I am contemplating when (if ever) the right time to buy a home is. I have very mixed thoughts on spending a considerable amount on an asset that I expect to have a sub-4% IRR over the course of a 10 or so year period. I would prefer not to get into a discussion focused on returns (if I am fortunate maybe my IRR is closer to ~10%, but I don't want to be optimistic in my speculations at these preliminary stages), so lets just assume that the property I would buy would appreciate, but only marginally.
My SO wants one when it makes sense (2-5 year time frame looking feasible) and I am trying to be pragmatic about how I approach this. We both do fairly well for ourselves and have saved considerably for a long period of time. However, I don't want to finance this purchase by pulling out a material portion of my savings from the market, so I want to do this as strategically as possible. I currently have a high interest account being used as a fund for a future house, and am trying to decide if I up the % of each paycheck this year considerably in order to have a nice chunk of change in this account in 2ish years.
For additional context, I am not sold on the idea of buying. I currently live in a nice spot with far more amenities than 99% of city folks have, and work with an individual landlord as opposed to a real estate mgmt. company, so my rent is very unlikely to increase meaningfully over the next 2-5 years.
Just in case it needs to be said, I realize a house is a huge luxury and not a high IRR generating asset. As it is a privilege, I think careful consideration is required when it comes to purchasing one. However, I suspect many of the other users who are married and planning on having children (or already have them) AND have a SO who is a high earner understand that this is something they have always wanted.
I am really looking to get a discussion going on the subject, and thought of a few potentially helpful questions below.
For those of you with children, what age were you when you purchased your first home? A few additional questions that would be interesting:
-
How much did you have saved (can be liquid and / or illiquid, but specifying would be helpful)?
-
What was purchase price relative to combined income (e.g., If the house is 2M and you and your SO generate 400k a year, the multiple would be 5x)?
-
What % did you use for a down payment?
-
Do you regret this decision?
-
Lastly, if you don't own but have a family, why do you feel that was the right decision?
One thing to consider is planning ahead on your home size. I bought a few years before having kids with the intention of having kids. I've seen so many people get obsessed with buying a house to appease the SO that they buy something too small. 4 years later, they have a kid or two (shock face I know) and then have to move. Or alternatively, they thought about getting a bigger house but didn't think very hard whether they want their little princess going to the local public school or expensive private school. At that point, did you really buy a house or did you rent and pay for a 4-year call option on price?
Buy something that could work for you for the next 10 years. Otherwise, when you're "buying", you're just a short-term renter making an investment decision giving yourself an illusion of owning a house.
I bought at 27 when my wife was 3 months pregnant. It was about having extra space for the family and I have zero regrets.
How much did you have saved (can be liquid and / or illiquid, but specifying would be helpful)? $300k of liquid assets.
What was purchase price relative to combined income (e.g., If the house is 2M and you and your SO generate 400k a year, the multiple would be 5x
At the time it was 1.5x our annual income. I'm in research and my wife worked for a hedge fund. We purchased under the assumption we might only have one income at any point. We could've gone bigger but chose not to.
What % did you use for a down payment? 20%
Do you regret this decision? Not once. It was a great time to buy and our house is up 75%, but we have no intent to move. We are very happy in the home we've built, have great neighbours and have lots of wonderful memories here.
Lastly, if you don't own but have a family, why do you feel that was the right decision?
Hi @trevelayn006 thank you for the reply.
My main takeaways from your response are that you feel you bought at the right time and because it made logistical sense (family was expanding, needed the reliability of not having to move on a whim due to things like rent increases). Im really impressed with the PP / combined income multiple, I think a multiple under say 3 really reduces stress.
Hope you have many more wonderful years in that home. Thanks again for the insight!
I bought in Toronto, which is a massively inflated, overvalued market. So similar to your thinking, I expect the lift to be marginal.
I took the plunge despite the math not really checking out and will say that there are qualitative things that probably add a few points of IRR for me just from a quality of life perspective.
