of my apartment. Who would walk away from a house in this market? Anyone who bought in the last year has enough equity to break even and sell.

http://www.cnbc.com/2017/05/17/real-est ... s-out.html

warner25
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Re: Rent in safer neighborhood or buy in less safe one?

Postby warner25 » Mon Jul 17, 2017 1:54 pm

I'm just thinking, having been deployed to an actual war zone, that everything else goes out the window when safety is really in question (like the people on this thread who say they've woken up to the sound of gunfire or had their homes broken into multiple times) whether you have a family or not. Safety is very near the bottom of Maslow's hierarchy of needs pyramid, and I think there's a lot of validity to that. It's hard to think about or enjoy much else. If the prospective neighborhood is really that bad, I would certainly just rent elsewhere, and plan longer-term to move to a whole other area if this one continues to be unaffordable.

MnyGrl
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Re: Rent in safer neighborhood or buy in less safe one?

Postby MnyGrl » Mon Jul 17, 2017 2:00 pm

warner25 wrote:I'm just thinking, having been deployed to an actual war zone, that everything else goes out the window when safety is really in question (like the people on this thread who say they've woken up to the sound of gunfire or had their homes broken into multiple times) whether you have a family or not. Safety is very near the bottom of Maslow's hierarchy of needs pyramid, and I think there's a lot of validity to that. It's hard to think about or enjoy much else. If the prospective neighborhood is really that bad, I would certainly just rent elsewhere, and plan longer-term to move to a whole other area if this one continues to be unaffordable.


I agree, safety should be the top priority here.

I know you are probably impatient and don't want to "tread water," but it is for these transitional times - when kids are little and mom is out of the workforce for at least a while - that renting is the way to go. Buy a house in the bad neighborhood (with probably bad schools) and you'll be stuck if you decide that public school is the way to go in a few years. Renting gives you options.

If your wife is an RN, see if she can pick up a shift or two during the week or weekends. It'll keep her job skills fresh and add to your down payment money.

mega317
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Re: Rent in safer neighborhood or buy in less safe one?

Postby mega317 » Mon Jul 17, 2017 2:42 pm

kjvmartin wrote: Reality is I can either continue to endure raising rents while essentially treading water, or I can move to a more urban apartment and save some money, buy a house in that urban area, or drain my 401k to buy a decent house in a comfortable area.


You're in a really tough spot. What about taking on a much longer commute to find a middle-ground? I would be willing to put up with that in exchange for safety and solvency.

Edit to also ask where do your coworkers live?
Last edited by mega317 on Mon Jul 17, 2017 4:56 pm, edited 1 time in total.

Limoncello402
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Re: Rent in safer neighborhood or buy in less safe one?

Postby Limoncello402 » Mon Jul 17, 2017 4:14 pm

"On the other hand, plenty of people have bought in "gentrifying" areas and have been very happy with their purchases, both as far as the neighborhood and price appreciation. "Good" neighborhoods can also decline. Real estate markets are very local."

It is true. In fact, the neighborhood I mentioned above that I stayed in 20 years showed early signs of turning around, for the better. I stuck it out that long because I had hope, and had put a lot of TLC into my dear house in anticipation of that hope. Then it tanked. No area is exempt from what could happen, but this time I moved to a much surer bet--an establishe neighborhood that is not now nor has ever been on the margins.

kjvmartin
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Re: Rent in safer neighborhood or buy in less safe one?

Postby kjvmartin » Mon Jul 17, 2017 5:36 pm

mega317 wrote:
kjvmartin wrote: Reality is I can either continue to endure raising rents while essentially treading water, or I can move to a more urban apartment and save some money, buy a house in that urban area, or drain my 401k to buy a decent house in a comfortable area.


You're in a really tough spot. What about taking on a much longer commute to find a middle-ground? I would be willing to put up with that in exchange for safety and solvency.

Edit to also ask where do your coworkers live?


In this area, the further one gets away from the city, the more expensive the real estate gets (to a point) and then it diminishes some. So, if I drove an hour to the other side of town I'd be in the same boat. Same kind of suburbs, different names. On my side of the city, the furthest out you might go is 55 miles from my office and around a 1.5 to 2 hour commute at rush hour. No one ever really moved out there until the last 10 years.. There's an outlet mall, some highway fast food stops, and lately new subdivisions. Those are 250k+ homes.

