Pros and cons of a house vs. condo?

[Vladimir Lenin]

Thinking of buying one with my SIC, any advice?

 

[wil]

Based on your screen name I would suggest the following: After waiting in line for 9 hours for a pair of size 7 brown wing tips manufactured by your comrades you should apply to the government for an apartment allotment. As any good commie knows the ownership of property is the root of the Capitalist devil. It is the basis of the class system that Marx sought to destroy. If you are a party member you will receive a 500 square foot $hithole based on your needs. Otherwise, I hear Siberia is nice this time of year-

 

[Vladimir Lenin]

Based on your offensive screen name I would suggest the following: After waiting in line for 9 hours for a pair of size 7 brown wing tips manufactured by your comrades you should apply to the government for an apartment allotment. As any good commie knows the ownership of property is the root of the Capitalist devil. It is the basis of the class system that Marx sought to destroy. If you are a party member you will receive a 500 square foot $hithole based on your needs. Otherwise, I hear Siberia is nice this time of year-

that's not communism you're describing, but a totalitarian ghetto

and before I can help bankroll the overthrow of the imperialist pigs, I gotta build up some equity, so help a brother out

 

[wil]

Totalitarian ghetto is the result of communism!!

But, in the spirit of aviation brotherhood I would probably go with the Condo. Less upkeep, easy to rent down the road or sell. I sold mine in less than 3 weeks and that was over the holidays. The one downside to consider would be appreciation. A House tends to increase more in value than a Condo. I would say that no matter which way you decide owning is usually better than renting. And, not because of taxes. There is no advantage unless your itemized deductions go over the Federal Standard. Given the low bank savings rates of 1-2% I would estimate that most markets should give you 5-8% appreciation easy. If your in S. Cali where the living is easy 25-35% no problem. In 2002, my friend bought in L.A for 235K (2 bed Townhome) a year later sold for 310K!! Dirty Capitalism at its' best!!

 

[chperplt]

I bought my house in Vegas 13 months ago for $200K.. It just appraised for $325K. Once the elementary school that is being built behind me is finished, it'll go up another 10-15%.

 

[bobbysamd]

Condos

We live in a townhouse. The pros are manifold. For example, you don't have to worry about lawn or yard work, or painting the outside, or general property management. It's like living in and buying a house without the hassle of outside maintenance. The interior, though, is your responsibility, as it would be with a house.

You do need to purchase homeowners' insurance. You will still pay property taxes, but your lender will incorporate it into an escrow that you pay into as part of your monthly home payment, just as you would if you purchased a free-standing home. You will also have to pay monthly condo association fees. Those go toward grounds maintenance, snow removal, painting, capital improvments, etc. More about snow removal below.

There are cons. Sometimes, property managers and/or condo boards aren't all that swift. For example, last March we had a seven-foot snowstorm over two days. It was a given that there would be no snow removal during the first two days. The third day, I waited, and waited, and waited, for snow removal from our alleyway. Finally, the neighbors got out their snow shovels and cleared the way. I missed a day of work because the snow removal people did not come through. I wondered what the hell I was paying for with my condo fees.

Which leads me to my point about condo boards. Many in the community complained to the condo board president about the unsatisfactory snow removal. In the next month's newsletter, he whined that he cannot accomplish these things himself, and essentially told off the complainers. He said they should "get a life." He's one to talk.

(In all fairness, we learned later that the snow removal company's equipment's clutches had burned out because of the massive demand for snow removal.)

There also rules that must be followed, usually regarding displays of things outside of units and parking. There were a couple of times when residents who couldn't mind their own business hassled my wife about parking in guest parking. She hadn't parked there that long and there were numerous other spaces nearby. Having said that, our rules are generally reasonable and enforced minimally, though I don't care for one rule that essentially forbids the flying of the American flag outside one's unit. Sometimes, condo board members are very often crotchety retired people who need a life and go around acting as a sort of fascist condo Gestapo to ensure all rules are followed. They sometimes also engage in petty arguments. This is true at my mother's condo. I am reminded of the Seinfeld episodes about Jerry's parents' condo board in Florida.

Really, the pros outweigh the cons, and condo living is virtually hassle-free. It beats paying rent because you are building equity in something. And, you get tax advantages.

Hope that helps. Good luck with your home purchase.

 

[AeroBoy]

I also live in a townhouse, and we bought it for 135K three years ago and it's now valued at about 225K. Buying is way better than renting...

My wife's on the homeowner's board (no she's not retired...I wish we *could* be retired while we're still 32--oh, to dream), and the rules are enforced, but not in a Gestapo way. Many times people don't read the rules (or even where to find them) and don't know they're breaking them. Get a copy of the rules before you consider buying and READ them to make sure they're acceptable to you. That will take care of this "problem."

It's nice not to have to mow a lawn, etc., but we do yearn for a "real" house with a yard. Also be sure to ask what the maintenance fees are up front, before you sign to buy.

Good luck.

