Advice on renting vs. buying

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!

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Comments (9)

Jan 9, 2022 - 2:07pm

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.

Jan 11, 2022 - 12:03am

randouser123321

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?

The only difference between Asset Management and Investment Research is assets. I generally see somebody I know on TV on Bloomberg/CNBC etc. once or twice a week. This sounds cool, until I remind myself that I see somebody I know on ESPN five days a week.
Jan 9, 2022 - 2:39pm

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.

Most Helpful
Jan 12, 2022 - 2:57pm

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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Jan 12, 2022 - 3:05pm

I rent and plan to do so until I NEED a house. Allows me flexibility (don't really need it but nice to have) if I want to move.

When I do buy a house it'll be a multi-million dollar house. Don't care if I spend $200-300k on rent until then over the next several years

Jan 12, 2022 - 3:33pm

Straight out of undergrad should never buy. You'll likely move at some point early in your career. I moved 3 times in 7 years. 30% raise each time. I don't recommend you buy, especially if you are in consulting. Get a room with roommates who arent in consulting so they live in your apartment while you are gone. You'll have instant people to go out with too when you are back home on the weekends. Or just get a small apartment and stack cash while travelling.

Jan 12, 2022 - 5:02pm

different geography, I bought last year - three bed - going to rent out two rooms to my friends. the rental income should cover the mortgage and bills given the UK government new build scheme. also managed to negotiate a lower price and tax paid by the housing developer. beats paying £1.5-2.5k on rent for the similar property. 

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Jan 12, 2022 - 6:02pm

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