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My Next Step: Two Bedroom Condo or More Renting?

by Flexo on April 26, 2007

in Real Estate and Home

Those who have been following my travails closely may have a feeling I might need to start contemplating my living situation. About a year ago, a chronicled my adventures looking for an apartment with my girlfriend (one, two, three, four, five, and six) which ended unsuccessfully and with a bit of a scuffle with the real estate agency.

This time, my current lease is up at the end of June and I’m not quite sure which path to take. I will be living alone, but where? I have a number of conflicting thoughts about what would be the best for me to do.

I like the idea of not being tied down to one particular area, and renting allows me the possibility of cutting a lease short (although in my current apartment, it will require 60 days’ notice as well as a very high fee) if I find my calling somewhere else. On the other hand, I’ve been saying that since I returned to New Jersey after college about 8 years ago. I’m still here.

Right now, the New York Times says it’s better to rent than buy. That makes me feel better about having rented the past few years, but the decision to buy a house shouldn’t be about market conditions, which are unpredictable in short time spans.

Nevertheless, I don’t particularly like my current apartment. I could move to another apartment, anticipating another move somewhere down the line. Living in a condominium, I would have the option of keeping it and renting it to a tenant if I end up moving somewhere else. As an owner of a two-bedroom condo, I could write off office expenses for that second bedroom, reducing my income tax.

If my income remains consistent, I should be able to afford a home at about $200,000, or maybe a little more. I’m hoping my income continues to increase at my day job and on the side. In this area of the country, being able to afford only about $200,000 drastically limits the locations in which I could buy. Rather than moving closer to work and to my girlfriend, I would have to move farther away.

There are a number of options to consider, and time is running out. While I’m not quite sure which answer is best for me, I plan on having some discussions with people I trust in real life. Please free to leave comments.

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About the Author

Flexo, the owner and creator of Consumerism Commentary, has been blogging and writing for the internet since 1995 and has been building online communities since 1991. Find out more about him and follow him on Twitter.

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  • KMC
    This is a tough one, Flexo. There are good reasons on both sides. On the one hand, interest rates are historically low and the housing market is softening, so buying looks more attractive. On the other hand, as you point out, rents are cheaper relative to buying right now.
    I think maybe you haven't lived in a sufficiently crappy apartment. If you had, the choice would be easy!
    Good luck on your decision.
  • mapgirl
    Whether it is cheaper to rent or buy is a question of time-horizon. At this time, it is cheaper for me to rent than it is to buy, but in the DC housing market, having held my condo now for 3 years, I'm at the point where buying was better. But that's a hindsight decision, rather than a decision looking forward into the future.

    The main thing to ask yourself is how long are you going to live in the next place. If it's less than two years, keep on renting.
  • Gayla
    In my humble opinion, real estate prices have to come down. I went to look at a house for rent/sale here in Kansas City, and the rent was 850 and the purchase price was 300,000... not to mention the additional cost of taxes, insurance, and maintenance. And, like you said, it's farther from work, shopping, and friends. I DO live in a sufficently crappy apartment and desperately want to buy a home, but the reality of it for me is that it does not appear to be financially responsible at this time. My son is considering buying a home at this time and one thing that I would tell him (if he asked for my advice) is to be informed with the loan papers and not to sign ANYTHING that he does not read and understand fully. Good luck!
  • I totally feel your pain! Right now I'm going through the same mind-bending decision. My fiancee and I are getting married in November and are trying to figure out what to do. Right now, in Michigan (metro-Detroit specifically), it's a great time to buy because the economy is so bad, there are foreclosures and people selling for really low in just about every neighborhood. Problem, of course, is that if things keep getting worse and we want to get out of the state, owning a house would be a bummer because we'd have to sell... blah blah blah. Then, of course, getting my fiancee away from Michigan and her very large family would be just short of a miracle! :-) Very tough decision indeed. Good luck!
  • The NY Times says it's better to rent than own right now, but that may not always be the case. The big questions you have to ask yourself are do you plan on staying in the area for a few years, and can you afford to make the payments? If so, you might consider purchasing a house.