 

[labbats]

I thought I read somewhere that a general rule for homeownership was that anyone living there for less than 4 years wasn't getting their money's worth. You're better off renting in that case.

 

[chperplt]

I thought I read somewhere that a general rule for homeownership was that anyone living there for less than 4 years wasn't getting their money's worth

After 1 year I can sell my house and pocket $125K. It all depends on the house and the location.

As far as rent Vs own.. I was paying $950 per month for a 1200 Sq ft apartment.. I pay $1100 per month for a 2800 Sq ft house, and that includes my property tax and home owners insurance payments.

 

[labbats]

I think it was due to the fact that the first few years are only paying off interest, not the property per se.

Also add in the fact that you may be stuck paying a mortgage while you don't live there, whereas a rental you can leave with no strings attatched.

Congrats on the money making! But I suppose it's just as likely to go down if you're unlucky. It's an investment like anything else.

 

[chperplt]

Very true about the interest. If you send in an extra $100 or so with each payment, you can knock that 30 year loan down quite a bit.

I've never heard of a home depreciating. I'm sure it happens, but I've never seen it.

 

[Vladimir Lenin]

This is going to be a starter for both of us, since I've been renting since college. After a few years (and when/if kiddies come) we'll look for a house and use whatever we can make on appreciation (or at least equity) for a downpayment on it.

 

[BornAgainPagan]

Just remember that you almost "marry" you neighbors when you purchase a home. This marriage is especially close in a condo. Some condo association rules can be ridiculous. i.e. I've seen a few that have rules against setting garbage out on the night before pick-up and it must be set out the morning of. Carefully check the association by-laws before making a contract offer on a condo.

I too wanted a relatively hassle free living from a maintenance perspective and was searching for a condo when I stumbled upon a great deal on a house. For me, this worked out nicely and since moving in, I keep discovering more and more advantages of having a house.

Both have pros and cons, I strongly recommend getting a "Home Buying for Dummies" or an equivalent.

If you detect ANY pressure from your agent, don't hesitate to fire them on the spot.

Good luck.

 

[Gulfstream 200]

a condo will never appreciate as much as a single family home.

Dont ever pay the extra 100$ a month in principal - chances are you wont keep the first place more than 5 yrs. Put your 100$ elsewhere to make more money. why pay down a 5% mortgage when most stocks made you 15% this year....

Condos have fees every month - some as high as 500$. these ARE NOT tax deductible and are in effect - throwing money out.

new school going up?? dont be excited, that means higher taxes.

Looking in a place with hundreds of track mansion developments going up? run now, new schools are coming for all those rats and your property tax will triple shortly. Seek places with strict zoning. The extra bucks it costs you up front will be worth it in tax savings.

yes, everyone is seeing big new appraisals on thier homes, but remember - you haven't made a penny until you SELL it. --- and another thing, dont raid that "equity" they are so happy to give you. Appraised value does not mean market value.

you are looking to buy now - at a very high in the market.

nevertheless, ownership is wonderful - and you need the tax breaks. a 200K loan will give you maybe 20K in deductions depending on your situation. this saves you a lot of $$$$.

Its really a no brainer - everyone who can make the payment should buy. but also rememeber to buy where and what YOU LIKE - its not just an investment its your home!!!

Good Luck.

 

[tlax25]

A Condo for $135k? House for $200k

Man some of you guys are lucky - I live in the wrong city. To buy a 2B/2B condo in Chicago (1200sqf), in just about any neighborhood on the north side of the city, that is even half way decent, it would cost you well over $300K. Maybe I should move to Vegas.....

 

[wil]

Are you banging your F.O? Or, are you referring to your wife? If it's your wife and your not putting her on the same level as you (Co-Captain, Comrade) you may have to answer to the party!

 

[Swass]

Buy the house

My wife and I are in the process of building our last home (hopefully). It is on the golf course and will be over two and a half times the square footage of the house we are in now. This would not have been possible had we not decided to buy as soon as we got married, slowly upgraded, then when business is looking good we went for the freaking gusto (7300 sq ft up, not counting finished basement). One of the driving factors is the interest rates right now, that pushed us over the top.

 

[chperplt]

Dont ever pay the extra 100$ a month in principal - chances are you wont keep the first place more than 5 yrs. Put your 100$ elsewhere to make more money. why pay down a 5% mortgage when most stocks made you 15% this year....

I disagree... First of all, I do plan on living here longer than 5 years. This may be my first home, but is most certantly isn't a starter home. Making a 30 year mortgage into a 15 or 20 year mortgage by simply adding a 100 a month is always a good idea.

 

[Vladimir Lenin]

Are you banging your F.O? Or, are you referring to your wife? If it's your wife and your not putting her on the same level as you (Co-Captain, Comrade) you may have to answer to the party!

LOL, no, I don't fly for a living and she couldn't hack it as a comrade due to her strong ties to the establishment

 

[Gulfstream 200]

chperplt.

So.....

