OT: Home Ownership

[Nooch]

Is it worth it?

Let me run down the current scenario that I'm looking at, and hopefully the wealth of knowledge can help drive me at least into a general direction.

Background info, 28 y/o, married, decently employed, moved 5 times in the last 10 years, tired of moving.

Renting a great apartment in a great little town for about $1250. 2 br, 1 bath, seperate dining room, not a ton of storage, new appliances, and the landlord didn't up the rent after the first year.

Watched too much HGTV this weekend and started looking on Trulia at houses in the area, found some in the 280's-350's that were nice but would probably need some work, putting them way out of the range. I'm not looking at buying something and then moving in a few years, as the thought of moving at all is just sickening to me.

The option to consider is a 2br, 1 bath garden condo. Asking price in the 230's, and we would put around 10 percent down. According to the online calculators we would come in right around the same payment that we have now, but we'd be owners instead of renters. But in owning comes the fears of home ownership, having to replace hot water heaters and stuff like that. I suppose each condo is different, so i don't know what might be covered under the common charges.

The question really is whether or not it make sense to buy over renting, and whether or not it's worth buying a condo vs. waiting, renting, and buying a house 5 years from now. I suppose if the dollars out of pocket are the same, then buying seems to make more sense on paper than renting. At least there would be a return on the investment, hopefully. At the same I only feel comfortable in a two bedroom for at most 5 more years, and who's to say what the housing market will do in that time.

Thoughts?

[PQJ]

With interest rates and real estate prices where they are currently, there has probably been no better time to buy than right now. And the window won't last more than 2 or so years.

With that said, it's true about what they say about homes that you own being money pits.

This sword really does have 2 edges.

[bikerboy337]

I say yes, buy... this is a pretty good time to buy, interest rates are under 4%, prices are low and I expect they'll bounce back in the next few years (depending on where you live).

I'll let others give an anyalysis, but dont forget a few things..

With 10% down, youll have to pay PMI most likely, or do some creative financing (90/10/10).

Dont forget insurance and tax payments.

Also dont forget you can write off interest paid on the house.

At 28, i'd imagine you might at some point want children in the next few years, cudos if not, but if so, I'd say owning is pretty nice... you rule the roost and can do what you want to the walls, yard, etc.

I'm sure there are plenty that think renting is better too...with 2 kids, I, personally, couldn't imagine not owning (or our bank owning) a house...

unfortunately we bought in 2007 and have lost a ton... there's always that risk.....

[Nooch]

For the sake of this scenario let's keep it solid on a 2br condo, assume a kid within the timeframe.. keeping land out of it, as there won't be a yard per say with these types of garden condo's that are in the area..

[SPOKE]

How much will you be paying each month in HOA dues with that condo?

[eddief]

you are already married to woman. do you want a second marriage = home ownership? i am not saying that to discourage, but the complexities and expenses of home ownership are definitely two edges of a sword. and as in many decisions, there are head and heart things to consider:

1. financial advantages
2. tied-downness
3. YOUR roof over YOUR head
4. fix, paint, replace, dig, hammer, nail (you wanna or you wanna pay)
5. creating a warm and comfy place for your family
6. stuck next door meth addicts, barking dogs, loud music

we had a 4.0 earthquake here last week. my neighbor, who is a renter, had her water heater crack. our landlord called the plumber. HE paid $1400 for that experience. she paid nothing.

[AngryScientist]

Is it worth it?



cost of condo: 280k
cost of fees : 250/month
cost of utilities : 600/month
not having to come home to a house full of pot smoke: priceless.

[BumbleBeeDave]

. . . . for a fixer-upper? OMFG.

Guess I gotta keep in mind that's the NYC metro area, but still that's just crazy.

BBD

[keithreynolds]

here's what I found;

* Newer condo communities have significantly lower fees; less "going wrong" and no urgency to build up a reserve. Over time that changes.
* While you live there, it's up to the board to decide how much money then need in the coffers. A vote is taken and your fees can & will go up.
* Banks have influenced how much reserve funds should be; to be in their interests to give you a loan. Expect this to be >10% operating funds.
* Banks want to see how many are "current" on fees. You'll be surprised that some people don't pay.
* Some communities only want x% rented.
* Forget the jet-ski or motorcycle at some places.
* Water#1 Some communities do not allow separate meters (ie for watering grass). That will cause you to pay for sewer on water that's feeding the grass.
* Water#2 Now you are 2ppl. But you are sharing the cost of water for all. Some people have no idea what conservation is. You will pay for that.
* Water #3 Some munis bill at 'commercial' rates instead of giving you a break for taking up so little space and paying the same taxes as a house.
* Your neighbors won't move, just like you. You're stuck with the crazy people and you share a wall (usually). They will have barking dogs, parties, disputes over "guest" parking, etc. Some will be on the board and want to do X with "your" money.
* When your neighbors have a [roof] leak, you'll basically be paying for the repairs as part of the "reserves".
* If there's an insurance claim, you'll get a % of it and you'll split the deductible via the % ownership (check the docs). Neither is win-win.
* You'll realize it costs a lot to get the grass cut & remove some snow (up to 25% of your fees).
* You'll be responsible for "anything" inside the studs. The heating/cooling and all appliances.
* If you sell at a loss, it's just that. You can't write it off or carry that loss. I think that's a failure of the tax system.
* When you sell you pay a realtor commission (sometimes 5%).
* When you sell you pay a sales tax (sometimes called Tax Stamps). This is not insignificant.
* When you sell you don't get any of "your" money which went into reserves.

When it snows or the grass is long, you can usually just jump on your bike and come back and it's probably done.


The board should be actively involved. Get a copy of the last years meeting minutes & all the financials. Be sure to uncover any "assessments".

All that said, location could win you over. If you sell at a profit, you will have a nicer tune.

