Okay, so you just got your first real job out of a college and are ready to move out of your parents house or move out of the place your currently living in roomates. Many people face the conundrum of whether to buy or rent?
Sure there's a million different articles on the internet as well as websites with calculators where you can enter figures in and see whether it makes more sense financially to buy or to rent but in this article I'm going to be talking about my experience as a Young Professional in my early twenties and buying a home. I'm going to tell you about what I liked about it as well as what I disliked about it as well as discuss other intangibles that you should consider if your wrestling with the decision of whether to buy or whether to rent.
I was a few years out of college in my mid twenties and was living with my parents. I had been holding off on renting or buying my old place as the job I was working out of college was a great job in my industry and I was paid well, however it was a contract position and I wasn't comfortable taking on the commitment of a 30 year mortgage when I had a secure job for only 3 months at a time. Well after the economy took a nosedive my contract wasn't renewed and I was out some time before finding a stable job. About a year and a half into my new job I had considered moving out and either renting an apartment or buying a condo, townhome, or single family home. After finally getting sick of living at home and not wanting to "throw rent money away" I decided to look into buying a place.
I had first considered condos due to a lower price point as well as less maintenance. What turned me off however was the high association fees. At least mortgage interest is tax deductable, however association fees or dues are not so though you often do get things for that money such as a gym and property maintenance essentially that is money that is completely lost.
Now part of my problem was I was looking at poorly run buildings where there were a lot of shortsales and foreclosures and due to this fees had increased as less people were paying into them. Don't get me wrong some condo communities give many ameneties for the price. One for example in my area has a free daily breakfast, free shuttle to the train station, boat rentals, free skiing, all types of events for young people and singles. All this for about $300. Other condos however were charging upwards of $400 for a dated mediocre property with no amendities aside from a tennis court with chipped concrete, certainly not worth that $400.
Eventually I shied away from condos in favor or either a Single Family Home or a Townhome. One other thing that tilted my decision, though I believe real estate should be looked at as a place to live and not an investment, especially following the housing crisis, I still think future value should play some role in deciding on a property and condos tend to appreciate at a lower rate than single family homes and townhomes. I also liked the idea of having my own yard for my dogs, to have people over for BBQ's, things like that.
Then I wrestled with the option of Single Family Home versus a Townhome or Duplex. I was finding single family homes out of my price range so I opted for a Duplex or Townhome.
After finally narrowing it down to a Townhome or Duplex I was faced with another question. Do I buy one with an association or no association? I decided I wanted no association as A. I didn't want to pay someone to cut my postage stamp size yard and shovel my one car driveway, something I could easily do myself. I also didn't want my hands tied by crazy rules as we have all heard so many horror stories about no satellite dishes allowed, fines for all types of things. Not being able to park your own car in your own driveway, etc.
I opted to go with no association. I looked in a neighborhood of Duplexes with no association and eventually bought one. Let me briefly digress to tell you I really wish I would have opted for an association for several reasons. Sure some associations have very high fees with very little you get for your money, however oftentimes duplexes and townhomes association dues are only about $100-$150 each month. Depending on the assocation what's covered can vary but generally they do your landscaping and lawncare as well as snow removal in the winter if you live in an area with snow. This may not seem like much and it may even seem a lot to pay to mow a small yard for example but I really wish I had opted to have this covered.
Though my lawn is small and doesn't take that long to cut, you don't think about all the tools and expenses that go along with having a lawn. You have to have a lawnmower which costs a few hundred dollars, you need gas and oil for that lawnmower as well as Spring and Fall maintenance on it. You have to buy mulch, paving stones, fertilizer, shovels, sprinklers, hoses, etc. All this stuff begins to add up. Also, though you may think you can handle the work on this relatively small yard just fine, keep in mind your a young person, you probably like to be out with friends on the weekend, having fun, traveling, and probably don't want to spend your time in your yard doing yardwork, even if it is a relatively small amount of yardwork.
The biggest factor in my opinion however in terms of why to choose an association is exterior maintenance. With most associations in townhome or duplex communities part of the dues go to a fund to pay for exterior maintenance on all the properties. If for example you need a new roof over time, or new siding, with an association generally that's covered with no fees to you,however without an association that stuff ads up to big money. Also, even something like damage to a roof or siding in a storm without an association that's on you to repair, with an association not only is the money covered by them but they hire the workers and take care of the whole shebang leaving nothing for you to do which is also a bonus.
Looking back I wish I would have opted for a place with an association because although it may feel to you as if your throwing away money, if you find a place with reasonable association dues or fees and you actually get a good amount of maintenance and insurance for that fee, it will save you time and money in the long run.
Well, I just wanted to briefly touch on my experience in choosing between a Condo, Duplex/Townhome, and Single Family home as well as my thoughts looking back on that decision as well as the decision to go with an assocaition versus without an association another thing I wanted to touch on was just the experience of being a young person owning a home.
There are definately positives to it. I enjoy having a home, it's something I take pride in, I enjoy having people over to my home and entertaining friends which as a young person can save money over going to the bars. It's fun having your buddies over on a Sunday for some beers and food and to watch a game. It's fun having a place to invite a lady over for dinner. It's nice owning your own place and not having landlords check up on you.
There are also downsides to owning a home though. It's a big responsibility. You essentially have a large bill you owe for the next 30 years. As a young person you may want the flexibility to move to a new city for a job. Not that you can't do that with a home but it complicates things as you now have to sell your home or rent your home before you move.
Owning a home also somewhat locks you into a job. They say now days people change not just jobs but entire careers something like 6-8 times over their grownup working life. When you have a mortgage your are somewhat tied down to your job as you need a steady paycheck. Without a home if you want to explore a new career or even just find a new job your pretty much free to hop around. You probably have the ability to either move back in with family temporarily or crash on a friends couch for cheap rent. When you have a home however you really need a steady paycheck so switching jobs or careers is more difficult as well.
Back to some of the plus sides. As a young person you tend to have a lot of friends and associate with a lot of people. It's still socially acceptable to have roomates in your twenties and even early thirties and maybe you have friends looking for a place to live. This happenned to me and I wound up having two buddies move in with me. This was fun as not only was I able to have my friends as roomates but I was able to offer them rent cheaper than they could find elsewhere all the while they were paying my entire mortgage for me leaving only utitlies and insurance for me to pay.
I wound up having two buddies live with my for about 3 years and over the course of that time had my mortgage paid by them my entire time allowing me to either overpay on my mortgage and knock down the principal, or put money away into savings.
Currently I'm renting the home out and looking to purchase another property to live in while keeping that property as a rental property.
Though there are downsides to owning a home, especially to owning a home at such a young age, there are definately positives as well and overall I am happy with my decision. Were I faced with this decision to rent or own again I would choose to rent again. A few changes I would make I may have opted for a Condo over a Duplex. Sure it's great to have a yard but it's also a lot of work and oftentimes if you find a good one condos can come with some fun amenedies such as pools, workout centers, business centers, etc. Were I to choose between an association or no association I would definately opt for an association providing I found one that covered lawncare, exterior maintenance and insurance for a decent price.
If your considering purchasing your first place and are wresting with the decision to rent vs. own as well as what type of place to buy leave a comment below.
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