Reducing Rent Payment by Buying a House?

[john_pifer]

Hey guys!

Off the bat, I want to say how much I appreciate this forum, and how much respect I have for the opinions of those here. I'm a member here because it's an "adult" message forum with not a lot of kids talking about nothing. I know I can come here and get good advice about a myriad of different things. And there are a LOT of REALLY smart people who follow this board!

Anyway, here are my thoughts:

I am getting killed on rent (well, it may be a fair deal for what it is). I'm paying $1100+ per month, making, probably, a little better than average money. It's a nice apartment - 2 bedrooms, with attached garage, in a nice, gated community. But, that's really beside the point...

If I could buy a decent, newer home (I don't mind doing some work on it, but don't really want something that's going to require a lot of maintenance) and cut what I'm paying in rent by several hundred dollars per month, and be building value at the same time, I'd like to do it.

I'm single, with no kids, and no debt to speak of (I owe a little bit on a credit card right now due to some dental work I had to get done). I'd like to get married within the next few years, God willing, and buying my first house was something I really wanted to do with my wife. But I just feel like I'm throwing $ away in rent that I could be putting in the bank for emergency purposes, getting married, kids, retirement, etc.

Anyway, since I respect the opinions of those on this board, I figured I'd start by discussing it here. I'm hoping to hear from some of you who may have been in the same boat, and were able to achieve exactly what I'm proposing... If so, I hope you'll be willing to share some of what you learned in the process, both for my benefit, and for that of others who may be thinking along the same lines I am...

My lease here expires in June...would be awesome if I could move at that time and cut what I'm paying per month for housing significantly!

Thanks guys.

 

[supton]

How long before you want to move? IIRC I keep hearing about how you need to stay someplace for 7 years or so. Have to figure out what the costs are for tax and title, and for setting up the loan--everyone gets a cut it seems when you buy a house. When you go to sell, if you use an agent they get 6% of the sale.

 

[lawman1909]

Well, if you're talking about getting a mortgage for a home, you'd be hard-pressed (unless you have a lot of money for the down payment) to pay less than $1,100 a month for a mortgage, at least in my neck of the woods. You also should factor in other expenses with a home; some may be property tax, unexpected repairs/expected repairs. Also, if you do end up marrying a fine lady, she may not like the house or want to live somewhere else, etc. All these should be considered. Cheers brother.

 

[EdwardC]

Obviously there are a lot of variables to that question, but we probably need more information first.

How much savings do you have? Putting down less than 20% and having to pay PMI significantly affects the equation.

Plus, how long do you plan to live where you are? If you get married, are you going to move again? There's a certain amount of time that makes sense to buy, otherwise, you'd be throwing money away at closing costs.

I'm typically all for home ownership for the positives you list, but considering your imminent life changes (and not considering many more details I don't know about, like local housing market), I would wait.

 

[zzyzzx]

Does the apartment rent include any utilities? If so, you need to figure that into any equivalent house payment calculations. That and homeowners insurance is way higher than renters insurance. Like 5-10X higher (something like that).

 

[Schmoe]

Dude, Nashville is going to keep growing. Invest. For 1100 a month, to include PM&I, I think you can do well. Get with a realtor and let them tell you. Interest rates will probably never be as low as they are right now in the future. Your also single, lot's of time on your hands to fix stuff and work on it. Owning your own home is a pretty good feeling.

 

[AKhan87]

Originally Posted By: Schmoe
Dude, Nashville is going to keep growing. Invest. For 1100 a month, to include PM&I, I think you can do well. Get with a realtor and let them tell you. Interest rates will probably never be as low as they are right now in the future. Your also single, lot's of time on your hands to fix stuff and work on it. Owning your own home is a pretty good feeling.

I totally agree, just make sure you count property tax, increase in utilities (size difference) into that monthly figure to get a proper figure for your budget.

 

[Lapham3]

Yes-got to compare all your variables of he rent/buy to get a good answer. I never really felt I was the true owner until I quit 'renting' from the financial community and the mortgage gone.

 

[HerrStig]

Renting means you get shelter and a receipt. Buying means you get to own a little bit more of the value of the house with every payment and the value, in good times, may go UP at the same time you pay the mortgage down. A lot of what a landlord charges in rent goes toward the many costs of owning a rental, taxes, insurance, HIS mortgage, repairs, wear and tear, sewer and water, ect. Though rents seem high, they may reflect a good part of the actual costs of ownership rather than the owner "taking advantage". Often the only big "profit" for a landlord is that the mortgage is paid down and the value of the property has gone up. A big profit on a rresidential rental is not that common. If it's a two or three decker and the landlord takes one apartment it's an extra benefit.