[54ny77]

the main question is what price the convenience of picking up the phone and saying, "hi [owner] [superintendant], there's a problem with [you name it], please have it fixed right away. thanks."

it's that scenario vs. getting to know every product in every isle at home depot or lowes, as well as the specialty plumbing and electrical stores for that obscure part that once cost $5.50 but now costs many thousands of $ because not only do they not make it anymore but you'll need a specialty tradesman to retrofit the existing situation to conform with modern products and/or building codes... :crap:

if the idea of farting a new di2 group and custom frame without blinking each time you pick up the phone to deal with a retrofit situation, go for it! :p

[tv_vt]

I've never owned a condo - only houses. I'd be much more positive if you were talking about buying a house than a condo. I wonder if condos appreciate on the same scale as houses do. And the extra fees for the condo association, etc, as others have mentioned turn me off.

But - you will never in your life again see interest rates as low as they are now. Remember, rents will rise with inflation. A mortgage doesn't.

But again - you won't have as much fun money as you probably do right now.

But there again - if you have a domestic streak, owning a home is really rewarding. I love the house my wife and I share, and I love the work we've done on it to make it our home. That's priceless, to me.

[cody.wms]

Keith nails it. You don't have the same level of control as you would with a house. That's good and bad. I don't ever have to take care of the yard, and we effectively subsidize each other. We had a big foundation problem with one of the buildings, and I had to help pay for it. Likewise, when my roof leaks, my neighbors help me out.

I'm lucky that I only share one wall, and I'm on the top floor. I have great neighbors (and they all ride!). BUT, I live in an old complex, which means there are quite a bit of things that can go wrong. That foundation thing happened at the same time as the financial collapse. We had a $3.5K "special assessment" for the foundation work, and a bit under 1K to cover fees that were going unpaid as people went into foreclosure. My condo has been VERY aggressive at collecting delinquent fees. Looking forward, my condo projects about $7K per unit for our hot water system that is pushing 50 years old now.

Some of these things were known when I moved in (foundation, reserves on the low side of OK). Some really weren't (the extent of foreclosures, the rapid deterioration of the hot water loop).

It goes both ways. For me, there wasn't an option to purchase a house, since they were out of my price range (or way too far out to be viable for me). Just make sure to do your homework on the condo group beforehand.

here's what I found;

* Newer condo communities have significantly lower fees; less "going wrong" and no urgency to build up a reserve. Over time that changes.
* While you live there, it's up to the board to decide how much money then need in the coffers. A vote is taken and your fees can & will go up.
* Banks have influenced how much reserve funds should be; to be in their interests to give you a loan. Expect this to be >10% operating funds.
* Banks want to see how many are "current" on fees. You'll be surprised that some people don't pay.
* Some communities only want x% rented.
* Forget the jet-ski or motorcycle at some places.
* Water#1 Some communities do not allow separate meters (ie for watering grass). That will cause you to pay for sewer on water that's feeding the grass.
* Water#2 Now you are 2ppl. But you are sharing the cost of water for all. Some people have no idea what conservation is. You will pay for that.
* Water #3 Some munis bill at 'commercial' rates instead of giving you a break for taking up so little space and paying the same taxes as a house.
* Your neighbors won't move, just like you. You're stuck with the crazy people and you share a wall (usually). They will have barking dogs, parties, disputes over "guest" parking, etc. Some will be on the board and want to do X with "your" money.
* When your neighbors have a [roof] leak, you'll basically be paying for the repairs as part of the "reserves".
* If there's an insurance claim, you'll get a % of it and you'll split the deductible via the % ownership (check the docs). Neither is win-win.
* You'll realize it costs a lot to get the grass cut & remove some snow (up to 25% of your fees).
* You'll be responsible for "anything" inside the studs. The heating/cooling and all appliances.
* If you sell at a loss, it's just that. You can't write it off or carry that loss. I think that's a failure of the tax system.
* When you sell you pay a realtor commission (sometimes 5%).
* When you sell you pay a sales tax (sometimes called Tax Stamps). This is not insignificant.
* When you sell you don't get any of "your" money which went into reserves.

When it snows or the grass is long, you can usually just jump on your bike and come back and it's probably done.


The board should be actively involved. Get a copy of the last years meeting minutes & all the financials. Be sure to uncover any "assessments".

All that said, location could win you over. If you sell at a profit, you will have a nicer tune.

[MadRocketSci]

With interest rates and real estate prices where they are currently, there has probably been no better time to buy than right now. And the window won't last more than 2 or so years.


This is the line uttered by real estate agents no matter what the economy is like, interest rates are at, etc. It's ALWAYS a great time to buy.

Allow me to play a little devil's advocate. Most people probably figure out how much home they can afford by the monthly payments. If, in the long term, interest rates were to head up (how long can free money for banks last?), and the economy and/or inflation didn't grow, assuming a similar monthly payment, then would home prices have to go down, again, in the long term?

Would a higher interest rate/lower home price situation be more attractive? You would need to put less down, get to deduct more taxes from interest, and, have the ability to refinance when interest rates go down. If you got some cash (bonus, inheritance, better job) in the future, you could pay down the principle faster and get into a shorter term loan.

Anyway, back to the original question...hot water heaters should last at least 10 years, so $1400 amortized is no big deal. Furnaces and AC are more costly but again, it's an upfront burden that eases over time. I would think if rent and mortage are similar, and you have a decent down payment, and a bit a reserve cash, then it makes sense to buy, even more so if the unit can also be an attractive rental property. Get someone else to pay the mortgage!

[Louis]

Two biggest things (IMO) about home-ownership. (I bought my first one about 9 years ago.)

1) Unpredictable nature of expenses. You never know when the next big expense will hit.

2) Big time-sink for maintenance. Inside, and outside. There's always something that needs attention.

I suppose that with a condo both of the above problems are mitigated.

On the plus side (in my case): I get to live out where the riding is really nice. Also, the privacy of 3 acres is nice. (one drawback of a condo)

If I had to do it all over again, knowing what I know now, I'm not sure if I would. YMMV.

Finally, I would not do the condo thing simply to avoid rent. You're still renting - it's just that you're renting from the bank. For a very long time a huge proportion of your payments will be interest.

Good Luck.

[Nooch]

. . . . for a fixer-upper? OMFG.

Guess I gotta keep in mind that's the NYC metro area, but still that's just crazy.

BBD

yeah, actually 250-350 for a fixer upper...

more like 199-230 for a move in ready condo 2 br condo, which is more what we're looking at..

