Will I forever be a renter?

**parafly** · 01-16-2013, 10:31 AM

It seems like you are in very good shape so keep up the good work!

The answer really comes down to your own individual goals. If owning real estate is a big goal for you, then by all means focus on building a 20% down payment. If not, then focus on paying off your student loan. A combination of both may work well for you. From an outsiders perspective, it seems like real estate may be a very good avenue to round out your overall investment portfolio.

You seem to be already saving plenty for retirement so personally that would be the last place I would dedicate more funds.

**siggy_freud** · 01-16-2013, 11:59 AM

$325,000 w/ 0% down over 30 years at 3.5% interest is $1459 per month. You could consider saving up a marginal down payment to offset what the monthly would be on a FHA loan's mortgage insurance.

Just figure out what your taxes, insurance, etc would be per month, and save up enough down to offset those costs.

I'm a firm believer in buying, especially when you can do so for close to what it costs to rent the same place.

You could also consider moving away for a few years to more rapidly save up a down payment.

**MonkeyMama** · 01-16-2013, 12:03 PM

I've been there, done that, and we left the area. Just way too expensive. I have generally found that people over-estimate their happiness living in an expensive region. By a mile. Just some food for thought.

Beyond that, sounds like your only real option is to rent. There is nothing wrong with that. I think for me it's hard to imagine paying that kind of money, monthly, for the rest of my life, for a roof over my head. BUT, if you build up savings and are ever willing to move, this does not rule out being able to buy eventually. If it takes 10-20 years to save up for a home, so be it. If it never makes any financial sense to buy, so be it.

If unwilling to move, I would absolutely not buy a home in your shoes. It might work with these interest rates, but who knows where interest rates will be by the time you save up 20% down. BUT, if you ran the numbers you may be surprised because there are substantial tax breaks for home ownership. There is of course risk basing purchase decisions on "current tax breaks" and "current interest rates" as these could always change out of your favor. So, I mention this with mixed feelings. When we bought a condo in an expensive region, the tax breaks were *everything,* and made it far cheaper than renting, but no one was threatning to take the tax breaks away very seriously.

Personally, I like simplicity. I'd kill the student loan and be done with it. One less payment and one less debt hanging over your head.

On the retirement - I think you could do better. You are doing okay. But it couldn't hurt to put away more, and to take the tax advantage of bigger retirement contributions. I'd probably kill the student loan, then increase retirement contributions for a while, and just re-evaluate with time. I don't think you need to put "more" away to retirement for any huge length of time. Maybe just a few years to catch up a bit.

**Nika** · 01-16-2013, 12:04 PM

After company match, you can contribute to ROTH. Let savings grow tax-free and it is possible to use money from ROTH for purchase of your first home with no penalty.

Inside the ROTH, you can choose a Real Estate investing fund, to protect yourself if RE prices go up (your fund should appreciate).

Eventually you will either have enough for down payment, or, who knows, some day you may find a job in a less expensive city and will have a good chunk towards the house. Or you will get married and have a larger combined income.

In the meantime, renting is not so terrible -- millions of people in upside down properties wish they did not buy.

**Ima saver** · 01-16-2013, 12:22 PM

You should definately be saving for the down payment on your own place. Use some of your emergency fund if you have to. I cannot imagine where you live. My husband is a builder and he is working on a two bedroom 2 1/2 bath house with unfinished basement (which will add another bedroom, bathroom and rec room) for about $200,000, on a creek.

**StepRightUp** · 01-16-2013, 12:51 PM

Thanks, guys.

Good tips here. I live in the Boston area. The cost of living, both to rent and to buy, is ridiculous. But I love it here and won't be leaving anytime soon, so I accept it.

The only way I could hoard cash would be to move out of my place and get roommates. But the risk to my quality of life and overall happiness of that endeavor is too great to warrant such a drastic life change.

I think killing the student loan is the way to go first. I had always been rather complacent with it because of the 3% rate. But now, I have the funds so why should it stick around?

I'm with you, MM, about retirement. I had been making under $50K until July 2011 and so I feel I need to catch up on my retirement.

I've always been a firm believer in renting over buying until I started paying rent that equaled a mortgage payment

Siggy, I haven't investigated what kind of loan I could get. I have excellent credit. But the thought of putting 3%-5% down like some people do scares me. But that could be irrational.

On a related note, does anyone know how 20% became the standard for a responsible downpayment?

**siggy_freud** · 01-16-2013, 01:49 PM

Not sure when or how it became the standard. I imagine people were putting in less, and simply walking away after a short time because they had little of their own money invested. They probably figured that 20% was enough to make people averse to walking away from their own investment.

