A few things to consider. First the bad. Inspections miss things and distressed homes are risky. The amount for repairs could run up to as much as you originally paid for the house. Also, that is something that has to be paid either at the beginning as part of the mortgage, or out of pocket when something breaks. (Recall, if you will, the plumbing exploding at Lisa and JD's house less than a year after they moved in). Second, there is always the possibility that 4+ years down the line, it will continue to be difficult to sell the house when you are ready to move on. That, of course, is a risk that any home buyer takes
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When you say distressed homes are "risky", do you mean financially or in terms of condition and repair? Repairwise, I suppose someone who slipped into default on their mortgage is perhaps more likely to also neglect major repairs on their house, but the truth is any house you buy could have unknown or unexpected problems, even in a normal sale.
Financially, I'm not fully educated on the consequences to the buyer of purchasing a foreclosed home; the only thing that comes to mind is that the title might not be clear (which apparently happens in a lot of normal sales, too, usually due to something minor like a missing signature on some old document). With foreclosures, you might have to evict the now-former owners, but with REO and HUD I assume that would already have been taken care of. As far as I know the foreclosure only continues to affect the previous owner, not the house or its new buyer.
Additionally, with regular sales you can make on offer conditional on certain repairs being made. With foreclosures and short sales they are often so as-is.
I'm going to start off my saying that I think my decision to buy a house was a mistake. So know that I'm going to be very wary telling anyone else to do it, and I'll tell you why
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I'll go ahead and ask the obvious question... feel free to give me the obvious answer if I'm just out of the loop.
Why not get a roommate?
Running some naïve numbers, if you had 1 roommate and charged them a mere $425/mo (half of the mortgage payments, or a third of the total monthly payments (was the homeowners' association fee monthly or annual?)), you could save it and use it to make the repairs you need to make in just three months. Or, you could put it towards the mortgage and work on getting rid of the mortgage insurance.
With the going rates for rentals in Atlanta, you could probably ask for quite a bit more. Even though they'd be a roommate and sharing the living space with you, with such a large house a higher rate would still be justifiable.
So, the basic answer is I have a bad history of roommates and just don't want one. I like me space the way it is, and I don't like other people in it. Additionally, the second bedroom is the part of the house that I use the most, and the third is not large enough to be livable for a person, but I'll freely admit that is not the best excuse. And yeah, I could build up some savings in a few months, but most agreements are more long term and I wouldn't want to misrepresent my intentions to anyone planning to move in with me. I'm working on budgeting a little more closely, and I quit school, and for now I'm hoping to get a little savings going on that
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I am very far from a qualified person to ask about this because I believe that real estate is a system of control that the rich use to oppress the majority of the population. But I think that about everything except slurpees. mmm, slurpee
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Just to double-check your meaning. If all the costs of renting is cheaper on a monthly basis than all the costs of home ownership, then it would be better to rent and invest the difference. That is the main argument against buying a home. Assuming that Peter has calculated his home ownership costs correctly however, the monthly cost is less than he is currently paying. At which point, not only can he invest the difference, but he is also building equity in the house. Does this not make more sense in a financial sense?
Yeah, totally. It's just that traditionally (factoring in all the work and repairs), renting is cheaper. If he's estimated properly and buying's cheaper, more power to him. (Hearing stories like Catie's makes me think that even smart people tend to not estimate properly)
It's not that I didn't estimate properly. I knew going in exactly how much I would be spending on my house, and to me it seemed worth it. Honestly, it still does. What I did not expect was lots and lots of money for repairs and customizations, and the stress of having no savings should an immediate need arise. Let me clarify what I said earlier: I do not think buying a house is a mistake; I think buying a house with no money in reserve to take care of incidentals that arise was a mistake.
Also, the guys I bought my place from had been living in New York and renting it out for years. Most of the major stuff is okay, but lots of wear and tear cost them some piece of $50K in the end (the other part being an overestimation of its value).
I just helped a friend buy a house, and one other thing to take into consideration is the mortgage tax credit. Depending on exact circumstances this can range from lowering your tax responsibility a little to a lot
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Financially, I'm not fully educated on the consequences to the buyer of purchasing a foreclosed home; the only thing that comes to mind is that the title might not be clear (which apparently happens in a lot of normal sales, too, usually due to something minor like a missing signature on some old document). With foreclosures, you might have to evict the now-former owners, but with REO and HUD I assume that would already have been taken care of. As far as I know the foreclosure only continues to affect the previous owner, not the house or its new buyer.
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Why not get a roommate?
Running some naïve numbers, if you had 1 roommate and charged them a mere $425/mo (half of the mortgage payments, or a third of the total monthly payments (was the homeowners' association fee monthly or annual?)), you could save it and use it to make the repairs you need to make in just three months. Or, you could put it towards the mortgage and work on getting rid of the mortgage insurance.
With the going rates for rentals in Atlanta, you could probably ask for quite a bit more. Even though they'd be a roommate and sharing the living space with you, with such a large house a higher rate would still be justifiable.
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Also, the guys I bought my place from had been living in New York and renting it out for years. Most of the major stuff is okay, but lots of wear and tear cost them some piece of $50K in the end (the other part being an overestimation of its value).
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