OT: to rent or to buy?

kerikitkat

Hubby and I are moving in two months. We have been shut down constantly in our search for houses because renting is so expensive here and there are so many high-crime neighborhoods in Houston.

My dad suggested tonight that we think seriously about buying a house and selling it off in 3-4 years after hubby has his master's degree and we leave Houston.

Any words of wisdom? :noway: I think buying a house is way scary... but maybe not as scary as the $60K we'll be throwing out the window on rent instead.

kerikitkat

Hubby and I are moving in two months. We have been shut down constantly in our search for houses because renting is so expensive here and there are so many high-crime neighborhoods in Houston.

My dad suggested tonight that we think seriously about buying a house and selling it off in 3-4 years after hubby has his master's degree and we leave Houston.

Any words of wisdom? :noway: I think buying a house is way scary... but maybe not as scary as the $60K we'll be throwing out the window on rent instead.

AJCM

I just heard Suze Orman yesterday saying that it is a buyers market! I'm in Canada, and our market is different, but from what I read and hear in the financial sectors, they are saying it is time to buy - some great deals out there with decent mortgage rates.

We bought our first home a few years ago, were in our late 20's and although were nervous, it's been great. We now own more than 50%, so the equity is nice security. We have no debt, and hate the thought of debt, but a mortgage is not considered debt, or at least not considered "bad debt".

Unless the rentals are dirt cheap, I say buy...
:flowerforyou:

kerikitkat

Unless the rentals are dirt cheap, I say buy...
:flowerforyou:

To have a house in a neighborhood where I will feel safe home alone and our dogs can be left outside all day without being stolen... and a house that is even moderately in nice condition, it's going to be $1100+. And we're not that picky either. My in-laws think we are crazy for considering some of the neighborhoods we are considering... but we are less scared of other colors of people than they are. :huh:

AJCM

Some things to think about... :flowerforyou:

Well, think about how much a house would cost (and a house that you want and like, because a move is expensive if a couple of years you would need something bigger, etc)?

How much are you comfortable paying toward your mortgage every month? Does your $1100/mo rental include the utilities? Our utilities and taxes together are a little more than $1100 a month alone, so renting might be a good deal, however the investment of a property is a good one.

$1100 is going to be a mortgage of around $200,000 (it's roughly $600 per month per $100,000 @ 5% interest) plus your utilities and taxes (which I'm not sure how much of that you pay with a rental). Our property tax alone is a little over $300 per month, so there is lots for you to work out. Crunch all the numbers and see where the signs point!

GOOD LUCK!!!

barracudamuscle

I feel you Kerikat! I am in your shoes right now as well!

I just made my first offer on a house if that means anything, the market is in the slums in Cali which is better for me. I hate throwing money away at a place I get absolutely nothing back out of, at least with a house its something your not dumping your money away into for nothing, its yours.

If you find a good house at a really good price you might be able to turn it to break even or actually make maybe 30g or so on it in a few years but I think we have a good year left of this housing issue. Weve been house hunting for about 2 1/2 months now, we found some terrible houses where they took everything including the kitchen sink, broke all the windows etc, then we cam acrossed our diamond in the rough last week.

Its only been on the market a week in cali, and she feel in love with it so I went ot make an offer, and come to find out there was already 2 other bids, they wont tell you how much but I told them what my offer was and asked them if its even worth putting in the paper work. They said yes, so hopefully the bank that owns the foreclosure will get my offer early next week, accept it and off we go without anyone bidding high on it ( markets down I hope not)

Sorry this got long, anyways a house even if you lose a little money on it is worth it, you get to write off your interest in taxes, you have something you can do anything to youd like, and your not paying some crappy apartment/landlord/etc for a crappy shady place where they can't even be trusted to sell a coffin!

Good luck, and let us know how everything is going!

barracudamuscle

Also, a friend of mine who now owns 8 propertys told me when your estimating costs, 1% of the house's cost is a really good ball park for what it will cost you every month including cable, trash, insurance, etc.

AKA 300K = 3,000 a month ( its actually a little less but depends on your down payment, your cable service, taxes, etc.)

Ive also heard a quick cheat sheet is take your combined yearly income and times it by 3 to figure out how much house you can afford. Granted everyones different and it might have to be adjusted to your bills/student loans. You said your hubbys getting his degree 3-4years? You might want to factor in a good buffer for when he has to start paying those loans back ( I think 6 months after you graduate ) maybe plan to pay off a car that way that extra 3-400 a month can be allocated towards his new student loan payment incase you cant sell it, dont want to, etc. Or even factor it in now and start paying 200 or so a month to keep your costs down on the life of the loan.

nmonkey

Buy! I just heard that the housing market is expected to rise again around 2010.

kerikitkat

Also, a friend of mine who now owns 8 propertys told me when your estimating costs, 1% of the house's cost is a really good ball park for what it will cost you every month including cable, trash, insurance, etc.

AKA 300K = 3,000 a month ( its actually a little less but depends on your down payment, your cable service, taxes, etc.)

