| Should I rent even though I could buy? What should I do? |
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cjh1148
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| Should I rent even though I could buy? What should I do? |
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Alright, I desperately need advice. Please weigh everything and tell me what you think:
I am currently a 26 year old who works part-time as tech in a hospital (get about 440 every two wks) and after this Summer I will be in my second year of nursing school before I'll be an RN.
Alright, I don't have much money coming in (as you can see). I currently live at home but this is about to change since my Mom has been forced to sell her house. Heres the curve ball...when my Grandma recently died I was very blessed to recieve a good chunk of money. Half is invested and the other is in the bank. Currently my value is 65 thousand and change. It should be over 70 but the market has taken some. My brother is a financial advisor and I'm trusting him to take care of this. Anyways, I have this money and I could easily put a down payment on a home. Another curve ball: I don't want to to live in Springfield, Ohio, but this is where I go to school and where I work. If I were to live anywhere in Ohio than it would most definately be in Columbus which is a hour drive and not where I go to school or where I have my part-time job. The part-time job is kind of a big deal because it means I have my foot in the door at this hospital and its very likely that I'll have a job waiting for me after I graduate (but jesus do I hate Springfield, did I tell you that?). Another reason for me to possibly get a place in Columbus is I think I want to get my BSN and go to grad. school at Ohio State. I wasn't going to say this but there is also a flounder of an idea in my head of some day living by the beach (which of course would sway me to save the money and rent for a year to give me more time thinking what I want to do) but that dream/goal can probably wait, but I dont know.
What would you do? Rent a studeo for 400-500 a month for a year (and lose 6-7 grand) in Springfield and than decide what to do? or buy a house and commute an hour to school and work for a year (lot of gas money/kind of a hassle).
PLEASE HELP. I am very conflicted about this. I do not know what to do. I keep going back and forth and back and forth.
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Thu Jun 28, 2012 11:46 pm |
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oldguy
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Well, you can't buy a house with the $11,000/yr income, no lender can authorize the loan - so that's out. Sorry 
But renting a $500/m studio may also be dicey - that would take half of your income. You would not have enough money for food, clothes, books, and tuition. Can you move with your mom to her new place?
A word about the $65,000. On average it takes lottery winners, heirs, legal settlements, trusts, about 7 years to blow thru the money and become broke again. In most cases they fail to keep the money in a single lump. They spend some for a used car, some for a down payment on a house, some for their education, some to pay off their credit cards, and so on. All of those things sound good at the time - but then the money is gone.
A better plan is to keep the $65,000 together and invest it where it will grow. Eg, your $65,000 invested at 11%/yr grows to $1,490,000 in 30 years. What that means is that you actually have been given the opportunity to be a millionaire at age 56 simply by NOT touching the $65,000. You can spend everything you earn - just leave the $65,000 alone & let it grow during your working life.
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Fri Jun 29, 2012 12:39 am |
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cjh1148
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Where in the world would I get a 11 percent return? Sorry, I am a 1 year old when it comes to investing. Your reply sounds rationale and of course I like the millionaire part but it sounds grandious. Any thoughts on where I would put the money for that long so it would grow that much?
-cjh1148
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Fri Jun 29, 2012 1:08 am |
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oldguy
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quote:
Any thoughts on where I would put the money for that long so it would grow that much?
I use the SP500 Index Fund. Most fund companies have it - Vanguard, Fidelity, TR Price, etc. It averaged 11.29%/yr for the 30-year period ending May 31, 2012. Here's a site.
http://politicalcalculations.blogspot.com/2006/12/sp-500-at-your-fingertips.html
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Fri Jun 29, 2012 3:08 am |
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fast
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| Re: Should I rent even though I could buy? What should I do? |
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quote:
Originally posted by cjh1148
Half is invested and the other is in the bank. Currently my value is 65 thousand and change. It should be over 70 but the market has taken some. My brother is a financial advisor and I'm trusting him to take care of this.
First, I want to say that you should seriously consider taking heed to oldguys very good advice.
