I need your help in assessing the options for me. Here is the
background information --

Husband and wife; both 28 years old; no kids; both working full time;
currently renting a one bedroom apartment in Boston suburb; monthly
rental slightly over $1,000;

Each month, after tax, car loan, rental, 401k, utility, and other
misc. expenditures, can save about $3,400. At this rate, in 3 ~ 4
years, will reach over $200k in saving. At that point, plan to buy a
house at about 500K ~ 600K (which probably would be average in a good
Boston suburban town at the time of 2008). Have to wait until that
time, because (1). do want to put 20% down payment; (2). do want to
have enough money for overhead housing expenditure and emergency fund.

Right now, need to move to a bigger place. So either can rent a
two-bedroom apartment (monthly rental will be around $1,300), or buy a
condo or a townhouse at over $200k (once again will put 20% down
payment) in this area. But given that we plan to buy a single house
in, let's say, year 2008, we cannot decide whether the benefit is any
bigger to buy a condo/townhouse and then sell it in the 4th year. If
renting a two-bedroom for 4 years and holding a two bedroom for 4
years yield the similar financial outcome, then we'd rather avoid the
hassle of owning a unit. Can you help me assess the options? Thank you
very much in advance!

S.S.

In article ,
S. S. wrote:
I need your help in assessing the options for me. Here is the
background information --

Husband and wife; both 28 years old; no kids; both working full time;
currently renting a one bedroom apartment in Boston suburb; monthly
rental slightly over $1,000;

Each month, after tax, car loan, rental, 401k, utility, and other
misc. expenditures, can save about $3,400. At this rate, in 3 ~ 4
years, will reach over $200k in saving. At that point, plan to buy a
house at about 500K ~ 600K (which probably would be average in a good
Boston suburban town at the time of 2008). Have to wait until that
time, because (1). do want to put 20% down payment; (2). do want to
have enough money for overhead housing expenditure and emergency fund.

Wise choice.

Right now, need to move to a bigger place. So either can rent a
two-bedroom apartment (monthly rental will be around $1,300), or buy a
condo or a townhouse at over $200k (once again will put 20% down
payment) in this area. But given that we plan to buy a single house
in, let's say, year 2008, we cannot decide whether the benefit is any
bigger to buy a condo/townhouse and then sell it in the 4th year. If
renting a two-bedroom for 4 years and holding a two bedroom for 4
years yield the similar financial outcome, then we'd rather avoid the
hassle of owning a unit. Can you help me assess the options? Thank you
very much in advance!

General rule of thumb is that less than 5 yrs, rent. 5 or more, buy.

Like most ROTs, should be taken with a large grain of salt.
Evaluate the costs for both alternatives, not forgetting taxes and
insurance and see which looks better.

--
Rich Greenberg N6LRT Marietta, GA, USA richgr atsign panix.com + 1 770 321 6507
Eastern time zone. I speak for myself & my dogs only. VM'er since CP-67
Canines:Val, Red & Shasta (RIP),Red, husky Owner:Chinook-L
Atlanta Siberian Husky Rescue. www.panix.com/~richgr/ Asst Owner:Sibernet-L

S. S. wrote:
I need your help in assessing the options for me. Here is the

Right now, need to move to a bigger place. So either can rent a
two-bedroom apartment (monthly rental will be around $1,300), or buy a
condo or a townhouse at over $200k (once again will put 20% down
payment) in this area. But given that we plan to buy a single house
in, let's say, year 2008, we cannot decide whether the benefit is any
bigger to buy a condo/townhouse and then sell it in the 4th year. If

I would probably lean toward buying a condo in a good location
if possible. If the real estate market explodes for some reason
your condo resale value should offset some of the unexpected
increase in costs for the house your want to buy. On the other
hand, if real estate tanks, you might be slightly worse off
but the house cost should also be easier to afford.

If housing costs skyrocket, your rent may go up, but a
mortgage payment won't. Finally, I think in the most
likely scenario, you would probably break even or
a little better in 4 years. As others have said though,
you should look at insurance, taxes, and maintenance fees
to make sure it isn't a real losing proposition to buy.

