Purchasing "second" home first

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Location: chicago

Purchasing "second" home first

Post by B3GINN3R »

I want to gut check something here to see if it is crazy.

Married 28 year old. Entire family lives in MCOL area hometown. I moved to big city for job (about 4 hours from hometown). COVID has sent us home for an extended period of time, living with parents. My job is pretty easy to do remotely and not sure when we are going back. We were saving cash for a down payment on a home in city.

I am now thinking it may make sense to buy a small home here 3bd/3bath for 250-300k. We could put down 80k and have only a 1200-1600 mo payment. We would use this for now as a place to stay, but could in the future use as a vacation home when we come visit family/spend summers here etc. We have 20 nieces and nephews and are close with family, so we will be here often even if we don't move here to visit family. I intend to keep my job in the big city for the foreseeable future. Also, if we ever decide to move back, I'd say there is a remote chance this happens in next 5 years, we could use it as a transition home or live in it longer term if it is large enough. We hope to have kid soon. Meanwhile, we would keep our apartment in the big city and just continue to rent there for the next years.

Is this a crazy idea?

HHI is about 350k

Taxable/Nontaxable/Retirement - 250k
Cash - 100k
No debt

3800/mo rent

Income is relatively stable, may go down a bit in next years, may go up
Topic Author
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Re: Purchasing "second" home first

Post by B3GINN3R »

bumping before it goes to low.
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Re: Purchasing "second" home first

Post by GmanJeff »

Why do anything now? Wait until you see if you end up working remotely permanently. Many employers may find they need not incur the expense of as much office space as they used to occupy if they find their workforces are productive as remote workers. If you do end up working remotely indefinitely, you might want a different permanent residence in your home town. If you don't, incurring the carrying costs of a second home you use only occasionally will place limits on what you can buy in the city where your employer is located.

Maintaining two homes always involves opportunity costs with long-term financial impacts which may or may not be important to your planning for retirement and other longer-term goals.
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Re: Purchasing "second" home first

Post by senex »

It's not uncommon in big cities to rent in city and purchase in a weekend spot.

300k home on 350k income is easily affordable, even with your rent payment.

If you have great family situation, and they can check on house, help with upkeep, nephew can mow lawn, etc, it may work great. Else you need to hire everything out (can get expensive; hard to find good people; difficult to coordinate from afar), or you need to spend most of your weekends on maintenance chores.

As for a "5 year plan," those rarely works as expected, and it's usually bad to buy something now because you might use it in the future.

For me, it would revolve on (a) how long I expect to work remotely and (b) level of family help for upkeep. If family can't help, I would just rent.
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Re: Purchasing "second" home first

Post by rich126 »

What is the goal of buying a place there?

Are you willing to spend $25-30K+ a year on a 2nd home? Seems like a lot of money to throw away. The only way you'd break even or come out ahead is if the house appreciated between the time you buy and sell.

If you have enough money to do that and don't mind doing that, then that is your business but I don't see how anyone can make it into a good financial choice. At that cost you can easily rent a nice hotel/airbnb/etc. for quite a few nights a year and still be way ahead.

I have a house in a very nice area that I'm likely to sell (personally I think the market is crazy high right now where I'm at). I've thought of keeping it since it will be paid off but then I consider all of the expenses I'd still have - lawn, pool, taxes, insurance, some maintenance, etc. And I don't need that as I approach retirement. Maybe if I had $10M in the bank, but that still requires someone to keep an eye on the property and deal with unexpected issues like a leaky pipe, etc.

The odds of that money invested in the market doing better than the appreciation of the house plus all maintenance costs, taxes, etc. is probably quite high (and I'm not someone who thinks the stock market's future is that good).

I guess I just don't see any real goal here. Reminds me of all of those house hunters shows where the couple is always wanting a place with an extra bedroom or two for family/friends/etc. to use when they visit. Then if you do the math, the extra cost for those rooms is likely to greatly exceed the hotel costs of hosting visitors for a few weeks a year. But then again, maybe it is the fact that while I make a nice salary it isn't in the level where I can throw away that kind of money.
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Re: Purchasing "second" home first

Post by Mr.Chlorine »

WIth your income, it is definitely feasible. Your PITI would be less than half your big city rent.

Other than the job, do you have any attachment to the big city? Meaning, if your work let you stay remote long term, would you continue to have two places or move back home entirely?
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Re: Purchasing "second" home first

Post by Flyer24 »

I wouldn't do it. I would at least wait until things settle down and you get a better idea of your work situation. If I was looking at a place to stay when visiting family, then just stay in a nice hotel or maybe a cabin (vrbo). It would be just too much expense and upkeep to maintain a house.
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Re: Purchasing "second" home first

Post by getttinggoing37 »

Buying a house is as much an emotional decision as it is a financial decision. It sounds like you can afford it, though I wouldn't treat it as an investment, rather an expense that provides you personal value and gratification. Perhaps it will appreciate beyond your purchase price + inflation/missed market gains, but likely it won't and I wouldn't bank on that.
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Re: Purchasing "second" home first

Post by Watty »

One thing to consider is that if you buy a home there it could impact your ability to have a downpayment and qualify for a loan when you want to buy a home in the big city in a few years.

If you move back to the big city it would likely make more sense to rent out the house in your hometown instead of keeping it as a vacation home. The problem is that four hours is too far to frequently go there for a weekend especially if you have kids.
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Re: Purchasing "second" home first

Post by LittleMaggieMae »

I don't think it's a crazy idea. I would not put more than 20% down. Save the rest of your money for the next house. You'll probably be around 2K per month (with utilities and alittle for repairs sinking fund). You've got the income. The real issue is will you have family who can check on the house and mow the lawn, pick up mail, and who might be willing to "project manage" when something needs to be done when you aren't there (like let in a plumber or look over work done) etc...

How are schools where you would be buying?

I would do it. There doesn't appear to be too much "risk" involved financially and you are young - plenty of time and energy for dealing with any 'drama' taking on first time home ownership will throw at you. If nothing else - you get some home buying (and then home selling) experience. And if you've never helped your parents care for their house when you were growing up (have no idea how to paint a wall or mow a lawn or hang pictures or replace a p trap drain on a sink) you can get in some experience doing DIY stuff and learn all about what it takes to own (ie take care of) a house. It will make you a better house buyer the second time around.
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Re: Purchasing "second" home first

Post by phxjcc »

Be aware that you are asking advice from those in a real estate averse environment.

You have the income to do this.

If you enjoy the area and it is your happy place, then by all means go ahead.

One HAS to work and NEEDS to live close to their work, but that does not mean the place where they LIVE TO WORK is necessarily the place where they LIVE TO LIVE.
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