Freedom was not something that crossed my mind when I was renting. Like being able to do whatever I want with the place. Aside from renos, put in a gym + heavy bag and sparring area, set up a studio to jam with friends etc. Having chill neighbors is awesome, so space for projects/hobbies and generally stupid shit I indulge in has been a huge plus.
To answer your questions, paid 5x base, down payment took down 70% of my savings and I put down ~30%. Will add that I did have a decent chunk of savings but could EASILY have built up way more with some discipline. My thinking was (a) am in a market where detached homes don't really depreciate, so even if the gains are marginal, will be in the black and (b) very very sensitive to not having to change my lifestyle for the mortgage so wanted to minimize my monthly payments.
Zero regrets man. I step out onto the deck in the morning, sit down with a coffee and the paper and have my "everything the light touches is my kingdom" moment. So worth it.
Hey @rabbit thanks for the reply, I always read through your responses on various threads and learn a lot. Its interesting because I think the scenario you described is a lot more realistic for most of us users, especially those living in / close to a major metro. I guess my takeaway is that while you paid a pretty penny and don't expect to generate a strong IRR, you're happy with the decision you made as you diligenced the area and property well enough and it provides you with meaningful lifestyle perks.
Is there anything you wish you did differently? It would be helpful to learn from you further, if there is any home-buying wisdom you wish to impart.
I'd be curious - do you think this purchase will impact your retirement trajectory? I guess to talk through my biggest hesitation, I don't want to pull out of more than say 30% of my investments to finance this purchase, as I think even a 5-8% IRR on that capital would be meaningful down the road. However, like most of us, I am not sitting on a six figure cash stack that would serve nicely as a downpayment, so some sort of strategic planning is required.
I have to be a bit more prudent with my spending to be able to keep saving, but I take the view that building up equity in the home is a nest egg as well. While I'm conservative looking at returns, Toronto is a crazy market so I'm feeling pretty good about coming out ahead when I sell. Magnitude of return TBD.
I def understand where you're coming from, putting down that much dough for anything is absolutely daunting. The day I signed I was a wreck lol. Felt like I was signing away everything I'd worked so hard for and its pretty terrifying seeing the drain on savings. Almost took me back to that broke ass college student feeling. I'm happy to say that feeling passes and it was well WELL worth it to have my own home. Between a very sharp agent, being patient, sticking to my budget and a bit of luck, I don't think I could have done anything differently.
Friend of mine gave me a really good piece of advice. You will have days where you absolutely love the place, and ones where you're full of regret and hate yourself for buying lol.
Two things I learnt during the process that really helped were to keep some budget headroom for immediate fixes. I got lucky, minor furnace repairs, some roofing and insulation type stuff, maybe 15k but have heard horror stories about foundation issues and the like. The other thing was to prioritize properties with good bones rather than something that is reno'd. Renos have crazy crazy markups and restrict your ability to modify the place the way you want.
The fact that you bought in Toronto is nothing short of amazing. I have seen Real Estate TikTok Toronto and adore a lot of the homes available in the area.
Regular prices started at $2m easily for a home.
If you can swing it, a wise move would be to wait until you can purchase a property with revenue-generating potential. For example, a multi-unit property or something with an ADU. Not only will this give you an income-generating option, but it could also massively offset your future childcare and/or elder-care costs as you could have an Au Pair move in, or your parents/ in-laws.
From a pure finance perspective, this makes sense, however, this doesn’t align with the reason I think 99% of people purchase a home.
When I buy a house, it won’t be a condo nor a townhome. It will be a standalone home that has room for my kids to run around and play both inside and out. I know this will be expensive, but I’ve been planning for it for a while.
I'm totally with you and you can have both. I bought a SFH on an oversized lot with plenty of room for pets and kids to run around, and also enough room to build a decently sized ADU in the backyard. Even though the house is modest and nothing to shout about, the listing got bid up a bit more than others in the area because of the lot size. Other would-be buyers probably saw the same potential to add an addition to the property that I did.
Not married nor have kids but want to give a response bc I feel so highly about myself.