Bill Ranck
Blacksburg, Va.

On 3 Dec 2004 14:44:59 -0500, someone wrote:


Like most ROTs, should be taken with a large grain of salt.
Evaluate the costs for both alternatives, not forgetting taxes and
insurance and see which looks better.

Very hard to do in a useful way because of the un-knowable assumption
of what rate of inflation or appreciation to use. "Past results do
not guarantee future performance." You could tweak it to make it come
out either way, and then he is right back where he is now. If real
estate in that area continues to shoot up up up he will be wishin' he
hadda bought.

But if what many folks think is a bubble bursts, he will be one
hurtin' turkey and cash would have been king. Well not hurting as bad
as if he had bought low/no money down and now owed more than he could
net. But still.

If he can really really plan his life like that, its all still quite
marginal. But if he has the discipline to keep sockin' away that
money - I say save and if prices do flatten or even dip he can buy
what he really wants sooner. The transactional costs in real estate
make it very inefficient to change houses frequently. The 4 years is
a marginal time frame, and anyway I could see him getting into the
townhouse - and then wanting out in SOONER than the 4 years.

I say wait a bit to get what he really wants - even if he does an
80/5(shorter term ) and 15 down and does it a bit sooner. But its not
"wrong" if does it the other way either.

-v.


Reply to NG only - this e.mail address goes to a kill file.

On Fri, 3 Dec 2004 23:20:31 +0000 (UTC), someone wrote:


....He should make sure to account for association fees,
though. Around here they are sometimes almost a rent payment unto themselves.

Good point. Even with the tax deduction, the mortgage plus the
(non-deductible) fee can make the net much worse than "just" renting.
BTW, in MA there is a State tax deduction for RENT!!!

-v.


Reply to NG only - this e.mail address goes to a kill file.

On Fri, 3 Dec 2004 21:32:22 +0000 (UTC), someone wrote:

.... If the real estate market explodes for some reason
your condo resale value should offset some of the unexpected
increase in costs for the house your want to buy....

And if he doesn't buy a townhouse but keeps saving, and the stocks or
mutual funds he picks explode, he could pay cash for his dream house
with the profits. See the problem of trying to do these projections?
What does one assume is going to go up, and what does one assume is
going to go down, when neither can be predicted with any certainty.

Many people think real estate in that area has already exploded and is
heading for a crash. RE prices have been outpacing CPI and wage
growth in that area for years - so is this a structural change, or
will it "correct"??? Is he an optimist or a pessimist?

If he is going to stay in the bigger house "forever", maybe he should
stick it out one more year in the little apartment, increase rate of
saving is possible (haiving a shorter horizon to the payoff may make
it emotionally possible to do this), and buy the big house a little
sooner without waiting for the 20% down.

whatever,

-v.


Reply to NG only - this e.mail address goes to a kill file.

Just my two cents here, but one thing to consider is that when making
an offer on the "real" house, he may have to include a contingency
about selling the "temp" house. The fewer contingencies, the more
attractive an offer to the prospective seller.

Also, there is a psycological aspect here. I found that whenI bought
my house, minor things that I couldn't even be bother to tell the
landlord about in my apartment, would inspire me to make 29 trips to
the hardware store. It is unlikely that you will paint an apartment,
but very likely that you will paint your house, particularly when you
are trying to get the best price for it when it comes time for the
upgrade.

Gwen

SS,

Looks like you have done the math well. We were in a very similar
position and decided to go in for a low 200s townhome this year, as a
starter home. The monthly payment does not increase THAT much vis-s-vis
rent, and you have the satisfaction of owning your place. Mortgage
rates are low now, who knows about 2008? Besides, condo/townhome need
not necessarily come with hassle/baggage/rework. Check property sales
and appreciation is your area, make sure you buy in a desirable
location if you intend to sell it off in a few years' time. The best
way is to get into the market as a prospective home buyer, the choices
will become that much clearer to you and you will be able to make an
informed decision yourself.

Good Luck!