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Should I buy or rent given my financial situation?
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housingprospects2
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PostPosted: Mon Jan 20, 2014 4:59 pm GMT    Post subject: Should I buy or rent given my financial situation? Reply with quote

Hi Everyone,

I originally posted 3 years ago with this very question. I decided to continue to rent then but in hindsight, I should have definitely bought... I didn't think things would shoot up so quickly. The market has run up significantly in 2011, 2012, and 2013.
http://www.bostonbubble.com/forums/viewtopic.php?t=3363

I am back to the same question now, should I rent or should I buy? My financial picture has changed for the better much more so than I thought it would. The last 3 years the job market for software engineers has gotten extremely hot so I have benefited from that. But at the same time, the property market has gotten just as hot so my buying power has stayed flat or maybe even declined in terms of what I can get for the money.

My financial picture:

currently renting w/ girlfriend at 1700/month
30 years old
125k salary w/ 15% bonus. My comp should be somewhere in the ballpark of 140k for 2014
200k in liquid assets in taxable accounts (stocks, cash, bonds)
70k in 401k

My price range is 500k max. Last spring I looked at a few nice places in this range but they were quickly taken. Right now places that I like are priced in the 600-700 range and that is way out of my price range.
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admin
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Joined: 14 Jul 2005
Posts: 1788
Location: Greater Boston

PostPosted: Mon Jan 20, 2014 6:26 pm GMT    Post subject: Reply with quote

What advantage(s) do you expect from buying? I think others pointed out many of the disadvantages last time, so I won't rehash those now. It might also help you make your decision if you go to a few open houses. I'm trying to buy now myself, and the available inventory is abysmal to the point that I think seeing it in person may put your mind at ease about continuing to rent. I'll echo CL's advice from last time: continue renting until you're ready to start a family and stay put in one place for 10+ years. Buying will get you permanence, which might be an advantage if you have a family, but which can actually be a disadvantage otherwise.

- admin
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showgunx



Joined: 14 Jul 2005
Posts: 60

PostPosted: Wed Feb 12, 2014 5:00 pm GMT    Post subject: Reply with quote

Quote:
currently renting w/ girlfriend at 1700/month


Your problem obviously is not about money, your income can get you into $700,000+ home without any issue. And in general you should expect to pay more than $1700 if you are buying in the close by location where you rent.
I guess the decisive question for you is, with the extra money you are paying , are you getting the relative amount of extra benefit. Such as more space, extra parking, better environment, better way to retain capital etc. If you feel like the extra you are paying is totally worth it, then go for it, otherwise, keep renting.

Just curious, what 1700 rent get you these days? 2 beds condo with parking in the city? or Some shitty basement near T?
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balor123



Joined: 08 Mar 2008
Posts: 1204

PostPosted: Thu Feb 13, 2014 4:26 pm GMT    Post subject: Reply with quote

I recently bought a home. It's brand new and relatively cheap (not in the NE). I'll echo the statement of others here. Why are you looking to buy?

- You want stability? You can get that from renting. Look for a place that's managed by a large company. Equity Residential or Avalon come to mind. They'll never kick you out.

- You want to save money? I could write a whole book (and might) about why buying is at least not cheaper than renting on average, especially in Boston.

- You want a giant mansion with lots of space? All things being equal, space is nice up to a point. You can get more happiness bang for your buck in other places.

Few places come to mind that provide exceptional value inside the 95 belt:
- Longviewplace in Waltham. 3br in Waltham for about $3k/mo
- The Brook House in Brookline. 3br in Brookline for about $4.5k/mo
- Avalon at Chestnut Hill. 3br inb Newton for about $3.5k/mo

I could never find anything decent to rent in Lexington, Arlington, Belmont, or Wellesley. You can commute easily from these towns though.
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New in NE
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PostPosted: Thu Feb 13, 2014 7:07 pm GMT    Post subject: Reply with quote

Baloro 123

Those rents are not any cheaper than monthly mortgage+tax in those towns or even Lexington and Arlington.
I can easily find 3br/2bths SFR with 3.5 to4.5k monthly (mortagage+tax and may be utility) so why rent? if rent is 2 to 2.5k then may be I will rent.

