Profile picture for jmmooney

Mid 20's, Should I buy a house?

Hello. I am 4 months into working and considering buying a house. My budget is <$150k, plan on putting 10% down. I'm looking for more of a fixeruper. The house would be in downtown Birmingham near a college. I have 2 friends who will be looking for an apartment in the city who will pay rent. Should I buy a house? I feel this will be a good investment because after my friends leave there will always be renters with it being close to a college. This will also get me out of my parents house :).
  • December 19 2011 - Birmingham
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Answers (23)

One of the best thing I did in my 20's was to buy a house. But it was a 2 family. I tell every young person that is starting out, buy a 2 family. Let someone else pay your mortgage. Over time it helped me jump start to other investments and then to the dream home I always wanted. So if your going to buy make it a multi family. 
  • January 03 2012
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Your biggest issue isn't your age. There are 16 year-olds out there more mature than many 40 year-olds.

One issue is your financing, since a lender won't give you a loan with only four months work history. But your parents may co-sign just to get you out of their house.

But an even greater issue is the age of your tenants. Have you spent much time in college town rental properties. I went to a huge university, spent a lot of time in a lot of houses, and I can't recall a single place that wasn't trashed by the end of the year. Maybe stick to the graduate school market. Engineering department.

In your mid-20's it may seem like a giant party to have college students in YOUR properties, but it will get old real quick.

There is the one advantage of there always being leftover pizza in your kitchen when you stop by to fix another broken window.
  • January 03 2012
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ABSOLUTELY! Be the first one of your friends to own a home and I guarantee you will be the first one of your friends to retire... If you can legally buy real estate and you qualify, you are not to young. "Ninety percent of all millionaires become so through owning real estate." -Andrew Carnegie

  • January 02 2012
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If you feel confident about your job you should definitely consider home ownership. Rates lowest since 1950, great houses out there, tax advantages, and payment will probably be less than rent. Go for it. Wes Black  [contact information removed by Zillow moderator]

  • January 02 2012
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Profile picture for ConnieK_ppm
I wanted to buy very badly in my late 20s.  Fresh out of college but working in the college town with many rentals available- I thought it would be great to buy and rent it out when I moved. Looking back- not buying was a great decision.   Renting isn't horrible, esp if your primarily just looking to get out of mom and dad's house.  one of the biggest values renting has is that you are mobile.  If the city decides to widen that road or you land a great job in another state, meet someone to marry that already owns a house or something else...you don't need to sell it.  As for renting out...I would reccommend owning for a minimum of 2 years before trying to be a landlord.  Being a landlord can have it's own special pains.
  • December 27 2011
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Buying is a good idea. Just make sure you buy something you can rent if you do decide to move or relocate once you are out of school. Condos are very hard to rent in some assocations as they regulate what you can do with them. A single family home is better but make sure you don't buy the "money pit". A home must be maintined in order for you to have a return on your investment when you go to sell it. If you find something that has been redone, you will do better in making more money since you most likely wouldn't have put that much into it. If you do want a fixer upper, be certain you can get a loan on it. Buyers don't understand this but lenders do.There are certain loans that won't lend to first time buyers a home that needs work. If it does need work, they will require it be done before you buy it in some cases. Since it is a variable, ask your lender first before you make any moves to purchase a home that needs work. Thank you for your question.  
  • December 27 2011
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Do what you want to Jmooney. It's your money and your life. I know a guy who bought his first house, in his twenties, in a college town, and he now owns about forty of them. I know another who owns eleven. Neither of them have ever sold a house. I wish I had the cajones they did. They also have the most beautiful set of tenants you've ever seen.
  • December 19 2011
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Profile picture for hpvanc
Financial consideration of the current market as well as what your goals are and the stability in your life are right now need to be considered.  In hindsight not buying in my 20's was the right decision for me so I have no regrets that I didn't buy until much later.
  • December 19 2011
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Profile picture for the_country_hick
Have you ever worked on a house before? Doing minor repairs and upgrades is both heavy and long work that can take an exceptionally long time to finish. At the end of a day you could be sore and tired. You could spend months getting things up to par. Until the house is in decent shape no roommates would pay you rent. You can spend a lot of money buying tools to get the job done, and a lot more on materials. Just when you think everything is about finished up comes another detail you have to figure out.

After helping a relative get 3 rooms in a house together I am not sure I would ever want to do it again if I could avoid it. Everything you use in construction is heavy and costs add up quickly.

If you plan on using hired labor you might as well buy a house already in good shape. You never know how bad a house is until you tear into it. As an example a foundation wall of concrete block moved. It needed to be replaced. While doing that it was discovered that the sills were rotten and several feet of the outside wall needed replacing. That original estimate for repairs was worthless and the costs went higher and higher. A relative just dealt with that exact issue on an inherited house.
  • December 19 2011
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Many lenders require 2 years of work history in order to qualify for a loan. First thing I suggest is talking to a Realtor and asking for a referral to a great lender. See if you qualify and for how much. Because, it is great to have an investment  (a home) that can be paid for (partially or wholly) by others, such as renters. I feel it is well worth the effort to have renters pay your mortgage so that you reap the benefits of increased equity. With unprecedented and hisorically low interest rates and home prices, if the reasons you are buying make sense to you, then it is a great time to invest in Real Estate.
  • December 19 2011
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I should have added to my post- "as someone who bought their first house at 25 and had a roommate at the time."
  • December 19 2011
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This could potentially become a great situation for you because, depending on the amount of rent you charge, your tenants could be paying your mortgage for you.  However, becoming a landlord presents its own challenges.  You should research landlord/tenant laws for your city.  You can never be too careful protecting your interest. 
  • December 19 2011
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Another couple of factors to consider...