You're obviously concerned with your quality of life, but it's also apparent that you have some quality of life concerns with being a long-term renter. Have you ever considered that you're sacrificing long-term quality of life in order to retain the quality you enjoy now. Yes, moving and/or having roommates would suck, but think about how much better you could feel living back in Boston in a place you own, versus a place you rent.

**neatdesign** · 01-16-2013, 03:01 PM

I don't really have any advice, I only wanted to say that renting isn't a sign of failure or that there's something wrong with you. I used to feel that way, but not anymore.

I love the fact that I never have to do any maintenance or yard work, there's always someone around to fix appliances or plumbing if needed, that deliveries can be left with the front office at no risk of being stolen, I don't have to shovel the sidewalks when it snows, etc. There's a pool and a clubhouse, and a 24-hour gym. There are even receptacles with free bags to pick up my dog's poop. It's great!

I appreciate the fact that if I NEEDED to move for some reason, good or bad, I have that flexibility. Owning a home, not so much. Honestly, when the economy tanked a few years ago, I was really relieved that I had stayed a renter rather than taking on one of those mortgages with 0% down that would ultimately go underwater. I had been really tempted to do that at the peak of the lending boom, and I didn't. Thank god, because I'd really be screwed if I had.

**Diavel_guy** · 01-16-2013, 07:43 PM

Don't feel like a failure. You are doing what is right for you. My income puts me in the top 5%. I rent and drive an 8 year old vehicle. I'd love to say I do it because I'm frugal. That is not the case. I do it because I'm happy with my situation. I'm debt free because I don't want for a lot of material things. Thank goodness! I find freedom in my large savings account and the freedom to pick up and move if for some reason that becomes necessary. I have very little stress in my life because of it. Which makes for a healthier, happier me. My joy in life comes from living a liquid, debt free lifestyle. But I do buy what I want when I want it, which is why I say I'm not frugal. I'm just lucky I don't need a lot to keep me happy.

Do what feels right for you. Don't base your life decisions on what others perceive of you. That is my opinion. Not everyone will agree with me. Which I'm ok with too : )

**97guns** · 01-17-2013, 05:17 AM

look at the bedroom communities around your work, in my area a 50-70 mile commute will save you 200K on a home

**rennigade** · 01-17-2013, 05:27 AM

Nothing wrong with renting. I never understood the reason for buying a condo? HAO fees and property taxes...lets see, HOA fees around where I live are typically 400/month or up per year. So you have approx $5k in HOA fees, and lets say $3k in property taxes. So $8k is gone right off the bat every year, you'll never see it again.

My rent right now for a 1 bedroom is $1100/month. The way I look at it is just from the fees/taxes of a condo I can rent for 7ish months worry free for the same amount being thrown into condo fees/taxes. Add another $1k for misc throughout the year for the condo and thats another month of rent. So really I only have to pay for 4 months rent vs forking out money for a condo. If I get noisy neighbors I can move when my lease is up. Change jobs? I can move. Im never tied down.

The only residence I will ever buy is a detached single family home. And even that gives me the creeps.

**Diavel_guy** · 01-17-2013, 06:18 AM

Originally posted by rennigade View Post

Nothing wrong with renting. I never understood the reason for buying a condo? HAO fees and property taxes...lets see, HOA fees around where I live are typically 400/month or up per year. So you have approx $5k in HOA fees, and lets say $3k in property taxes. So $8k is gone right off the bat every year, you'll never see it again.

My rent right now for a 1 bedroom is $1100/month. The way I look at it is just from the fees/taxes of a condo I can rent for 7ish months worry free for the same amount being thrown into condo fees/taxes. Add another $1k for misc throughout the year for the condo and thats another month of rent. So really I only have to pay for 4 months rent vs forking out money for a condo. If I get noisy neighbors I can move when my lease is up. Change jobs? I can move. Im never tied down.

The only residence I will ever buy is a detached single family home. And even that gives me the creeps.

I'm with you 100%, but we are a rare breed. My dad feels because of my high level of income I should own a home. I disagree. However, someday I do plan on buying one in a rural area with land. But when I do that I will be doing so with cash!

**StepRightUp** · 01-17-2013, 06:33 AM

Diav and renn, I think I am with you. Given that I'm single, who knows what the future holds? I do not want to be in a position where I have to sell my place or become a landlord.

The freedom of movement combined with not owing a bank a few hundred thousand dollars gives me great peace of mind.

And the reality of this area is just such that home-buying is not for everyone. And I had forgotten about the condo fees! Yes, it's gets pretty ridiculous real fast.

I think I will attack my student loan before I think of hoarding a down payment.

**97guns** · 01-17-2013, 06:41 AM

well i thank you because if it wasn't for lifelong tenants i would be looking for a job

Will I forever be a renter?