A house you buy to live in with your family is not an investment. I put over $500k into building a house that will be a rental. I currently rent a penthouse for myself. When I do buy a house, it will be for my family. I absolutely would not consider a multi-family property for when I have a family.
Looking at my parents’ situation, they bought a house that at the time was 5x bigger than what we were currently living in. This was 20 years ago, but around 2x dad’s total comp. Now, that house has more than doubled in value. My dad’s income has grown exponentially, but he has absolutely no intention of moving. That’s the house his kids were raised in, and it’s now no longer a house, but a home.
Of course you ideally want to time the market, but biggest thing is don’t overextend. Think of WHY you are buying the house you want. I could easily buy another house and call it an investment, but I don’t need the space. I have a large apartment that’s big enough for me, and the cash that would’ve gone towards a home to live in is just chilling in a few accounts.
I agree with this. I also don’t think you should look at home equity as part of your net worth or retirement picture (outside of not having a mortgage by then). The only way that equity is realized is if you downsize significantly or move to a less expensive area.
Not sure I agree you make imputed rent with a paid off home so that number net of maintenance and tax and insurance capitalized at a cap rate that you would pay if you rented is part of your net worth
Not true.
You can use that equity + additional savings to buy a bigger house and upsize.
You can also tap equity in many different ways if ever needed.
It’s also an investment because you have a fixed cost for 30 years, which allows you to save more money and put it into the market and generate a return, rather than paying higher rent y-o-y for 30+ years…
Couple thoughts:
1. Definitely don't think about owning a home as an investment if its for your family. Not everything needs to be though of on a return basis.
2. If you're having or planning to have kids, think about the school district.
3. Don't buy more home than you need. Too many people buy a home with rooms that they only use once every 3 years. So, don't buy something and think you need a guest room because your cousin flies in every 5 years and doesn't want a hotel or one with a big dining room because you rotate Christmas every 4 years.
4. Buy a home that functions for you. I think a lot of people do things now (not just buying homes but say cars or other things) that look good in an IG post but then you have to live there. So as baller it would seem to have a pool or extra room, you have to pay taxes/heat/cool/take care of that part of the property.
#2 is the most important I'd say. This along with the safety rating of the neighborhood you will live in.
Buying a house for you is not an investment. It is an emotional decision you make.
Think of your opportunity cost: You put a lot of money into a house for living inside with your family vs. life memories in the house.
Thank you. I thought people learned that 15+ years ago.
It's about a house vs. a home...a house is more of an investment while a home conveys emotional attachments. Think up to a point about buying a primary home as an investment but emotion matters more there....if it didn't then yeah you don't really need to buy a house
You can also buy the first primary home as a more of an investment and not go crazy over having everything be perfect and then in 10yrs get your actual dream home with everything you want (and either sell or rent out the first home).
I bought a place about two years ago and then sold it when I moved about 7 months ago. I saved money over renting which is nice, but would not have done it if it wasn't for my wife being cool with finding the place and dealing with everything.
We are both OK with not buying until we have kids and even then, I probably want to wait a year or two after kids to figure out what I even want out of a house. I think I know, but it would be nice to live in ~2 more places first before I commit to a pricier place.
Right now I still find myself changing my mind about things too often after we move into a new place. For example, I learned recently that having some of our higher level employees crash at my place isn't too bad and kind of fun for offsites. Especially for me because then I don't have to fly anywhere lol. So it's something I want out of the house we buy... It will be awesome too post-kids if I don't have to fly anywhere often. For example, could build a little laneway house in the back or something, and stick the visiting execs in there, and then another "office" facility type of thing.
When we do buy it's a pretty big commitment where we live, and it has to be in cash b/c I don't have w2 income.
Had a lot of the same thoughts you did on this topic. I ultimately decided to start looking for a house a few years earlier than I expected I would want to move in and then rented it out. Talk to your CPA but there are some solid tax benefits to having a rental plus I was able to make a lot of the improvements I wanted to without the headache of living through them while also getting it as a tax benefit. I'm not totally clear on the details but my CPA mentioned that after I "stop rental activities" for a year I'll have some kind of tax benefit for all the expenses I capitalized (not sure if this is gonna be worth to much but still something!). Best of luck!
bought a 3-bed condo recently, a little outside manhattan w/ 20% down and ~8% rate. Some thoughts:
- the interest schedule is horrifying, it will be a while until i start accumulating equity w/out additional payments. Hopefully i have some decent years and chunk this off.