Ive also heard a quick cheat sheet is take your combined yearly income and times it by 3 to figure out how much house you can afford. Granted everyones different and it might have to be adjusted to your bills/student loans. You said your hubbys getting his degree 3-4years? You might want to factor in a good buffer for when he has to start paying those loans back ( I think 6 months after you graduate ) maybe plan to pay off a car that way that extra 3-400 a month can be allocated towards his new student loan payment incase you cant sell it, dont want to, etc. Or even factor it in now and start paying 200 or so a month to keep your costs down on the life of the loan.

His master's is going to be very inexpensive because there's a special program he can get into as an active school teacher here. He'll get the degree over the course of 3 summers. That's pretty much why we are sticking around here for a few years even though we don't like the city much. He has no undergrad loans thanks to his family. I have 20K we're paying on right now from my undergrad, and when I go for my master's there will definitely be some loans involved, but I'm not in a huge hurry to get started on that.

We have 2 cars we're paying on as well, other than that we have no debt. So with our income we should (according to what you suggested) get a 200-230,000 dollar home. But at the 1% that works out to 2000 a month... which with bills and everything is a bit more than we are hoping for.

So complicated!! Exciting and scary to think about, especially since we are such noobs to the whole thing.

Thanks, y'all!

foxfire9372

My husband and I just finished the house inspection on our new home. If you are going to buy, buy now. It is scary, scary, scary, but not as much as the money you are paying for rent and the other person gets the tax breaks. We put in an offer on our house for 203k, the last owners paid 253k two years ago and it is assessed at 240k. It is definitely a buyers market. One of my good friends is an agent and my mom works for an appraiser and the market hasn't been this good to buy in years.

Helawat

Also consider the hidden expenses of owning a home. New homeowners often over look the small things that really add up in the end. Not only do you need to consider the mortgage but you also need to consider:

Security deposit
Condo fees/HoA fees
Homeowners insurance
Maintenance
Water
Gas
Electric
Trash collection
Property taxes
Income taxes -- state and local

You need to ask yourself questions such as:
* If your air conditioning breaks in the middle of a Texas summer, will you be able to afford to fix it?
* Can you cover the fees of basic appliances such refrigerator, washing machines, microwave, stove, etc. if you don't have one already?
* Can you afford to repair your home in case of disaster?
* Can you afford home improvement projects to increase the value of your home?
* How much do you plan on investing on landscaping? Are you prepared for the extra water if you chose grass landscaping? Do you want to save money and do desert landscaping instead?

Ask yourself these questions and consider the hidden expenses. Can you afford all this, not including automotive financial woes while your husband is earning his masters?

Just food for thought :flowerforyou:

AJCM

Keri - Look at all that great help!
Let us know what you do! :flowerforyou:

lessertess

It is definitely a buyer's market and interest rates are really good. You'll be able to itemize your taxes and deduct your interest and the house will build in equity over the three to five years.

It is almost always a better option to buy than it is to rent.

chilli

buy ....always buy... markets go up and down but are always climbing over the years ....you wont earn the same amounts of "interest" if the equity was banked would you:happy: .

lisabeavers

I just went through the same situation. Here in knoxville, rent is increasing dramatically. A nice apartment runs around $1000 a month for about 1400-1500 square feet. I ended up buying a 3 bedroom condo (no mowing!) that has over 1800 sq feet and my monthly payment with association fees and all is $1035. So i am paying almost the same as rent, i can do whatever i want to to the inside of it (I painted it a deep soothing blue) and I get a deduction to take against my taxes at the end of the year. I say BUY. Even if you didn't make a penny at the end of four years when you sold it, after accting for closing costs and all, you still would have had the tax deduction for the the interest, and an improvement on your credit report for having had a mortgage.

Nich0le

I say BUY. I don't know about Houston, but here in Arizona there are a lot of renter's being evited because the owner's have defaulted and are in foreclosure so renting is not any safer right now than owning. Buying can be scary but once you own something you are vested in it and doing the little extras feel great because you are improving your property.

If you are not planning on moving for 3-4 years then buy, the market is expected to be up in two to three so you could make a decent profit and turn around and put a great down payment on the next home!

You might even be happily surprised to find out your mortgage is less than rent, I know ours was. I totally had cold feet but now I am glad that I don't live in a complex or someone else's house, I live in MY house and I wish my husband and I would have taken my dad's advice and bought a home 4 years sooner than we did!

And don't be afraid of "hidden expenses", you can get your mortgage to include your property taxes and home owners insurance. Once you move in, you have to start saving money for the "ifs" in life, but I live in AZ, similar to TX heat wise and my air conditioner is fine, the electric companies offer discounted tune up specials in the spring so you know how well your unit works before the heat starts. We have been in our house, that was a new build for 7 years now and so far the only thing that went wrong was the waterline in the fridge busted and flooded the downstairs, but that's what insurance is for and insurance got the fridge manufacturer to pay for most of the damage because of their faulty part! YOu can do it, it's a big step but a great step!

flachix

go ahead and buy. you might even check into having a new one built. a lot of builders are sitting on spec homes and empty subdivisions and would be thrilled to move it. that way everything is included and new and the house has a guarantee for a year. at least here in florida they do. its a buyers market and you can get in for less money than you think.

Helawat

I know I said this before but just make sure you can afford those hidden expenses before you buy. People say "buy buy buy" because it's a buyer's market but there are a lot more factors that need to be considered.