Profile picture for norawinslo

Should a recent college grad rent or buy?

I recently graduated from a top 25 university and I have a full-time job in a large metropolitan area with a high cost of living. I am planning on moving to the city soon, but rental rates are outrageously high. I am strongly considering buying a place. The price difference is only about $1000 / month. I am concerned however that buying home is too much of a commitment for me to make so early in my career.
  • August 16 2010 - San Francisco
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Answers (11)

Thursday, September 2, 2010

First off, congratulations on your ability to find steady employment amidst the state of financial crisis we are currently in... there's no denying it.

Secondly, in agreement with a majority of the other contributor's wisdom and advice, you should definitely capitalize on the market that is currently available. Generally speaking home prices are at a drastic low when looking at historic data, across the board.

Lastly, the $1,000 differential you spoke of is moot in the long run. Spend a couple hundred dollars and speak to a CPA (if you don't have one) and learn the tax advantages of homeownership!

You're in a better position than most people are in this current market, congratulations. One last note... if you do wind up renting, make sure the property is in good standing - meaning that the property taxes are current, no notice's of default are filed, etc.

Best of luck to you in your endeavor!

Sincerely,

Dino Morabito, Realtor
DRE#01415017
Real Living Napolitano Real Estate
939 Orange Avenue
Coronado, CA 92118

C.A.R. Region 24 Director - 2010
 
  • September 02 2010
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Thursday, September 2, 2010

First off, congratulations on your ability to find steady employment amidst the state of financial crisis we are currently in... there's no denying it.

Secondly, in agreement with a majority of the other contributor's wisdom and advice, you should definitely capitalize on the market that is currently available. Generally speaking home prices are at a drastic low when looking at historic data, across the board.

Lastly, the $1,000 differential you spoke of is moot in the long run. Spend a couple hundred dollars and speak to a CPA (if you don't have one) and learn the tax advantages of homeownership!

You're in a better position than most people are in this current market, congratulations. One last note... if you do wind up renting, make sure the property is in good standing - meaning that the property taxes are current, no notice's of default are filed, etc.

Best of luck to you in your endeavor!

Sincerely,

Dino Morabito, Realtor
DRE#01415017
Real Living Napolitano Real Estate
939 Orange Avenue
Coronado, CA 92118

C.A.R. Region 24 Director - 2010
  • September 02 2010
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Profile picture for DavidPlush
Congrats!! I hope you love our wonderful city, there is never a dull moment in San Francisco!

The price of desirable Real Estate always seems high no matter the time. J.P. Getty constantly heard that from people over his lifetime as he sought to buy as much property as he could.

The $1,000 difference will be uncomfortable at first but will strongly diminish over time. If you are able to set aside some money for reserves this would be ideal.

It's very important to buy a very desirable property so that you can easily resell it, rent it for a higher price and attract high quality tenants should you decide to rent the property.

Nobody got anywhere without taking risks in life, the key it to take a calculated risk. You took a lot of risks in school emotionally, financially and most importantly your time. Apply that same effort to Real Estate and not only you will be happy but your grandchildren as well!

Don't you wish your grandparents bought a home here 50 years ago? Trust me $30,000 for a home seemed like a lot of money then.

Good luck to you in your search and your life. I am happy to help in any way possible.
  • September 02 2010
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Im afraid you did answer your own question. You want to be absolutely sure when it comes to home buying. It is a large commitment especially if a relocation is needed in the near future.  Congratulations on your graduation!! Focus on your career and you will know when the time is right. good luck
  • August 24 2010
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If you are planning on staying in this city for a long term period, I'd say 5 years or more, then I recommend buying if you can.  It is more of a committment, but it's also more rewarding.  You can write-off the interest on your taxes, you're putting money towards your own mortgage instead of someone else's, and if you can get in on the low interest rates and the low home prices, you'll be in good shape. Right now there are many wonderful programs that allow you to put a small amount of money down, so you can keep much of your income liquid of invest it in other places as well as the housing market.  Also, the city properties usually do much better as far as retaining their value, so although you might have to wait a few years to see some real equity, you will most likely as least break even if you have to sell sooner than you planned.