It's good that you have family to turn to for financial advice, and since he's not only your brother but also a financial advisor, you may (hopefully) find yourself amidst someone that will help guide you in making your own good decisions.
I would imagine that he will make suggestions that will go to benefit you, but I hope that in his eagerness to lead you in the right direction, he does not make the fatal error that so many advisors are well known for. Most people, and for that matter, most advisors will fail (and when I say fail, I mean miserably fail) to lead others to do as good as the S&P 500 over the long term. I didn't say people won't beat the market. Many can, and many do. What I'm saying is that the vast majority won't do it over a long time frame, so it really doesn't matter how well you think someone is doing when they boast about how they beat the market. They do. They just don't do it enough. In fact, it only takes a few bad years to seriously undermine their efforts, and that's the side of the story people usually don't hear about, so be very careful about the decisions you make when you're given suggestions that deviate from the worthy goal of matching the returns of the index.
About the house. Don't do it. It's not merely a bad idea; it's a horrible idea. It will not be a blessing. It will be a curse. And no, you won't be saving money, and you won't be coming out ahead in the end. It would be like putting a young child in a car and telling him to drive to another state. There's nothing wrong with driving, but it's not something people should do until they're ready. You're not ready. In fact, even if you pay more in rent than on a mortgage (if you manage to get one), you will wind up spending more (or borrowing to spend more) than you expect. Besides, if you do it, you'll probably wind up later in the very undesirable position of being a landlord. There's nothing wrong with being one, but unless you're one by choice (and something you've planned for), then you'll be regretting the decision to buy. Wait until you're ready, and like I said, you're not.
By the way, the half in the bank isn't working for you, and until you put it somewhere where it will, you're failing to gain (some say it's losing, but there's a difference) what you could be earning had you wisely invested it.
Hope that helps.
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Fri Jun 29, 2012 4:27 am |
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ericammcoy
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Personally I think buying a house you could call your own is way better than renting, just come to think of it when you rent just like buying a house you will pay monthly but upon buying a house once the payment is finished the house is all yours.
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Sat Aug 11, 2012 6:12 am |
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littleroc02us
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Just so I can be the black sheep of the posters, let's say the worst case scenario happens. According to Bloomberg's research states that the worst 25 year period on historical return's of the S&P 500 was 8%. Well, you'd still have 960k after 35 years.
Risk comes from not knowing what you're doing. (Warren Buffet)
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Mon Aug 13, 2012 3:32 pm |
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Mreilly06
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I think it's wise to buy. As long as you can keep yourself afloat on you income, you always stand to gain your money or break even when buying. Not so when you rent. And there's just something great about having a home of your own. I say buy.
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Thu Aug 16, 2012 9:25 pm |
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robinson1983
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I think you still rent,thus if you want to buy,you should consult experts like Ed Butowsky for good Investment Property recommendation.
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Tue Aug 28, 2012 8:28 am |
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Wino
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quote:
Originally posted by Mreilly06
I think it's wise to buy. As long as you can keep yourself afloat on you income, you always stand to gain your money or break even when buying. Not so when you rent. And there's just something great about having a home of your own. I say buy.
I have to disagree here. As long as you pay a price the house is actually worth, and not some inflated value - as was paid by about 90% of the buyers over the last 10 years (1997 to 2007) before the bubble burst. Everyone was paying more than the property was worth, and then reselling later at an even more inflated price.
Which lasted until someone finally asked someone else to actually pay the bill.
And it all came a'tumbling down.
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Tue Aug 28, 2012 11:32 am |
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WisdomF
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Just consider the good points of owning vs renting a home
a. Buying or Owning
The most important advantage is that, it gives contentment or a feeling of comfort being at your home everyday. It will give you the freedom to do whatever you want or you can customize your home based on your own preference, design and security.
b. renting a home
If you do not have home mortgage, it means you do not have a long-term financial commitment. You do not have to pay any tax for renting and you have the choice not to buy insurance for tenant.
These are only few factors or advantages reason of having a roof over your head.
sorry, links to your own sites not allowed in post body
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Tue Sep 18, 2012 2:11 am |
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