Thinking Through Buying a Property

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Topic Author
Broadway2018
Posts: 284
Joined: Sat May 13, 2017 3:34 pm

Thinking Through Buying a Property

Post by Broadway2018 » Sun Jun 30, 2019 11:56 am

I recently moved and am not sure what price point to buy at. My income recently doubled however I don't have much for a downpayment (HCOL). Not sure if I should buy something towards upper range of budget and put down less money or try to buy cheaper and put down 20%. I could also borrow $50k from 401k and pay back in 6 months. The main issue is lack of savings right now, however, with this new income I can save $7k a month after 401k max. I can't really wait to buy unless I rent something as I need to be out of temp housing by October. Also, I am selling a home in another state and breaking even (no gain) but have a full house of furniture. I don't want to get rid of it if I am going to buy in the next year.

Age: 34
Income: $200k just myself, partner will make around $100k
401k: $110k
Savings: $60k
Car debt: $20k
No other debt

Options I am thinking about

1) Condo - 1-2 bedroom, 1000 sq ft close to work (within 1-2 miles in city)
Cost: $550k-$700k depending on location, updates
Pros: close to work, could use as investment property later
Cons: HOAs are around $500-650 a month depending on building, no yard

2) Duplex in city but slightly further commute then option 1
Cost: $700k-$900k
Pros: immediate rental income of ~$2k in one unit
Cons: upfront cost/investment

3) Rent instead of buy
Cost: $2500-$3200 depending on location
Pros: cheaper, ability to save more
Cons: moving more frequently and we have a large dog which could be an issue (paying pet rent, etc)

4) Buy outside city and have 40-50 minute commute
Cost: $500-600k
Pros: more space and potentially a yard
Cons: commute

adamthesmythe
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Re: Thinking Through Buying a Property

Post by adamthesmythe » Sun Jun 30, 2019 12:58 pm

Avoid churn. Don't buy for the short term.

Be a landlord only if you want to be a landlord. Unless you HAVE to be a landlord.

Know your commute tolerance. Be sure your time estimate is realistic.

WhyNotUs
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Re: Thinking Through Buying a Property

Post by WhyNotUs » Sun Jun 30, 2019 1:17 pm

If you are selling your old place and breaking even, it may mean that you lost some money after improvements and repairs, I say that just to imply that jumping into owning might not be the best approach now. I would focus on where I want to live- commute, social amenities, lifestyle- and see what is available for rent. If it and the new job turned out to be a good fit, then I would build a down payment and start looking prior to the end of my lease. Once we live in an area we learn whether it is a good fit for the next 10 years. If not, it gives us time to explore other areas without being stuck.
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Sandtrap
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Re: Thinking Through Buying a Property

Post by Sandtrap » Sun Jun 30, 2019 3:52 pm

#3 Rent home.
#4
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btenny
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Re: Thinking Through Buying a Property

Post by btenny » Sun Jun 30, 2019 4:24 pm

I like option 3 with a commute of 20 minutes or less for 2-3 years. Save some $$ for now. Then buy if job works out good. By then you will know new city and good locations and good commute paths. Do not buy right now. You have too many unknowns in this new city.

Good luck.

cherijoh
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Location: Charlotte NC

Re: Thinking Through Buying a Property

Post by cherijoh » Sun Jun 30, 2019 5:39 pm

Broadway2018 wrote:
Sun Jun 30, 2019 11:56 am
1) Condo - 1-2 bedroom, 1000 sq ft close to work (within 1-2 miles in city)
Cost: $550k-$700k depending on location, updates
Pros: close to work, could use as investment property later
Cons: HOAs are around $500-650 a month depending on building, no yard
Condos are harder than SFH to sell IMO although I haven't lived in a HCOL area where many potential buyers are priced out of SFH.

I'm not sure if I would classify being able to convert to an investment property a plus or a minus. Often, the house you choose to buy doesn't meet the criteria for a profitable rental. In addition, localities vary in balance between favoring tenants or landlords in the applicable laws. If you are contemplating becoming a landlord - even in the future - be sure you understand how it works in your area.

Then HOAs add a level of complexity. A former co-worker lost her job and moved home to the mid-west. She decided to rent out her condo here. Several years after she began renting her unit out, the HOA board decided to change the rules and totally eliminate the ability of owners to rent out their condos. The only "concession" they were willing to grant owners already renting out their condos was that they could continue to rent it out until the end of the lease agreement with their current tenant. Not much of a concession since I doubt they could force someone to break a legally binding contract. :oops: She and some of the other owners sued the HOA and from what I heard from a mutual friend it was a royal mess.

Topic Author
Broadway2018
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Joined: Sat May 13, 2017 3:34 pm

Re: Thinking Through Buying a Property

Post by Broadway2018 » Sun Jun 30, 2019 6:33 pm

btenny wrote:
Sun Jun 30, 2019 4:24 pm
I like option 3 with a commute of 20 minutes or less for 2-3 years. Save some $$ for now. Then buy if job works out good. By then you will know new city and good locations and good commute paths. Do not buy right now. You have too many unknowns in this new city.

