Howdy All,

Could use some advice as I'm trying to figure out what makes more sense financially - continuing to rent an apartment and saving or buying a house, saving less, and building equity.

I've been at the current apartment for around 6 years with my lease ending in November. I pay roughly $1150 in rent each month and am able to put around $1500 - $1700 into the savings account after all my expenses are payed off. I'm getting tired of living in an apartment at this point for a number of reasons and am looking at getting in to a house. I've done a bit of research / budgeting and it seems I can afford a maximum monthly mortgage payment of around $2k while still putting around $650 in the savings account.

Am I better off getting into a mortgage and working towards building equity or should I stay in the apartment, continue to save, and wait for the next recession / deflation event and buying something then. Currently 31 and single but would like to start a family in the future if that changes anything.

Any advice is appreciated.

Thanks much.

I would keep renting until your relationship status changes. Buying a house usually only makes sense financially if you plan on being in it for a while (>5-7 years). In your situation, I think it's more likely than not that you would be selling any house you buy now in shorter time than that.

Just keep renting and saving/investing the difference, then go house hunting once you're engaged/married.

Or a fixer upper in a desirable area you can put work into and turn into equity

What area are you in?

Being 31 and single the best options are to stay in an apartment (maybe upgrade to a nicer one pending lifestyle and wants) or buying in an area that is gentrifying. Buying in an area that is developing hopefully will increase value a bunch and give you great equity. That way in 5-10 years when you need to move due to kids/wife (and not just want to) you'll hopefully have a better base for that "forever home".

Don't forget the social costs as well.

Owning a house is a time commitment as well. You will have a house and a yard to take care of. Plus if you cant afford to buy in an area where your friends live/socialize you might as well move across the country because you wont be seeing them anymore.

Keep renting and keep saving. Especially at around $1,150. If you are tired of your current apartment find a new one in a similar range. 6 years is a long time to be in one place. Sounds like you need a change more than anything. You are already on the right track by renting a $1,150 place and not a $1,500 place.

There are other costs associated with buying a house that future sale proceeds might not fully cover.

The interest you will be paying each month.
Taxes.
Insurance.
Maintenance.
Any monthly or annual contract service providers.
Closing costs.
Etc.

The break even point with a standard 20% down might be 10-15 years down the road when you consider all costs of home ownership, and that assumes constant 2-3% home value appreciation each year. Granted, you won't be losing money like you are with renting, but I agree with the poster above.. if you think your relationship status might change in a couple years it might be worth waiting.

I don't think there's a wrong decision. But I would be patient and wait for the right house at the right price. Don't rush to throw out that whole 2k.

If you'd like, I can lend you my model that shows a sort of pro forma run on home ownership considering all the costs.

hypeiv said:

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Buy a house because you want one, not because you think its a good investment. Home ownership does force you put money into the equity of the house, but you can easily build net worth without owning a home.

I bought a house 4 years ago and the value has gone up a little over 5% a year, which is nice because the value is going up on a leveraged amount of money so its better than a stock market gain of 5%. Over that same time period the S&P has gone up over 10% a year annualized. If I had left my down payment in the market and invested the savings of not having to pay for stuff around to get fixed instead buying the house I think my net worth might be a little higher than it currently is.

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The bolded is true, but the potential % returns diminish every year until you pay off the mortgage.

My advice for someone like yourself (you've shown responsibility by actually saving money at 31 instead blowing it all at the bars or otherwise) is to buy a house, rent out rooms, and keep your situation roughly the same or improve it. Here is a real life example thats doable in Texas:

• $400,000 house
• 10% down
• Roughly $2,700 per month principal, interest, taxes, and insurance
• Rent two rooms for $800 per month per room
• Your net paymnet is now just $1,100 per month (or less if you can charge more in rent)

Yes, you'll need to budget for upkeep, maybe lawn care, etc. So charge your tenants for lawn care and utilities. But you'll also get:

• Mortgage paydown
• Appreciation
• Tax benefits

If you would like real life examples in your market I'm happy to send them to you.

Why not just rent a house and get out of the apartment?

I wouldn't buy while you're still single. Never know when that could change.

Thanks all for the feedback, much appreciated. It seems like continuing to rent until I get married is the most sensible / easiest option at the moment.

Perhaps its also a good time to move some cash into some index funds and let it ride for a while vs. having it parked in a savings account which offers very little interest.

Moving into a nicer apartment or rental house would be cool but the increased spend seems hard to justify as my current place is decent enough for the price (especially compared to other areas in DFW).

But a four plex and house hack (rent out the other 3 units). Do it.

gig em 02 said:

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But a four plex and house hack (rent out the other 3 units). Do it.

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I wish I would have when I lived in college station. Back in 2009 they were a steal and absolute money makers.

Kind of serious, kind of not. Wait until the next housing crash/recession in a year or 2 (or 3), then buy your house and maybe a few other rental properties.

ea1060 said:

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Kind of serious, kind of not. Wait until the next housing crash/recession in a year or 2 (or 3), then buy your house and maybe a few other rental properties.

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Time the market perfectly.

I bought my house at 26, less than a year after moving to Houston. I thought it was a good starter opportunity, and that even if I met someone, we would use it as our starter home (knew I wouldn't raise kids in it), or maybe even a rental.

I started dating my now husband 4 months after buying it, and sold it about 14 months after moving in. I came out at a very slight loss once you counted in closing costs and money I had put into it, and that they were still building brand new houses in same subdivision, so it wasn't like I could ask for much higher than those were going for.

I don't regret it, but it was stressful trying to sell it (I was moving back to BCS, so keeping it really wasn't an option).

If you do buy, buy something you can rent eventually, and make improvements to it from that perspective.

I'd say the most important part is that you said you are tied of living in an apartment. Life is too short to live a way you don't enjoy... With the premise you appear to have the financial means to adjust.

With that said, look at Mazag's list of other costs. Depending on value of home, you may spend as much on throw away costs in a home as you do on rent. But go back to lifestyle to determine if it is worth it.

All the advice to but fixer upper.. rent rooms.. etc. Are big leaps on the lifestyle aspect. Nothing you said let me to believe you want a project or a tenant with you.

Last comment... I don't believe you indicated where you lived and were you are considering buying. I'm in Houston, and I'll say most of the suburban Houston market experiences very low percentage price appreciation. Home ownership is about lifestyle and rarely investment here.. in my opinion.