house vs renting an apartment

[itguy08]

Originally Posted By: 99Saturn
Correct me if I'm wrong, but I believe you can still go the route or a conventional mortgage with PMI, and discharge the PMI at 20% to 22%.


Yeah - once you have 80% equity you can get rid of PMI. We "had" to have it for this place because we were about $5-7k short. $40/mo for a year and a half now. Rather than dipping into savings we decided to take PMI and pay more on the loan. I estimate out LTV will be 80% after Feb and I'll be calling them as soon as the payment clears to get it taken off.

IMHO for some it should be needed, but for some like us that have near perfect credit, were never late, and are so close it makes no sense at all. But it's the game you must play!

 

[hattaresguy]

If you can swing it buying a house right now would be a good move. Interest rates are low and will probably not be this low again for years and years.

A lot of states have first time buyer programs, if you qualify you could get into a house for under 3% down.

Figure in terms of mortgage its roughly about $700 per $100k borrowed, typically banks allow you up to 33% of your monthly take home towards debt service. So for a rough idea of what you can afford add up all your monthly payments, ie loans of any kind, figure $25 each for a CC unless you carry a balance. Than take that number and divide it into your monthly take home to get the percentage. The difference up to around 33% is what you can in theory get a mortgage for.


I bought my first house at 23, actually it was a house with a lot next to it. Now 5 years and probably oh 30+ properties later, I think I can safely say real estate is one of the best investments in your future you can make.

I finally convinced one of my friends of this and now he is putting together a nice little two family portfolio, that when its paid off at today's rental prices will generate about $6k a month for him, if he adds another property which I'm trying to convince him he should that will rise to $9k. With his 401k and other investments from his day job he could retire in 20 years at 49 with about $12k-$15k a month in income.

I'm a huge fan of owning real estate, its very hard to build and maintain wealth without some form of real estate ownership. IMHO you should sell the truck for a down payment and eat noodles to buy a good investment property.

 

[andrewg]

If I could do it all over again....I'd have never bought a house. I've owned several. In hindsight all the upkeep and added costs din't really justify the investment in the end. The 2008 downturn was an eye opener as well. I do own a future retirement home down in Arizona....and I am glad I did that. But if I would have taken all that cash I dumped into houses the past thirty years and put it into some sort of retirement fund....I'd be in a much better position right now. I'm 50 years old and thinking daily about how/when I can retire. Too many toys (foolish), too many fancy houses, and not enough planning for retirement.

 

[supton]

Originally Posted By: hattaresguy

Figure in terms of mortgage its roughly about $700 per $100k borrowed, typically banks allow you up to 33% of your monthly take home towards debt service. So for a rough idea of what you can afford add up all your monthly payments, ie loans of any kind, figure $25 each for a CC unless you carry a balance. Than take that number and divide it into your monthly take home to get the percentage. The difference up to around 33% is what you can in theory get a mortgage for.



Didn't quite follow: sum up loan payments per month, subtract that monthly income; then the most you can spend on mortgage would be at most a third of that difference? IOW, if one pays $500/month in loans, and has a monthly post-tax income of $2,000, then one-third of the $1500 difference means mortgage+escrow should be less than $500/month?

Curious, as I wasn't wise enough to look at calculators when I was in the market. I just bought as cheap as I could, under the impression that it was wiser to buy than to rent. Interesting, I wind up at 21% when I do that math out in your formul a; would drop to 18% had I not taken out those auto loans. No wonder why I feel cramped in my budget.

 

[99Saturn]

supton - To give you a general idea, lenders usually look at a front end ratio and and back end ratio, the front end relates to maximum spending on your mortgage, and the back end relates to the maximum servicing of your total debt. AFAIK, calculations are always on pre-tax dollars.

Front end and back end ratio

 

[supton]

99Saturn: Huh, well, good thing I didn't look at that at the time--it would only have confused me. 8 years later, I make more, and refi'd with a lower rate; going by their 28% front end rule I should be able to go as high as 2x my current mortgage. Looking at the backend I'm at 22% (all loans added up). Since I spend so much on auto fuel for commuting that 22% feels like too much; that or I simply spend too much elsewhere. Thanks for the link.

