Renting vs. Buy a Condo.?

Question

My fiance and I are paying $715 for rent on our apt. We are in St. Louis, MO. We have been in apartments for the past 2 years and dont want to keep wasting money on them.

We found a nicer condo that is way bigger than our apt and would be fine even if we had kids. It is everything we wanted in a house but an advantage of no large yard and outside repairs are covered by the condo complex owners.

The condo of course needs work like repainting the rooms, getting new bathroom cabinets and living room carpeting. I would take a guess and with insurance, mortgage and fees...we'd pay like $1200 to $1300 a month for it. Yes it is much more expensive than the apt....but it is bigger and it's in the location we want and everything. It has 3 bedrooms and 3 bathrooms.

We dont wanna rush into something we cant afford, but it is either now or next year to buy. I just see the higher payment, yet you get equity with a condo not an apt. Is it worth the extra money per month to own?

We would also be a first time home buyer. I'm worried about the responsibility of owning instead of renting. But u can get the repairs figured into your loan for the condo, so... We hate wasting that $715 we pay monthly for another year and get nothing out of it.

My dad says we are rushing into it. We are young and getting married next year. But he is the one would told us that renting is worse than buying.

We dont want to get caught with a mortage and fees that we cant afford. Renting just seems so much cheaper.

The $1300 a month figure listed above for the approx. monthly payment is including mortgage payment, condo insurance, condo upkeep fee and property taxes

It just seems like everything we want. It would be big enough for us to have kids and still have plenty of room too. We dont want to have to move 4 to 5 yrs from now because we ran out of room again.

My dad keeps saying we need a garage. Why? We dont have new cars and we dont plan on buying new ones...we aren't so concered about scraping windows in the winter like he is. Either scrape windows in winter or mow a lawn every week in the summer. We pick the scraping.

Answer 1

I bought a Condo in 2003. It costs me less than an appartment of smaller size but it's farther out of town. As you know the bulk of your mortgage payment becomes an investment in your owned property. What may not occur to you is that once your through escrow your rent doesn't increase. Home owner's dues will rise or fall slightly and your property tax will shift slightly but your home will cost you nearly the same in 20 years as the day you bought it. Overnight I went from no credit to getting offerred platnum cards. I refinanced this year and bought a new car outright paying 4% interrest rather than the 11-14% car dealerships wanted. I Opted for this rather than getting a line of credit to start my own business which my Mortgage comany was eager to do. Each of my Tax Returns since then have been extremely large as I deduct the interrest payments on my loan. I'm considderring buying a second condo. If I rent this one for two years I can deduct all of the home improvements as rental improvements.
I have never regretted buying.
Do some research into the resale value of the condos in the unit. Look at schools and utilities and all things you'll want to know are there if you never move again. Find an excellent housing inspector to look at your prospective property and really sit down and talk with him about the review. I ignored a few things my inspector mentioned and found out I had some hidden expenses.

Answer 2

The key is to buy smart. Either buy the 1st condo in the development for dirt cheap (always the best deal) or don't buy new. Buy a newer one (less than 10 years old) with low association dues and for a cheap price. Maybe it's not the best looking condo in the complex, but a little paint and deoration that costs $500 is worth the $10,000 lower price, right?.

Buy low and consider a single family home. Can you buy a single family home for more with only a slightly higher payment because there are no dues? Condos don't appreciate as fast but are great for some people. I saw a 59% return when I sold my condo after 3 years but I got a great deal and lucked out with the timing. That same condo hasn't appreciated more than 7% in the past 4+ years so make sure you are buying in the right place at the right time. I bought a home for a good price and I've seen only 35% appreciation in 4 years but the market has cooled a lot so that's not half bad right now and I love my new home.

You'll feel good about it when you find it. I found that condo the day it came on the market and there were 6 offers on it. Go to realtor.com and search EVERY day and when you find the right property, don't let it slip away because it will go fast if it's a steal.

Don't listen to your dad. If you love your fiance and KNOW it's going to work out, go for it. I bought my condo 3 months before I tied the knot and I have no regrets.

Answer 3

Owning is usually better, but consider the fact that you lose flexibility when you own. What if you want to move to a different city, and the real estate market is soft?

If you're fairly certain you'll be in the same city for the next 2 or 3 years, then I'd consider buying.

One other thought: consider a 15-year mortgage. The extra payment may seem like a lot (say, another $200-300/month), but when you consider the extra principal you'll pay off over a period of even 2 or 3 years, it's a pretty good deal.