[Fixed]

nyc
how much time do you send inside at home ?

cheers :beer:

[merlinmurph]

keithreynolds makes excellent points about condos - I live in one and it has worked out well. Others have had horror stories.

Here's a few more condo related concerns:
- Is the goal of the board to keep the fees as low as possible at the expense of not maintaining the property? I've seen 10-year-old condo viallages that were beat because people didn't want their fees raised. I'm sorry but $100/mo condo fee on a $250K property just isn't enough.

- Ask for the records for the last 5 years minimum. Have condo fees gone up and how much? Have there been assessmsnts and how much? What do they spend money on?

- Are there any planned projects that may require an assessment? If so, you can negotiate the sale to have the current owner pay the assessment.

- What's the makeup of the board? How long have they been there? Does anybody keep an eye on them? There are many stories of boards going amuck, giving friends business for maintenance, kickbacks, etc.

- I would personally avoid very small (<5 units) associations, there's safety in numbers. Owners form power groups for control of expenses, things get personal.

- I believe in a properly funded reserve fund. That roof that lasts 25 years should be paid for over that 25 year period. Same goes for the parking lot, septic, well, etc. That means a good piece of the condo fee will be put into reserve.

- There is a loss of privacy and there will be conflicts among owners. There are rules, some will ignore them, others will complain, and someone has to decide how to enforce. Things can get ugly.

Saying all that, my 15 years in my townhouse has been very good. It's definitely more expensive having others cut the grass, plow and shovel snow, etc., but my free time is worth a lot more to me. Our condo fee is higher than normal because the place is very well maintained.

With anything else, it depends what you want.

Murph

[CNY rider]

2) Big time-sink for maintenance. Inside, and outside. There's always something that needs attention.


Good Luck.

No kidding.
We bought our (first and only) house 11 years ago.
The seller, being a good guy, cut the grass the day before closing.
I remember moving in, thinking how beautiful the lawn was.
A few days later I noticed that the lawn was starting to grow.
A few days after that it dawned on me rather abruptly that now it was MY lawn, and I didn't have a lawn tractor.
Nor did I have spare money laying around after going through closing.

That's sort of how it goes as a new homeowner.

[DreaminJohn]

Disclaimer: I'm the victim of an upside-down mortgage and short sale.

I was forced to rent after 25+ yrs of home ownership and have found it quite liberating to call someone else when stuff breaks. But that's atmo.

The one issue I see being only peripherally mentioned here is the price/value of the home. Some markets are more inured to it than others but if you plan on moving in 3-5 years you may find that your precious asset has depreciated in value. So buying now with a low interest rate might make only sense if you view it long-term.

If you're in it for the long hall then I would concede that the prices will eventually recover; however it may take longer than you might think.

Just ATMO.

[the bottle ride]

This is a generalization of the US housing market:
The inventory of homes on the market are a record high- 3-4 times historical average. More homes than ever. More "large" homes than ever.

Banks are not lending- till that is solved not much will move housing wise.

Who are buying homes today?
What segment of the housing market is moving in a meaningful manner?
How many loans are upside down? (an importnat question to ponder as it means there will be more pressure on the sell side)


Renting is shorting the market.
My opinion is don't buy anything (stocks/bonds?whatever) when markets are trending down.

Buy when you start hearing all of your friends start talking about re-financing-when that happens it means market has started to recover. Till then pricing will continue to erode.

2008 was price compression- now we are seeing what they call the "classic housing crisis" which is fueled by good homeowner who no longer can make payments because of financial hardship.

American housing market has to experience a reversion to the mean from the inflation that has occured over the last 20 years.

That is my 2 cents.

Disclaimer- I work at a place that has studys the housing market in relationship to the general markets and the effect on the economy.
Not that it matters- this is a forum.

[cody.wms]

The one issue I see being only peripherally mentioned here is the price/value of the home. Some markets are more inured to it than others but if you plan on moving in 3-5 years you may find that your precious asset has depreciated in value. So buying now with a low interest rate might make only sense if you view it long-term.


This is an important point to make. Even if your place holds value, which it may not, you still have to pay out the 6% or so to a realtor when you sell it. That's 12K or more on a 200K condo, which could be quite a bit of rent money.

FWIW, I don't know if I'd buy again. I really, really like my place, paid less than ANYONE had in a long time, and have still lost 35% of value. I'm not planning on selling tomorrow or anything, but quite a bit of money went out the door. I wouldn't plan on a place being an "asset" or gaining value.

[Ken Robb]

The OP doesn't WANT to move again. With luck he will be able to control that part of his life so there is a real possibility that he can pay off his 30 year mortgage before he is 60 and have quite low housing costs during retirement.

With the exception of rent-controlled apartments in NYC and a few similar situations renters are always at risk of being forced to move at the whim of their landlord. I want to control this part of my life and I want to be able to decorate/remodel to suit me.

Some states now require HOAs to budget for future repairs based on actuarial tables of the life expectancies of various systems and components of the improvements owned. This has reduced the old problem of developers underpricing HOA fees on new developments by disregarding reserves for future repairs/replacements. Many people who have owned/maintained single family residences realize that an HOA fee may be a bargain due to economies of scale. OTOH buyers who will never use extensive recreation centers will be over-paying and subsidizing their more active neighbors.

If you want to discuss the pros/cons send me a PM and I'll send you my phone #. Iretired after 36 years as a real estate broker and I'm on the board of our HOA so I have prett much "seen it all". :)

[PQJ]

This is the line uttered by real estate agents no matter what the economy is like, interest rates are at, etc. It's ALWAYS a great time to buy.


I'm not a real estate agent and haven't spoken to one in a while. Interest rates are at historical lows; there is a very strong probability they will start to rise in the next couple of years. Home prices are back to, what, 2000 levels? There is also a strong consensus among economists of all stripes that real estate prices are just now bottoming out. These are facts. I'll say it again - there has never been as good a time to be in the market for real property as exists now. If you want to buy, now and the next 2 years present a tremendous opportunity to do so. But homeownership can be a bitch!

