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A place for Get Rich Slowly readers to ask questions
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It is currently Wed Oct 22, 2014 10:59 pm




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 Post subject: Buying a house...What is the smart choice to make?
PostPosted: Fri Oct 03, 2014 11:03 pm 

Joined: Fri Oct 03, 2014 10:53 pm
Posts: 3
Some background on me...I'm 25 years old, single, have a stable and promising career, and no debt.

I am considering buying my first house in another year or so.

I recently got a $20,000 bonus at work, and now have about $40,000 sitting in my savings account.

My question is: am I wasting investment opportunities by letting $40,000+ sit in a savings account that essentially earns nothing for the next year? Should I safely invest some of this in hopes of reaching my goal faster, or wait it out and continue depositing money into this savings account?

Thanks in advance!


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 Post subject: Re: Buying a house...What is the smart choice to make?
PostPosted: Fri Oct 03, 2014 11:06 pm 

Joined: Mon Jun 30, 2014 5:28 am
Posts: 155
Are you going to stay in the house for a long time? How much does a house cost and how much is your rent?

Use this:

http://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html?_r=0&abt=0002&abg=0


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 Post subject: Re: Buying a house...What is the smart choice to make?
PostPosted: Sat Oct 04, 2014 8:21 am 

Joined: Fri Oct 03, 2014 10:53 pm
Posts: 3
Pretty interesting link...that says renting is the better choice for me.

I would see myself being in a house for at least 10 years, maybe longer. I would be looking in the $300,000 range, give or take. I currently pay $1100 per month for rent.

Depending on my downpayment, a monthly mortgage would cost $1400-$1500.


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 Post subject: Re: Buying a house...What is the smart choice to make?
PostPosted: Sat Oct 04, 2014 4:34 pm 

Joined: Fri Sep 12, 2008 12:29 pm
Posts: 1627
Location: Seattle, WA
To answer your stated question: If you plan on using the money in a year, the correct thing to do with that money is let it languish in a savings account.

If you are willing to buy a house contingent on a bumper year for stocks, you could invest the money. But you have to be willing to not buy a house if the market goes down.

Does the $14-1500 include property taxes?

You also have to consider maintenance. The rule of thumb for maintenance is to expect to spend 1% of the house value, per year, on average (some years will be much more than others, e.g. roof and water heater in the same year). We've owned our house three years but spent way more than 3% (3 years x 1%) of its value on maintenance. Furthermore, expect to spend a lot of time (or additional money) on the thousands of other tasks you'll be taking on as an owner. E.g. yard work.


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 Post subject: Re: Buying a house...What is the smart choice to make?
PostPosted: Sun Oct 05, 2014 10:41 am 

Joined: Fri Oct 03, 2014 10:53 pm
Posts: 3
The more I evaluate it financially, it seems like staying in an apartment for the next few years may be the better choice. Just keep saving and investing that money. Maybe buying a house at some point when I feel like it is smarter than trying to buy a house as soon as I can.


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