The lease is up on my apartment in April, and I have spent time over the last couple of months looking at buying a home. I have toured two condos and a duplex, which is just starting to get my feet wet in the local market. I am trying to get an idea of what is out there before I decide either way.
Timing
The biggest reason to buy today is a combination of historically low interest rates and real estate prices. If you are in the market to buy, this could be a great opportunity for you. Rates have come up a bit since their record low a few months back, but you can still find a killer deal. Bankrate can help you find low rates in your area.
While interest rates are low, so are home prices. The residential real estate market, as I am sure you know, has crashed over the last few years. Homes have come down tens of thousands of dollars. That sucks if you bought an expensive home before the bubble burst, but it leave great prices for those of us in the market to buy.
Location
Where you live is a huge consideration for potential buyers. While you can rent an apartment or house for a year and decide to pick up and leave with no penalty, if you buy you are making a long-term decision.
I have decided that I would like to live in the Highland neighborhood, which would take me 30 minutes closer to work and put me in the middle of a fun, young neighborhood with a lot going on. It is a 15 minute walk from Lower Downtown and a 30 minute drive from work. That is about as good as it gets.
Convenience
Like most people my age, I have been a renter since college. I have loved the portability of renting. I have enjoyed the benefits of being able to move around and the lack of responsibility. I don’t have to worry about a lawn, snow removal, or repairs.
While renting is often carefree, it also limits you. You can’t change much in your apartment. You are stuck under some else’s rules. You can’t control your rent for more than a year. You have to deal with a constant change in neighbors. There are certainly drawbacks.
Equity
At the end of the day, money is a big concern. I can keep paying someone hundreds of dollars a month indefinitely or I can make an effort to own a home outright and stop paying someone else. If I own a two bedroom or larger, as I am planning if I decide to buy, I can rent out the other room(s) to friends and their rent will help me with my mortgage payment.
The Big Decision
I have not made up my mind yet. Some people are advocates of owning a home. Others think it is a bad idea, particularly for a single guy in his 20s.
What do you all think? Should I rent or buy? Please share your thoughts and experiences in the comments.
I think you're definitely right on the timing. Rates aren't going to be this low forever, and with many markets selling for under the cost of replacement, there is tons of value to be realized, even if it takes a decade or two.
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Thanks for the input JT. I am right on the market timing, but not necessarily my own timing. I am not sure how long I want to live in that area. Tough choices…
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The highland is a great area. Some of my friends lived there for 2 years and moved out just last year – there are great restaurants in the area and cool shops – there's also some very cheap housing still. If you do buy, enjoy it!
It is a ton of fun there. I have some friends up there and seem to visit more and more often lately.
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Real estate is a good way to achieve wealth. Is now a good time? I don't know, but I don't think anyone else does either. Use the unknown to get a good deal! Start now, it may take a while. Also, don't take the first deal that comes along unless it makes sense. Good luck.
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I have checked out three places so far. I am still looking to see what is out there before I make a decision.
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If you can swing it, home ownership is great and rates really are hard to pass up now. Even if your house doesn't appreciate like they used to, there are still plenty of other benefits to owning.
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Such as?
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Hi Eric,
If you can find a good real, you should definitely look into buying. Aside from the favorable interest rates, or the possible gain on investment should the property increase in value, it's an automatic equity-builder, since as you mentioned, you will no longer be "throwing away" money into monthly rental payments.
Good luck with your decision.
Adam
The trick is the math on it. I have really cheap rent, so it might not work out as a financial gain unless I stay for a long time.
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Eric,
I think buying would be a good idea for you, but try and calculate the time horizon that make it worthwhile. Remember, selling a house costs you 6% off the top. So you need to weigh not just the equity gained, but the sales cost and opportunistic cost of not otherwise investing the money. So if you don't want to take a loss, and have low expectations of a near term boom in the market, you will need to hold the house for a while to make more than a renting (probably 5-10 years.) I'm guessing you plan to be married and maybe have kids in this time-frame, so it might be wise to consider what would be required in a house with a wife and small child, not just a bachelor pad.
That is the tough part. I am loving the bachelor lifestyle and want to live in a place that suits it, but I imagine there will be a special someone in the picture within the next few years. If I do buy, it will be a place with room to grow.
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IF you love where you live, can see yourself being there for 5-10 years, and can afford the payments with 20-30% own, DO IT. I think it's a no brainer to buy now. Sam
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Thanks for the thoughts Sam. I am not sure about the time horizon, which is part of why I am on the fence. Today I am 26 year old single Eric with no kids. In 5-10 years, I may be married Eric with a kid or two. I want a place good enough to grow into. I love the neighborhood, but there are many variables at this point in my life.
Part of what I love about the area is that it is urban, there are restaurants and bars everywhere, and I can walk downtown. When I have kids, I might want to be in a big house in a suburb with a yard.
I am on the fence like you. My lease ends in April and while I plan to move to southern Florida, I am also interested in purchasing an investment property in PA. I will be meeting with the realtor at the end of the week to check out a property that is located next to a popular college and is selling at a discount.
My thinking is that I move in, fix it up (not much to do in fixing up, just paint, replace carpet) and rent it out to the students. This way at the least before I move to Florida, I have some rental income coming in to boost the cash flow during relocation.
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Be careful about the loans and whatnot in this situation. You have to live in a home for a certain length of time to qualify for the loan as a principle residence (lower rate) instead of investment property.
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