To buy or keep renting?

[ChristinaM]

So, DH and I are thinking about buying our first home. We currently live in an apartment but would like to have more space for our hobbies and possibly growing our family. The cost of living here is fairly low and through researching on the internet we have found some nice houses for under $100,000. This seems like a good time to buy, with the housing market the way it is.

However, I am wondering if we will be able to break even, if we do buy a house. I am working on my Ph.D. at Notre Dame and will be here for 4 or 5 years. I know other grad students who own houses and seem to be comfortable with their decision. However, I have read that if you are going to be in a place for less than 5 years it is more economical to rent. I also know there are a lot of "hidden" costs such as property taxes, repairs, loan fees, closing costs, etc.

Advice would be appreciated. This is a big decision and I want to be well informed!

[1ke]

Have you considered renting a house?

A house is a lifestyle choice, not necessarily an "investment". That's what got so many people in trouble, assuming their house would go up in value in a few years. If you live in a college town demand is likely to remain fairly steady. But, you are *always* taking a chance when you buy a property.

I agree that less than 5 years and you will probably not break even. You have to also factor in all the costs of buying the house-- appraisal, inspection, closing costs, realtor fees-- along with the payments you are making etc. Your house will not likely appreciate enough in 5 years to get your money out of it. Unless your house is in Malibu or somewhere. But a $100K house in the South Bend area is not likely to go up oodles and oodles. Just my guess. Check the historic prices for the last 10 years to see what kind of annual appreciation happened in the "good" times.

And, yes, there are a LOT of things that go with homeownership that you may not want to deal with being in grad school and such.

I suggest you get the book 100 Questions Every First Time Home Buyer Should Ask by Ilyce Glink. It really helped me when I bought my first home.

[ChristinaM]

Yes, renting a house sounds like a much more appealing option to me. But I think that DH is really enamored of the idea of having our own space. He doesn't want to pay $700 or $800 to rent a 2 bedroom house when the mortgage payments on that would be less, even though property taxes and such will probably make it about the same. I really need to sit down and crunch numbers and show him that it might not be as hot of an idea as he thinks it is.

I'll look into the appreciation values in this area. I think it will confirm my suspicions. Thanks for the book recommendation, I've been looking for something like that!

[whiteyacht]

You've already received some good advice, but I thought I'd chip in with my own experience.

We moved from college town to hometown after learning we were pregnant last year. Hubs really wanted to buy rather than rent (we'd been renting a house in college), and despite my reservations, we looked at houses, got pre-approved, etc. Well, with the time crunch of starting new jobs AND the holidays, we ended up in an apartment.

I am SO happy. Renting (a NICE rental, of course; that is the tricky part) allows us to pay only slightly more per square foot than buying, but we have NO worries about taxes, maintenance, etc. My husband works FT and takes classes FT, while I work PT with the baby. There is no way we'd be able to keep up with a house! We can afford a much safer neighborhood by renting as well.

I would definitely encourage you to continue renting if you are not having problems. Especially while still in school, the flexibility and convenience cannot be beat. Your hubby sounds a lot like mine at this time last year, but I know he's glad we are where we are now. HTH.

[ChristinaM]

Thanks for sharing your experience, whiteyacht. I am a full- time student and DH works long hours and has a 2-hour commute, so we can relate to being short on time! I think he's just tired of not having his "own" space after renting for so long, and I am too, but I just don't feel like this is the right time. I'd rather be stashing money in our "rainy day" fund.

I believe I will start looking at rental houses in the area. Maybe I can find something that'll work for both of us.

[ChristinaM]

UPDATE: Apparently nice rental houses in good neighborhoods are hard to come by in this area. Most of the rentals are not in the part of town we would want to be in. There are some by Notre Dame and I would love to be near campus but that is very inconvenient for my husband's commute. Rents here are also staying high or increasing even as home prices are dropping.

The good part is that we have found some modest houses for under $60,000 here. Most are older but well kept. So there is no need for us to spend anything like $100,000 on a house. Interest rates are also rock bottom right now. DH and I sat down and did the math, and if we can get a house for 60K or less it would be better than renting.

The next step: we are going to talk to some banks here to see if we can get a loan, and SAVE every penny we can towards a down payment.

[AlaAnnie]

After the trip to the bank, go by Lowes and check out the cost of yard maintenance equipment (mower, gas can, rakes, hose, etc.). Do you own a washer, dryer, and frig? Might want to price those as well. Do you have enough furniture to adequately furnish the house? Will you need to buy blinds to cover the windows? Price those too.

Then, look at your time budget. Do you have time to keep the yard up? Do you have time to fix the leaking sink or do you have the money to pay the plumber?

These are more truly the "hidden costs" of home ownership. The appraisal, closing costs, etc. are one time costs and easily estimated.

[ChristinaM]

The house we are looking at has a washer, dryer and fridge. Appliances are expensive but DH gets a company discount on certain brands, which should help.

