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Hi Taylor
- My wife and I are thinking about buying a home, but we aren't sure
whether or not it's the right time. I'm a PhD student, she's a nurse,
we bring in about $70,000 annually and we don't have any debt. We've
got $70,000 saved up and both contribute to our retirement accounts.
The main variable is that we wouldn't plan on staying in this house
for more than four or five years. Is buying now a good or bad decision?
- Dylan
Hi Dylan - I've got a great, straightforward answer for you: it
depends! It might be a sound decision, but there are a lot of things
to think about. Here are the main three: |
1. What's
the real estate market like? Where you live and the current
housing trends in that location are important. It's hard to predict
what will happen in five years, but real estate analytics can
offer a little bit of guidance. If you're in a big city experiencing
affordability problems, now isn't the best time. If you're in
an area with a growing market and reasonable prices, it's a more
reasonable consideration.
2. Additional costs. You also have to think about maintenance,
taxes and other fees associated with homeownership. If you drive
your monthly cost much higher than what you're currently paying
in rent, you could end up with crippling debt. You have to look
past the price tag when buying a house, because there are lots
of expenses you don't see right away. However, if you understand
the additional fees, you have the time to handle maintenance,
and you get a good mortgage rate, you could end up with a solid
piece of real estate to either rent or sell down the road.
3. Don't overextend. What's most important is you don't
take on a bunch of debt for a house you're not planning to immediately
rent or sell. Buy a home because you can afford it and have a
plan for its future use, not because you love the idea of owning
instead of renting. It's easy to get caught up thinking that buying
a house means you'll make your money back later, but you have
to make sure you aren't leaving lots of variables unaccounted
for that will sneak up and bite you later.
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I always tell
people not to take out loans for non-assets. This house, even though
you may plan to sell it in five years, isn't an asset you'll be making
money off in the immediate future. However, if you feel like you can
afford it and will be paying close to what you pay now in rent, then
homeownership might make sense for you. Good luck finding your new
home!
© Taylor Kovar
January 29, 2020
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| Disclaimer:
Information presented is for educational purposes only and is not
an offer or solicitation for the sale or purchase of any specific
securities, investments, or investment strategies. Investments involve
risk and, unless otherwise stated, are not guaranteed. Be sure to
first consult with a qualified financial adviser and/or tax professional
before implementing any strategy discussed herein. To submit a question
to be answered in this column, please send it via email to Question@GoFarWithKovar.com,
or via USPS to Taylor Kovar, 415 S 1st St, Suite 300, Lufkin, TX 75901.
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