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Can I Afford this vs Should I Buy it

Home Mortgages and Home Buying Can I Afford this vs Should I Buy it

  • Avatar hightower 
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    I used to own a condo and I agree with the potential problems that can arise such as increasing hoa fees with little in return and the frustration of not being able to rent your property when/if you desire. These are the exact reasons we sold it and bought a single family.
    Beyond those concerns I think the more important issue to consider is the fact that you’re currently single. Do you plan on pursuing a significant other and maybe getting married? If so, waiting to buy a place together might actually be a smarter move. If I were single I’d rent for sure. Owning your own place will just make things more complicated in the event you decide to marry and buy a place as a couple. Keep it simple and have less to worry about.
    You could get a nicer apt if you’re feeling the need for an upgrade and/or impress potential mates? Otherwise yes you absolutely can afford to buy a place in that price range. Congrats on your success in paying off your loans and saving well already.

    #109296 Reply
    portlandia portlandia 
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    Agree with others that you can afford the condo.

     

    Having owned a condo,  I will never purchase another one. What an absolute disaster.

    Here is a partial list of problems that I had, and can be potential problems in any condo: shortsighted board causing severe lack of reserve funds leading to “special assessments”, liability issues arising from pools and common areas, high percentage of rental units, loud neighbors (who wants to own a place, only to realize your purchase affords no greater privacy than an apartment?), bickering among neighbors about direction of board.

    The condo that I moved into had the original roof of >40 yrs (not disclosed by sellers, nor revealed by home inspection) that in some spots had 8 layers of replacement shingles to patch over previous leaks. This is against code and could cause an insurance company to deny a claim in case of fire. I felt obligated to join the board after discovering many of these issues as the existing board members where grossly negligent in their duties.

     

    If it were me I would continue to rent until such a time I was willing to buy a single family home with my own four walls and deal with maintenance issues myself.

    YMMV.

     

    #109373 Reply
    Liked by MPMD
    Avatar Anne 
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    Beyond those concerns I think the more important issue to consider is the fact that you’re currently single. Do you plan on pursuing a significant other and maybe getting married? If so, waiting to buy a place together might actually be a smarter move. If I were single I’d rent for sure. Owning your own place will just make things more complicated in the event you decide to marry and buy a place as a couple. Keep it simple and have less to worry about.

    Click to expand…

    I’m going to disagree with this reasoning.  All of society will tell you to put your life on hold until you get married.  What if you don’t find the right person for the next 10 years (or ever?) Are you going to rent the rest of your life when you want to buy?  Or are you going to just pick someone and marry them so you can get on with your life?  Live your life now and when the right person comes along owning a place won’t complicate things.  If the fact that you already own a place complicates the relationship too much, they probably aren’t the right person.

    My spouse and I both owned when we met, which I think helped us be wealthier today than we would have been if we had rented until we met.  We just moved into one place and rented the other (it would have been equally as easy to just sell the other).

     

    #109489 Reply
    Avatar artemis 
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    I’m going to disagree with this reasoning.  All of society will tell you to put your life on hold until you get married.  What if you don’t find the right person for the next 10 years (or ever?) Are you going to rent the rest of your life when you want to buy?  Or are you going to just pick someone and marry them so you can get on with your life?  Live your life now and when the right person comes along owning a place won’t complicate things.  If the fact that you already own a place complicates the relationship too much, they probably aren’t the right person.

    I agree.  It would be different if there was a potentially significant other currently hovering in the wings; then I’d say talk it over with that person and buy a place together that suits you both after the wedding has happened.  But putting off buying a place of your own because you’re waiting on a Mr./Ms. Right who may never come along doesn’t make much sense.  But the home YOU want and can afford NOW.  The future will take care of itself.

    #109612 Reply
    Avatar hightower 
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    Too often in American society people assume you must own a home or condo or something to be a complete adult and “move forward” with your life. I disagree with this notion completely. Owning your own home doesn’t always work towards building wealth. Often it has the opposite effect. Taxes, home owner assoc fees, unexpected repairs, upgrades, interest on the mortgage, closing costs, etc. can all add up significantly and could easily mean you barely break even when you sell or even lose money. People rarely keep track of these extra expenses and when it comes time to sell they ignore those costs when calculating their “profit.”
    My point in saying to wait is that there’s no need to own right now, especially a condo that’s really no different then an apartment. Sure he/she may never marry and that’s fine. But in the even they do, not having to waste the time and money required to buy then sell a condo (which could lose value during a 5-10 year period) could end up being a complete waste. And what does it give you in return? Sure, if somehow it makes you happier, then it’s money well spent and I have nothing to argue. But, my point in challenging this idea of buying now was to point out that it’s not a necessary thing to do and it may work out better financially to just wait awhile. Homes are expensive, condos especially, they dont always appreciate in value and almost always end up costing more than expected over time. To each his own, but from my own personal experience of owning a condo, I would not waste my hard earned cash on one again (especially if I were single and thought there might be any chance of wanting to own a house in the next 5-10 years).

