Any younger guys have experience buying a house?

[repoman0]

One of my roommates and I came to the "revelation" this past week that paying a fortune to rent our house every month is a terrible waste of money. Right now, there are four of us sharing a single family home in Somerville, Mass (few miles north of Boston) and paying $3200 total per month. We're renting another place in Brookline, Mass from Sep 2013 - Sep 2014 and then are thinking about just buying in Brookline after that. Brookline is one town west of Boston, a mile or so away.

The one roommate and I who are thinking about going in on it together are both 23, and between the two of us bring in around $150k / year. Unfortunately still have some decent student debt to pay off, about $60k for him and $30k for me, but totally manageable within a reasonable time frame. A decent four-bedroom place in the area is probably $600k-$700k+ right now (high for our salaries) but we believe we can easily rent bedrooms 3 and 4 for $900-$1200 each per month, at least, to students, friends, etc.

So, not quite the usual situation - neither of us are convinced we want to be here forever, but we do think we can buy a place, stay in it for as long as we want, and then very easily make enough money renting it in this area to cover mortgage payments, upkeep, realtor fees, property taxes, property manager, and probably a small profit; and in the end, have a nice place in a historic town. We think that Brookline is a pretty low risk area and will be "in demand" for a long time, as it has been for a long time.

Anyone here ever done this before or want to share experiences? Anything glaringly obvious that we missed that we can think about for the next year or so? We're obviously pretty new to the idea, and would be the first of any of our friends to own a place instead of live with parents or rent...

 

[bignateyk]

Depends how close you are with the roommate I guess. What if he changes his mind after a year? Will you have to sell the place? (And incur the huge losses to sell it)

There's definitely a lot of risk going in with someone else's name on the deed with you. A lot can change in your life when you're 23 years old. I doubt both of you will want to remain committed to this long enough for it to become profitable.

 

[skyking]

I don't know if you have duplexes around there, but that would be a good scenario. They can be titled separately, sold, etc. When you buy them together they are usually a better value than two similarly sized single family dwellings on separate lots.
Buy a duplex unit, rent out half. If he or you want to move on it would be easier.

 

[dave_the_nerd]

Yeah, too young; need to remain more flexible.

And taxes/assessments/maintenance can screw you over.

 

[Mixolydian]

I wouldn't do it, personally.

 

[K1052]

no

 

[Baked]

Never, ever, ever, ever, repeat never ever 100 times, co-sign anything with anyone, EVER! If you make 75K a year, you should be smart enough to figure out why

 

[HydroSqueegee]

yeaaaa.... dont do it.

also, 3200$ a month for rent?!?!?! holy hell.

 

[repoman0]

Wow, pretty unanimous so far

I guess at the very least we should give it two more years of renting and see where we're at then.

 

[repoman0]

yeaaaa.... dont do it.

also, 3200$ a month for rent?!?!?! holy hell.

Exactly. That's Boston for you. We're on the low end right now, and the house is basically falling apart :hmm:

This is why we can rent a nicer place in a much nicer area for $4k-$5k / month...

 

[sourceninja]

Honestly, I wish I would have waited until my 30's to buy my first house. I was not prepared for the work, the commitment, or the frustration of home ownership.

 

[AMDZen]

I did this. But I was the sole purchaser. Either you or your friend need to be the sole purchaser. With the other person knowing he is able to save money to buy a place of his own after paying much less to you for your mortgage.

That's how I did it. Had 3 roommates who lived with me because I was the one who could afford the house first, and then they were able to save by living with me a lot more then they would have if they rented, and when they had enough they moved out and bought a house of their own.

Worked great.

I had planned to get new roommates to replace them but luckily I was able to afford the place by myself after they all moved out.

 

[bignateyk]

Honestly, I wish I would have waited until my 30's to buy my first house. I was not prepared for the work, the commitment, or the frustration of home ownership.

Regarding commitment: Anything less than 5 years and you'll probably lose a pile of money from realtor, bank fees, transfer tax, and interest.

Regarding work/frustration: New construction will be far less work (and money to maintain) for a non DIY person.

 

[jaedaliu]

General rule of thumb is that you need to own 5 years before selling to break even. This has to do with closing costs and agent/broker fees.

If you're able to rent out the extra rooms, that can be considered income for mortgage applications.

You already live with the guy, so you have an idea of his responsibility and committment. If you are both handy around the house, it's not a bad idea. Just make sure you don't buy so much house that you can't make payments if a tenant misses rent.

