Buying a home vs apartment renting

**kork13** · 11-16-2010, 01:42 AM

It's entirely do-able, and I plan to do the same once I have the opportunity. The biggest difficulty is the fact that in some respects, you would be managing (and paying for) two separate households, which is difficult at times even for a dual-income family to do. However, the potential benefits are real. It all relies upon finding and keeping quality renters in the investment property. If you can do that, you can often use the rental income to pay the entire mortgage/taxes/insurance and upkeep expenses for the property -- and as an investment property, that should be your goal (if not even making a marginal profit beyond that).

My first bit of advice, based on what you've said: Unless you can devote adequate (read: substantial) time to managing the investment property, the best way to go is often to hire a property management company. They typically charge ~10% of the rent as their fee, but if it's a quality company, they will ensure it stays in good repair, ensure the renters are paying as agreed (and deal with them legally if not), and should be able to keep it rented or find new renters quickly (as the case may be). Personally, if/when I do it, I'm planning to rely heavily on a management company, because I'm also in the military, and would likely buy a property somewhere that I either don't live, or won't live for more than a couple years.

**thefamilyfinanceguide** · 11-16-2010, 06:22 AM

Define your goals. If you don't like living in a house and you don't plan to get married and havekids then a studio apartment is fine and you can focus your investments in the market (i.e. long term mutual funds, don't get day trader happy - you'll fail)

Do you have an emergency fund. You say you'll have a pay raise in 2 years. I'm not sure your job position, but anything goes in this economy and I would not make financial decisions based on a raise 2 years from now.

1) Get an emergency fund in place. If you have any debts (Credit Cards, Student Loans, etc.), make the fund $1000-$2000.
2) Pay down the debt to $0.00.
3) If no debt, or when you finish paying it then save 6 months of expenses. If your job goes belly up you have 6 months to find another one without losing sleep.
4) Then invest 15% minimum into your retirement accounts
5) Save for other interests and always pay in cash. If you want a home to invest in but want a studio to live in. The think of that home as a second home. Pay for it in cash and you'll only pay the taxes. Then rent it out to make money. Don't venture in the housing market as investments unless you understand it.
6) Enjoy Life, Give to Charity to help your tax bill.

**bjl584** · 11-16-2010, 08:19 AM

There are no rules that say that you can't buy investment property if you don't own a home. The only thing that I would caution you on is your statement that you will get a large raise in two years. I would not jump into an investment assuming that. Base your risk tolerance and the amount you finance on TODAY'S income level.

**jpg7n16** · 11-16-2010, 01:39 PM

REITs - mutual funds that invest in real estate properties/loans

Advantages: No ownership/management/tenants needed. But can participate in the real estate asset class. Pays monthly dividends - kinda like rent checks.

Downside: you essentially pay the company to manage the properties for you, which eats into your returns a bit. (paying a middle man)

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As far as the stocks or real estate question goes, the main consideration is how long you can afford for the money to be held in the investment. If you'll need it in 2 years, neither would be a good investment. If you won't need it for at least 20 years, either could be good, but stocks will likely be better.

**nick__45** · 11-17-2010, 06:49 AM

Where do you keep your cash that gets 3.5% interest? My barely earns 1% and Navy credit union only gave me .8% for CD.

**nick__45** · 11-17-2010, 06:54 AM

Don't military people have to move all the time? Unless the Army will pay for your move, which include realtor fee of sold house and closing cost of new house as well as any possible loss in value, buying a house while moving all the time isn't very good.

Is that 3200 dollars a month after or before tax? That's a lot if it's your take-home.

**MaxPowers** · 11-17-2010, 02:53 PM

united heritage credit union is my bank.
I will be commissioning in 2 years, guaranteed, unless I fail out of college or get into big trouble I will be getting a large pay raise in addition to the quick promotions in the officer corps.
3200 is what I make before rent.

I will continue to read and learn about it. There are several people that I have met in the military that buy property and either flip it, and sell it, or they rent it out.

**cjscully** · 11-17-2010, 06:50 PM

Originally posted by MaxPowers View Post

I am wanting to make moves on investing while I am young and without bills. From what I understand the best ways of doing this is stocks or real estate. I am single, and I don't see myself living in a house. I enjoy studio apartments because it is easy to maintain and only has 1 room. Is the only way to get into the real estate game by living in a house?

No. You can invest in real estate without living in the properties you're investing in. It's done all the time.

Originally posted by MaxPowers View Post

Any words of wisdom for someone who wants the investment, but not the hassle of a house?

If you want hassle free investment in real estate you can hire a property management company to manage your properties for you.

The first step should be to learn as much as you can about investing in real estate. There are several books on the subject you can read. There are also several forums dedicated to real estate investing. Another resource is real estate investing clubs. They exist in most cities. They're good places to meet experienced investors and learn from them.

**Kris Jarczyk** · 11-19-2010, 08:13 PM

Right now buying makes sense, historically low interest rates, low home prices, alot of times now mortgages are lower than renting. Will not stay this way forever. Rates will go up, inflation and eventually home prices will rebound. Or you can rent and pay your landlord's mortgage. Good Luck!

**Drac** · 11-21-2010, 12:49 PM

My husband and me, we have been investing in real estate for the last eight years. We have several properties here in the US and internationally too. My recommendation is that if you don't want to live in a house, and you will be moving in a couple of years, forget about property management services, and put your money in the stock market. if it is for the long term, you will probably get a better return. The housing market is low right now (it is a good time to buy), but it will probably take several years to recover, in other words, it will be difficult to sell your property if you need the money.

**snafu** · 11-26-2010, 10:01 AM

It helps to work out pros & cons for your particular circumstances. The biggest issue with buying a house or condo is that it takes time, effort and usually large commissions to sell real estate whereas other investment instruments are nearly instant sells. A condo is a place to live which if in a good location has the potential to increase in value over the long term plus can be rented if you are comfortable as a landlord. As has been pointed out, price are currently depressed and mortgage rates are lower than they've been in 60 years.

**loansta** · 11-26-2010, 01:04 PM

Homeownership is generally not an investment. Your 'dividends' are just a 'nice place to live.' I would not buy a house unless I had children and a family. My goals would be different then...houses are really costly and the tax benefits are not enough. Rent a cheap place and actually invest the money!

**cschin4** · 11-27-2010, 02:44 AM

Don't buy a house. Being a landlord is a hassle and so is maintaining a property, etc. You would be far better off and further ahead to just continue to invest and save and forget about property ownership. And, if I had to do all over again, I would have bought a smaller home with the smallest yard. Maintaining a home is time consuming, never ending and as I am getting older it isn't how I want to spend most of my time. We did downsize last year from a big home to our present smaller home and I am much happier. But, when the kids grow up, I wouldnt mind moving to an apt or condo instead.
So, enjoy your freedom. Without property ownership, you have freedom to move about, nothing to tie you down,etc. That is a nice thing. And, you will have much more money and disposable income in the long run to pursue your hobbies, interests, travel, good food, etc.

**disneysteve** · 11-27-2010, 05:53 AM

Originally posted by cjscully View Post

If you want hassle free investment in real estate you can hire a property management company to manage your properties for you.

By no means is this a guarantee of a "hassle free" investment. I know numerous people who own rental properties and use a property management company and there are plenty of hassles. Some of these people have gone through 2 or 3 or 6 different property managers before finally finding one that did a decent job. Even when using a mgmt. co., the owner is still the one ultimately responsible for everything.

Buying a home vs apartment renting