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Buy a house or rent an apartment?


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30 replies to this topic

#1 of 31 Robert_Z

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Posted April 06 2003 - 05:49 PM

For the past 6 years, I have told myself that I would change careers. Because of that, I shyed away from buying a house. Well, I have had the same job all this time, and have always rented. I want to cry thinking about how much better off financially I would be today if I would have bought a house.

My situation has not changed. I am unhappy with my job, but I am too practical (or not) to quit.

I have no kids, no wife, no debt and good credit...but I only make about 60 percent of the average salary in my town, so buying a house in an area I would like is a challenging task. Plus, I anticipate buying a car before the year is out because mine is fading away.

Is homeowning everything it is cracked up to be, or will I be okay continuing to rent? FYI, all I can afford to buy is in the suburbs, so I would be looking at a doubling of commute time, gas $$$, and stress in addition to a higher mortgage compared to a lower rent.

#2 of 31 Philip_G

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Posted April 06 2003 - 06:08 PM

I don't know about austin, but around here I could buy a house for what I pay in rent. possibly less. it makes me want to cry also.
my ex-resident managers in this building (and friends) bought TWO houses, one had been seized by the city, and the other sold by owner, their mortgage is half what my rent is, and they can rent out the second house. Posted Image

#3 of 31 LewB

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Posted April 07 2003 - 12:17 AM

Owning a house is like taking on a part time job. There is always something that needs to be done, either maintenance or stuff that you'd like to improve. They don't call them 'money pits' for nothing. Sounds like you need to determine what your tolerance for commuting is.
Now for the good stuff:
1) Interest rates are dirt cheap right now.
2) Take a fixed rate loan and your payments stay the same, if you rent then the rent can go up every time the lease expires. May be some pain in the beginning, but the percentage of your pay that's taken for mortgage payments decreases over time sine your pay will hopefully be increasing.
3) I believe that you are considered a better credit risk due to the fact that you are a home owner.
4) Last but not least, you can play your home theater loud Posted Image Posted Image

#4 of 31 Eric Samonte

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Posted April 07 2003 - 01:29 AM

LewB has pointed out the many great perks of owning a home. Anothr thing to consider is the tax break u get. Just this year, we paid $6K worth of interest on our house and now, $4500 came back in our income tax return. Imagine that!

#5 of 31 Angelo.M

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Posted April 07 2003 - 01:52 AM

Just do it. Buy a house.

#6 of 31 Dave Morton

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Posted April 07 2003 - 02:03 AM

yep, you'll be better off buying a house. Renting is just like throwing money down the toilet.
------ Dave ------
------------------
MY HT

New Family Addition

#7 of 31 RobR

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Posted April 07 2003 - 08:58 AM

Assuming the situation is right for you to purchase a house or condo....

Quote:
I would be looking at a doubling of commute time,


It's just your time. You won't cry on your way to work.

Quote:
gas $$$,

When you buy your new car, get a more fuel-efficient one Posted Image

Quote:
and stress in addition to a higher mortgage compared to a lower rent.


To minimize the burden, just adjust your withholding to have less taken out of your paycheck per month. You'll get a significant amount of money back as you'll be able to deduct mortgage interest payments, property tax, and state income tax (for federal return) on your returns. The mortgage bill you get after you pay your first mortgage payment will give you a good idea of how much in interests you'll be paying over the year. Your agent will be able to tell you what percentage of your house sale you will owe in property tax. Enter those information to the paycheck withholding calculator (available on www.turbotax.com ) and make the appropriate adjustment on the W-4 form.

#8 of 31 Moe Maishlish

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Posted April 07 2003 - 09:07 AM

Quote:
Anothr thing to consider is the tax break u get. Just this year, we paid $6K worth of interest on our house and now, $4500 came back in our income tax return. Imagine that!

I'd like to imagine that, but unfortunately up here in Canada our Mortgages are not tax deductable.

Sucks, eh?!?

Robert, I'm in a similar position to you (although I like my job)... I want to buy a house in the Toronto suburbs, but real-estate prices in this city are sky-high. I also need to buy a new car this year as mine is going to pot.

I know that I need to buy my car first, or I just won't have the money to do so after I buy a house. I'm in the process of saving something for a downpayment for both car & house.

Money's tight these days (well, when isn't money tight?). I'd like to buy something with perhaps a basement apartment that I might be able to rent-out, and perhaps recoupe some $$$ for mortgage payments.

*sigh*

Moe.
- Confidence implies the knowledge of one's limitations, while arrogance implies that one does not have any.

- There's no such thing as "normal". The secret is to find someone that's screwed up in a way that seems "normal" to you.

