ToTransferOrNot wrote:bdubs wrote:ToTransferOrNot wrote:snailio wrote:Focus on the Debt first, it's your best investment ITE, then start a small cushion fund, nothing dramatic. forget housing for now.
The more I research the possibility of buying a house, the more I think that the bolded is really market-and-situation-specific. Chicago, for example, has a really, really high cost of rent vs. cost to own ratio, at the moment, and even considering the opportunity cost of putting down a down payment instead of paying off loans with the downpayment amount, house ownership would make sense for me if I knew I was going to be here for 5 years.
Even though I don't know whether I'll be here that long, it's still awfully tempting, but I'm not sure I'm ready to have to deal with renting the place out long-distance if I end up having to relocate.
TCR in Chicago is to buy if you're in a rentable neighborhood. If you don't know how long you will be in the city and you're in an area that is really only desirable for purchase then you should be more cautious (transaction costs in real estate are a huge money sink).
Yeah, I'm looking at getting a south-loop condo. And with respect to transaction costs: true, but I'd be working at a bit of a discount since I have a family member who is a real estate person in Chicago.
With respect to being able to afford to wait: of course. But if owning is literally cheaper than renting on a year-to-year basis, after you account for the deductibility of mortgage interests, property taxes and the like, some of the tinkering I have been doing on the NYT calculator seems to indicate that, even presuming *no* appreciation in the home's value, and assuming no yearly increases in rent (bad assumption in Chicago right now), I'm coming out at "all-in, buying is cheaper than renting if you own the place for 4 years". "All-in" is accounting for: opportunity cost on the down payment (at a rate of 9.8% to try to account for how the calculator treats investment "income" - basically, it works out to be 8.5%. That, of course, is too high, since my highest-rate loan is 8% after auto-pay is considered, and I would kill that loan with the down-payment); condo association fees of 150 a month; lost utilities contribution of $150 a month (too high for most Chicago places); a bearish assumption about yearly upkeep costs and such; and rent of $1800 (which is on the lowish side for the kind of places in the south loop that my fiance and I will be considering).
So yeah. It's not a dead-simple calculation. I used to think it was - my plan, until recently, was all-out loan repayment - but I'm really starting to waver on it.
I found that condo fees were the biggest deal killer in Chicago real estate. They are subject to the same pressures that drive up rent and , at least in Streeterville, are a huge portion of the carrying cost of the home.