I'll add that if the op is looking to buy in NYC, especially Manhattan, it is virtually a no brainer.

[Nooch]

The OP doesn't WANT to move again. With luck he will be able to control that part of his life so there is a real possibility that he can pay off his 30 year mortgage before he is 60 and have quite low housing costs during retirement.


Well, i should be more clear: My original intent was to ride it out renting and to purchase a, more or less, forever house (house-house, in suburbia, with the white picket fence and all)

My consideration now is making a move to a 2-br condo that would give me 5-10 years which would allow me to pay the same out of pocket while building equity and saving the same amount of money as i would have while renting (since my monthly out of pocket expense wouldn't change, if I did this right)

And no, we're not in NYC.. We're in Bergen County, NJ / Rockland County, NY. It's the metro-NYC area.

[MadRocketSci]

I'm not a real estate agent and haven't spoken to one in a while. Interest rates are at historical lows; there is a very strong probability they will start to rise in the next couple of years. Home prices are back to, what, 2000 levels? There is also a strong consensus among economists of all stripes that real estate prices are just now bottoming out. These are facts.



The only facts are that interest rates are at historical lows and that (maybe) home prices are back to 2000 levels. The latter certainly does not apply to the SF bay area, so it is a generalization. Everything else stated is an opinion.

Consensus among economists has about as much weight as consensus among weathermen about what the spring of '15 is going to be like. There was definitely not a consensus in 2006 of what was coming among highly regarded economists, even though it was painfully obvious to many lay people. So who cares what they think. Real estate bottoming, interest rates rising strongly possible? Study the case of what has happened in Japan since the early 90's.

On the other hand, sentiment on this board seems to be mixed, so when everyone starts saying "don't buy" then it truly is time to buy.

[54ny77]

go with the high quality white vinyl picket fence....unless you like staining fences every couple years or so in a huck finn sorta way. :p

Well, i should be more clear: My original intent was to ride it out renting and to purchase a, more or less, forever house (house-house, in suburbia, with the white picket fence and all)

My consideration now is making a move to a 2-br condo that would give me 5-10 years which would allow me to pay the same out of pocket while building equity and saving the same amount of money as i would have while renting (since my monthly out of pocket expense wouldn't change, if I did this right)

And no, we're not in NYC.. We're in Bergen County, NJ / Rockland County, NY. It's the metro-NYC area.

[the bottle ride]

FWIW- as bearish as I am on the real estate market, and have been for some time (I am a wet blanket at cock tail parties-but you can not argue with the numbers), I do think there is value in the Nyack area.

As a life long NYC resident, I would never in a million years buy in NYC. Look at the early 90's for indication of how quickly your asset depreciates- 40-60% hair cut in the course of 2 years. If you lost your job you would be screwed...

[yngpunk]

Is it worth it?

The option to consider is a 2br, 1 bath garden condo. Asking price in the 230's, and we would put around 10 percent down. According to the online calculators we would come in right around the same payment that we have now, but we'd be owners instead of renters. But in owning comes the fears of home ownership, having to replace hot water heaters and stuff like that. I suppose each condo is different, so i don't know what might be covered under the common charges.

Thoughts?

Not sure what is meant by "garden" condo in your area, but in Chicago, "garden" indicates that part of the unit is below ground level. Since not everyone want's to live in a garden type unit, this may impact your resale ability, but also has the benefit of being lower cost compared to above ground units.

[54ny77]

the doomsday period of $30k studios that were almost giveaways are long gone. or at least i would hope so. nyc economy much more diverse today than it was in that era.

heck even the web wasn't invented quite yet.... ;)

and nyc, while it has certainly taken its lumps, hasn't experienced the desolate landscape of other parts in the country, due in no small part to insane co-op boards who scrutinize applicants' financials. its the most ridiculous process on earth, but the irony is it has preserved some value due to post-purchase liquidity requirements, high down pmts, etc.

the downside to that is again, insane co-op boards who artificially inflate property value by restricting comps, i.e., they don't approve purchases, or make the process so ridiculous that buyers walk.

and to further add to the mix, lender restrictions are so tight that in many buildings, esp. for those with more than 30-40% non owner occupied concentration, there are no loan options available for buyers. that means sellers are screwed, there is no liquidity. conclusion: welcome to a very long, long long term asset, and pray for a cash buyer.

FWIW- as bearish as I am on the real estate market, and have been for some time (I am a wet blanket at cock tail parties-but you can not argue with the numbers), I do think there is value in the Nyack area.

As a life long NYC resident, I would never in a million years buy in NYC. Look at the early 90's for indication of how quickly your asset depreciates- 40-60% hair cut in the course of 2 years. If you lost your job you would be screwed...

[Nooch]

Not sure what is meant by "garden" condo in your area, but in Chicago, "garden" indicates that part of the unit is below ground level. Since not everyone want's to live in a garden type unit, this may impact your resale ability, but also has the benefit of being lower cost compared to above ground units.

Garden condos, rows of individual buildings with 4 units to a building, two up, two down... read: not highrises or town houses, never more than two stories, might be attached or detached (the buildings of 4, that is)

[yngpunk]

yeah, actually 250-350 for a fixer upper...

more like 199-230 for a move in ready condo 2 br condo, which is more what we're looking at..

Thanks. Learned something new. I would think some of the issues brought up by others may be less in these types of units versus a high rise or similar type of building

[the bottle ride]

the doomsday period of $30k studios that were almost giveaways are long gone. or at least i would hope so. nyc economy much more diverse today than it was in that era.

heck even the web wasn't invented quite yet.... ;)

and nyc, while it has certainly taken its lumps, hasn't experienced the desolate landscape of other parts in the country, due in no small part to insane co-op boards who scrutinize applicants' financials. its the most ridiculous process on earth, but the irony is it has preserved some value due to post-purchase liquidity requirements, high down pmts, etc.

the downside to that is again, insane co-op boards who artificially inflate property value by restricting comps, i.e., they don't approve purchases, or make the process so ridiculous that buyers walk.

and to further add to the mix, lender restrictions are so tight that in many buildings, esp. for those with more than 30-40% non owner occupied concentration, there are no loan options available for buyers. that means sellers are screwed, there is no liquidity. conclusion: welcome to a very long, long long term asset, and pray for a cash buyer.