- the HOA is already screwing me (15% increase starting Jan 1st), I'm sure taxes and utilities will screw me at some point in the future. Owning does not preclude you from getting screwed with inflation and other costs, but +15% on $2k HOA vs. 15%+ on $7.5k rent is better. Thats where my rent renewal was probably shaking out this yr (another story).
- the stickiness of real estate ownership is a feature, not necessarily a bug. Had i bought a large studio or large 1-bed a few years ago, I would have been more likely to avoid lifestyle creep and likely saved more long-term. Renting, I quickly went from 1-bed walk-up ($2.8k), 1-bed luxury ($4.4k).. wife + kid came, quickly went to large 2-bed "luxury" rental ($8k).. all of a sudden, your wife is raising the kid and you're on the hook for a 7.5-9k rental and the yearly increases on that figure have been horrible to digest. Now we're thinking about a 2nd child and my wife works from home so we really need a 3-bed. I dare you to look at true 3-bed rentals.. call it 1600+ sq ft.. ugly, even for a Director trying to accumulate some decent wealth.
- we got a conventional 30 yr loan, and bought well within our means so it turned out not to be a jumbo loan. I checked two money center banks and neither seemed to take any interest in getting me a competitive loan - I innocently thought my strong base and sub-$1mm household income would get me some courting from a private banker. I went with a mortgage broker - it was a good experience. Fannie Mae adds a 75bps adjustment to mortgages on condos - i didnt appreciate that until the end. Also, Fannie Mae currently views 25% down as the new underwriting standard.. not 20%. You'll save about an 1/8th with each additional 5% down.
- so far, ownership has been very rewarding. we are doing some basic renovations and it is costly. I'm drawing down a lot of my investment/savings accounts and it hurts, but isnt that what the money is for? Providing for my family and being the "breadwinner" feels great right now. I also bought a nice SUV for the fam - I didnt think i would care but it also feels great.
- i cant believe i am saying this but I am ready for some semblance of quasi-suburban life. The concept of "luxury" in the rental market is laughable, the new builds are only getting smaller, and Manhattan feels unsafe with so many mentally disturbed people on the streets. Do i sound jaded? I am. The outer boroughs have suddenly become much more attractive to me after hustling in Manhattan for ~15 years. These neighborhoods have true economic and ethnic diversity and community - not just different shades of the same top-50 school, white collar / white shoe professionals w/ drinking problems. I am that - i want more "different" around me.
Thank you for such a comprehensive and well-thought out approach. Your response was full of valuable lessons learned that others have not mentioned to me, and I am taking note.
Its interesting to see that the costs are still hitting you hard, despite being a top 1% couple with a strong career (I don't know what your wife does, but I assume she contributes meaningfully). My sense is that as you look to have kids, the ability to live frugally gets put on the back burner (and likely doesnt return until the kids are grown), at least from a living situation perspective.
I am fortunate that I live in a (relatively) lower cost of living city, but man do those 3-BR rental prices scare me.
You know, the 8% interest rate is daunting, but what is crazier still is 20-30 years ago the rates were closer to 15%. With that said, home prices were on average (and I am speculating here) 3-5x a single mid-30s annual salary.
You seem very well informed, if given the choice (assume you werent already married with a 2nd child on the way) would you have *ideally* opted to wait another 2-4 years for supply to increase and rates to decline? Or would the difference be immaterial?
i feel like the "lack of supply" argument is less relevant in the five boroughs and very relevant in the 'burbs. I was able to find 2-3 options that fit our needs early in the Summer and put an offer in. I have been tracking the supply in the neighborhood over the past 6 months and have not found anything pop up that was a better fit or more affordable.