You are taking 100$ or so after tax money every month to pay down a 30yr loan in 15-20 yrs.

so......basically you are creating a 15yr loan but paying interest rates on a 30 yr. loan???? (1-1.5 points higher than a 15)...

run that one by your tax guy or accountant. Thats crazy!!


but anyways...


Tlax -- not saying a starter home can be had for 200K -- just saying a LOAN was 200K....starter homes in the metro areas seem to run 350K thee days...depressing!!!

 

[Visceral]

I disagree... First of all, I do plan on living here longer than 5 years. This may be my first home, but is most certantly isn't a starter home. Making a 30 year mortgage into a 15 or 20 year mortgage by simply adding a 100 a month is always a good idea.

Most of the books I've read about this say its not smart to pay extra on your house, especially if you have other non-tax deductible debt. You are essentially trying to end your tax deduction sooner.

 

[chperplt]

run that one by your tax guy or accountant. Thats crazy!!

I did... and since we don't plan on moving, we will be saving thousands of dollars in interest.

An additional $100 per month will save me just over $40,000 in interest and cut my 30 year to a 20 year. That's just $100 extra per month. If I invested $1200 per year for 20 years, you're telling me that the $24,000 investment will absolutely, guaranteed, do better than the $40,000 + I'm saving myself?

My 20 year old brother in law was in town this past weekend. You sound very much like him. Only one answer and it has to be yours.

 

[chperplt]

You are essentially trying to end your tax deduction sooner.

Your tax deduction is on interest paid. Take a look at an amortization schedule for a typical 30 year loan. See where your monthly interest payment goes from the majority of the loan payment to very small part of the payment.

 

[bart]

I work in the real estate industry, specifically a mortgage broker.

First a note to Chperplt: You can invest that $100 a month at 5% per year and in 20 years you will have $41,103. If you are smart and get 8%, that money will be $58,900, at 12% it will be $98,926. So your 20 year old brother in law was right, unless you make some pretty pitiful investment decisions, and I am not even counting the tax savings you give up by paying off your mortgage first. You would do well to seek him out for financial advice in the future.

1) I can tell you that condos are never going to appreciate as fast as a single family residence (SFR) with VERY few exceptions. They also stay on the market longer in all markets except NYC, SF and LA. Generally what you pay in an association fee will pay for a lawn maintenance co.

2) Loans on condos and townhomes are riskier than SFRs, and as such command higher interest rates, sometimes as much as a half a point. The association rules are generally reviewed by the underwriter to evaluate this risk.

3) You are much better off paying off your higher interest loans (read credit cards and cars) than making extra payments on your house. Your mortgage will most likely be your lowest interest debt (except a 0% car loan) due to the fact the interest is tax deductible. The effective rate of interest is your interest rate times (1 minus your marginal tax rate). Pay off anything else that is higher than that effective rate first.

4) Best of luck on your purchase. When you go to secure your loan, pay the most attention to the Truth in Lending statement. The loan officer will try to brush over it, but the APR on that document is the true cost of the money. If it is significantly different than your quoted rate, you are getting screwed on fees. I cannot stress this enough. That is the real number, everything else is hogwash. They will do all they can to convince you otherwise, but don't fall for it.

 

[wil]

Bart- Since you are in the know- what resells better, 3 or 4 bedroom? Looking to build in a few months when our Townhome closes early Feb. Thanks

 

[labbats]

Ben Franklin and his compound interest theories win again.

Don't forget that you get a return on the interest of your interest. At 10% a year, let's say you invest $1000. After a year you have $1100. The next year, you will have $1210 due to compound interest rather than $1200 and so on ad infinitum. And that little bit is what makes all the difference when compounded over a 20 year cycle or a lifetime of savings.

Now if I could just pay off all my loans and start investing $300 a month at 10% interest, I'd be a millionaire by 60!

After five years of that I'd have $24176.20 instead of a zero interest amount of $18000.

After ten years I'd have $63112.21 instead of a zero interest amount of $36000.

*** Sorry, I got bored and had a calculator handy ***

 

[bart]

what resells better, 3 or 4 bedroom?

Honestly, that is hard to say. What really sells is location. Buy in the best location you can afford, and look for the cheapest house on the block, that is what sells. Good Luck.

 

[Gulfstream 200]

I agree. LOCATION sells. which seems to bring in low tax rates and good schools. all go hand in hand but - of course - thee all come with higher price tags!

3 or 4 bedroom? I think they sell equally well...but DONT add a 4th bedroom and plan on getting your money back. Only things that give any return are kitchens and bathrooms. Worst investments - swimming pools.

chperplt - of course your finances are not my business...but was your accountant the same guy who sold you the 30 yr mortgage?? you gotta fire any accountant the tells you to pay extra on a 30 yr mortgage.
If you want to save the "thousands" you think you are - get a 15 yr loan and beat them all...

anyways - I am done with the unwanted advice....

 

[bart]

Good point G200: you will get a 1/4 to a 1/2 point better rate in a stable rate environment with a 15 yr loan vs a 30.