Does indicate that that the property across the street that I've wondered about would technically be w/in reach, at least by the bank standards. If I knew I could rent it out, and actually had enough for the downpayment, it'd be tempting.

 

[itguy08]

Originally Posted By: hattaresguy

I finally convinced one of my friends of this and now he is putting together a nice little two family portfolio, that when its paid off at today's rental prices will generate about $6k a month for him, if he adds another property which I'm trying to convince him he should that will rise to $9k.


Who pays $3k to rent a house? I could buy a house for that and a darn nice one at that!

 

[supton]

CT isn't cheap. Glancing at the ads once in a while, one to two bedroom apartments are like $800/month in my area, in somewhat rural NH. When I moved to NH 13 years ago I considered myself lucky to find a small one bedroom apartment for $450/month.

 

[itguy08]

Originally Posted By: supton
CT isn't cheap. Glancing at the ads once in a while, one to two bedroom apartments are like $800/month in my area, in somewhat rural NH. When I moved to NH 13 years ago I considered myself lucky to find a small one bedroom apartment for $450/month.


That's even worse than North Jersey!

 

[99Saturn]

^ Lol, when I saw $800 I thought that was a good deal, we're close to an apartment complex that you can get ~$$800 - 900/month with heat and water included for about 700 sq. ft. Though it's relatively cheap a sq. ft. to get more space once you get over the initial amount.

@ supton - From what I know the acceptable debt ratio is different for second homes, just in case you get serious about that place across the street. And I have the exact same reaction as you, as I add up our fuel receipts every month.

 

[SwampSurvivor]

I pay nearly $600 a month and I thought that was too much!

 

[threeputtpar]

Originally Posted By: Win
We are inexorably and unwisely being driven to a nation of haves and have nots.

More and more people will be chasing fewer and fewer "decent full time jobs".

Which do you want to be? Have or have not?

Buy all the real estate you can while you can. Let a renter pay for it.

Sorry if that sounds harsh.


That's not harsh at all. It's actually pretty good financial advice.

OP - I bought my first house when I turned 26. I had saved for 2 years while still living at home, and bought a little 2BR 1BA house in a good part of the town I grew up in. I paid as much as my budget would allow against the note, and after two years I sold it to buy a larger house. I still own the second house, and it's now a rental.

When I married my wife, the second house was paid off (5 years) and we lived in her house. We're half way to paying that one off (7 years) and it's also now a rental.

We never set out to become landlords, it just kind of happened. I'm really glad it did, because before we turn 45, we'll have enough income throught the rentals to support us in the event one or both of us were to lose our jobs. The piece of mind that brings is immeasurable.

You're never too young to invest in your future. Just find the proper avenue to do so, whether it be buying real estate, maxing out on your retirement contribution, or even starting your own business.

 

[hattaresguy]

Originally Posted By: supton
Originally Posted By: hattaresguy

Figure in terms of mortgage its roughly about $700 per $100k borrowed, typically banks allow you up to 33% of your monthly take home towards debt service. So for a rough idea of what you can afford add up all your monthly payments, ie loans of any kind, figure $25 each for a CC unless you carry a balance. Than take that number and divide it into your monthly take home to get the percentage. The difference up to around 33% is what you can in theory get a mortgage for.



Didn't quite follow: sum up loan payments per month, subtract that monthly income; then the most you can spend on mortgage would be at most a third of that difference? IOW, if one pays $500/month in loans, and has a monthly post-tax income of $2,000, then one-third of the $1500 difference means mortgage+escrow should be less than $500/month?

Curious, as I wasn't wise enough to look at calculators when I was in the market. I just bought as cheap as I could, under the impression that it was wiser to buy than to rent. Interesting, I wind up at 21% when I do that math out in your formul a; would drop to 18% had I not taken out those auto loans. No wonder why I feel cramped in my budget.