#9 of 31 Steve_Tk

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Posted April 07 2003 - 09:31 AM

I've thought about it before, but in no way do I want to be tied down to a house right. I just don't worry about how much money I could be saving. Hell I could save a lot of money by not going out, not buying DVDs, and so on, but I'm not going to do that.

If you are ready for yard work (Which I'm not wasting my time doing) and maintaining a house, then buy one.

I don't want a yard, or leaves to rake, grass to mow, bushes to plant. I did that for 15 years at my parents house, I'm going to enjoy the rest of my 20's and not waste my time doing that stuff.

The maintenance is the only thing keeping me from buying a house. It's nice if the garbage disposal breaks to have it fixed quickly and free. If you get ants, it's done for free. In a house you have to deal with that stuff.

I'll probably buy a house in 5-6 years.

#10 of 31 Jason_H

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Posted April 07 2003 - 09:41 AM

I think you should buy a house (or condo/townhouse) if you can at all afford it. It is one of the best investments you can make, IMO, as long as you choose wisely. Don't throw money away on rent if you can help it!

Quote:
I don't want a yard, or leaves to rake, grass to mow, bushes to plant. I did that for 15 years at my parents house, I'm going to enjoy the rest of my 20's and not waste my time doing that stuff.


I bought a condo, there is no lawn to worry about. I have a little garden in my walled-in front patio that I enjoy taking care of. If I didn't, I could just leave it as dirt, nobody can see it.

Quote:
The maintenance is the only thing keeping me from buying a house. It's nice if the garbage disposal breaks to have it fixed quickly and free. If you get ants, it's done for free. In a house you have to deal with that stuff.


You can buy a home warranty plan for around $200-250 a year that will cover all of your major appliances if this worries you. The cost is much more than worth the amount you are saving by not renting.

Like the others said, tax breaks for homeowners are also great. I am relatively young (25) and single (though probably not for long). I have done much better than many I know by simply investing in my home instead of dropping money on the dismal stock market over the past couple of years. Unless you really choose poorly and get a house with hidden problems, real-estate prices almost never deflate.

#11 of 31 MarcVH

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Posted April 07 2003 - 12:22 PM

I would be looking at a doubling of commute time,


If your current commute time is 5 minutes, this is probably no big deal. Otherwise, I'd say it is. Time is one resource you can't ever get more of. Even 10 minutes each way adds up to 100 minutes over the course of a week, which is enough time to watch a movie.

#12 of 31 Joseph DeMartino

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Posted April 07 2003 - 12:29 PM

Why not compromise and buy an apartment? Posted Image (Condo or co-op) You get most of the benefits of ownership without a lot of the hassles like exterior & lawn maintenance. In a few years, if your circumstances change (big promotion, marriage, kids), you can always buy a house with the equity you've built up. But in the meantime you don't have to buy new furniture to fill rooms that don't exist in your present place, or invest in a lawnmower, lawn spreader, mailbox, fertilizer, insecticide, exterior lights or the million and one other things that you'll need for a house.

Regards,

Joe

#13 of 31 DaveF

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Posted April 07 2003 - 01:30 PM

Robert -- I'm thinking about buying a house myself. I've found the book Home Buying for Dummies helpful.

A friend bought If You're Clueless About Buying a Home and Want to Know More and found it helpful.

Also, I've put together an Excel spreadsheet that lets me estimate monthly payments on mortgages, play with rough budgets, and estimate tax savings from the interest deductions. If you'd like a copy, email me and I'll send you a copy.

Everyone talks about the money you'll save buying a house -- this is conventional wisdom, but you also generally need to live in it 5 years. And I know people who have lost money on a house. It's not necessarily money in the bank. Just something to keep in mind.

#14 of 31 MikeAlletto

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Posted April 07 2003 - 02:33 PM

Robert, I used to be in your situation just about exactly and in the same town. I moved to Austin in 97 right out of college and had been rented ever increasing and larger apartments since then. I was just getting more and more fed up with living around some of the pigs in apartments and I had to get away from it. I just recently bought a house, have been in it for a month now and its great.

Quote:
To minimize the burden, just adjust your withholding to have less taken out of your paycheck per month. You'll get a significant amount of money back as you'll be able to deduct mortgage interest payments, property tax, and state income tax (for federal return) on your returns.

Absolutely. My mortgage is about $200 more than my rent was but with my adjusted W4 it compensates for the difference.

Robert where in Austin do you work? I moved further North (still in Austin but very close to round rock). It added about 10 minutes to my drive in the morning and about 15 on the way home. All of it depends when I leave to go to work and come home. But its worth it. Its outside the crowded areas, the neighborhood is brand new and very nice. Drop me a PM or email me if you want recommendations on areas or anything like that.

