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Thread: Considering home buying (first timers)

  1. 1/2 hippie, 1/2 diva... all Jersey
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    #1

    Considering home buying (first timers)

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    Hey all, so DH and I are kinda tired of paying for someone else's mortgage (aka: renting). Right now, we're in College Station, TX -- home of Texas A&M so the rental market is HUGE.

    DH said he would like to consider buying a place, living in it for the next 3 years or so (I'll prob stay here while he goes to TBS + MOS school), and then renting it when we PCS to our first duty station. So we'd be in the house for 3-4 yrs before either renting or flipping. Obviously we have a LOT of variables to consider, but I wondered if any of you who have BTDT could offer some advice?

    The whole idea to me seems SUPER scary. (I'm not really a risk taker). But I've seen other people be very successful with it. Any thoughts or advice are welcome. I have student loans, but we are not in any other financial debt (if that's an issue).

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    #2
    That's exactly what we're doing. We love the area we're in, plus it's a college town so there will always be a rental market. We would like to retire/have our family in CO too, so for us it was a no brainer.

    When looking at houses, just keep in mind the renter's perspective. I'd look for a yard that's easy/low maintenance, potentially a bi-level ranch type if you think roommates would want to move in. We picked our place because it has a bathroom upstairs and downstairs so it's nice if two roommates wanted to rent and have their own space.

    ETA: I told J y'all were thinking of buying, and he said to do it (totally worth it), followed by "the Aggies suck."
  3. 1/2 hippie, 1/2 diva... all Jersey
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    HAHA! Tell J that DH doesn't disagree. He's totally not into the whole college thing. I'm going to be the one begging him to go to a football game.

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    #4
    The only thing to consider is how you will take care of the rental after you move out. Will you be afford to pay for it if you cannot find renters? What if there are necessary repairs that you need to pay for that amount to a large sum? How will you deal with bad renters? What if you have to PCS to somewhere very far away? Will you have a manager or company manage it for you?

    For buying and living in the house right now. Do you have the income to cover ALL of the costs of owning a home, both expected and unexpected? There is the mortgage, taxes, insurance, etc. but then there are maintenance costs which can be huge. When you rent out, you will still have those kinds of expenses.

    IDK, I think you should look at your personal finances and the prices of houses in the area, then list all of the pros and cons and really think about it. I've seen my Mom handle rental homes, it is not easy, and she is close to them! She also has the cash to back up any unexpected costs. I've also seen how a lot of college students treat rental homes, and it is not pretty.
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    #5
    Right now DH and I own 2 houses. The one we're selling and in a couple weeks is the scheduled closing date. We bought 3 years ago in June. The other one we bought 8 years ago in August and is rented.

    Be very careful with buying. If you plan on selling in 3-4 years then you should buy something that will get you instant equity and you can do work to it to get even more equity. The amount we owe to the realtors and all the other fees for selling are more than what we have paid off on the mortgage. Thankfully, we're getting more back so we'll get a little profit. But we have friends in the same area that are either short selling or not selling at all because they would have to short sale and they've been in their homes longer. Our rate for the realtors is 6% of whatever we sell for. 4% if they were both from the same company.

    Our rental....we're on our 5th set or renters. The last 2 we had to tell to move out since they weren't paying rent. The one before them wasn't paying and I had to evict them. That process took 2 months so I was living with my dad with the 3 kids while DH was deployed. My biggest advice for renting to make sure you have a detailed lease and you do background/credit checks. We have and we still got people that didn't pay. Thankfully, they've all taken care of the house. But we had to cover that mortgage as well as the mortgage of the house we were living in. Which is why we're selling the 2nd house instead of renting. We absolutely cannot afford to cover that mortgage and rent somewhere else. Or God forbid, 2 mortgages and a rent. And the cost to fix the 2nd house would be a lot more than the 1st if they messed something up.