Jon Lichterman
Provincity, Inc.
  • August 23 2010
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The answer depends on your timeline. Interest rates are low right now, and prices are likely as low as they are going to get in the city. So it's a great time to buy...................unless, your career is likely to cause you to move in the next few years.
It's likely the market will appreciate very slowly for the next several years, so you need to plan on owning the property you buy for 7 to 10 years minimum just to be on the safe side. If you believe it's likely that you will live here for that long OR that you would be able to afford to rent it out if you move out of it for any reason then absolutely you should buy.
Be careful with lease options. They are often written in the Seller's favor to guarantee them a certain purchase price. You don't want to get locked into an agreement thinking you are getting a good deal with all or partial credit of your rent towards the purchase price and then realize that the property is not a good fit for you. I have seen prospective Buyers pay too much in rent in return for the promise of it being credited to their ultimate purchase price. When they don't end up purchasing it they have wasted a lot of money.

  • August 18 2010
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Yes, you are right about such a large commitment since you are not fully established.  I'm a leasing specialist and strongly advise to temporarily for go on the luxury community amenities and settle for a small short term apartment where you can save for a larger down payment.  This down payment will bring down your monthly payments and gain greater owner's equity.  Also, banks are becoming more conservative in their underwriting and you'll be favored more with a larger down payment.  As to amenities join an affordable health club.
  • August 17 2010
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Profile picture for gabepal
Dan is half right or half wrong. No one has a crystal ball. Yet if i was to call the shot i would take a lease to purchase agreement over a straight lease.

More and more people are finding this option over a purchase today.

While it sounds simple it is not. The real winner is the person who can apply a portion of an agreed rent towards a purchase down the road if he chooses to. In a way it is like found money. Naturally if the market keeps falling you lost nothing and may take advantage even a lower price at the end. The structure of this proposal needs some fine  tuning either from a savvy realtor or a blood sucking attorney. The real prize goes to the one that could put it together.

  • August 16 2010
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Profile picture for the_country_hick
Spending $12,000 a year extra adds up to $120,000 (without adding in interest) over 10 years. Look at what is likely to be paid off via a mortgage in that time. Renting could be much cheaper and save you a lot of money.
  • August 16 2010
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Profile picture for the_country_hick
The future is still unknown for you.

What happens IF your job cuts positions? Last hired first fired is usually the process.

What if you find a better job position in a different area? Your house would hold you back from that move.

What if you buy a house that fits your needs today and tomorrow you get married, have kids and need more space?

I would spend a couple of year getting your life situation in focus. Determine if this area is really where you want to live forever. Find out what kind of house you really want.

One last thought, the cost difference is actually MORE than $1,000 a month. You are not including any repairs that WILL happen. You rent and the landlord fixes the problem. You buy and you have to fix the problem.

You may want to actually look at the numbers to see how much of a financial difference it could make by renting or by buying now.

Using your numbers the blog below shows you how.
"Does it make more sense to buy, or to rent? Here is the way to find out for sure."

Why paying more renting could be cheaper. A very different way to look and think about this question.
"Why rent if you could buy for less money? Valid reasons inside."

When buying consider the real cost of getting to work. The blog below shows some things to consider both in the location of a house and the price when also adding in driving to work.
"Should you consider the price of gasoline both today and tomorrow when buying a house? I say yes. See why inside."

Finally, a list of things I have found as potential problems when buying a house. You can ignore 3/4 of the things below and still have a hefty amount of things to consider.
"Questions I would ask when purchasing any property."
  • August 16 2010
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I am getting the impression that you answered your own question.

You just started your job, you are (presumably) young, and I don't think of $1000/month as insignificant.

Unless you know that you are going to be living in a property for at least 10 years, I would say it is way too soon.

Wait until you have been employed full time for a few years, save up some money, live life some more (you know, the you're only young once thing) and realize that there is no hurry.

Home ownership is a huge committment, sucks up money continuously and endlessly and although in the long run, it can be a solid investment, it is a long term investment, not a short term one.
  • August 16 2010
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