Hi folks! I’m 26 yrs old, on H1B, can put about 50K down. Not keen on having roommate/s. Should I rent or buy a studio/1BR in Seattle *if* I get a property between 400-500k? Renting it will cost me around 1.6-1.8k per month and EMI is close to that number for a 400-450k loan. This is pushing me really hard to consider buying property. Am I missing any obvious pitfalls to buying property in Seattle? Are there any good online resources I can rely on to help me decide? I’m scouring RealEstate threads on Reddit, it’s been hard to get information about Seattle. I think property prices are extremely high right now. What do you all think about valuations right now? I’m not sure if I should wait for a 10-20% correction that may/may not happen in the next 2-3 years.
Right now rent is cheaper. Buy if you are sure you will keep the place for a while
When I look at EMI + tax benefits, the difference isn’t huge. There’s an additional benefit of possible price appreciation of the property. When you say keep it for a while, do you include the possibility of me renting it out 2-3 years down the line?
How are you calculating? Buy = mortgage+hoa+prop tax+down payment lost interest-tax benefit. Appreciation is offset by depreciation. House prices go up in the long run but not necessarily in the short term. Remember that if you rent it out and rent is less than buy, then you lose money every month. It all depends on how long you plan to keep it. In 10 yrs, you will make $ for sure. In 5 yrs, maybe. In 3 years,....
Short term, rent. Long term, buy.
* Will you be in the area for at least 5-7 years? * Can you save up to put down 20% (to avoid PMI) + the closing cost + homeowner insurance + moving cost + misc. expenses? [$85K to $90K in your case] * Do you have a 3-6 month emergency fund (NOT including the down payment)? * Have you started cleaning up your credit history and or bank statements, if necessary? (You can leverage CreditKarma to view your weekly score and history for free, then write to each bureau if any correction is required. Any significant deposit - other than your paycheck - to your account for the past 3-12 months will have to be explained in writing to the lender) Free Resources: * CreditKarma, as mentioned above * Zillow: - Check out their “Rent vs. Buy” calculator https://www.zillow.com/rent-vs-buy-calculator - For any given property listed there, the Seattle Zestimate will help you determine whether to negotiate the price down vs. outbidding other potential buyers * Bankrate.com, to help determine which amortization schedule works best for your budget (EveryDollar is a great budgeting tool, if you do not already use one) My personal suggestion is to give yourself six months to research, as home ownership is NOT the same as renting. It is a great LONG TERM investment nevertheless.
Thanks! These are some really good points. I’ll make a checklist with these points. Yes, I will take atleast 6 months to decide. If I wait for a year, I think I can reach 20% and still have about 4 months of emergency funds. My credit is decent now, in the upper 700s.
Awesome, break a leg! :)
Looking at the price correction graphs for properties for the last 30 years in stable cities like NYC, it feels like we are in the middle of a major bubble and a price correction is long overdue. This is my concern. I’ll take sometime to think this through. Thanks !
I am not sure this is a bubble. More folks (with high income) are moving to the Seattle area creating high demand. As you noticed, rent is increasing as well which means there is more demand for housing.
With the increase in the standard deduction to 12k for 2018 and given Washington has no state income tax to induce a SALT tax deductiom, the first 12k of the mortgage interest every year would not be "deductible" on your taxes because you already get such a higher standard deduction. Assuming you have a marginal rate of 30%, that increases the cost of home ownership by $4k/year. Seattle is definitely not a place to buy right now given the recent changes in our tax code.
But OP already had 6000 or so deductions even before the tax code changed, right. So new tax code makes it slightly less useful, not $4k worth. Or rather, not all $4k can be blamed on the new tax code.
@RIPLBS @Deflector good to know Also I’ve started to hear about rent control act that may not help me get the kind of rent that would offset my EMI
Buy! But buy in a place that you can easily rent in future! Buying condos are a bit risky coz these are the ones who will fall the most when there is a correction! But a house is an asset, its a proud feeling of accomplishment, a greater sense of responsibility. Do your due research on the areas and go for it! I haven’t seen anyone in my last 15 years who bought a house and regretted!
Buy. Buy. Buy. I can refer you to people who can help you find places before they hit the market and get into budding war. I have purchased two homes, sold one after 3 years and made 86% from purchase to sale price. Just taking down payment into account, made 800%
Congrats! I’ll do some research now!
Buy, don't put all your savings into down payment tho. Unless there's a black swan event, Seattle downtown/SLU is a clear buy.
Yeah, new projects selling like hot cakes in downtown Seattle/SLU
For questions like this you will run into two groups of folks. One who own a house and the other who are waiting for that correction or crash. So folks who own a house will say all the positive things about the market and the other group will point out negatives. It's hard to time the market.
How about: people who decided to buy are giving him the pros and cons and risks. If it fits OP's risk appetite, then he should go for it.
True that! I’ve had quite a good number of pros and cons to begin my research. @Lie You are absolutely right, we can’t time the market!
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How sure are you that won’t want to leave Seattle and won’t want to move into a larger home in the next 5-7 years?
Very likely to move. I’m considering renting out as an option or sell the apartment to buy a bigger house.