    Also, keep in mind that projects can easily get more expensive than what you originally thought. Things can come up in the middle that you didn't plan for. And things in the house can break that as a renter, you just call the landlord. And some of those things are not cheap. If you're getting a bigger place then your utilities will go up as well. If you get a yard that you didn't ahve then you have the added time of taking care of it you weren't having to spend. Plus buying the tools to take care of it. While your mortgage may be lower than rent, maintaning could put you at more. Add in fixing up/updating and you could be thousands over you rent per year.

    Not trying to scare you or talk you out of it. Just giving you an outlook DH and I found after owning these two houses. We're happy to rent again just so we can call the landlord and say something happened. But I'm also having to suck up some things like not having the house updated to my specifications. So it is a give and take type thing.


    Good luck!!!
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    #6
    I don't have any advice or experience, since DH and I aren't going to buy, until he' EASs. I just want to say that I agree with everyone that says to be financially ready for everything... and then some. I've been renting my townhouse for just over two months, now, and my landlord has, already, had to replace the refrigerator, ceiling fan, and AC. This place isn't even old or anything along those lines. It's just that we've been a bit unfortunate.
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    #7
    We bought and tried to stay in a price range where we could afford it without renting, even if we PCS. But the big thing is that we think a PCS is unlikely any time soon, and we want to retire in the house. It's a gamble, but due to multiple factors we feel it was a good choice (time will tell ).

    Are you planning to use a VA loan? That could be the only kink I see in getting a less expensive/fixer upper. DH is very handy, and we were fine with a fixer upper, but the VA is not at all. There were many houses we looked at that were out of the question due to small issues. It took us ten months to find a house that worked for us (but like I said, we were being picky because we plan to keep it and retire here).
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    #8
    Home ownership is a lousy investment, has been for years, and is worse now.

    You think of it as paying someone elses mortgage, but you also do not have the risk he is taking, and are not paying for the risk and true cost of home ownership.
    Unless you intent to live in a home for at least 5 years, 10 is better, it is not a good idea to buy.

    Realize that to break even, you are going to have to charge a rent that is about 150% of your mortgage. Plus if your unit is empty for a month, that is money that needs to be added to the rent you charge. And if there are any problems with the house, you are going to need cash on hand for that, such as water heater breaking, roof leaking, tenant damage etc.
    Speaking of tenant damage, college students are high risk.

    If you are not living near there, you may need to pay a manager.
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    I wouldn't do it if the numbers didn't work. Look at current rentals for extremely similar places (age and condition of property, size, number of bed/bath, single family or something else, garage, yard, etc.). Then look at your mortgage, your property taxes (divided by 12), HOA if applicable, anywhere from $1000-$7500+/yr (/12) for maintenance depending on type of property and age, and then probably 10% of the rent for a property manager, which you will likely need because you won't live in the area.

    This isn't 100% accurate because you'll save some money on taxes for all the above expenses, but if the numbers aren't at least close, I wouldn't do it.

    And you'll need to have at least 3 months total costs in savings (in addition to regular emergency fund money) so that if the place is empty for a while, you are still okay. And will colleges students sign a year lease and stay over the summer, or will it be rough to find people to fill the place in the summer months.

    Being an absentee landlord sucks. If something goes wrong, you just have to trust that someone else is going to work hard for you to find the best and most cost effective solution. You might spend hours researching companies, but will they? And if something goes wrong that you could fix for $25 in parts and a couple hours of your time, you have to pay $250 to a "pro" to take care of. We did it out of semi-necessity, and it blows, and we've been very lucky so far. No way would I plan for it unless I got a screaming deal in a place with a market where the rents were obscenely more than the mortgages.
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    #10
    Thank you so much for all the ideas/perspectives and BTDT's. Really, I appreciate allllll the input. I'm not a risk taker, so I'm thinking we should just keep renting for the time being. We have over a year until our lease is up anyway. DH is more of a risk taker, but he's also a super researcher/planner, so that is why we were asking about it now. There's just so much to consider.

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