I’m still a fan of the mobility and flexibility offered by renting a place to live rather than buying. I don’t know where I’ll be living in the next few years, and I wouldn’t want to deal with the expense and hassle of selling a house so soon after purchasing. Perhaps my evaluation of my situation is changing, however.
I like the area where I live. As of today’s thinking, I probably won’t move way from the greater Princeton area unless my girlfriend and I decide to live closer to her family in Queens or Long Island. The borough of Princeton is an expensive place to live, as is the surrounding township, so if I were to buy a house in this area it would be out of town.
Though the decision to buy is influenced by my needs and concerns, it’s always helpful to look at the real estate market in the area. For most non-investment real estate transactions, a homeowner would sell one house and buy another, sitting on both sides of transactions. All things being equal, he or she would not see an advantage in a sellers’ boom market because he or she would also be buying, and the same is true in a buyers’ market as he or she would also be selling. The only time one can really take advantage of a buyers’ market is when they are buying a house without selling one, as one would do when buying a first house.
That’s where I stand right now. Home prices are historically low, even if Princeton has seen a 5% increase in median sale prices over the last year. Although the Case-Shiller Home Price Index is up 3.6% this month, many analysts still forecast low prices for a while.
One option I am currently considering is buying a multifamily house, living in one unit and renting out another. With renting being a popular option right now, and with a location in close proximity to an Ivy League campus, this could be an interesting way to build equity and create new cash flow.
If I decide to move away from the area, I could rent both units in the multifamily house. Managing the house from afar could be difficult, but if there is enough cash flow, I could hire a management company.
The plan relies on finding the right kind of house for the right price. If I do end up leaving my day job, it will be harder to qualify for a mortgage and if I do, I’ll most likely have to pay higher interest rates. This plan may need to be enacted, if at all, before I quit the rat race to work on my projects full-time.
Any thoughts are welcome. Do you think this is a good plan? What would you do?
Updated January 17, 2011 and originally published August 31, 2010.