I will be working in Boston after I graduate from undergrad, and I am in a dilemma for renting vs buying. My parents have constantly supported me and are the ones pushing to buy a condo for me to live in. We aren’t super well-off or anything, both have solid middle/upper-middle class jobs, and the price range they are looking at is $500K-900K (2-3 bed, 1-2 bath, 1-2k sq. feet).
I want to make sure this isn’t an awful idea. They think that buying this house and renting out one of the bedrooms will be better than me just renting and sending money to a landlord for the next few years. While I agree in principle, my family has 0 experience with this sort of thing, and I’d love to hear some other important considerations that they should be thinking about when buying a second property.
I know there have been renting vs. buying posts in the past, but I'm wondering if my parents being involved in this changes the decision calculus. Personally, I am hesitant because with the way the housing market has moved these past few years, I can’t help but think we are buying the top. Also in consulting, there is lots of movement at the 2-3 year mark, so I may only end up living there for a few years. I'm sure there are other factors here that might make this not as attractive of an opportunity as they may think, so any and all perspectives would be greatly appreciated, thanks in advance!
I think one thing to consider in the price of the house is also the broker fee, transaction costs, building fees and property taxes.
houses can have high turnover costs especially if you think you'll move in 2-3 years.
Lets just back of the napkin model:
If you buy now and it appreciates in value 3% a year and the rent/your out-of-pocket just covers the mortgage. If you sell at the three year mark w/ a 6% tcost you'll be up ~3% on the property ... Not sure what your situation is but could the capital be better deployed for the down payment? Also just as a sidenote managing investment properties w/o a management company middle man can be a huge headache.
This is good advice. I rent. I like it. my mother constantly pressures me to buy. Mom, my budget is great, I'm stuffing away a few grand a month, and I can move next month if needed. Can we talk about my sister who overextended herself buying a fixer-upper?
Another thing to consider is the fact that houses are expensive, even in maintenance. If you buy a 900k house, will you have time to mow the lawn, clean the house, etc, yourself? Or will you be shelling out a hundred or two a month for those services. Think about gas, electricity, water. On top of repairs, replacing appliances, etc. This adds up to several hundred a month. You will save money as compared to renting, but not as much as you think you will.
Buying a house sometimes tends to be inflexible - it's prob a good idea if you see yourself in Boston for a significant portion of time
There's a question you need to answer - do you actually want your parents as your landlord? But that's not really the point here.
I encourage them, and you, to look at it like any other investment property. Determine the holding period, run all the numbers and decide if it's a good opportunity - you should think in terms of decades, not 3-5 years. It's folly to forecast short term price/rate movements (though if you can - please DM me!) and, frankly, probably better for them to give you help with a monthly rental payment if it's that short term and they don't want to deal with a rental.
My caution is that when you start mixing supporting you as their child, with what my guess is a significant financial outlay for them, you need to be very clear and deliberate with what you are doing.
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