 

[eljefino]

Don't buy a fixer-upper. There will always be someone with more skill than you who skipped this for a reason the doe-eyed first time buyer doesn't know.

Do what you can to get in, even if it means paying offensive PMI. It could be years more of saving in your apartment to make the 20% threshold, and that threshold could be higher by then.

Buy, and if your property value goes up under your feet, you only need to pay a few or zero percent to have 20% equity. You can then automatically dump PMI or shake it off by refinancing.

I'd buy something boring for a first home.

You don't care about school or a spouse, so I assume you don't care too strongly right now about how they'd affect the process.

 

[hatt]

Get with a Realtor and see what's available. You'll probably be disappointed if you think you're going to buy and save a ton of money on your monthly expenses. Buying is about more than that. If you don't have a current wife prospect I wouldn't figure that into the equation.

 

[tgrudzin]

I didn't see any mention the tax situation that favors owning versus renting. You a will also find that your car insurance will probably be lower because you own a house. Woman are looking for more stability than you think, owning a house make you more attractive as a future mate. You might also attract women who see you as free rent and just want to get out of the rental situation. Choose carefully, as time in a house really feels by. It will be 5 yeasr before you know it, so watch the nieghborhood you choose.

 

[dlundblad]

I imagine anything you could invest in and sell later would be better than renting in the long run.

 

[JHZR2]

Originally Posted By: lawman1909
Well, if you're talking about getting a mortgage for a home, you'd be hard-pressed (unless you have a lot of money for the down payment) to pay less than $1,100 a month for a mortgage, at least in my neck of the woods. You also should factor in other expenses with a home; some may be property tax, unexpected repairs/expected repairs. Also, if you do end up marrying a fine lady, she may not like the house or want to live somewhere else, etc. All these should be considered. Cheers brother.


+1

$1100 is downright cheap.


Still, real property ownership has benefits, including against one's taxes. Its a smart move if he deal is right.

 

[hatt]

A person buying a sensible house in 2015 is almost certainly going to be in better financial shape in 2020 vs renting. Worst case 10-15% equity while the renter will be greeted by ever increasing rent with no hope of equity.

 

[Mr Nice]

With super low interest rates, why not buy a house


What does your wife say about buying a house ?

 

[bubbatime]

This is what I would do if I was in your shoes.

1) Buy a cheaper place. If you can buy a duplex and rent out the other side, even better. Not sure of your housing market up there, but I would get something in the 40K to 75K thousand dollar range. A mild fixer upper (new carpet, new tile, new paint, new appliances, update kitchen type of place). Get a 10 year or 15 year loan and your payments are only looking at $600-$800/month. Pay extra (the $1100 you are currently paying) or more toward the principle to get it paid off in 7 to 10 years.

2) By the time you meet and marry Ms. Wonderful, you will be ready for a new place for the two of you. Rent out the home and have income for the rest of your life.

 

[sciphi]

Be certain to figure all the costs in renting vs. buying a home that you, the eventual Mrs., and any little rugrats would be comfortable in. With all the costs in buying a decent house, staying there for a good long while is the only way to make it break even financially.

I doubt that anything worth owning in that area would be much less than $1100 a month after escrow is included. The realtors advertise "mortgage of $XXX a month", not including the taxes, interest, and insurance. Utilities are also generally higher on a house, and any little perks that you use in your current complex like a fitness center or garbage pickup will have to be figured as well.

 

[mattwithcats]

Underbid the house.
Find a decent place, bank repo, built after 1990 or so, in good shape, put a bid in at 20-25% of it's value.

If they don't bite, bid on another. Banks may take the loss just to get the property off the books.

I bought $160,000 for $40,000...
And the seller (the bank) ate the closing costs...

 

[Nate1979]

With today's Interest rates on mortgages so low it makes a lot of sense to at least consider buying. By buying now you are basically locking in for the next X years the cost of housing. You can take it to the extreme and calculate what your cost of housing would be for the next say 50 years if you stayed in the same house. Then, assuming housing values and rental values appreciate at a minimum of the average Inflation rate (2-3%) you can truly see the value of purchasing vs renting.

However, or a short period of time the initial costs really make it difficult to break even unless the market is really increasing.