Rent versus Buy

Hey guys,

Recently moving to a new city (low SOL), and got a IB Associate position. I have 225K saved up. Single guy.

I'm wondering if I should rent ($1.5-1.6K/Month) or buy (400K-500K) place.

I'm both ways hard for me to decide.. I

Comments (39)

Mar 25, 2018

Probably cheaper to rent, but if you plan on staying for a while, owning isn't terrible.

I'm not sure how many bedrooms the 400-500k place would be, but getting a roommate would make it a good bit cheaper.

Mar 26, 2018

You should calculate the costs associated with home ownership (i.e. manitenance, brokers fee upon buying/selling) to see how much you would end up paying if you had to move sooner than expected. Generally, if you plan on staying for at least 3-5 years and have the money for a 20% down payment, it's worth buying. For anything less than 3 years, you're usually better off renting. You should also take into account how much liquid savings you'll have after the down payment and the opportunity cost of forgoing having the down payment invested in something else. Real estate is usually a decent investment over the long-term, but you should still look into trends in the area you want to buy. Either way, as a rule of thumb, if you're going to stay for at least 3-5 years, you're probably better off buying and building equity instead of throwing away money on rent.

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Mar 26, 2018

Buy for sure. I will never understand folks willing to rent for years on end when they have the means to buy a home. I agree if you are in a city short-term rent is the way to go but otherwise you are wasting money.

Get your facts first, then you can distort them as you please.

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Mar 26, 2018

If your rent is cheap enough (or at least less than an expected mortgage) and you plan on fully investing the difference, that could net you a similar to better return with far fewer headaches.

Otherwise its usually better to own if your time horizon goes beyond a couple years

Mar 27, 2018

I fucking despise rent in this country with a passion but I'd say rent in your case. This will probably prompt eye rolls but markets, particularly housing, are due for a nice re-adjustment after the fun everyone experienced 10 years ago.

You're young, keep yourself liquid and without something like a piece of real estate keeping you down in a geography you might not want to have anything to do with in a few years. Invest wisely and take another look at the market in a few years time, IMO.

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Mar 27, 2018

One piece of advice I received was around the price difference of mortgage payments vs. rent.

My mortgage payment is much lower (c.60%) of what I'd pay for rent on a similar property. This is partly a factor or rent costs, and partly the large down payment. A colleague suggested I calculate the difference if rather than putting my cash against the down payment, I put the money in fixed income and used the revenues to pay the higher cost of rent. After tax it was net neutral, and so you're still taking a punt on the housing market.

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Mar 27, 2018

As others have said, look at it from all angles. I don't know if you have an accountant, but it might be worth it to talk to one in this case. Show him/her your tax returns from last year and see how much the depreciation is going to help you. At the price you're buying, you'll also be able to deduct the interest payments on your mortgage. And since I am guessing you're in finance, it isn't a stretch or misleading in the slightest to say that you're working out of your home several hours a day, so you'll be eligible.

If you rent, you need to pay enough for your landlord to cover his debt service, his operating expenses, and a nice profit on top, and you get none of the benefits of property ownership. If you buy, you eliminate the landlords vig and (since you obviously have a nice income) also take advantages of the huge tax breaks the federal government showers homeowners with.

But if it's only for a year or two, the expenses associated with buying (transfer and mortgage recording taxes, brokers, lawyers, etc), mean you probably should hold off.

Mar 27, 2018

rant n invist all in crayptocuranciz

Mar 27, 2018

$225k saved up? How old are you?

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Mar 27, 2018

Do the cost-benefit analysis. If you live in a home you purchased for at least 2 years, then move elsewhere, you'll pay LT cap gains on any increase in sale price of home.

If you have that much saved, and you're young, perhaps buy in an up-and-coming community, own the home and build equity while you're there, then when you move on, keep the home and rent it out.

Being a long-distance landlord is a pain in the ass, but there are a number of companies who, for a fairly nominal fee, will do most of the work for you.

Just a thought. I've owned my own home for years. Quite liberating to only have to pay property taxes at the end of the year as opposed to the monthly burden of rent or a mortgage payment.

Best Response
Mar 27, 2018

Most people are missing the most obvious point: You just moved there with a new job as an Associate. You very easily could be moving again soon or at least have the opportunity to do so. You don't want a home tying you down if you want to move in two years. Wait until you are absolutely settled, which you are not right now. Renting is an option on future flexibility.

Not to mention, even if you were 100% settled, I would suggest renting while you figure the town out. There are lots of nuances about neighborhoods that you don't pick up as a visitor.

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Mar 27, 2018

This is the best advice. I bought a place near Boston - I grew up in the state but I only get calls from NYC/Chicago recruiters.

That has been the biggest drawback of owning. I feel like I am stuck in an okay city with minimal job prospects beyond my current one.

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Mar 27, 2018

Put it all in Bitcoin

If the glove don't fit, you must acquit!

Mar 27, 2018

Rent for the first few years

Mar 27, 2018

Rent.