    #109628 Reply
    Liked by portlandia
    Avatar angeladiaz99 
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    Hey all- first post here. I’m a 2nd year private practice attending in a medium-sized non-coastal city with a moderate cost of living. Single, no kids, just paid off my $150k in student loans last year. My income was 330k last year and ought to grow more over the next few years as I take over the practice I joined. I won’t have to take out a loan to buy in – there is a 5 year transition plan that is essentially sweat equity. I’ve been renting my apartment the last 2 years and looking to buy. There’s a new condo bldg in my neighborhood going up and it’s exactly what I want. The problem is I really don’t know what is reasonable to spend. The two units I’m considering are 500k and 573k (just to be clear, I’m only considering buying one, not both). Originally I thought high 400s was my criterion for the mortgage. I should have the 20% saved up soon. Question is – as a first time buyer, am I foolish for considering spending this much? I think I can afford it, but it seems like a ton of money.

    Click to expand…

    I apologize for piggybacking on this thread but I had a similar question with different numbers. It also seems like an old thread so I figured nobody would mind my piggybacking and hopefully would be cleaner than starting a new thread.

    My husband and I are both physicians in our mid 30s. We are in a medium-sized coastal city with a surprisingly high cost of living (if you insist on the type of housing my husband does)

    Married, 2 kids, no student loans, no other debt. Combined income is in the high 6 digits but we are unlikely to grow it any further (and are always concerned about reimbursement cuts lowering this given the fields we are in and the current high income.)

    We already own a house and paid off the mortgage. We haven’t looked into what we could get but in speaking with our neighbors, we paid $400K 5 years ago, we think we might be able to sell it for $500K. I think the house is just fine but my husband wants a bigger and “better” house and cites closer location to school as a big driving force for a desired move.

    The house he is looking at costs $3M. We have the 20% set aside in a taxable account as we speak (and a little more if needed to make sure the mortgage is no more than 2x our gross income). We’ve played with numerous mortgage calculators where even in factoring in utilities, insurance, and much higher property taxes, our monthly expenditure for all housing items should not exceed 20% of gross monthly income either.

    For my husband, he’s claiming this is his dream house and the numbers work so why not plow forward?

    For me, I have the same reservations as the OP. Am I foolish for considering spending this much? I think I can afford it, but it seems like a ton of money. I have reservations about maintaining the same kind of income for the next 15 years to pay this kind of debt obligation. I also question whether spending 6x as much as our current home will bring us 6x the happiness. I would be closer to my work and the kids’ school. My husband would be looking at tacking on another 15-30 mins to his already 45 min commute.

    Would appreciate any insight! Thanks!

    #154260 Reply
    jfoxcpacfp jfoxcpacfp 
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    I apologize for piggybacking on this thread but I had a similar question with different numbers. It also seems like an old thread so I figured nobody would mind my piggybacking and hopefully would be cleaner than starting a new thread. My husband and I are both physicians in our mid 30s. We are in a medium-sized coastal city with a surprisingly high cost of living (if you insist on the type of housing my husband does) Married, 2 kids, no student loans, no other debt. Combined income is in the high 6 digits but we are unlikely to grow it any further (and are always concerned about reimbursement cuts lowering this given the fields we are in and the current high income.) We already own a house and paid off the mortgage. We haven’t looked into what we could get but in speaking with our neighbors, we paid $400K 5 years ago, we think we might be able to sell it for $500K. I think the house is just fine but my husband wants a bigger and “better” house and cites closer location to school as a big driving force for a desired move. The house he is looking at costs $3M. We have the 20% set aside in a taxable account as we speak (and a little more if needed to make sure the mortgage is no more than 2x our gross income). We’ve played with numerous mortgage calculators where even in factoring in utilities, insurance, and much higher property taxes, our monthly expenditure for all housing items should not exceed 20% of gross monthly income either. For my husband, he’s claiming this is his dream house and the numbers work so why not plow forward? For me, I have the same reservations as the OP. Am I foolish for considering spending this much? I think I can afford it, but it seems like a ton of money. I have reservations about maintaining the same kind of income for the next 15 years to pay this kind of debt obligation. I also question whether spending 6x as much as our current home will bring us 6x the happiness. I would be closer to my work and the kids’ school. My husband would be looking at tacking on another 15-30 mins to his already 45 min commute. Would appreciate any insight! Thanks!