    The housing market has been coming down lately and there are a lot of people being forced to sell their homes due to foreclosures.

    The tough thing is you only have until the end of June before your lease is up. That is not much time to get to know the market and make such a big decision. If you were able to extend your lease a couple months, the market may improve more for buyers, and you will have a better idea of the area you want to live in and which deals are really good.

    Also keep in mind that condo fees can add quite a bit to your monthly housing bill.
  • PT
    I'm in the same boat...I've been living/renting in the same area now for essentially 6 years. But I rented because I wanted the flexibility and didn't want the headache. Looking back though, I wish I would have bought long ago. Even if I didn't want to stay in that particular place, I could have rented that place out and enjoyed the process.

    Wait for the market to dip some more, as predicted, and then go for it man. Purchase that condo and love it. You're the flexo, you should be teaching us about real estate from a first hand perspective.

    I'm purchasing my first home this fall. Our plan is to live there 5-7 years and then rent it out.
  • Hey Flexo,

    Sorry to be a bit of a bug about this, but its usually way better to own than rent. If you own you get the price appreciation, the equity build up and the satisfaction of owning. If you rent, you get none of these.

    Best,

    James
  • I think renting and buying is almost a relegious battle. Given that I brought and now I rent that makes me agnostic. The one thing I do preach is location, location, location. Pick a place that's a better commite and is a good place to live in. If you have to sacrafice that to buy then I don't think it's worth it.
  • I think the biggest thing it's going to come down to lifestyle. I own a home and love it. However, I can definitely see the upside of having someone else to lean on for all of your home maintenance problems. During the non-winter months I'll spend at least four hours every weekend maintaining the outside of my house. And that doesn't include everything done on the inside as well, including plumbing, electrical, etc. I'll usually pay for those, but I'm still responsible for getting them fixed. Renting definitely provides you with more free time.
  • tolak
    I don't know about the "crappy apartment" stereotype. Renters can live anywhere and choose any quality that suits their budget.

    Living as an owner in a fixer-upper is much worse and yet totally acceptable.
  • Flexo, you are dealing with too many variables at a time. I am sure you have a priority list, but if you don't you need one. It might get much simpler than it seems. If you want to be closer to your girlfriend, anything that takes you away is out of question; whether that's a financially wise decision or not.

    New York times is analyzing the problem in purely financial terms (again with lot of market *variables* as you correctly point out) and if I were in your situation, I wouldn't rely to much on it...whatever it says. So take that out of the equation.

    Although there may be a financial see-saw between renting and owing, it would be wise to go with what is *affordable* to you. If you can *afford* to buy a house that suits your requirements, then it should work out ok.

    Finally, if you are talking about June 2007 time frame, you might be cutting it too close for an important decision (invitation for impulsive decisions(?)).

    Just my 2 cents (ok 10 cents)...sorry I wasn't expecting the comment to get this long.
  • Golbguru: I think you hit the nail on the head about the need to prioritize the variables. As far as the time frame goes, I have been *thinking* about it for at least six months, but I haven't gotten closer to a decision yet.
  • Lee
    Ask people who you know will give you a very one-sided answer, and see which you have a negative reaction to, or which one you argue with more fiercely, trying to sway them to the other side. While this is a finance blog and all is supposed to be very rational and spreadsheet-ish, the gut knows best.
  • I would say it all depends on what your goal is overall. If you want to live closer to your girlfriend and to work then renting is the better option. But, if you want to "settle down" and own a place after 8 years of renting or what have you then buy.

    Your goals will push you in the direction you ultimately want to be. Renting will surely allow you to save more money as well, but does it matter? All comes down to a simple question Flexo, what do YOU want in your life?
  • Karl
    Doing a lowball bid worked for me a year ago on my house in northern New Jersey; the sellers were getting divorced and we settled on a price in the middle. Definitely have a reserve for repairs, though, particularly if the place is older (mine is 76 years old, somewhat typical for the area). The first six or eight months, I was averaging $500 in surprises every month ($900 for a water heater, $700 for a refrigerator, leaky shower, etc.). It has a lot of charm, though.
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