I partly took a bet on inflation. If inflation was persistent, I look very smart. If prices hang around here for the next 7 years, I should have some adequate/decent equity built up in a good-sized property while maintaining a HOME. If i'm wrong, and the market collapses in 2024, ok that sucks but i didnt lever up to the hilt so its not the end of the world. I applied the appropriate probabilities to those outcomes and came to my answer. Also, you can always refi...
8% is brutal.
I bought recently, and was trying to figure out if I wanted to put 25 or 30% down. Going for 30% knocked an 8th off the rate, but I'd have to put 1.25% of the purchase price down to get there, so I stuck with 6.5% and 25% down.
I'm in an inner outer boro place where It's ethnic, but I don't stand out for being a gentrifier. (think polish/irish/greek)
My advice: unless you have expensive tastes buy what you will need. Housing is a very illiquid market and I think the breakeven is about 7 years. Others have brought up assuming a 4% CAGR on the house price. I think that's optimistic, but remember: it's a very leveraged 3-4%. I don't know any other market where even suggesting a 20:1 leverage ratio won't get you laughed out of the building.
Also: if you're in NYC read up on co-op vs. condo. It matters. In a co-op your neighbors are going to be nosy, for good and for ill.(we just got flyers put up in the loby about a guy looking suspicious near the cars)
"I'm in an inner outer boro place where It's ethnic, but I don't stand out for being a gentrifier. (think polish/irish/greek)"
My guess is Astoria.
Others have pointed it out, but to reiterate - owning a home is not an investment. If you are viewing this from the perspective of "will this generate a competitive return?" the answer is no. But it also implies you're thinking about it the wrong way.
It's more of an emotional decision than anything else. It is your space, a place to raise a family or make your own. You need to have a roof over your head, so if all else is neutral and you want a space you can personalize without feeling like you'll lose the benefit of it in 3 years when you move, move now. Depending on the market you're in, your home is unlikely to lose value, and you'll almost certainly have vastly more space than if you continue to live in an apartment (assuming you're talking about a single family home and not a condo/co-op).
I also suspect you're not actually doing the math right when you try and calculate your IRR. For example, you can deduct the mortgage interest on your home up to $750,000 - a 30 year fixed is about 7.5% right now, so you're talking about ~55k in savings right off the bat. That changes the calculus enormously when it comes to figuring out your opportunity cost to buy.
More generically, the purpose of life isn't to pile up wealth. If you don't actually have plans to spend the money you're making, then why bother at all? I'm not knocking the idea of having savings, or investing wisely, or anything else... but if you cannot bring yourself to buy a home, arguably the most important and least-objectionable possible purchase you'll ever make, then what exactly do you plan on doing with your wealth? It's all well and good to have $20mm when you retire instead of $15mm, but if you've never enjoyed the fruits of your labor until your mid-60s or later, then (in my opinion) you've probably made the mistake of maximizing zeroes in your bank account instead of your happiness and day-to-day utility.
I always shit on everything you say, but that last sentence is something I only recently realized. People always told me all I talked about was money and I would blow them off, but it was true. For the past several years, I’ve done nothing but work and obsess about money. Granted, it did get me to a level where I am fortunate to no longer care about it, but I was still finding myself obsessing over it up until October 2023.
I’ve realized that there is no point of making a ton of money if it alienates you from those you actually care about. Now, I’ve cut contact everyone but my close family and a couple friends, but I think that’s just me maturing and realizing that the people who send me memes on social media wouldn’t show up if I was in the hospital. Sure, I might only receive a few texts a day now, but they’re from the people who actually care about me.
Better to find wisdom late, than never!
Well there might be a middle ground between cutting out everyone but a close circle and obsessing about money, but yeah, the point is sort of the same.
I obviously don't encourage living paycheck to paycheck, but obsessively maximizing returns to the point where one won't even buy a house is just insane.
I had drafted a much longer response but for whatever reason it didn't save, so this one is a little shorter. Based in Chicago and can speak to the Chicago area.
How much did you have saved (can be liquid and / or illiquid, but specifying would be helpful)? I had around 125K saved up.
