Considering an elevated bay house in an area that is hurricane prone and has high insurance. Let's say $12k a year in insurance as an estimate. And let's assume almost very low anticipated appreciation due to high insurance costs.

Option 1: By a basic house for $250k in cash. Can self-insure and "save/gamble" $12k a year in insurance, which won't take long to afford a new roof but a catastrophic loss would hurt and am concerned about liability risk. Total cost $250k plus higher catastrophic risk.

Option 2: Purchase same $250k basic home. Take out mortgage at current rates (say 6.5%) so around $1600 a month plus $12k a year in insurance. So $2600 a month.

Option 3. Assume a mortgage at 2.65% on a much nicer home at $400k. Mortgage would be right around the same $1600 a month and oddly enough my insurance quote is coming in right around $13k a year so almost exactly the same as option #2 per month.

Option 3 sounds like the winner to me

Thanks for your thoughts.

Will probably be in the house for about 5-8 years for work then will either sell or rent. It's worth the higher costs and risks to us for the house to be on the water.

We are considering renting too, but don't like the idea of dealing with landlords in case of a big storm and the risk of getting kicked out over a 5-7 year window is pretty high. Plus rentals are hard to find, again I think because of insurance where most can't make the amount in rent needed. Some do the Short term rental thing instead too.

My concern is the market is depressed due to insurance costs and in my opinion based on how slow things are moving, may go down even further. So if the market drop 25% in value then a $250k house losing that value would be easier to stomach then a $400k house.

If we decided to rent, then the $400k house would likely be easier to get a higher rent income for, especially with a low mortgage payment.

I do like the idea of not burning all that cash right now too as I think a pretty sizeable stock market and maybe housing drop is likely in the next 3 years, so would like to be positioned to buy in low and current high yield savings accounts are still pushing 4-5%.

Anyone else or investors have any calculations on financing vs using cash and if you calculate risk more on monthly payments or total debt value?

Option three, if paying the note isn't a burden.

Option one wouldn't be bad if you could get in an area where storm surge is less likely. Most total losses come from being front and center storm surge. Not as much from wind.

Option one also works well if a lot of your value is in the land.

And don't forget the difference in taxes.

Option 3
In Texas homes will not drop more than 10%
My guess is that it will grow 20% before your ready to sell

Option 3. If you can borrow money at that rate its a no brainer over cash. Safe investment in the market will double if not triple the same money.

Location?