I agree with you about the co-ops- some require 8 times the value of the apartment in liquid assets. Totally crazy.

I do not agree with about the economy being more diverse in NYC though-the indicator is the tax revenue is down due to less bonus on the street.

In the 80's and even the early 90's- the middle class existed. No more.

[stephenmarklay]

People will go around and around with it. If you think it is, then as mentioned, its a great time to do it.

Is it worth it?

Let me run down the current scenario that I'm looking at, and hopefully the wealth of knowledge can help drive me at least into a general direction.

Background info, 28 y/o, married, decently employed, moved 5 times in the last 10 years, tired of moving.

Renting a great apartment in a great little town for about $1250. 2 br, 1 bath, seperate dining room, not a ton of storage, new appliances, and the landlord didn't up the rent after the first year.

Watched too much HGTV this weekend and started looking on Trulia at houses in the area, found some in the 280's-350's that were nice but would probably need some work, putting them way out of the range. I'm not looking at buying something and then moving in a few years, as the thought of moving at all is just sickening to me.

The option to consider is a 2br, 1 bath garden condo. Asking price in the 230's, and we would put around 10 percent down. According to the online calculators we would come in right around the same payment that we have now, but we'd be owners instead of renters. But in owning comes the fears of home ownership, having to replace hot water heaters and stuff like that. I suppose each condo is different, so i don't know what might be covered under the common charges.

The question really is whether or not it make sense to buy over renting, and whether or not it's worth buying a condo vs. waiting, renting, and buying a house 5 years from now. I suppose if the dollars out of pocket are the same, then buying seems to make more sense on paper than renting. At least there would be a return on the investment, hopefully. At the same I only feel comfortable in a two bedroom for at most 5 more years, and who's to say what the housing market will do in that time.

Thoughts?

[54ny77]

That is a very good point.

When I first moved to NYC in mid-90's, I lived in the West Village. Rented a room for something like a few hundred bucks a month or so in a 4 bdrm loft, which was affordable on my income. Decent amount of beer money left over after expenses... Interesting quality-of-life in the neighborhood was transvestite hookers strolling around and saying hello baby as I got home from work at 3-4 a.m. The neighborhood had not yet transformed, and Western Beef was my go-to grocery store on 14th.

Nowadays, that same apt. would be $12-15k/mo. easily, and in place of Western Beef is an Apple store.... :rolleyes:

In the 80's and even the early 90's- the middle class existed. No more.

[the bottle ride]

That is a very good point.

When I first moved to NYC in mid-90's, I lived in the West Village. Rented a room for something like a few hundred bucks a month or so in a 4 bdrm loft, which was affordable on my income. Decent amount of beer money left over after expenses... Interesting quality-of-life in the neighborhood was transvestite hookers strolling around and saying hello baby as I got home from work at 3-4 a.m. The neighborhood had not yet transformed, and Western Beef was my go-to grocery store on 14th.

Nowadays, that same apt. would be $12-15k/mo. easily, and in place of Western Beef is an Apple store.... :rolleyes:
Very funny- NYC has changed alot. The way it is now is a like a cartoon- the wealth creation during this period has been amazing.

My mother works in real estate- she does placements for ex patriots who are in town for a few years with huge budgets and where do many of them ask to be placed with 8k-16k monthly budget? The lower east side near the methadone clinics off of delancey....

[54ny77]

Man, that whole neighborhood was so different back in those days. The stench of rotting meat scraps or carcass juice in the gutters on a sweltering August afternoon...nothing quite like it. :p

Very funny- NYC has changed alot. The way it is now is a like a cartoon- the wealth creation during this period has been amazing.

My mother works in real estate- she does placements for ex patriots who are in town for a few years with huge budgets and where do many of them ask to be placed with 8k-16k monthly budget? The lower east side near the methadone clinics off of delancey....

[Fixed]

Well, i should be more clear: My original intent was to ride it out renting and to purchase a, more or less, forever house (house-house, in suburbia, with the white picket fence and all)

My consideration now is making a move to a 2-br condo that would give me 5-10 years which would allow me to pay the same out of pocket while building equity and saving the same amount of money as i would have while renting (since my monthly out of pocket expense wouldn't change, if I did this right)

And no, we're not in NYC.. We're in Bergen County, NJ / Rockland County, NY. It's the metro-NYC area.
i lived in West Haverstraw i lived in a apartment that was over a hundred years old , on the 3 rd floor with a beautiful view of the hudson and sing sing
in 76 the rent was 250 utilities included
a month
cheers

[Nooch]

i lived in West Haverstraw i lived in a apartment that was over a hundred years old , on the 3 rd floor with a beautiful view of the hudson and sing sing
in 76 the rent was 250 utilities included
a month
cheers

my last apartment, not too far from there, in West Nyack, was 1050/mo, living in someone's basement, with no view... my, how times have changed! (needless to say I'm paying more than that for my nicer apartment just a few miles from there in NJ...)

[1centaur]

Before the market tanked when posters talked about wanting to buy I said watch out, you could lose money. Many/most said buying a home is not about investing it's about ownership and you'll do fine over time, that was history's lesson. I said you'll think it's an investment if it goes down. What's remarkable about this discussion so far is that the sentiment that housing is not an investment has evaporated. Good. Housing is an investment, and it's other things as well.

So number one, do not view moving from an apartment to a condo as an inherent good. It's not. It's an investment choice, so analyze that choice dispassionately like you're buying a bond. Location, location, location is how to analyze the investment, along with rates and demographics, in-migration, etc. It's not an easy analysis, so take months to get up to speed. Talk to brokers about how they view the condo projects in which you have interest, understanding they'll impart that view to buyers for years to come.

Number two, as many have said, a condo brings a whole lot of special considerations, with HOA being a significant one given how that body of people will determine investment value. They can collectively support the value of the units by maintaining them as the objects of desire for the likely buying demographic, or they can be a personal fiefdom that loses sight of the goal. Who buys condos and why? In the old days, lots bought condos to build equity, but these days I think a lot more buy condos that fit other goals, since they know the investment thing may take a while. Ownership without outside maintenance is a big rationale; location and amenities are big rationales. You can get a lot of that in apartments too.