What was purchase price relative to combined income (e.g., If the house is 2M and you and your SO generate 400k a year, the multiple would be 5x)? When I closed 2-3 years ago, I'd say I leveraged up to 5x base salary. Today it is about 3.5x base. Both are lower with bonus but at the beginning it was honestly pretty stressful. 5x left me with nearly no disposable income, but I did plan for this and knew I would continue to make more money in the next 3-5 years. Also, I was single when I bought my place.
What % did you use for a down payment? I put 12% down and used the remaining amount for a massive renovation of the kitchen and 2 full bathrooms. Worth every penny, and actively in process of getting PMI removed (PMI was cheap in the grand scheme of things so it didn't make sense to put full 20% down)
Do you regret this decision? Yes and No. Yes, when I think about what the market returned and what I would have had with that money. But ultimately homes are an emotional decision and not an investment (98% of the time). I needed more space during COVID era, and I got it. Even though I'm getting smacked by Cook County property tax, I've put a notable amount of money into equity compared to what I was paying for my high-rise rent. I'd say I came out on top.
Lastly, if you don't own but have a family, why do you feel that was the right decision? I'm actually the opposite of this question. My fiancée and I both own our homes and are now looking to combine into one primary residence in a safer area + better schools. It's going to suck giving up the low interest rates but being in the same household full time + knowing we are building our family dream together is very exciting.
Other things to consider -- expect to spend 1% of property value on maintenance. In Chicago, I have huge stresses about random things like snowstorms, shoveling sidewalks, etc. since I travel for work 50+% of the time. Things you don't care about when renting because your landlord took care of it are now your problem. You will want to be around when they're working on your home even if it is something small. These don't feel like big events until you own your home and know the potential damages that could take place if your place is not brand new.
Renovations are generally out of pocket, and whatever you think you are going to spend on them, add another 25%. Also be sure to assume that there will be a 1–2-month delay minimum. Sometimes your tile doesn't arrive on time, or it shows up damaged, you just don't know.
Last thing I would say is make sure you are buying a place that you actually know you will grow into. Someone said don't buy too much house, and while that is true, don't assume that you don't need more space. Once you've made the purchase, you're locked in and it is not easy to change to another property (also just shitting away money in agent fees).
Hi @BreakingRich thanks for the well articulated response. I am a Chicago local as well so your experience is even more relevant.
5x your income seems stressful, but Im glad to hear your income has scaled dramatically since the initial purchase.
How much did PMI end up costing you? How does the fee structure work? What made you know it was a good deal?=
How bad are Cook County taxes? I hear theyre pretty ruthless but I cant compare them to anything else (e.g., NYC, LA, Dallas, etc).
Lastly, what led to your decision to buy prior to being married and starting a family? Ideally we would look to buy pre-kids too so just trying to understand what logic drove your decision making
PMI on my place is only about $120/month. I weighed out the cost over 2-3x years of paying PMI before it would get waived. It didn't make sense to me to put 20% down to avoid a $3-4K of cost which I likely wouldn't notice very much in that period (small payments as opposed to one big hit).
I would say it is important to factor income growth. It isn't optimal to be cash strapped or "tight", but if you buy right, from everything I saw, being in the more expensive neighborhood ultimately was going to net the largest appreciation. This can obviously vary widely based upon area.
Cook County taxes are around 2.2%, DuPage County is around 1.75%.... compare this to California where they are around 1%, the impact is massive. It means hundreds of thousands on the purchase price because you can or cannot afford the cashflow to pay your mortgage each month.
The decision to purchase as a single individual was largely because it made financial sense at the time. Rent was flying up in my building and I needed more space. Rates were also absurdly low (sub 3% on my place). I bought with the intention that my eventual partner would move into my place and split the mortgage with me 60/40. Instead, my now fiancée owns her own place in the suburbs and has a kid already. Both of our places are too small and I'm adamant we need better schools for her kid + the 1-2 we intend to have together.
