Should I buy or cont. to rent? I plan on renting out extra rooms.

[Logan J.]

Morning everyone,

I am looking to buy a home in May when my lease ends. I plan on buying a single family home with a minimum of 3 beds and 2 baths. I am currently renting a 2200 sq. ft. 3/2 house for $1500 a month. After rent is split, my cost is $515 + utilities. I live in San Antonio, Texas so the COL is pretty low here. The average cost of a 3/2 here is around $210K – $200K.

$515 in rent is not much but I would like to pay less in rent or no have rent by buying a place and renting out the extra rooms.

Financials:

I net around 70K a year. However, I am front loading my 401K this year so for the first 4 months of this year, my bi-weekly check will be 50% of what it would normally be. I’ve calculated for the first 4 months of this year, my gross pay will be $822, which I can manage with without having dipping into my savings.

I have roughly 17K in cash before I max out my IRA for 2017.

My monthly expenses other than rent are extremely low. I own my car and don’t have any loans to pay. My cell phone and insurance are $100 monthly. I also spend around $40 a week on groceries and $30 a week in gas.

My credit score is hovering around 750, most in part to churning a year or so ago. I was planning on going with a conventional mortgage and putting down 5% as opposed to an FHA and putting 3.5%. I don't like the fact that the PMI/MIP for an FHA doesn't drop off at 20% equity and your only option to get rid of it is to refinance. If anyone disagrees, please convince me. With the home price staying the same, 5% down on a conventional has a lower monthly payment than 3.5% on an FHA. If I can qualify for a conventional mortgage with 5% down, it seems like the better option in the long run.

Looking Forward:

For reference, I’m 25 and have been in a relationship for about 3 years now but am not married. In about a year I’ll graduate with my MS in Data Analytics and I’ll probably be looking for a new job if I don’t get a raise/promotion/ new job at my current company. With that being said, especially with the work I’ll be doing, it might be advantageous to move to a larger city that has more prominent tech companies. This is the only reason I am holding back from buying, is the idea that I might be moving within a year. However, the chances are slim.

If I do purchase and within two years need to relocate, my plans are have a management company take over the property, as a buy and hold strategy. It wouldn’t make sense to sell because I would probably put myself in the hole because of it especially in that short of a time frame.

My other worries are juggling a full-time job as well managing the house i.e. finding tenants and maintain the home.

I’d appreciate some outside perspective on this situation. I need some sense talked into me to help me rationalize this decision. It’s obviously a big one and would appreciate the advice. 

Thank you! 

[Rick Pozos]

Hey @Logan J.,

In the end it is what is best for you. You are the only one who knows what is best for you. Buying a property is a big financial decision and should not be decided quickly and without research. Just remember, if you do purchase, you dont have to buy a 200k home you can opt for something nice, but closer to 150k or maybe even 125k that has 2 or 3 bedrooms that can be rented out. The younger folks are doing that. Both of my sons separately live in a house with a couple of friends. I think it is a millenial thing. Nothing wrong with that.

Secondly and most important, dont listen to people who are negative like Jack B. When people like that are scared to post their picture, fill out their profile and even use their last name yet are down right rude to people is cowardly. The forums here are set up to help people in their real estate knowledge not to be rude, mean and degrading.

Continue researching so that you can decide what is best for you. You are the only one who knows what that is.