Mar 27, 2018

I live in Houston. It really depends on where you live and the downpayment required. The big thing about Texas is there are high property taxes since there is no state income tax. I would also look into other fees such as HOA fees. Condos have additional fees as well. At a young age, I would only consider a condo. If you plan to live in Houston for awhile, I would look into buying. Interest rates are so low. Assuming a 10% downpayment on a $60k condo, the total mortgage payments on the debt is about $4k (assumes 4%/30 yr amortization). So it is cheap to own a condo. Again I would just look into the additional fees like property tax and condo fees.

Mar 27, 2018

Don't you need two years' employment to get a mortgage? Or are you talking straight buying it with cash?

Mar 27, 2018
nyboarder:

Don't you need two years' employment to get a mortgage? Or are you talking straight buying it with cash?

This is not a hard and fast rule. If you got a degree in, say, finance and are working in financial services then most underwriters will have no issue with approving the loan, all else being equal, if you can produce a college transcript and if your career "makes sense" based on the time lines and degree.

Mar 27, 2018

The NYT has a great calculator that will tell you whether it is better to buy or rent and over what period of time. Keep in mind that if you sell within 2 years you will owe taxes on the profits and that both buying and selling a house is a huge pain in the ass. Only buy if you plan on staying put for a few years.

http://www.nytimes.com/interactive/business/buy-re...

Mar 27, 2018

60k condos?

Texas is crazy

Mar 27, 2018

^^^A condo right near where I live was selling for $90k, its basically in the richest part of the city. The condo had all the works, stainless steel appliances, granite countertops, cherry cabinets, etc.

Mar 27, 2018

Buy bigger, then RENT extra room(s). Presumably, current economics do not provide for a large variance between market rents and market pricing (in Houston). Supplement the debt with rental income. Houston is getting hotter, so make sure you execute 1 year leases. On the other hand, you don't want to run the risk of large downtime due to over supply within your immediate neighborhood. This is something you need to research.

Locking in long-term financing at a fixed, low rate is one of the easiest ways to mitigate risk. This assumes you're able to get financing, and also assumes a favorable debt structure with respect to your income.

Think of a LBO (high level), where operation income from the acquired entity is used to pay the debt. At the end of the deal, the acquiring entity is left with.......equity.

Mar 27, 2018

Hello Friend
I think rent for the first few years is best and then start looking for a condo apartment but before exploring you should go online and check out and then compare rate and get your desired condo.

Mar 27, 2018

Edit: just realized the date of the original post.

You never know where life will take you, although you could always rent it out in the future, I wouldn't suggest the hassle this early in your life. While you looked for a tenant, would you have the funds to pay both the mortgage and rent in a new city if a new opportunity came about? Don't tie yourself down. 1,000 for a fully furnished rental is awesome and means all you need is yourself and a suitcase. Keep yourself flexible and ready to move at a moments notice. Best of luck.

Mar 27, 2018

house hack with FHA bitch

heister:

Look at all these wannabe richies hating on an expensive salad.

Mar 27, 2018

nah, do 3% conventional

Mar 27, 2018

Yeah looking in Houston now and to be in a nice part of the city for young people, furnished apartments start around 1200+, any condo in those same areas of town are easily 250+. Crazy what a difference 3 years makes

Mar 27, 2018

The oil boom definitely fucked shit up on home prices in Houston. Still hasn't come down much since the crash. My colleague sold the house he had owned for 1 year just before the oil bust and got 30% more than what he paid for it.

Mar 27, 2018

Rent until you can afford 20% down on the house you want and still max out your 401k/investments and have a 3-6mo rainy day fund.

Mar 27, 2018

I am considering the same thing in Chicago. I am going to rent for at least one more year, but that's more because I'd rather not restrict my current lifestyle.

Also, what I can afford to buy is not as nice as what I'm currently renting, so for me its worth waiting.

Mar 27, 2018

Plus you build your credit. Anyway um housing market's in a slump...you might want to buy before they lower rates or else housing prices are going to skyrocket. You can always refinance later.

"We are lawyers! We sue people! Occasionally, we get aggressive and garnish wages, but WE DO NOT ABDUCT!" -Boston Legal-

Mar 27, 2018

Besides the cost, you really have to consider whether you may relocate in the near future, especially early in your career. That is my main hesitancy when it comes to buying.

Mar 27, 2018

You could rent it out and if you buy in a decent neighborhood, the rent should be able to cover tax, mortgage, insurance and a bit for repairs and stuff. And you build net worth too, and at the same time let someone else pay your mortgage.

"We are lawyers! We sue people! Occasionally, we get aggressive and garnish wages, but WE DO NOT ABDUCT!" -Boston Legal-

Jun 5, 2019

The costs of buying are higher and complicated than for renting, making it hard to tell which is a better deal for you. At Westrom Group Real Estate, we help our clients to calculate according to their requirements and Financial Condition.

Jun 5, 2019

Rent mate, im sure you can save more and invest in something better in the future.

Jun 5, 2019
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Jun 7, 2019
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