That's why I say it is better to buy a place that you can grow into. Plan for schools, additional childcare services, potential remote work in your next job, commute time to work if you change jobs (for us downtown express metra access is critical), and so many other miscellaneous things that people say you will figure out when it comes up. Knowing you have a game plan and an idea of what everything in your new location is going to cost you is critical. It makes you a lot more nitpicky and a pain in the ass (especially if your partner has a different viewpoint) but you also know you won't have to move for 5-10 years unless you have a major career opportunity which requires moving to a new state. This means you can value any renovations, redesigns, gardening, etc appropriately and decide whether it actually makes sense to invest the time + money to make changes on your new property.
Owning a home is great hedge against inflation, just something else to consider.
Are you factoring in rent savigs when running your IRR calc? 4% seems very low unless you are in a super HCOL/ low cap rate market.
I did not, so thank you for this consideration. I admittedly havent done more than back of the envelope rough math
You should also factor in that our P&I will be fixed. Taxes, insurance, and maintenance will obviously increase with inflation but a good chunk of your outlay will be fixed.
Genuine question for you all. I'm 10 years into my career and have some savings. I can't bring myself to buy a home though as I think very much in terms of risk reward and I'm going to continue living in Manhattan in a condo/co op.
For the same price you buy a house especially with where rates are plus maintenance etc. you could rent the same place cheaper and invest the difference ? So your standard of living is unaffected but you grow wealth faster. I'm unmarried and do not plan to have kids for another decade.
Does it make sense for me to buy ? What's the rationale of buying ? And for the points around why grow wealth why not enjoy life etc I agree but then you can just overpay on rent, improve your standard of living and still bank the difference and grow that piece of equity as fast as home equity ie if it's cheaper to rent on a like for like basis you can always choose to overspend and take the higher standard of living vs higher savings esp in condo/coop trade offs in Manhattan?
1. I was 29 when I bought my home. 33 now. Put down $200k
2. House price was originally 7x pay. Now it is about 3x pay.
3. Down payment was 20%.
4. No regrets. Home equity has increased by 2.5x over the last 3 years, and so has income (while maintaining the same fixed rent). Life is good. I sleep incredibly well at night. I don’t have to move. Now that housing is covered/predictable for the long term I can take my tax breaks + savings and worry about other investments/ways to enjoy my money
5. Have a kid now, and it’s incredibly helpful to have a monthly payment that doesn’t increase. A stable home environment for the baby is always best. Anyone on the fence will change their tune once they have a family. Just hope people will be able to afford a home by the time they figure it out…
"Anyone on the fence will change their tune once they have a family. Just hope people will be able to afford a home by the time they figure it out…"
I'm pretty convinced this is why my parents chose to buy a bigger house after all the kids moved out to college etc. At one point, we've all lived back home with them. Heck we have people in our neighborhood who have their children with their spouses / kids live with the parents and it's not a congested household (personal privacy isn't a huge issue).
I was 24 when I bought my home that I still live in. A couple of things:
Happy home hunting!
Bought at 26, expecting my first child this year (several years later). Love the home, neighbors, and area. Lucked out for the most part.
Live in a tier 4 (or lower) city with congruent wages at the time so take my downpayment/multiple with salt.
2: 2.2x, I was starting a new role and was a little shaky on getting a home at the time. We bought at a safer price as there was potential that my new role wouldn't work out and we'd be on one income for a while. We could have stretched to 4x and would've been fine.
3: 20% (thanks grandma)
4: Only regret was not going bigger, we have a modest 3b2b but I WFH full time now and with family in the future another room or two would be a nice to have. Especially considering we've been completely priced out of our neighborhood with most homes being bought, flattened, and rebuilt for +$2M. I came from a resi-mortgage banking background and the run-up in prices (2018/19ish) spooked me but if we waited it could've been worse. I bought with no expectation of a reasonable IRR for at least a decade, this purchase was more than an investment choice. We refinanced a year later at near bottom rates and now have a 15 yr well under 3% so sometimes things work out well.