Note Avalon is also available in Lexington at two different locations.
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PostPosted: Fri Feb 14, 2014 4:36 am GMT    Post subject: Reply with quote

balor123 wrote:
I recently bought a home. It's brand new and relatively cheap (not in the NE). I'll echo the statement of others here. Why are you looking to buy?

- You want stability? You can get that from renting. Look for a place that's managed by a large company. Equity Residential or Avalon come to mind. They'll never kick you out.

- You want to save money? I could write a whole book (and might) about why buying is at least not cheaper than renting on average, especially in Boston.

- You want a giant mansion with lots of space? All things being equal, space is nice up to a point. You can get more happiness bang for your buck in other places.

Few places come to mind that provide exceptional value inside the 95 belt:
- Longviewplace in Waltham. 3br in Waltham for about $3k/mo
- The Brook House in Brookline. 3br in Brookline for about $4.5k/mo
- Avalon at Chestnut Hill. 3br inb Newton for about $3.5k/mo

I could never find anything decent to rent in Lexington, Arlington, Belmont, or Wellesley. You can commute easily from these towns though.


Those apartments you mentioned are considered "luxury" rentals. To be honest, they are way out of my price range and while the income I make sounds good to some, its no where close to being able to afford that. I'm only making around 7000 a month so why would I want to spend half of it on rent? Right now I split the rent with my girlfriend so I'm really paying only 1000. I'd feel comfortable paying 2300 a month MAX for my living situation.
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balor123



Joined: 08 Mar 2008
Posts: 1204

PostPosted: Sun Feb 16, 2014 6:50 pm GMT    Post subject: Reply with quote

Few points:
- There's a big difference between $3.5k and $4.5k
- There's a big difference between $4.5k in Brookline and $4.5k in Lexington
- Yes these are luxury rentals and that's why I called them good values. You can certainly do much cheaper. Winsor Village in Waltham is nice but a step lower in quality. A 3br townhome there is about $2k/mo right now.
- Yes there are two Avalons in Arlington. Not terribly cheap or expensive as I recall and they provide great customer service.
- If you have a predisposition to buying, then go ahead and buy. My point is that it's likely not saving you money and I'd still argue that they cost more. Basically, you pay a large premium for owning a SFH relative to a large MFH complex in MA. I'm not even sure that renting is profitable except at the very low end of the quality spectrum.

Some advantages to renting:
- You can cheaply scale up or down size. You don't have to overbuy now or underbuy later.
- Finishings have a lifetime of about 10 years. You wouldn't rent an apartment that's not remodeled and you need to factor in the cost of remodeling your place every 10 years. I told my Realtor we don't like our finishings and he tells us we should move out for a few months and spend $70k changing it out at this point (+$10k for rental in mean time!). That's over 3 years in rent (no, I won't do it)!
- Houses come with unexpected costs and they can be very large. There is little risk to estimating the cost of a rental.
- Rentals come with amenities you'd have to pay for in a house. Longviewplace provided covered parking, a nice gym, landscaping, snow removal, community activities, pool/poker table, media and event rooms, hot water, and heat/cooling all in rent (when I was there). We even got them to through in a storage unit for next to nothing at one point ($25/mo I think). Meanwhile, my friends with houses report paying up to $1k/mo for heating in the winter cause they're homes are so old they're basically living outdoors.
- You need to factor in opportunity cost in downpayment on home.
- Rentals take little to none of your time. Your time costs money and at those prices, a lot of it.
- Old homes gross me out. They're dusty, moldy, dirty, smelly, and generally lacking in functionality. MA seems hell bent on ensuring that anything new is either for upper class or renting. On occasion you can find a new construction townhome but they still aren't great due to reasons above.