There is definitely a huge initial cost getting into a house, especially right out of living in an apartment for so long. My credit card bills for the first month were about 4x what they normally are but luckily I planned rather well and was able to handle it. Spending will be back down to normal levels next month. If you don't have any money saved up take 6 more months (if you can) and save as much as you can. Its not just closing costs. You'll also need a fridge, washer/drier, lawn mower, and other appliances depending upon what comes in the house.
Michael Alletto

#15 of 31 Allen_Appel

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Posted April 07 2003 - 02:55 PM

You'll probably need about 20% of the cost of a house in cash to get a mortgage. All the benefits of homeownership mentioned are indeed true, but I really miss living in the city. Look into buying a co-op or apartment (perhaps the one you currently live in).

#16 of 31 M_a_r_k^NE

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Posted April 07 2003 - 03:05 PM

You're only one person, so a house right now would be the wrong move IMO. A house is more suited for a family. A condo is about right for one person. A condo is just an apartment except you own it. You can always move out in a year or two if you dont like it and even get a profit. YOu will have a nice bachelor pad and get the chicks. Plus meet folks in the building and become friends. This means more chicks. The thing with owning versus renting is when you own you eventually sell and RECEIVE money back. Even with a hefty profit. With Interest too. With renting theres no money coming back after all those rent payments. Zero.

The heavy duty money sucker is a car payment. Save money in not having a car payment. A car payment takes a big chunk out of your salary. Get a decent used car thats paid off and no car payments. You free up a lot of money right there. YOu dont need a expensive fancy car. Dont wait on the condo. Do it ASAP. I wish I purchased mine earlier in my life. What are you waiting for?. Call a realtor tomorrow.

"Just do it"

#17 of 31 Robert_Z

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Posted April 07 2003 - 05:08 PM

Question for those recommending a condo: Is a condo EXACTLY like an apartment? Or are they built with better insulation so that tenants (owners) can be a bit noisier and get away with it? That is my big concern and why I don't want to move to an apartment if it can be avoided. I don't want to hear other people and I know they don't want to hear me.

Quote:
Drop me a PM or email me if you want recommendations on areas or anything like that.


Mike, I will send you an e-mail.

Quote:
If you'd like a copy, email me and I'll send you a copy.


Dave, I'll contact you too.

#18 of 31 Joseph DeMartino

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Posted April 07 2003 - 07:29 PM

Quote:
Is a condo EXACTLY like an apartment? Or are they built with better insulation so that tenants (owners) can be a bit noisier and get away with it?


How well any apartment or condo is insulated is a function of the builder, not whether the units are rented or sold. (Many existing apartments "go condo" or "go co-op" years after being built. Nobody comes back and reinsulates them. Posted Image) You need to talk to rental agents and builders about particular properties you're looking at.

I live in a second floor unit currently (condo.) I don't hear my neighbors and I've never received a noise complaint. (Local building code - for both condos and apartments - specifies flooring materials, for instance. I dropped the idea of putting in tile when I redid the floors here because putting down sound-absorbing cork underneath it would have nearly doubled the cost of the installation. Had I lived in a first floor unit this wouldn't have been a problem.) I share the floor with the unit below, and one common wall with the unit behind me - and nothing at all with the other two units that make up my building.

In a pervious condo all of the buildings were one floor. With a corner unit I would have shared only one wall with a neighbor. Having this kind of thing in mind when you're looking can save you a lot of time and trouble later.

Regards,

Joe

#19 of 31 AjayM

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Posted April 08 2003 - 08:08 AM

In today's economic times don't count on a huge increase in real estate prices, at least not to the extent that we've seen in the past 5 years. And in some places the market has really turned around, the prices may still be high, but that doesn't help for when you want to sell and your house sits on the market for 6 months.

Also the whole money side of it, don't count on making any money off of a house for at least 5 years or so (that's probably a little to far on the safe side, but better to be safe), if you only plan to stay a short time then you may be better off renting than owning. The first house I purchased needed a lot of un-forseen work, mix that with a sellers market (couldn't get the price down to where I wanted) and after 2 years if I would have sold I would have lost about the same as what I would have paid in rent for those 2 years. Mix that with a lot of hassle of getting that work done and such, and renting would have been the better deal there.

Lastly keep in mind that condo's typically don't increase in value the same way a townhouse does which doesn't increase in value the same way a single family home does.

Andrew

#20 of 31 ken thompson

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Posted April 08 2003 - 08:29 AM

Everyone who is talking about the tax deduction I would suggest you keep in mind that the real interest deduction only kicks in beyond what your normal standard deduction would be anyway. If your married your standard deduction I believe is $6500. If you borrow $100,000 at 6.5% your first year interest would be roughly $6500. There is no benefit here. Only the difference above this amount is the true "additional" deduction of mortgage interest.


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