1) It's a pill to get a loan an a fixer, your loan options may be drastically limited if it's more than really cosmetic stuff.

2) You will probably not be friends with these people when they move out. It's tough enough on a friendship to be roommates - it really changes when one of the roommares is also the landlord.
  • December 19 2011
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Profile picture for Dunes ..
"It sounds like I need to put a lot more thought into my decision over the new few months and see how life pans out."

Select/Give/Award yourself the "BEST ANSWER" jmmooney

  • December 19 2011
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Profile picture for the_country_hick
Do not let low interest rates push you to buy a house. They do not affect real house affordability in the way many people think they do.

Read the links below to see why. Then talk to an economics professor and ask them how interest rates affect house prices.

NAHB: Interest Rates and House Prices: the "Priced Out" Effect

How Interest Rates Affect Property Values

"Do low interest rates really make it a good time to buy a house?"

You can see below how low interest rates allow higher property prices.
If you only have $500 a month to put towards a mortgage (excluding taxes, insurance, maintenance, and heat) your income does not change just because interest rates go up or down.

A 30 year $100,000 mortgage costs $491.94 a month at 4.25%.
A 30 year  $82,000 mortgage costs $491.63 a month at 6.00%
A 30 year  $80,000 mortgage costs $492.57 a month at 6.25%
A 30 year  $69,000 mortgage costs $494.32 a month at 7.75%
A 30 year  $67,000 mortgage costs $491.62 a month at 8.00%
A 30 year  $56,000 mortgage costs $491.44 a month at 10.0%

A house is priced simply on how much money can be borrowed to buy that house. Not many people have the kind of money needed to buy a house without financing. That means the cost of borrowing money changes the cost of a house bought with that borrowed money.

Don't Buy A House In 2011 Before You Read These 20 Wacky Statistics About The U.S. Real Estate Crisis
  • December 19 2011
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If you qualify, that would be the way to go!
Find and Agent and a Loan Consultant and they can pave the way for you.Cogratulations in advance!

Ania
  • December 19 2011
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Profile picture for jmmooney
Thank you for all the replies. I lived away from home for 5 years in college with 2 different room mates. They can be a big pain in the butt; there will have to be a few spoken rules of what I expect out of a room mate. 

What's pulling me towards buying a house is the low interest rates and building equity. It sounds like I need to put a lot more thought into my decision over the new few months and see how life pans out.
  • December 19 2011
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Yes, go for it.
  • December 19 2011
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Profile picture for wetdawgs
In one's mid 20s, it is quite possible there are a lot of changes ahead in the next 10 years.   Therefore, think of the big picture.   What may be coming up?   Sharing life with a significant other?  Children?  Job relocation? Exploring the world?   Mom getting ill so she has to move in?     Of course, none of us can predict our future perfectly, but keep in mind it can easily cost 8 to 10% of the selling price to sell, so purchasing and needing to move in 2 years is very costly (believe me, I've been there).

You will need to qualify for the house on your own (roommates may be nice for the monthly budget but don't help for the qualification).  

Houses can be expensive.   The furnace goes, then the hot water heater, the insulation is short - in other words, there is a lot more expense than just the monthly payments. 

I'd rent for a couple of years until you know you enjoy your job, and have a few hints on what life after college looks like for you.  

  • December 19 2011
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Profile picture for Dawn Gould
There has never been a better time to buy a house.  Interest rates are at an aall time record low, sales prices are low and sellers are motivated to sell.  Banks are rather strict about who they will qualify for a loan.  The first thing you need to do is go to a local lender and apply for a loan.  You will need to aattach a "preapproval letter" to your offer anyway once you find a house you wish to buy.  This way you will make sure you qualify and you will know what price of a house you can afford when taxes and insurance are added to the cost of the mortgage. Good luck and happy house hunting!!!!!
  • December 19 2011
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Profile picture for Dunes ..
Might be..Might Not be a good idea.....Depends


Become informed and KNOW the Market..Economy/Jobs/City-State/School Budget (Problems)/Sales.. Prices..Declining?/Zoning

It's a MAJOR Financial Decision & Commitment so treating it like one is the way to go ...imo


  • December 19 2011
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Profile picture for Connie Klemme
wow with a question like that you are likley going to get a lot of response encouraging you and offering help.   I'm not going so far as to say no you shouldn't but you shoudl do a lot of research and consideration before buying.  Also, if you have not moved out and had roommates before, I'd try that as a renter before being the home owner trying to get money out of your friends for rent.   You're looking at taking on more than just buying a house there.  

Normally, I'd have a lot of points to make to consider for your decision.  It can be a good idea, it can be a bad idea.  Instead of makign those points, I'm prompting a few others that have better comments and encouraging them to come respond.    If you were my kid in their mid 20s I'd have you wait until you'd been working a year and had put up with roommates a while. I hope you at least consider all the feedback you get whatever you decide.
  • December 19 2011
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Here is a good article on Can You Afford a Mortgage?  Hope this helps.

Nida
  • December 19 2011
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