There are some people who do better owning but on the whole without being able to tell who those people are, I think renting makes the most sense for most people and the advantage is most pronounced in places like MA.
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balor123



Joined: 08 Mar 2008
Posts: 1204

PostPosted: Sun Feb 16, 2014 6:53 pm GMT    Post subject: Reply with quote

Ok some embarassing typos in there. Sometimes I wish we had an edit button Smile
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Former Arlingtonian



Joined: 23 Oct 2013
Posts: 141

PostPosted: Fri Feb 21, 2014 3:45 am GMT    Post subject: Be happy you didn't buy Reply with quote

First consider why has real estate shot up so far in the last 24 months......
The United States is in the worst financial crisis since the 1930s and the Federal Reserve has engineered ultra low rates.

We got into this mess with too much Debt and now everyone things we are recovering because people have even more debt than ever.

The 30 something crowd often thinks that we are out of the woods, then why is the Federal Reserve having trouble tapering.

Be happy to rent, get some exposure to Gold (paper or physical) 5-15%, investigate a Canadian Bank account for some of your cash, and read about protecting your nest egg from inflation.

You'll be very happy you didn't buy in a couple of years.....30 year mortgages hit 3.2 these rates have been insane......is no one else worried about where we are today.
U-6 unemployment is 12-13% - any one who says the economy is improving can read financials.
Is Tesla really worth 30% of the market value of GM?
Facebook spent $19 Billion on an App company!
We live in financially challenging times.
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balor123



Joined: 08 Mar 2008
Posts: 1204

PostPosted: Fri Feb 21, 2014 5:00 am GMT    Post subject: Reply with quote

Gold has been decimated this year, no? Maybe that's a good indication it's time to buy, though I just read that by historical standards it's still expensive relative to mining company costs. Perhaps they're a safer bet.
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Former Arlingtonian



Joined: 23 Oct 2013
Posts: 141

PostPosted: Fri Feb 21, 2014 12:19 pm GMT    Post subject: It was a tough year for Gold - the Fed causes imbalances Reply with quote

Balor,

Miners might do better than Gold - but, Gold never goes to zero - it always retains value.

I hate to write people should buy miners in place of gold - then the folks who read this find the 3-4 miners they bought went out of business or had mining collapse.

People lose sight all residential housing in United States is worth approximately $19 trillion and the Federal Reserve has been buying bonds/printing money at a rate equal to 5% of all residential real estate in USA (this includes paid off properties).

Taper gets announced and we have financial chaos in the emerging markets....take a look at what happened in Turkey or Brazil. Imagine how many people in Turkey or Brazil wished they owned a little Gold as the value of their savings is crashing.

Yes, we are in a world wide financial crisis and don't let some real estate development in Lexington, Needham, Somerville, take your eye off of the crisis the world is in.
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Former Arlingtonian



Joined: 23 Oct 2013
Posts: 141

PostPosted: Fri Feb 21, 2014 1:33 pm GMT    Post subject: Follow up Central Banks for Industrialized Countries -Gold Reply with quote

Balor,

Number one reason to hold a little Gold is all the major Central Banks for Industrialized nations own Gold - lots of it.

http://www.businessinsider.com/countries-with-largest-gold-reserves-2013-12?op=1
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Boston ITer



Joined: 11 Jan 2010
Posts: 269

PostPosted: Sat Feb 22, 2014 5:33 am GMT    Post subject: Reply with quote

It's been a century since I've been on this board.

