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Notes -
Looking for some General Advice for
RetardsDummies on going from renting to owning…I live with my fairly-recently-married wife, renting a condo in a major city, and we’ve been looking at options to buy property instead. Well, as luck would have it, our landlord just recently reached out offering to sell us this very condo. His asking price isn’t a great deal, but it’s a fair one and I’m confident the unit will appreciate over time, probably significantly (aside from the general housing trend, it’s in a convenient and fast-gentrifying location). Based on what I’ve seen so far, we wouldn’t get this good of a place and this good of a location any other way.
So, I’m thinking we’re going to go through with it. My father in law has offered to gift us a frankly ridiculous-to-me sum to use as a down payment (in his half-joking words, “think of it as coming from your inheritance”) because he’s very eager for us to have a real asset on the books, so I’m not too worried about balancing monthly payments against the length of the mortgage, although I would love to hear what people think about that. One concern on my mind is that we will eventually need to sell and move to a proper house further out of the city, I assume before the mortgage is paid off. We’re in our late 20s and intending to have our first kid within the next couple of years. This place is big enough and located well enough to be suitable for at least one kid up through toddler-age (and in fact there are a number of families with young kids in the building) but for a 2nd or 3rd (or just an older kid) we will certainly want an upgrade. If anyone has gone through that process I’d be curious to hear as well.
Basically I’m just looking to hear the general thoughts of motteposters who have gone through this already. Also curious about the expected etiquette for negotiation.
Based on what you are saying I would run from the trade. I may change my mind if you are in an okay second or third tier city.
I hate the pricing in all the tier 1 cities right now. The city I am in the most in the States for the type of condo I am assuming you are describing the rent price would be about 3500-4k a month and the costs to own after 20% down would be 7-8k a month. Those numbers do not work to expect appreciation.
You just laid out a plan to move within 5-7 years. To sell the place you are buying you will pay 5% broker commission (most likely still), transfer taxes, appraisal, etc. It runs about 7% all-in for a lot of cities to sell a property. The first 7 years of a mortgage payment the principle pay down is basically 7%. So all the equity you paid in will disappear to selling costs.
All the real estate association publications on appreciation are basically bullshit and dominated by a few geographically and regulatory restricted places. I could do a long post picking apart issues with every real estate index but the short part is they all ignore key factors even the ones that only do repeated sales.
At your age you want to buy property. It feels like the “adult” thing to do and the next stage of life. Condos also are a very hard area to actually make money on. Current pricing is awful to buy in most markets unless you assume 30 year rates drop 300 bps.
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