I probably explained it poorly.

Say your take home is $1k a month for nice round numbers.

That means your allowed roughly $333 a month towards all debt service. However some mortgage programs allow that to go up to $430 but those are rare.

I run into this all the time trying to sell my houses because a lot of people have very good take home, but high student loan, CC, and leased vehicles. As a result they may make say $100k a year, but only have $500 in their budget for a mortgage. They are unfinanceable.

Typically when I meet first time buyers I look for clues as to their financial position. IE do the cars look late model and expensive, that means a lease or car payment. Do they have nice clothing, $300 jeans $10k watch, etc. Ask them what school they went to if they look young enough, ie does it sound like an expensive school. What kind of work do they do, does it usually pay $70k a year or $200k.

I sell middle of the road houses so at my price point of $300k-$350k a lot of that stuff is warning signs. Now if your selling more expensive houses its not. I'd expect them to roll up in a $60k car if they were looking at a $700k+ house.

 

[hattaresguy]

Originally Posted By: itguy08
Originally Posted By: hattaresguy

I finally convinced one of my friends of this and now he is putting together a nice little two family portfolio, that when its paid off at today's rental prices will generate about $6k a month for him, if he adds another property which I'm trying to convince him he should that will rise to $9k.


Who pays $3k to rent a house? I could buy a house for that and a darn nice one at that!


Two family's $1500 each floor.

Our rents are high, $3k will get you a nice colonial, beach houses can go for lots more.

 

[SwampSurvivor]

Originally Posted By: hattaresguy
Originally Posted By: itguy08
Originally Posted By: hattaresguy

I finally convinced one of my friends of this and now he is putting together a nice little two family portfolio, that when its paid off at today's rental prices will generate about $6k a month for him, if he adds another property which I'm trying to convince him he should that will rise to $9k.


Who pays $3k to rent a house? I could buy a house for that and a darn nice one at that!


Two family's $1500 each floor.

Our rents are high, $3k will get you a nice colonial, beach houses can go for lots more.


Wow! For $1500 you can get a designer loft apartment around here! Right in the middle of downtown!

 

[Cujet]

My mortgage is $1500/mo
My taxes+insurance are $1000/mo

Total cost $2500

Rental cost on neighbors house, similar enough to mine $1600, a nicer home with pool, $2500.

Renting may be a better deal in my neighborhood, and at this time.

 

[hattaresguy]

Originally Posted By: Miller88
Originally Posted By: hattaresguy
Originally Posted By: itguy08
Originally Posted By: hattaresguy

I finally convinced one of my friends of this and now he is putting together a nice little two family portfolio, that when its paid off at today's rental prices will generate about $6k a month for him, if he adds another property which I'm trying to convince him he should that will rise to $9k.


Who pays $3k to rent a house? I could buy a house for that and a darn nice one at that!


Two family's $1500 each floor.

Our rents are high, $3k will get you a nice colonial, beach houses can go for lots more.


Wow! For $1500 you can get a designer loft apartment around here! Right in the middle of downtown!


If you think that's high look at Manhattan or Fairfield county rents.

Relo people have this same problem. I just sold a house to a couple from Indiana and they were shocked what they had to pay here. Over twice the cost for not much more house.

$125k for 1800sf to $325k for 2200sf... Which is on the less expensive side of town, other side would be $50k more. In Westport the same house would be over $700k.

 

[OVERKILL]

Originally Posted By: Cujet
My mortgage is $1500/mo
My taxes+insurance are $1000/mo

Total cost $2500

Rental cost on neighbors house, similar enough to mine $1600, a nicer home with pool, $2500.

Renting may be a better deal in my neighborhood, and at this time.


My mortgage is $810/month. Taxes are ~$3K a year. My house is good sized but the lot isn't great. That said, I'm in a good (old) part of town and I'm happy with my location, neighbours....etc.

I used to rent and so far my house has been a far better deal for the last 7 or so years in terms of TCO.