Definitely consider schools in the area, commute (remember your sunglasses if are you driving east every morning and west in the afternoon), age of equipment (roof, windows, boiler, HVAC, etc), easements, age and wellness of trees in range of your house, drainage (we have 4 neighbor yards of runoff that run through our backyard on heavy rains), nearby amenities, nearby roads/highways noise.
Also consider renovations and unexpected needs/urgencies that will cost thousands. If you have renovations you want done, you can do it before you move in and it will save you a lot of headache. Do all you can before you move your junk in.
All said, can you buy out from your landlord? Shouldn't hurt to ask when you're prepared.
Best of luck and I hope you find a home you are happy with and will bring great moments/memories in your life.
At the end of the day, after looking at all the alternatives from an investing perspective (yes you could build equity elsewhere and write a check for a house, or have the dividends pay the rent, etc.), it's just nice to not have a cost to housing from cash flow later in life. Always rent means always pay rent. Again, you could invest in equities along the way that would take care of those payments but why not do both? Build equity and no housing cost (other then RE tax and insurance, maintenance). Much better quality of life being part of a community of other homeowners with a vested interest in the area.
the worst part about owning my condo is i have to do all the maintenance. my closet broke and my dumbass doesnt know how to fix it
How much did you have saved (can be liquid and / or illiquid, but specifying would be helpful)? - We had ~250k in cash (sold last house) and then probably ~$250-400k in stocks.
What was purchase price relative to combined income (e.g., If the house is 2M and you and your SO generate 400k a year, the multiple would be 5x)? We were at about 3x income from the year we bought, 4x from the year prior. Probably sitting closer to low 2x now. The house requires some work, so didn't want to stretch, would have probably been closer to 3.5x on that year and 5x on prior year if the house was buffed. For the next place, we are targeting 3-4x again, but most likely for something with less value add.
What % did you use for a down payment? 20%
Do you regret this decision? Not at all
Lastly, if you don't own but have a family, why do you feel that was the right decision? Trying to make a family, like the area and use it for entertaining friends
I don’t view it as an investment at all. Just buy a house where you can afford to put down a reasonable (10-20%) down payment and can comfortably pay your monthly payment. It’s really not rocket science.
if the stock market crashes and all your money is in it, you’re out of luck.
if the housing market crashes and your money is in your home, you still get to live in it.
Except you did view it as an investment ie one with less risk in your view
Just like any other from of investing the best time was yesterday, the second best time is today.
People here fundamentally do not understand what real estate is on the personal side. Everyone runs the numbers, compares it to the market or some other nonsense, and makes zero considerations about lockout.
Consequuntur deserunt adipisci fugit cupiditate minus. Consequatur nulla rerum et qui. Aut rerum similique a mollitia qui non. Non culpa laboriosam eos qui mollitia est vero.
Facere et quis ad consectetur. Voluptate ut adipisci sint exercitationem. Officia laudantium itaque et explicabo velit molestias. Officiis eaque fugiat reprehenderit libero id non voluptas. Saepe quis rerum et similique.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...
Mollitia dolorum at dolor alias. Recusandae unde porro ducimus rerum reiciendis rerum fuga. Et accusamus nihil quasi blanditiis. Amet dignissimos sit eveniet repellendus earum et adipisci ut. Dolorem molestiae ut esse qui eveniet illum ut.
Sed facere veniam dolores enim est laborum sapiente accusantium. Sint sit dolore dicta eum impedit eveniet quaerat.
Voluptatem non molestias dolor nemo. Quis unde ullam mollitia totam sed voluptatem. Dolorum saepe est eveniet iste excepturi nihil. Architecto excepturi hic nemo non nemo. Est temporibus numquam fugit est rem optio magnam.
Eos explicabo harum veritatis minima. Error velit enim eum. Neque aut error quam maxime. Iste qui architecto corporis exercitationem ut.
Voluptates non rerum possimus est omnis. Qui corporis quia architecto accusantium et iure necessitatibus id. Earum sed officia quia reprehenderit sequi quae. Ipsam qui corporis enim voluptas explicabo accusantium. A enim dolores numquam adipisci aut.