Buy now or wait and save?

Question

Right now, I would be able to afford a property that is around 325K or less.  I've been looking at a lot of 2br apartments and condos in areas like Malden, Medford, and Swampscott.  I need to be accessable to downtown Boston, but also to the north shore as my girlfriend works frequently in those areas.  I would be willing to house hack while renting out the rooms in my own apartment to friends.  But my main question is whether I should wait to save more so that I can afford something with more rooms.  Buying a duplex in these areas would be at least 600-700K.  Should I keep spending 900 a month on rent or just get started on something smaller that won't save me much money but at least I'd be paying down a mortgage instead of rent?  I appreciate any advice!

Charlie MacPherson · Answer

Account Closed Assuming that the market doesn't crash - and I don't see any signs of that - prices will continue to rise.

Worse, interest rates are up and the Fed has said that they will raise rates 3 times next year.  A 1% increase in rates will eat about 10% of your buying power.  Combine those two things and I think that waiting until you can save a bigger down payment is a pretty bad idea.

If you wait, those two factors will probably consume all of the additional savings.  If you don't wait, those additional savings can go toward paying down your principle.

As to having access to downtown Boston, look at www.mbta.com and see if the commuter rail can help.

Good luck!

Account Closed · Answer

@Charlie MacPherson thanks for your input.  I didn't realize that such a small increase in rates would affect your buying power that much.  It is something that I will keep in mind as I look and compare rates at different banks.

@Willie Mandrell I haven't heard about the Mass Housing  first time home buyer options...I only knew about FHA.  Great to hear that there's ways to avoid PMI, I am speaking with a lender tomorrow and will ask what their thoughts on this program are.

Account Closed I haven't given a whole lot of thought on those areas but I will do some more research on them.  Thanks for sharing!

Account Closed · Answer

Account Closed sooooo many millennials overspend, but great investment opportunities always exist! Not just in 10-20 years, although some phases of the market are unique and make finding home run opportunities greater than the others. IMO, if you're a RE Investor, forget the ETF's. Learn the real estate game and get to it sooner than later! That way you've got a track record when the real opportunities come around.

Account Closed · Answer

Account Closed

Investing in this phase of the market can be tricky. A 325k SFR or condo is definitely not going to be profitable, so may I suggest one of the two following things:

1. Invest out of state for higher yields

2. Sell stuff! Flips, etc...

If you're not open to those two then maybe sitting on your cash might be a good idea.

Don't fall into the "I'm going to buy because I don't want to pay rents" trap. Run a simulation of a 30 year mortgage amortization schedule: the first several years are almost ALL interest, taxes, insurance, etc... with very little principal pay-down. Pay rent, no obligation to improve or maintain property, avoid depreciation if markets correct, and be poised to purchase your primary residence when everyone else is reeling from their bullish lifestyle choices.

Boom!

Josue Velney · Answer

Account Closed, I believe it is always a good time to buy. The key is finding a great deal. Are you only looking on market? Maybe should trying looking off market too. Most of the deals I have found were off market.

Daniel Ortiz · Answer

Hey Kyle,

For what it’s worth, you’re not the only one facing the same dilemma. Interested in seeing what additional feedback you gather from investors in our area.

Regards,

Dan

Avery Heilbron · Answer

@Willie Mandrell The Masshousing loan seems like a great idea if you can find a property within the price limits. The down-payment assistance and no PMI make it seem like a much better idea than FHA. Have you noticed any drawbacks for the Masshousing loan in comparison to the FHA?

Avery Heilbron · Answer

As a follow up @Willie Mandrell my lender had mentioned this when I recently spoke to him in regards to FHA vs. Masshousing "

Mass housing has no PMI BUT the rates are much higher..  They build the  PMI into the interest rate..  It is less money down at 3% as opposed to  FHA..  FHA is great for lower credit score buyers and is much more  lenient in regards to debt  to income ratios.."

Willie Mandrell · Answer

@Avery Heilbron the programs are pretty similar.. the only downside I can think of is that bc MassHousing is a state program, not all lenders may do it.  So you might have to shop around a bit.  If you are looking at getting into condo associations, there might be restrictions around financing as well, but that would be at the discretion of each association.  Apart from that and the required PMI with FHA, I don't see any other drawbacks.  But I would open it up to the BP community to hear other opinions.

Oye Dosumu · Answer

Account Closed, I am in the same predicament. I can afford places around 700, but its tough to find something that works here. However, saving is definitely not the best idea. Put your money to work now 0 thats the best way forward. And yes, there are some great deals in lynn if you are willing to live with the commute.

Cheers!

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