Mower, snow blower, etc. will be the big expenses. His mom pointed that out to us last night, too. Right now there is like a foot of snow on the ground...I know we will need a snow blower for sure!

[pete 29]

If you buy a house, the money you pay is going toward something of value. Yes, the property value may go down, but it is never going to be worth nothing. With rent, the money you pay goes to the owner of the property and you get nothing but a place to live in return. Of course, when you buy you have the added cost of upkeep. Take this with a grain of salt, as my wife reminds me, I'm no economic genius.

[dontknow]

My 2 cents on buying versus renting (since I've done both).

House is not an investment - it's a lifestyle choice. Renting is not a waste of money (you are kept warm with a roof over your head) - it's a lifestyle choice. There are advantages and disadvantages to both.

That being said my choice is buying. I hate renting.

True the first couple years can be killer in start up costs - which you're wisely beginning to think about (ladders, lawn tools, simple hand tools, paint supplies, mowers, snow blowers). It's amazing though once you hurdle the start up costs how it can settle down.

That being said - a house will always need something done to it as it ages and weathers every day that ticks by.

Be prepared for furnace, roofing, plumbing items as they can be very costly - unless you can do them yourself.

A standard range tossed around is to budget for 2-10% of the value of your home in repairs/maintenance and upkeep each year.
Some years will be more, some less.

Some years you may want to do things like replace carpets, paint, landscape, etc....

Other years you may have to do something like replace a roof or furnace (which should last many, many years once you do).

As someone else mentioned - your time can be much more tied to the house if you bought it versus letting the landlord do it. I think this is where many people (at least some I've known) get tricked.

Best wishes!

[ChristinaM]

Originally Posted by dontknow

My 2 cents on buying versus renting (since I've done both).

House is not an investment - it's a lifestyle choice. Renting is not a waste of money (you are kept warm with a roof over your head) - it's a lifestyle choice. There are advantages and disadvantages to both.

Definitely, I know toooo many people have gotten burned in recent years thinking of a house as a big money-maker. We are definitely not of that mindset.

Keep the good advice coming, I surely appreciate it!

[Appleby]

Be sure you have the place thoroughly inspected, including all the appliances, the floors around the appliances, the windows, the roof, the basement and the foundations. Get a bug inspection done and check for termites, weevils, silverfish, cockroaches and ants. Have the furnace inspected and find out when it was last replaced, and have all the piping checked to see how old it is and if it might be lead piping (a lot of older homes have led pipes and around here it has turned out to be a BIG problem.) Check the zoning laws in the neighbourhood and find out if you are allowed to make alterations to the property. Around here you have to pay $100 for a permit to cut a tree on your own property and even if the tree is endangering your house, you might not get that permit because the government is run by socialist Greenies. Check the crime rate over the past 10 years in the neighbourhood. Unlike apartment living, when the neighbourhood goes down, you can't move away. Also check the last ten years of property taxes on average property in that area, and see when the next appraisal is due. People around here are paying taxes on assessments made before the housing crash and another one isn't due for 3 more years. Check the driveway. Find out what you are allowed to park in it or on your lawn. Is the street in front of your would be property a cut-through during rush hour? Does the next door neighbour work on his car on Sundays with the radio blasting? Does the next door neighbour play the tuba?

[Lil_M]

Originally Posted by ChristinaM

The good part is that we have found some modest houses for under $60,000 here. Most are older but well kept. So there is no need for us to spend anything like $100,000 on a house. Interest rates are also rock bottom right now. DH and I sat down and did the math, and if we can get a house for 60K or less it would be better than renting.
.

WOW I cannot comprehend a house priced so low! Here a tiny old house in an okay neighbourhood is at least $430k. We'll be renting forever But I'll second the others' advice- get a GOOD home inspector (a referral if you can) and consider all those other costs. I know it would be a LOT extra for us to get furniture, appliances, blinds, etc on top of the mortgage and taxes. Good luck! Getting a home will be so exciting.

[whiteyacht]

Originally Posted by Lil_M

WOW I cannot comprehend a house priced so low! Here a tiny old house in an okay neighbourhood is at least $430k. We'll be renting forever But I'll second the others' advice- get a GOOD home inspector (a referral if you can) and consider all those other costs. I know it would be a LOT extra for us to get furniture, appliances, blinds, etc on top of the mortgage and taxes. Good luck! Getting a home will be so exciting.

I am so glad to live in the midwest!! There is a light at the end of our renting tunnel. You always hear about those exorbitant housing prices, but they never seem real until someone who lives there mentions it.

[dontknow]

Originally Posted by whiteyacht

You always hear about those exorbitant housing prices, but they never seem real until someone who lives there mentions it.

For sure... I'm in Upstate NY (not near NYC) and $430K would get us at minimum 4000 square foot house on 4+acres. However our taxes would be approx. $15K/year