Good luck.
My main issue is the quality of rental is pretty awful at that price point. Not an apples to apples comparison. I looked at a place I fell in love with today so may try to make that work. I have not found any rentals and the idea of throwing $3k+ away a month for years seems like a bad strategy.

$675k list price with closing costs paid.

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willthrill81
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Re: Thinking Through Buying a Property

Post by willthrill81 » Sun Jun 30, 2019 6:36 pm

Thomas Stanley, the author of The Millionaire Next Door, created a metric for such situations that I believe to be very good: if you could not make your mortgage payment if your income were cut in half, then you cannot easily afford your home.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

Topic Author
Broadway2018
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Re: Thinking Through Buying a Property

Post by Broadway2018 » Sun Jun 30, 2019 6:56 pm

willthrill81 wrote:
Sun Jun 30, 2019 6:36 pm
Thomas Stanley, the author of The Millionaire Next Door, created a metric for such situations that I believe to be very good: if you could not make your mortgage payment if your income were cut in half, then you cannot easily afford your home.
I guess we would be safe then. I am bringing in $12k after 401k max and taxes. Plus my spouse also make $6-7k a month. This would be $3500 a month.

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Re: Thinking Through Buying a Property

Post by abuss368 » Sun Jun 30, 2019 6:59 pm

Broadway2018 wrote:
Sun Jun 30, 2019 11:56 am
I recently moved and am not sure what price point to buy at. My income recently doubled however I don't have much for a downpayment (HCOL). Not sure if I should buy something towards upper range of budget and put down less money or try to buy cheaper and put down 20%. I could also borrow $50k from 401k and pay back in 6 months. The main issue is lack of savings right now, however, with this new income I can save $7k a month after 401k max. I can't really wait to buy unless I rent something as I need to be out of temp housing by October. Also, I am selling a home in another state and breaking even (no gain) but have a full house of furniture. I don't want to get rid of it if I am going to buy in the next year.

Age: 34
Income: $200k just myself, partner will make around $100k
401k: $110k
Savings: $60k
Car debt: $20k
No other debt

Options I am thinking about

1) Condo - 1-2 bedroom, 1000 sq ft close to work (within 1-2 miles in city)
Cost: $550k-$700k depending on location, updates
Pros: close to work, could use as investment property later
Cons: HOAs are around $500-650 a month depending on building, no yard

2) Duplex in city but slightly further commute then option 1
Cost: $700k-$900k
Pros: immediate rental income of ~$2k in one unit
Cons: upfront cost/investment

3) Rent instead of buy
Cost: $2500-$3200 depending on location
Pros: cheaper, ability to save more
Cons: moving more frequently and we have a large dog which could be an issue (paying pet rent, etc)

4) Buy outside city and have 40-50 minute commute
Cost: $500-600k
Pros: more space and potentially a yard
Cons: commute
Have you considered if things go south financially?
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Topic Author
Broadway2018
Posts: 284
Joined: Sat May 13, 2017 3:34 pm

Re: Thinking Through Buying a Property

Post by Broadway2018 » Sun Jun 30, 2019 7:50 pm

abuss368 wrote:
Sun Jun 30, 2019 6:59 pm
Broadway2018 wrote:
Sun Jun 30, 2019 11:56 am
I recently moved and am not sure what price point to buy at. My income recently doubled however I don't have much for a downpayment (HCOL). Not sure if I should buy something towards upper range of budget and put down less money or try to buy cheaper and put down 20%. I could also borrow $50k from 401k and pay back in 6 months. The main issue is lack of savings right now, however, with this new income I can save $7k a month after 401k max. I can't really wait to buy unless I rent something as I need to be out of temp housing by October. Also, I am selling a home in another state and breaking even (no gain) but have a full house of furniture. I don't want to get rid of it if I am going to buy in the next year.

Age: 34
Income: $200k just myself, partner will make around $100k
401k: $110k
Savings: $60k
Car debt: $20k
No other debt

Options I am thinking about

1) Condo - 1-2 bedroom, 1000 sq ft close to work (within 1-2 miles in city)
Cost: $550k-$700k depending on location, updates
Pros: close to work, could use as investment property later
Cons: HOAs are around $500-650 a month depending on building, no yard

2) Duplex in city but slightly further commute then option 1
Cost: $700k-$900k
Pros: immediate rental income of ~$2k in one unit
Cons: upfront cost/investment

3) Rent instead of buy
Cost: $2500-$3200 depending on location
Pros: cheaper, ability to save more
Cons: moving more frequently and we have a large dog which could be an issue (paying pet rent, etc)

4) Buy outside city and have 40-50 minute commute
Cost: $500-600k
Pros: more space and potentially a yard
Cons: commute
Have you considered if things go south financially?
You mean lose my job? We are getting the mortgage only in my name and basing it on 1 salary. My partner will also be working bringing in about $100k a year. Where I am at right now is do I rent something for $3k+ or just buy something for a similar price. I haven't been able to find a cheap rental unless I go to about 700 sq feet living space.

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