    Click to expand…

    I’m not sure the discussion you and your husband are having is totally about money. It appears you can afford the house, but whether you should buy it is a different discussion.

    I believe both people in a relationship need to be in agreement before making any large decisions, be it spending, job change, or having another kid. That includes a $3M house. Not to say that either of you are right or wrong, but I don’t believe you are mentally at the point of pulling the trigger. I would not recommend doing so until you are both in favor of the move.

    Johanna Fox Turner, CPA, CFP: I am not your financial advisor; any responses are for general purposes only
    http://www.fox-cpas.com/for-doctors-only ~ [email protected]

    #154318 Reply
    q-school q-school 
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    we have a doctor house, but way closer to your current house than your proposed house.

    every year i think about the cost of maintenance, the property taxes, and how much longer i have to work to be able to pay those property taxes in retirement.

    if you need to sell the house, would it take 1 mo?  6 mo?  1 year?  the pool of buyers for that kind of house who don’t want to build their own must be somewhat small.

    if you live in that neighborhood, are you going to take fancier vacations and have fancier cars?  college funds paid off?  how much college fund?  what age do you want to retire?

    spending is easy.

    if you have no plans to cut back or retire early, won’t matter.

    but lots of people ten years older than you have health issues, or burnout, or just want to do other things.

    good luck with your decision.

     

    #154322 Reply
    Liked by Zaphod, Anne, hatton1
    Drop it into MD Drop it into MD 
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    You can have anything you want just not everything you want.  If the house is the one big cost in your life and you are willing to sacrifice elsewhere as needed then go for it.  We had a similar situation last year but decided other parts of life were more important and bought a more modest home.  I do not regret it.  I felt that after a few months the fancy new house would lose its luster and would just feel like a huge expensive pain in the rear.

    #154331 Reply
    Avatar angeladiaz99 
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    Thanks for everyone’s input, will definitely show this to my husband and discuss

    – I agree that at some level, it isn’t a discussion about a house but how we should be spending our money. It seems like my husband is at the point where he feels comfortable loosening the pursestrings and I don’t think I’m quite there yet or may not ever get there to that kind of loosening extent

    – I also worry about maintenance and the sextupling of our current property tax bill

    – Thanks for pointing out the issue about resale. It didn’t even cross our minds because if we were to buy it, this would be our forever home until retirement. The price for my husband’s dream house has fallen by $1M over the last 3 years because no one is interested in it. It is a modern white box in a town that has some very traditional architecture. It suits our style but you are correct that it would likely take a few years and price reductions before we are able to unload it. It is also close to the beach so maybe someone will give us all our money back just for the plot of land 30 years down the road

    – I think we have our other spending in check. We have young kids and both don’t like to travel so I don’t think fancy vacations will be a problem. We already drive fancy cars and feel out of place at times so I don’t think we will be upgrading those beyond what we currently have. College funds are not paid off but we have a solid plan in place, we plan on contributing $12K – $15K/yr/kid to the kids’ 529s until the value hits $250K. We plan on cashflowing any extra education expenses that may occur. We don’t plan on retiring early (for now) with or without the purchase of this house.

    – I also agree about the hedonic adaptation. We thought our current home was amazing when first moving in and now, after having kids beat it up and having to clean 3000 sq ft, I can see myself resenting an even larger home with more expensive walls for the kids to scrawl on. I do think my husband will appreciate the house for longer than I do. I did let him know that if we were to go through with this, there would be no more home shopping until retirement (and we would be looking at downsizing at that time)

    Will share these thoughts with him and hopefully update everyone once we reached a decision, thanks again for everyone’s help!

    #154361 Reply
    White.Beard.Doc White.Beard.Doc 
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    The price for my husband’s dream house has fallen by $1M over the last 3 years because no one is interested in it.

    Click to expand…

    The fact that it has been on the market for 3 years and has fallen in price by $1 million means that if you move in and ever want to move out, the house may not be sellable.

    In our area, houses under a million are hot commodities and go into multiple bids.  Homes priced from 1 to 2 million are in a balanced market between buyers and sellers.  Houses over 2 million take forever to sell and there are 10 houses for sale for every buyer.  Price reductions and long market times are the norm.

