House price differential for newer

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Kate1
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Joined: Sat Feb 12, 2011 5:47 pm
Location: Ontario, Canada
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House price differential for newer

Postby Kate1 » Thu Oct 11, 2012 7:12 pm

I'm buying a townhouse soon. The ones I'm looking at are between $290,000 and $315,000 and are between 8 and 2 years old. For similar initially quality, it's basically about a $20K difference to get 2-3 years old vs 7-8 years old.

I'm considering going with the newer, more expensive option because I will quite possibly want to move in 4-5 years and then the newer one will resell easier. Also, the older one may need a new roof and other major repairs before reselling since at that point it would be 12-13 years old. I need to stay in my current suburb due to kids school, but once the youngest is done in 4 years, I would move closer to my work in the other end of the city. Unless I change jobs in the meantime in which case I would rather stay here.

I'm not sure how to quantify the options. I'm starting with purchase price + cost of maintenance done at purchase + cost of maintenance done to sell. That part is easy. For a possibly longer time to sell, I guess I could look at what my incremental costs are. I would mostly be moving to save gas and time on my commute. If I spend an extra $200 per month in gas and it takes 3 months longer to sell, then that is a cost of $600. Does that make sense? Anything else to consider?

There's also the stress/hassle factor of being able to sell easier, but again not sure if it can be quantified.
Kate

stannius
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Re: House price differential for newer

Postby stannius » Mon Oct 15, 2012 10:27 am

Kate1 wrote:I'm considering going with the newer, more expensive option because I will quite possibly want to move in 4-5 years and then the newer one will resell easier.


Have you considered renting for that time period? It depends on your area, but in most areas, 4-5 years is the bare minimum time in a purchased house to break even vs. renting.

Also in 5 years, perhaps the difference will seem smaller to buyers. They'll be hypothetically comparing 7-8 vs 12-13 year old houses - a 50% difference rather than the 200% difference you're comparing today.

Kate1 wrote:Also, the older one may need a new roof and other major repairs before reselling since at that point it would be 12-13 years old.


Roofs should last longer than 12 years. I would expect 20+ years I guess. The only major things I would expect to replace at that age are perhaps the appliances.

Kate1
Posts: 90
Joined: Sat Feb 12, 2011 5:47 pm
Location: Ontario, Canada
Contact:

Re: House price differential for newer

Postby Kate1 » Tue Oct 16, 2012 3:47 pm

Renting a similar place is about $1600-$1800 per month. I'm not sure if that includes utilities or not. I can do a 15 year mortgage for under $1200 per month. Over 5 years on the mortgage I'd pay about $20K interest and $50K to principal vs about $95K in rent.

Now, I'm going to put down about $125K and have about $175K mortgage, so to be really comparable I'd have to also consider what I could earn in interest on the $125k if I was just renting. But rates are low, and I'd have to pay tax on it so it wouldn't be enough to make a difference.

Anyway, I have found a better deal. There is lots of building going on right now. I'm planning to buy a quick occupancy place, same model as the ones I've been looking at for $297K. It has more upgrades than the older ones at $292, and a few fewer upgrades than the ones in the $310-$315K range. I don't get to pick any colours or fixtures because everything has already been ordered, but I'll move into a brand new place in December.

I'm waiting for some final paperwork on my separation before I actually do the purchase agreement, but I have a hold on this place. If someone else comes in to buy, I have 24 hours to go in to buy. A few more days and I'll be in a position to do that, although there will be fewer complications if I can wait until the Friday after.

I really like the area where this house is, and I like the plans for what is going in around it. I may decide to stay put even after the 4 years when I could move. You never know what can happen in that time.
Kate


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