 

[velillen]

Honestly, I wish I would have waited until my 30's to buy my first house. I was not prepared for the work, the commitment, or the frustration of home ownership.

Screw that i bought mine at 23 and couldnt be happier (im 25 now). Love being able to do what i want to the house without having to ask (like wiring it all for cat6). Just having a place to come home to and have it be mine. guess i am a bit different than you though since i like working with tools and fixing things myself.


But in the OP's case i would say no. Probably be hard ot even get a mortgage when you both have debts and would be "relying on renting out rooms" to make ends meet. Just to much could go wrong. Friend decides he wants out or stops paying, you get screwed. Cant find a room mate for a month...your out that money. Just way to much could go wrong and end up screwing you over.

 

[esun]

There's just a lot of risk. If it were just you, sure, but co-signing with a friend means that if one of you loses his job the other may be completely screwed.

If in two years you guys are making closer to $90k each it may be an option (I assume you're around $75k right now). If you can put down 20% and get a low rate, you could pay a $480k mortgage on a $90k salary yourself.

Just as a reference, I bought a house in 2010 for a little under $600k when I was 24 with help from my parents for the down payment. It's certainly do-able, but I didn't co-sign with anyone or rely on any other income to pay the mortgage. However, I won't really know if it was worth it until I decide to sell (I don't live in the house since I moved for a new job, rent it out to a friend at a loss).

Actually this brings up another important point: renting is a hassle. You may have this grand plan of renting it out when you don't occupy it, but it will require work that you may not want to do. If you know you are really dedicated and will do the work to find and keep tenants, then that's fine. If you're not sure, then you should make sure that you can handle the monthly expenses without relying on rental income.

 

[Midwayman]

Buy it yourself and rent it back to your buddy. Or the other way. Big financial transactions with friends are great ways to ruin a friendship.

 

[zephyrprime]

Regarding work/frustration: New construction will be far less work (and money to maintain) for a non DIY person.

Yeah but in an old town like that which was already fully developed 100+ years ago, you're not going to get new construction. Also, OP doesn't have tons of cash so he doesn't have the luxury of a lot of choices. In an expensive area, fixing up a dump can save you a ton of money.

That's what I did. I bought a duplex foreclosure for cheap a 1.5 years ago in minneapolis. It's a ton of work to fix it up but easily worth it financially.

For you though, the problem is that you need to depend on someone else to help you buy it which is a problem. I don't know how the bank will regard the situation. Also, you are young so careers can change a lot at your stage in life. If you do buy, I would recommend a foreclosure if you are handy.

 

[rcpratt]

Just bought a house by myself, but this is not a good idea.

 

[bignateyk]

Buy it yourself and rent it back to your buddy. Or the other way. Big financial transactions with friends are great ways to ruin a friendship.

This is true. Problem of OP is that I doubt he'd get a loan for a $600K house on $75K salary.

 

[Demo24]

Does not sound like either of you would have the cash to front a down payment, which without it don't go expecting that monthly to be too cheap.

 

[Blieb]

It doesn't sound like your situation is condusive for this.

I was 24 when I purchased my first home, although I got a roommate, I qualified without, planned to stay in the area, etc.

 

[PingSpike]

So, assuming you have a $120,000 for a 20% down payment (which you almost certainly don't) and that you bought a $600K house (low end of your range) and a 3.75% interest rate you're looking at $2222/mo for the mortgage payment. Based on a property tax rate of $13 per $1000 of assessed value (crude google of your current location using a 2 year old rate and assuming the assessed value isn't inflated which it commonly is) minus a residential exemption of ~$1800 (that you may well not be able to claim) equals an additional $500 in property taxes. Add in home owners insurance. Lets just guess that at $100/mo which might be high but is almost certainly way to low for a $600,000 house owned by two friends and rented out.

That gives you a very rosy estimate of $2822/mo outlay before utilities and repairs/maintenance.

 

[Ruptga]

Wow, pretty unanimous so far

I guess at the very least we should give it two more years of renting and see where we're at then.

I disagree in principle. But, don't even try it unless you are going to be anal about doing everything right. That means drawing up exhaustive contracts with everyone that's buying with you, and everyone you're hiring to fix the place up. If you leave wiggle room someone or some circumstance WILL fuck it all up.

 

[SpatiallyAware]

Terrible, terrible idea.