    Do you really want to sink that much into a house that you may not be able to sell in the future?  Of course every area and market is different, but in many areas the large expensive houses are becoming white elephants that no one wants.

    #154454 Reply
    hatton1 hatton1 
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    I am worried about your husband having to commute one hour.

    #154478 Reply
    Liked by Hank
    Avatar jhwkr542 
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    This sounds like a terrible idea. You’re signing yourselves up for that many more years of work. As mentioned, good luck if you ever want to sell it. My neighbor’s almost brand new $700k house has sat for months already. Your husband is ok with an hour+ drive? One of the biggest sources of dissatisfaction in the happiness literature is simply your commute time. It really won’t bring that much happiness. That sounds like a big empty house when the kids move out.

    #154480 Reply
    Liked by artemis
    Avatar Dont_know_mind 
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    I apologize for piggybacking on this thread but I had a similar question with different numbers. It also seems like an old thread so I figured nobody would mind my piggybacking and hopefully would be cleaner than starting a new thread.

    My husband and I are both physicians in our mid 30s. We are in a medium-sized coastal city with a surprisingly high cost of living (if you insist on the type of housing my husband does)

    Married, 2 kids, no student loans, no other debt. Combined income is in the high 6 digits but we are unlikely to grow it any further (and are always concerned about reimbursement cuts lowering this given the fields we are in and the current high income.)

    We already own a house and paid off the mortgage. We haven’t looked into what we could get but in speaking with our neighbors, we paid $400K 5 years ago, we think we might be able to sell it for $500K. I think the house is just fine but my husband wants a bigger and “better” house and cites closer location to school as a big driving force for a desired move.

    The house he is looking at costs $3M. We have the 20% set aside in a taxable account as we speak (and a little more if needed to make sure the mortgage is no more than 2x our gross income). We’ve played with numerous mortgage calculators where even in factoring in utilities, insurance, and much higher property taxes, our monthly expenditure for all housing items should not exceed 20% of gross monthly income either.

    For my husband, he’s claiming this is his dream house and the numbers work so why not plow forward?

    For me, I have the same reservations as the OP. Am I foolish for considering spending this much? I think I can afford it, but it seems like a ton of money. I have reservations about maintaining the same kind of income for the next 15 years to pay this kind of debt obligation. I also question whether spending 6x as much as our current home will bring us 6x the happiness. I would be closer to my work and the kids’ school. My husband would be looking at tacking on another 15-30 mins to his already 45 min commute.

    Would appreciate any insight! Thanks!

    Click to expand…

    It was 4M and is now 3M ? That is a lot of non deductible debt.

    Could you not upgrade to a 1M house ? That would also be tax efficient.

    There is something called overcapitalisation, which you want to avoid if you want to preserve resale value. Some people say, buy the worst house you can in the best area you can afford…

    What is the land value of the 3M house. Houses depreciate. Land can appreciate. What is the 30 year capital appreciation rate if the area ?

    It might be ok if the land value is 2.5M and house value is 500k and the land is likely to appreciate 7% pa in the future.

    #154530 Reply
    Avatar Dont_know_mind 
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    Hey all- first post here. I’m a 2nd year private practice attending in a medium-sized non-coastal city with a moderate cost of living. Single, no kids, just paid off my $150k in student loans last year. My income was 330k last year and ought to grow more over the next few years as I take over the practice I joined. I won’t have to take out a loan to buy in – there is a 5 year transition plan that is essentially sweat equity. I’ve been renting my apartment the last 2 years and looking to buy. There’s a new condo bldg in my neighborhood going up and it’s exactly what I want. The problem is I really don’t know what is reasonable to spend. The two units I’m considering are 500k and 573k (just to be clear, I’m only considering buying one, not both). Originally I thought high 400s was my criterion for the mortgage. I should have the 20% saved up soon. Question is – as a first time buyer, am I foolish for considering spending this much? I think I can afford it, but it seems like a ton of money.

    Click to expand…

    I hate condos. I once had one and will never buy one again. Except maybe during a downturn, off the plan or orphaned build  at a 50%+ discount or something.

    Those owners cooperations are so painful and populated by grumpy, retired schoolteachers with way too much time on their hands. I wouldn’t know because I never had time to go to a meeting. But I would get the newsletters and they were bitchy.

    Also if you are buying it to live in you don’t use the deprec from a new build.

    You can afford buying a place. But I would look at a single family home.

    #154533 Reply

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