Rangerjoe007
New Member
Cash: $ 0.90
Posts: 4
Joined: 05 Dec 2011
Location: MD
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I am 30 years old and I am on my third deployment overseas. My wife and I are having a baby and she is temporarily living with her mother until I get home so we could save money. My wife wants to rent so we can leave our area in a year or two if I find a better paying job since I am in the Guard and the military is not my full time job. I want to buy a foreclosure because I feel it would be a better investment than paying $1300-$2000 a month for an apartment in our area.
So my question is this, If we can put $20,000.00 down on a foreclosed townhouse going for $120,000 (down from 245,000) and I would be backed by a VA loan as well as a good credit score, Would this not be a better investment than renting? I feel it would be because I could pay down the house in a few years and if we leave for a higher paying job we can always rent the condo or sell it to someone from the military stationed at FT Meade or FT Meyers. I would rather pay $1500 a month for my own house. Especially since I feel the smaller housing trend will continue due to the costs of heating and property taxes. Environmental impact and all that stuff, yada, yada. I keep telling my wife getting a place that cheap is a great starter house and although the economy is rough for a lot of people, this is perfect timing for us. I am pre-approved so I do not have to worry about securing a loan.
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Mon Dec 05, 2011 6:25 am |
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Rangerjoe007
New Member
Cash: $ 0.90
Posts: 4
Joined: 05 Dec 2011
Location: MD
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This is in MD area where rent is expensive but the housing in the area appears to make it a better investment to buy. I plan on paying triple what my mortgage payment would be if possible. I would put more down but I plan on putting a sizable chunk into a 529 plans when my son is born. We save A lot, so much that we chose to marry at the courthouse and skip a wedding. Maybe in the future but for now we decided not to have debt.
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Mon Dec 05, 2011 7:19 am |
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oldguy
Senior Member
Cash: $ 751.85
Posts: 3656
Joined: 21 May 2006
Location: arizona
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From a pure financial view, you are thinking backwards. Mortgage interest rates are at a lifetime low. So a better plan would be to make a very low down payment and make the standard payments and keep the loan for the full 30 years. Here is why - say that you make double payments on a $1000/mon, 30-yr loan, you'll pay it off in 10 years.
But if, instead, you kept your mortgage put that extra $1000/mon into an investment at 11%/yr for 30 years you would have $2,650,000. (The power of compound interest is amazing).
As for buying foreclosures, don't get too excited about a super deal, like everything else, there is no free lunch. I buy rental houses - it has been costing between $20,000 and $30,000 to get a foreclosure ready. And it takes about 6 weeks - so that is about $2000 of lost rent for me. I do better by buying a "move in ready" house for about $25,000 more. Plus I get the entire financing covered on a 30 year single loan.
As for renting vs owning - 4 years is about the breakeven point. If you own for less than 4 years the 6% cost to buy, 6% cost to sell, eats up any profit. In your case, the buy/sell would be about $14,500. Rent is not wasted money, you are buying mobility, you can pack up & move quickly when you get new job opportunities - that freedom worth a lot until you have 'permanent' jobs.
BTW, why are you staying in the area where renta are $1300 to $2000/m?
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Mon Dec 05, 2011 3:41 pm |
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