Buying a house in this area, vs renting.

dxkj

Lifer
Feb 17, 2001
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I've been looking at this situation for a while, and I think it might be marginally better to buy a house, but let me spell out the details.


Current Income + Wife = 68k a year

My wife will be starting Grad school, and entering a 5 year program.

This means that we will definitely be in the area for 5 years. It also means that our income will drop from 68k to 42k+___ whatever she makes part time in grad school. All houses in this area cost 130+. A 2-3 Bedroom ranch with garage, in good shape, Runs around 180k. This would put mortgage payments around 1k-1200 a month, but the property tax is outrageous. The prop tax adds another 400-500 a month., and without 40k to put down on the house, that means I will probably be stuck with either PMI, or higher payments on a secondary piggyback loan. (80/20 or 80/10)

Renting a 2 bedroom apartment in the same area costs about 700-900 a month. The amount lost each month renting is about the same amount thrown away in non recoverable Property tax, and PMI. If you count interest into the equation (minus the amount saved on taxes) It starts swinging a lot towards renting instead.


Of course we can do improvements, finish the basement, etc, and that will raise the value some, and it swings it slightly in the favor of buying a house instead of renting for the next 5 years. Plus there is the added benefit of having a house to live in vs an apartment.
 

laurenlex

Platinum Member
Feb 26, 2004
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If you can swing it, I would buy. What if interest rates are 10 percent in 5 years? You would be spending 48000 for 5 years rent, with no equity.

Unless you are in a risky, overvalued real estate market, your home will most likely go up quite a bit in value, especially if you buy the "worse house in the best neighborhood" and fix it up a little.
 

Stark

Diamond Member
Jun 16, 2000
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[dave ramsey]buying a house isn't always the best plan. you might want to wait a few years until you have everything under control. If you have nothing on credit (including cars) and an emergency savings fund, you might consider it, but not until then.[/dave ramsey]
 

dxkj

Lifer
Feb 17, 2001
11,772
2
81
Originally posted by: laurenlex
If you can swing it, I would buy. What if interest rates are 10 percent in 5 years? You would be spending 48000 for 5 years rent, with no equity.

Unless you are in a risky, overvalued real estate market, your home will most likely go up quite a bit in value, especially if you buy the "worse house in the best neighborhood" and fix it up a little.

If anything these houses are undervalued. They are to the west of Chicago, and far enough out that in 5-10 years they will go way up as the population grows outward. Where I work/live a similar house would be at least 300-400k, so 200k further out is what we are aiming for. There are also the options to buy new construction in a develpment out that way. So the house would be brand, new, and the prices are competitive with existing houses in the area.