Buy a cheap house or rent a nice apartment?
March 22010
I’m at a cross roads. For a while I’ve been thinking about not pissing money away every month and jumping into the market. The problem is that my income situation does not allow me to make house payments any larger than what I currently rent for +/- 100 bucks. I realize that in order for me to get into the market comfortably I’m looking at home prices <100K. Well, to no surprise the houses are old and dated and the neighborhoods are sketchy where I live (shreveport/bossier city, LA). For that same monthly payment I’m pissing away on rent, I live in a NICE apartment.
So my question is: is it a fair sentiment to consider that the opportunity cost of throwing away money on a nice apartment (and have a good QOL) is worth the equity not being built on a sketchy house worth less than 100K? I concede renting is worthless money-wise, but I cannot sift through the listings and look at these neighborhoods and feel as though it’s worth my time when I can be renting a nice place and have QOL.
I think you’re answering your own question. I learned recently that it’s not very easy to walk away from a mortgage like a rental. If you’re sure you are going to stay put for the next 5yrs or more then buy otherwise continue renting. It’s too much work to keep moving every 1-3yrs and if you have to add sellling a house to that then its no fun. Homeownership is for when you’re ready to settle down and stay put for a while.
March 2nd, 2010 at 6:00 pm
buy the house they are cheap right now!
also consider this as well you can write off home loan payments at the end of the year not your rent.
right now homes are being sold for considerable less than a year ago in most markets. right now you pay taxes on your full income when you own a home you only pay taxes on what you have after your mortgage payments tax etc.
i would look at homes in your price range take a look at http://www.directlendingplanet.com the articles are great for people looking into getting amortgage and they will also answer any question you ask and email you an answer asap.
if you ask them i want a home at this price range in this area they will look for it and give you stats. then make an informed decision…
you cant beat thier interest rates in most cases plus they will also look into the market in your area to help you get started.
these guys saved me 120k in added interest!!! they are worth looking into …. http://www.DirectLendingplanet.com
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March 2nd, 2010 at 6:40 pm
If you buy an older home, you’ll be spending money on maintenance. (maybe a lot, maybe a little)
If you want to own a home, move to a less expensive apartment, and save the difference. Then buy a home later.
It’s rarely a good idea to buy a home in a marginal neighborhood. They’re hard to sell later.
Otherwise, enjoy where you live.
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March 2nd, 2010 at 7:26 pm
I think you’re answering your own question. I learned recently that it’s not very easy to walk away from a mortgage like a rental. If you’re sure you are going to stay put for the next 5yrs or more then buy otherwise continue renting. It’s too much work to keep moving every 1-3yrs and if you have to add sellling a house to that then its no fun. Homeownership is for when you’re ready to settle down and stay put for a while.
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March 2nd, 2010 at 7:33 pm
I’m not an expert, but I’d rent a nice apartment. You should see an agent just to make sure you can’t qualify for more than you think or that there isn’t something better out there. Sometimes the agents get things and sell them before they are posted. Also, if you decide to wait, maybe get a second job to save up for a downpayment? Just a thought. I’m thinking of doing that eventually. My friend worked 7 days a week for a year and saved like $30000 that way for his first house! It will be a year from hell, but may be worth it.
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March 2nd, 2010 at 8:11 pm
In my opinion, for what it’s worth, owning is much better than renting. There are tax benefits, net worth asset, well most increase in value, especially if maintained. Now as for your financial picture, have you considered taking in a renter? Find a nice 2 bedroom 2 bath home for $100K or under. Something that a little elbow grease will make homey and improve the value. In some places HUD may provide financial assistance for closing costs/down payment. You need to go and be prequailifed by a lender.
And yes in my humble opinion, you are pissing away alot of money that you could be putting in to your home increasing it’s value! And increasing your net worth!
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March 2nd, 2010 at 8:41 pm
Yogi hit the nail on the head. Buying a home simply for the sake of buying – or because conventional wisdom is that owning is better than renting – isn’t a good reason. With the present state of the market – you aren’t giving away a huge equity gain by waiting a little while – and it sounds like you’d be happier in a nice locale with conveniences than living in a marginal neighborhood in a low-end home.
The marginal house will appreciate less and give buyers the same concerns when you’re ready to sell. The exception being a neighborhood that truly does a 180 and becomes desirable while you own the house – a relative rarity.
Rent something comfortable that allows you to stash a few bucks away or eliminate some debt for the next year or two – then go out and buy something you know you’ll be satisfied with.
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23 year REALTOR / Broker / Property Manager
March 2nd, 2010 at 9:26 pm
I would say try and buy an apartment in a nice, trendy neighborhood. Live there happily for 2 or 3 years. Later, when you have enough money saved to buy a single family home, put the apartment on rent and move into the single family home. That way, you can eat the cake and have it also by getting tax benefits from day one and the apartment will pay for itself when it is rented out.
Trust that this is making sense.
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March 2nd, 2010 at 9:40 pm
Home ownership is not for everyone. There are costs, maintenance, etc. that you don’t have with an apartment. The offset is, that if you’re renting (theoretically) you should be saving money, and that saved money should go into savings or some other type of investment. That’s where most renters go wrong, they put the ‘extra’ money into a nicer apartment at higher rent and, as you know, end up with nothing to show for it in 20 or 30 years. Of course, the government still helps you buy property right now by allowing you to deduct interest and taxes associated with buying property. So you’ll get a much bigger refund back next year. Of course, some of that should go into a ‘fund’ to pay for maintenance or make upgrades to your new home.
If you want to kind of ‘slip into the pool’ instead of diving, buy a condo or townhome. That way, you’re only responsible for a very small yard, or only what’s inside your walls. In most markets, now is the time to buy. Many economists are projecting housing prices to make a fall comeback…
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