Answer 4

The plus side of buying is that you build equity. That is the difference between what you initially paid for the property and what you can sell it for. Also there is a tax deduction for interest and real estate taxes. Also, you can make any changes you want to the interior since you own it. If you get a fixed rate mortgage, your payments will pretty much stay the same year after year.

The bad part is you are responsible for all repairs to your unit and if the real estate market in your area crashes, it can be a negative asset.

Since you like the area, plan to stay for a long while and it is suitable for a family, I would say go for it. You probably won't regret your decision.

Answer 5

the problem with buying a condo is that there are often condo fees on top of your mortgage. and they are not fixed. if they decide they need a new roof the fees can go up. so you are not stable.

i would recommend waiting a while until you have a larger down payment. the larger the down payment the smaller your monthly payments. and maybe you will find something that requires few 'fixes' sounds like a lot of work to me.

short term there are advantages to renting. you don't have to worry about the repairs. you can just walk away when you have had enough. and if the neighourhood changes you can just move.

i agree with your dad. dnt rush into things and get in over your head.

Answer 6

Buy vs. Rent.

As housing market slump, it is easier to calculate "Rent vs. Buy" scenario. Because "appreciation" is no longer a factor.

Mortgage payment consists of two parts: interests and principal. Interests are like rent, which doesn't add to the equity to your house. It simply disappear as your pay it.

If interests portion of the mortgage payment is roughly equal to rent of equivalent property, then it is a decent buy.

For example, let's buy a $500,000 condo with 0% down and apply interests only loan (just like renting a place). Mortgage payment would be $3250/month. It is a bad buy, because you can enjoy same property for $2000/month.

Please note that I assume the tax benefits from home cancel out fees from home association and property tax. For more accurate calculation, consult with your CPA or accountant. But NOT your realtor, whom will say anything to get the deal to go through.

And again, if you like a particular property, then paying more may be reasonable. You are the only person who can decide how much more premium you are willing to pay.

Answer 7

The mere fact that you felt the need to post this question leads me to side with your father: you are moving to fast.
If you have the slightest concern over your impeding decision, then you wait until you are 100% certain of your stance.
You are getting married soon, you likely a young couple, give it some time.
Also, you do not need a "new" car to quantify having a garage.
As you live where it snows, that is a pretty compelling argument already for having a garage.
On a more personal note, I view condos as nothing more than glorified apartments.
Do you think your children would rather play in their own yard, on in the professionally maintained parking lot the condo provides?

Answer 8

First of all why you do not get married.It is better if you are married.Inislamic teaching ,sorry I tell you that you are both making an adultery for 2 years .You have a big sin Please ask for forgiveness from our God Almighty.
Think your expenditures for getting a condo should be separated between routine monthly expenditure for expenses such as fee,electricity and so on ,water and a capital expenditure for the acquisition of getting new cabinets and carpeting. etc.You must separate it too for the annual payment of expenses such as
insurance premium ant property taxes.Besides that you must pay for monthly interest and instalment of your mortgage.
Your monthly expenses should be calculated for a year by multifying it with 12 and then add it with the amount of the annual payment expensesThe total of those amounts, should be compared with your rent expenses annually.After that you can decide which one is lower.Interest and installment can be considered as a capital expenditure for getting a condo.You have no enough money for paying it in cash,so you have a mortgage and you should pay monthly interest as its consequences.Having a condo is better than always renting a condo or apatrment.Renting is a losing money after you have finisher your terms,but buying a condo if you are dislike it,you can sell it to other and you will get your money back.And due to inflation your money will be bigger than you had historically paid for it..You car can be park in the parking lots or parh in front of your condo

Answer 9

You said you are getting married?
Do not buy a house for the first 3- 5 years . Spend the time on getting debt free and being newly wed. there is nothing worse than spending weekend fixing house yard spending money or credit charging on something you will sell at first job change. Get moneey in the bank before buying. Never buy a 80%/20% loan The Bank WINs you lose Do your money homework.Learn.
visit www.daveramsey.com

Answer 10

Listen to your Dad! Owning is fine, but it's not just the payment, consider the contents insurance, the monthly fees, the utilities, upkeep and property taxes. If you can afford all that - go for it. Go online, there are mortgage calculators available to calculate what you can afford as well as what your payment would be. Good luck!