If you get the investment part right you can take a lot of the hassles of the HOA and live with them. If you get the investment part wrong, you won't be happy. Get the investment part right, and if you're not sure, rent.

[echelon_john]

Hi Drew,
My opinions are:

If your time horizon to purchasing your 'final' or at least 'where you'll raise your kid(s)' house is really five years, keep renting and saving what you can. There's absolutely no way to tell if a condo investment you make now, when you factor in the maintenance fees, moving costs, and realtor fees at the other end, will in fact be a net positive from a financial perspective. It may well be a break even at best. I'm not a nay-sayer, but I just don't see using a property like that with that short a time horizon in any way as an investment vehicle.

Renting also enables you to respond to opportunities to buy your 'forever' house in a much more unencumbered way. What I mean is that, in a scenario where you plan to rent and save for five years, and something comes on the market in 4 that is PERFECT and affordable and you want to jump on it, you'll have the freedom to do so, vs. having to sell a property in an unknown financial/lending environment in order to free yourself up to move.

Finally, as others have said, owning, whether a house or a condo (more for a house) represents a big time and $ commitment beyond the mortgage payment. If you want to save money for the 'big' house, you don't want to be on the hook if your furnace blows up, and if you like riding your bike, you don't want to deal with maintenance issues.

We own our house and I really enjoy it, but am envious of friends who rent apartments in places like NYC because their total maintenance obligation consists of flushing the toilet and locking the door when they leave. That would be a nice feeling.

[Uncle Jam's Army]

I recently read an article (after we were committed to closing on our purchase of our house) that, strictly from an investment perspective, buying a home is a bad financial investment, all financial and tax costs considered. The analyst made the case that you would have more money in your pocket in the long term if you rented. Caught me completely off guard, as I thought conventional wisdom was exactly the opposite.

That analysis,however, doesn't take into account the intangibles of home ownership, like a landlord telling you you have to leave at the conclusion of your lease, or the kids having to move and make new friends in a new neighborhood.

[yngpunk]

That analysis,however, doesn't take into account the intangibles of home ownership, like a landlord telling you you have to leave at the conclusion of your lease, or the kids having to move and make new friends in a new neighborhood.

Well said, and the price of that "peace of mind" is priceless. Also, another factor to consider is that you will eventually own the place and not having to make a rent/mortgage payment while in retirement is a nice option to have.

[Louis]

Well said, and the price of that "peace of mind" is priceless.

I don't find that home ownership buys me much peace of mind.

Back when I lived in an apartment I didn't gives a hoot about storms, wet basements, hail, tornadoes, etc. Now that sort of stuff is potentially a huge hit on something that I own. Before I would just call the apartment office and tell them to fix it.

[Earl Gray]

As long as you are prepared to rent it out in order to upgrade, buy.

If not, rent.

[palincss]

But - you will never in your life again see interest rates as low as they are now. Remember, rents will rise with inflation. A mortgage doesn't.


And at some point, your mortgage will be completely paid off. Rent will never stop.

[Ralph]

I wouldn't assume that just because most people think owning what you live in is a good investment....that it actually is. Frankly....I wouldn't buy what you are describing. To me....you have a better deal than the owner of your unit.

And I own the house we live in....free and clear.

[Louis]

And at some point, your mortgage will be completely paid off. Rent will never stop.

Just because rent is a continuous payment doesn't mean that it's a bad deal.

Walking away at the end of your lease is no problem. You get to choose every 12 months. Try doing that with an underwater mortgage.

When you rent you get much more flexibility in your decision making. Home ownership ties you down, especially in this kind of market with uncertain prices.

[MadRocketSci]

home ownership has been religious dogma up until recently, and it's good to see people taking a critical look at the benefits vs the downsides. Basically, like everything else, you have to look at your own life situation, finances, desires for flexibility, security, etc and make a decision based on that, rather than all-encompassing pronouncements from others who don't know the details of your life.

For me, renting was fine during my single years - maximum flexibility, extra money to travel (especially where I lived), time to build up cash savings, invest, etc. Didn't care much about stability, moved every few years. That gets old real fast when you have a family, and it makes ownership now a much better option.

[firerescuefin]

Others have said it...market prices + interest rate environment, makes this the best time to buy a house in my lifetime (and many older than I)...whether it's the right time for you is another question all together.

[nm87710]

Good Luck

[MadRocketSci]

Others have said it...market prices + interest rate environment, makes this the best time to buy a house in my lifetime (and many older than I)...

maybe, maybe not

[firerescuefin]

maybe, maybe not

Tell me a better time...and I am not talking about niche markets.


Added: No one has a crystal ball, but I would guess that most housing markets have already hit bottom or near bottom...and interest rates are fantastic. Great time to be a first time home buyer bringing cash to the table.

[Ken Robb]

Buy if you 1) find something you like that is at or below market, 2) plan to be in it at least 5-7 years and 3) only get a 15yr 20% down fixed mortgage with a mortgage payment <=25% of household take home pay.

Life will be much easier and enjoyable for you and your family when you're 50.

Just trust me on this.

I wouldn't get a 15 yr. loan unless it was at a much lower interest rate than a 30 yr. loan because you are locked in to making those higher monthly payments from the start. A borrower can make extra payments when he wants to and can afford them on most 30 year loans that I have seen. That will allow a 30 year loan to be paid off in 15 years (or more or less) depending on how many extra payments are made. For most folks on this plan their ability to make the extra payments improves with increased earnings later in their working lives. OTOH making the same payment of "X" dollars with dollars that have been greatly diluted by 20 years of inflation has been enjoyable for many buyers over the past 50 years too.

[Ralph]

The Codo you are considering.....how many owners live there, or is it mostly investment property?

How many owners are renting out units....and not making mortgage payments or HOA dues? You won't know.

Is HOA reserving for roofs and other big expenses? Or do they just have a special assessment for big expenses? This you can find out.

Was your unit built to be a Condo.....or is it a cheaply built rental apt converted over to to Condo last few years? This you can find out.