First of all, Balor, why are you still posting here? Aren't you in the Texas Triangle, happily living a better life than us Yanks, up north? BTW, congratulations on that Smile

As for gold, what a lot of ppl don't realize, is that the original Gold bubble, from mid-78 to 80, where the price spiked from $190/oz to $850/oz, was a one time 400% to 500% run-up phenomena, not too disparate from Nasdaq 5K event in 2000. When the price of gold crashed back then, it never hit $190/oz, pre-parabolic price, ever again. And that for me, tells me something. Basically, gold was on a bullish trend but then, a short term speculative mania, squelched that bull run, for another two decades, when the US pursued excess quantitative easing.
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Former Arlingtonian



Joined: 23 Oct 2013
Posts: 141

PostPosted: Sat Feb 22, 2014 1:00 pm GMT    Post subject: Gold and what makes it move Reply with quote

Boston ITer,
First you do understand what set Gold off in August 15 1971.

President Nixon 'closed the gold window' for the settlement of international trade. President Nixon was spending a lot of money on a war in Vietnam and the bill for President Lyndon Johnson 'New Society' legislation was going parabolic.
Here is the video of President Nixon promising a prosperous 1970s would result from his closing the Gold window: http://www.youtube.com/watch?v=iRzr1QU6K1o

Gold takes off as inflation is taking off. The Federal Reserve starts to raise interest rates to combat inflation and that finished Gold. There were investors who shifted their Gold investment from Gold to Bonds as interest rates were peaking. It was Paul Volker who raised interest rates to the mid teens to kill inflation, the side effect was killing the economy short term.
Imagine how well the smart investors did who own some Gold and converted their Gold to long term bonds as interest rates rose.

The Federal Reserve has told us that they plan to keep interest rates low, as the money base expands the future buying power of your money declines.

When you can get 5-6% or more interest on your savings it is the time to get out of Gold. But, when your choices are to place your money in the stock market or real estate 0r 1% return from your bank then you need to own a little Gold.

If Gold is not an safe investable asset why do all major central banks and the IMF own a lot of gold.

I respectfully disagree with you uninformed view on Gold.

kind regards.
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Boston ITer



Joined: 11 Jan 2010
Posts: 269

PostPosted: Sat Feb 22, 2014 11:24 pm GMT    Post subject: Re: Gold and what makes it move Reply with quote

Former Arlingtonian wrote:
Boston ITer,
First you do understand what set Gold off in August 15 1971.

President Nixon 'closed the gold window' for the settlement of international trade.

[ snipped ]

Gold takes off as inflation is taking off. The Federal Reserve starts to raise interest rates to combat inflation and that finished Gold. There were investors who shifted their Gold investment from Gold to Bonds as interest rates were peaking. It was Paul Volker who raised interest rates to the mid teens to kill inflation, the side effect was killing the economy short term.

Imagine how well the smart investors did who own some Gold and converted their Gold to long term bonds as interest rates rose.

The Federal Reserve has told us that they plan to keep interest rates low, as the money base expands the future buying power of your money declines.

When you can get 5-6% or more interest on your savings it is the time to get out of Gold. But, when your choices are to place your money in the stock market or real estate 0r 1% return from your bank then you need to own a little Gold.

If Gold is not an safe investable asset why do all major central banks and the IMF own a lot of gold.

I respectfully disagree with you uninformed view on Gold.

kind regards.


Hold it, when did I say that Gold was not a good asset to have? In fact, I'm actually arguing pro-Gold, using an askance approach.

When Nixon removed the gold intra-convertibility window, it became a bullish asset immediately. A lot of ppl don't know that. They think that Gold went into speculation mode, peaking at $850/oz, not knowing that that that phase was the final 1.5 years, '78 to '80. From '71 till mid-'78, Gold rose from $35/oz to $190/oz, with corrections along the path, mapping the entire era of stagflation, energy crisis, & so forth.

Even when high interest rates were restored, along with the correction of oil prices, Gold never hit $190/oz, ever again, throughout the bear market which followed in the 80s. If that's not a retention of intrinsic value, then I don't know what is.

And thus, until something similar here, like limiting QE, Gold will continue to have support, though perhaps, not as strong as before.
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