If you're worried about whining, skip this paragraph: We acknowledge we missed the boat. Worried about missing the next one. Coworkers mostly made smart real estate moves during the crash & recovery. We had an offer on a 33k short sale in a good area for 9 months and did not get the house. -$600 appraisal + inspection...It went to foreclosure and an investor bought it cash. It's now worth around 150k+.. Our next offer was on a 4 bedroom 2300 square foot house for 98k in a nice historic downtown. Needed about 30k worth of work. It was bank owned. Our offer was accepted and someone stole all of the plumbing before closing. The mortgage company insisted on the bank fixing it and the bank refused, so we lost our financing. -$600 appraisal + inspection It's worth well over $200k now. So, our third offer was on a regular ranch for $109k on the border of the poorer city, but still in an ok area. The title company found an issue and the seller was in and out of court due to some kind of lein on the house for months with no end in site. No one could give us any answers and we eventually backed out of the transaction. -$600 appraisal + inspection. We did buy a completely remodeled and rehabbed house for $165,000 house in 2015 in the nice part of town. It was a fraudulent seller (also the realtor) and we were tied up in court for a year afterwords. He painted, walled, and roofed over mold from the floor of the basement to the roof of the house and most places in between. We had pro bono lawyers and lost our downpayment and costs (first time we didn't get an inspection, though not sure it would have mattered) to the tune of about $30,000 to get the property back into his hands. We also used a long term 401k loan to fund part of the downpayment for this one.

And back to the reality - We'll be fine anywhere, and I'm not stressed about the decision. If we can find the right house, I'll raid retirement to fund. Once I have the specter of being unsure about real estate off my back, I can really focus more on replacing those funds.

Marylander1
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Re: Rent in safer neighborhood or buy in less safe one?

Postby Marylander1 » Mon Jul 17, 2017 6:03 pm

prudent wrote:
Pajamas wrote:However, consider carefully whether a neighborhood is actually safe or not...Looking only at violent crime statistics might be more meaningful. You also shouldn't make certain conclusions about the crime rate in a neighborhood just because of who lives there or what it looks like. You might be surprised at the amount of crime in what looks like a safe, middle-class neighborhood.
Something similar (misleading stats) is true for our suburb. Crime stats are reported on a township level....On paper our township has average crime rates, but in the newer section it's very, very low. We can see the police blotter online to verify.

+1! Be sure to validate any statistics you find, because there are many sources of error.

I just looked up 3 neighborhoods I know well in online crime databases. For 2 of the 3, low-crime areas were lumped together with nearby high-crime areas. The maps lacked sufficient detail to differentiate.

I live in a low-crime area with high police presence. This means more crimes are reported than in other areas, inflating the statistics. A few years ago, our police blotter included a pet bowl reportedly stolen from outside a house, but recovered. Crime? Possibly. Cause for concern? Not much.

-Marylander1

Sandi_k
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Re: Rent in safer neighborhood or buy in less safe one?

Postby Sandi_k » Tue Jul 18, 2017 9:56 am

Limoncello402 wrote:I bought my first house (age 28) in a marginal area because I could not afford the nicer area that I really wanted to be in--the one so close to my work that I could walk. I stuck it out 20 years during which the neighborhood got worse and worse. Finally I got out as I was truly scared for my life and moved to the area I wanted to be in.

Had to take a mortgage again to afford it (I had paid off the earlier one) and had to fix up the house (an old one) starting from scratch, just the way I fixed up the one in the bad neighborhood. I regret to this day that I did not bit the bullet, even when I was poor and just starting out, to buy a decent place in an excellent neighborhood. And I don't even have kids--that's definitely a game changer.


I could have written this post. We too bought our first house in a marginal neighborhood, when it was all we could afford - rather than continue renting. We'd moved on a near-annual basis as renters, and wanted some security in terms of control. For the better neighborhood, we'd get 2 bedrooms, a near-useless driveway, and a Model T garage. Ten miles away, we got 50% more space, a third bedroom, a walkout basement, and a 2 car garage. So that's where we bought.

Our first New Years' Eve, we huddled in the walkout basement until the gunfire lapsed. We made sure not to be home on 4th of July. We always locked our cars, and stack parked in the driveway to avoid parking in the street. After a few years, the neighborhood improved. Then it cycled downwards. Then upwards. Then downwards again. A nearby friend found himself owning a home on the same block as a crack house - seriously. It took more than a year to get the criminal grandkids out of the house, and in the meantime, houses on the block were robbed, vandalized, cars broken into and stolen, etc.

We kept thinking our neighborhood/block/house was trending better. And then we got on a neighborhood email list after organizing a Neighborhood Watch. Within weeks, we had a litany of robberies, assaults, burglaries (including our next door neighbor), a man dragged off his bike on his way home from work and beaten, and other violent and non-violent crimes. For me, the breaking point was when we found out that dinner guests of a house down the block had been robbed at gunpoint, IN THEIR DRIVEWAY, in broad daylight, with their INFANT in their arms.

That was it.

IN the end, we stayed 19 years, and sold our house for a little more than 2.5 times what we paid for it. ($150k to $400k). If we had bought in the better neighborhood 19 years earlier? We would have been able to buy our current house outright - ($150k to $900k appreciation in 19 years).

Buy in the better neighborhood.


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