These are just some of the questions I would have before buying a Condo.

I realize real estate is local....and every market is different. Here in Florida counties are shutting down condo's that don't have the income to maintain the grounds, keep up the pools, pay water bill, etc. Owners are renting units they aren't paying for....waiting to be foreclosed on. Investors are losing everything when this happens, and renters are forced to move....and are caught in middle when their owners pocket the rent money and don't make the mortgage payment. And counties shut them down....making everyone move out. And then banks sue owners, looking for some assets, because as an owner you still owe the bank.

Just so much to know. So I consider a condo purchase to be a huge risk. Just so much out of your control. I think this way....and I'm an experienced real estate buyer.

Find a simple cheap house to buy. At least there you can probably know what you're doing.

[firerescuefin]

I wouldn't get a 15 yr. loan unless it was at a much lower interest rate than a 30 yr. loan because you are locked in to making those higher monthly payments from the start. A borrower can make extra payments when he wants to and can afford them on most 30 year loans that I have seen. That will allow a 30 year loan to be paid off in 15 years (or more or less) depending on how many extra payments are made. For most folks on this plan their ability to make the extra payments improves with increased earnings later in their working lives. OTOH making the same payment of "X" dollars with dollars that have been greatly diluted by 20 years of inflation has been enjoyable for many buyers over the past 50 years too.


....agreed.The interest rate curve rarely rewards the risk you take on with the 15 year loan....double up on payments, pay a slightly higher interest rate and have some breathing room.

[majorpat]

Buy if you 1) find something you like that is at or below market, 2) plan to be in it at least 5-7 years and 3) only get a 15yr 20% down fixed mortgage with a mortgage payment <=25% of household take home pay.

Life will be much easier and enjoyable for you and your family when you're 50.

Just trust me on this.

Great advice if you can pull it off. Bought a house I thought would be a "starter home" for my new family, feel lucky we've stayed put. In five years, I will be done paying (mortgage anyway, maint and taxes go on forever).
Pat

[MadRocketSci]

Tell me a better time...and I am not talking about niche markets.

japan style: interest rates at all time lows for extended period of time to prevent crash...general deflationary environment....home prices slowly deflate over decades...financially better to wait....

-or-

interest rates rise...economic recovery weak, still lots of debt and housing inventory to work off, people still can only afford a certain monthly payment...the thing to give is housing prices...need to go down to maintain same level of affordability....better environment for savers. Tax implications? Ability to refinance if rates go back down...then you get the best of both worlds...

[MadRocketSci]

....agreed.The interest rate curve rarely rewards the risk you take on with the 15 year loan....double up on payments, pay a slightly higher interest rate and have some breathing room.

+1 on this....4% on 30 year fixed, 3.15% on 15 year fixed...best strategy to not lock yourself into higher payments if you can is go 30 year fixed, put in extra when you can, then after i dunno 6 years your principal is reduced enough to go into the 15 year and keep the same payment. Use a loan calculator to see the numbers. i liked the graphics on this one:

http://www.hsh.com/calc-amort.html

[palincss]

Just because rent is a continuous payment doesn't mean that it's a bad deal.

It's just that it never ends.

Walking away at the end of your lease is no problem. You get to choose every 12 months. Try doing that with an underwater mortgage.

You don't have to if it's paid off. As Ken has pointed out, that's an awfully nice feeling when you are retired.

When you rent you get much more flexibility in your decision making. Home ownership ties you down, especially in this kind of market with uncertain prices.
True - but not everybody wants, or needs, that kind of flexibility; and not every market's prices are uncertain. That's certainly not the case where I live.

I don't think there are any simple, easy blanket statements that will cover everybody's situation.

[professerr]

Here's the best way I've seen to work through the financial aspects of renting vs buying, the NY Times rent vs buy calculator: https://www.nytimes.com/interactive/business/buy-rent-calculator.html

It is superb and builds in virtually everything you need to consider -- not just mortgage payments vs rental payments, but property taxes, insurance, repairs, tax deductions, rent inflation, stock market performance, realtor fees, etc.

Plug in the variables and play around a bit, and be sure to go to the advanced settings section too or you'll only get half the picture. Very small changes in expected appreciation and return on investment of alternative assets can have pretty big effects.

[nahtnoj]

Hi Drew,
My opinions are:

If your time horizon to purchasing your 'final' or at least 'where you'll raise your kid(s)' house is really five years, keep renting and saving what you can. There's absolutely no way to tell if a condo investment you make now, when you factor in the maintenance fees, moving costs, and realtor fees at the other end, will in fact be a net positive from a financial perspective. It may well be a break even at best. I'm not a nay-sayer, but I just don't see using a property like that with that short a time horizon in any way as an investment vehicle.

Renting also enables you to respond to opportunities to buy your 'forever' house in a much more unencumbered way. What I mean is that, in a scenario where you plan to rent and save for five years, and something comes on the market in 4 that is PERFECT and affordable and you want to jump on it, you'll have the freedom to do so, vs. having to sell a property in an unknown financial/lending environment in order to free yourself up to move.

Finally, as others have said, owning, whether a house or a condo (more for a house) represents a big time and $ commitment beyond the mortgage payment. If you want to save money for the 'big' house, you don't want to be on the hook if your furnace blows up, and if you like riding your bike, you don't want to deal with maintenance issues.

We own our house and I really enjoy it, but am envious of friends who rent apartments in places like NYC because their total maintenance obligation consists of flushing the toilet and locking the door when they leave. That would be a nice feeling.

This. All of it. Every last word.

Your life will change a lot in the next five years. Don't do something that is going to limit your options.

[jimsantos]

Wanted to add a little twist to this discussion.

Lately, I've been looking at the possibility of purchasing a below-market-rate condo here in San Francisco. Given the niche conditions under which someone qualifies for these loans, it seems like it could be a good fit for my situation.

Max income for 2 people is 82k/yr, and I'm doubting many first-time homebuyers make under 82k but somehow have 65k liquid for a downpayment (320k asking price).

That said, I'm on a solid career path, but the last couple year's tax returns would be helpful in keeping us under the max income to qualify (remember these are BMR conditions). Girlfriend (yes, she's "the one") is self-employed, which keeps things flexible in terms of reporting income, but very stable, and I spent a good amount of time as a consultant in 2011. However, next year's taxes will definitely push us out of the bracket.

Given that we're renting @ $1950 for the same space/location, and rates are at record lows, it seems like a no-brainer to me.

The only catch is that the resale price (for the next 50 yrs) is restricted by the Area Median Income (AMI) for SF, San Mateo, and Marin counties. Essentially, the resale price will be governed by it's relation to AMI. You're making a play on the area's income growth vs. true housing prices.

Records show that between 2007 and 2011, the previous owner made 60k "profit", which is minimal, but a far cry from the steep losses many have experienced in the same time period.

Thoughts?



Thanks in advance!

[1centaur]

The only catch is that the resale price (for the next 50 yrs) is restricted by the Area Median Income (AMI) for SF, San Mateo, and Marin counties. Essentially, the resale price will be governed by it's relation to AMI. You're making a play on the area's income growth vs. true housing prices.

While I've no experience with what that sounds like, what it does sound like is a one-way option against you - your price is only limited on the upside, since no one will over pay to buy if real estate prices drop more than income.

I think you also have negative optionality on earthquake risk if one of those three counties sustains large damage and drives out high income jobs.

[saab2000]

Be careful with condo ownership. Lots of busybody neighbors who can nitpick, the association dues are not tax deductible and may or may not cover future financial needs of the association. This is especially true where dues seem very low. Pay now, or pay later, but you will pay.

Additionally, condos have questionable value. Mine has dropped in value by at least 20% over the past 5 years making it a bit of an anchor around my neck. I can't sell it without taking a huge hit.

My next place will be a free standing place on a small parcel of land where I am supreme ruler of that parcel of land. I will make proclamations and circulate my own currency and be a benevolent dictator, but I will be a dictator because I can't stand some of the absurd issues of a condo association. Just sayin'...

[rugbysecondrow]

Hi Drew,
My opinions are:

If your time horizon to purchasing your 'final' or at least 'where you'll raise your kid(s)' house is really five years, keep renting and saving what you can. There's absolutely no way to tell if a condo investment you make now, when you factor in the maintenance fees, moving costs, and realtor fees at the other end, will in fact be a net positive from a financial perspective. It may well be a break even at best. I'm not a nay-sayer, but I just don't see using a property like that with that short a time horizon in any way as an investment vehicle.

Renting also enables you to respond to opportunities to buy your 'forever' house in a much more unencumbered way. What I mean is that, in a scenario where you plan to rent and save for five years, and something comes on the market in 4 that is PERFECT and affordable and you want to jump on it, you'll have the freedom to do so, vs. having to sell a property in an unknown financial/lending environment in order to free yourself up to move.

Finally, as others have said, owning, whether a house or a condo (more for a house) represents a big time and $ commitment beyond the mortgage payment. If you want to save money for the 'big' house, you don't want to be on the hook if your furnace blows up, and if you like riding your bike, you don't want to deal with maintenance issues.

We own our house and I really enjoy it, but am envious of friends who rent apartments in places like NYC because their total maintenance obligation consists of flushing the toilet and locking the door when they leave. That would be a nice feeling.


I agree. In addition, a 2BR, 1BA with a wife and kid is just not a good arrangement for the long haul and that is what purchasing means. I would wait to buy what you want or spend more time looking for the right deal. Frankly, if you can't afford to buy what you way, buying what you don't want doesn't make much more sense either. If you have a nice place to live then be patient and see what is around.

As an aside, I didn't hear you say that you have checked with a realtor, but I certainly would. In some markets, I think they are a redundancy, in others a good realtor is invaluable when it comes to finding you the right niche area in or close to your budget. They know pockets or areas worthy buying in, the ins and outs of certain developements, they can steer your to and from deals, they can tell you how a hood is trending.

Lastly, think about resale when you buy. Even though you don't have kids, buying in a nice school district is a nice stabalizing factor. Near parks, open space, metro lines maybe, etc. Think about these attributes and think about them, talk them over with your realtor.

don't make a move because you think you should, make it because you want to and it is the right time. House poor and time poor is no fun for a lot of people.

[Nooch]

Thanks everyone. As always I knew I could count on the wealth of age, experience, and knowledge on this forum for this one.

The wife and I will continue on with our original plan, upping the savings every year as the raises come, and keep our ear to the ground. If something comes up and the cards align and we can pull off a great deal on our 'forever' home, then we'll be more able to pull the trigger than if we were locked into the condo.

I only really ever planned for buying one house, assuming there was no drastic change in conditions/outgrowing it/etc, so that will continue to be the plan. Buy what I want, put in the time to make it perfect, and enjoy it. Sure the market may rebound some in the time it takes for me to swing that, but it's the right move and I'll just have to pay the difference.

Additionally, the fact that my rent hasn't gone up, after a year and a half there, while it's not safe to make assumptions, I don't think our landlords are going to raise it any time soon -- they're good people, and they like having good people in their building (that's why pot smoker dude is gone) -- puts us ahead as far as every rent vs. own calculator I've seen, especially for the short term (5-7 years)

Thanks again!

[nm87710]

Great advice if you can pull it off. Bought a house I thought would be a "starter home" for my new family, feel lucky we've stayed put. In five years, I will be done paying (mortgage anyway, maint and taxes go on forever).
Pat

Congrats!

[Fixed]

here is the view from the back door
it is nice owning
cheers :beer:

[nm87710]

Read up on the Rule of 78s

[johnnymossville]

I don't see much advantage to a condo over renting, unless the total out of pocket monthy costs is at least several hundred dollars a month less for the same size space.

I moved 15 times over a 15 year period and got really tired of it so we bought last year, which was our second house purchase.

Two main things I've learned. HOA's suck for the money, and are a hassle, Most properties built in the last 20 years in my price range are super cheaply made and are basically junk. I stress in my price range, since as you go up in price the quality of craftsmanship seems to go up as well.

Now is a great time to buy, and I think we should start seeing an upturn in housing in the next couple years.

Good Luck!