Save for a house? Or buy a smaller house and hope it appreciates?

**shanb63** · 05-08-2008, 08:51 PM

This is not the appropriate board. This is for freebies, not discussions.

**project15** · 05-09-2008, 04:08 AM

Since you're now in the correct forum now

Go with the small house if you can fit into it and don't worry about appreciation. Sure, the larger house would NORMALLY appreciate more than a smaller house, but the days of 100% appreciation on houses is over for a while, if ever.

Advice from my dad and interpreted by me (since I just went through this debate): A house is a money pit, not an investment. You'll pay for maintenance, repairs, more utilities, taxes, etc... If you want to make money while owning a house, stick to the small house and put money into stocks.

**Fillanzea** · 05-09-2008, 04:19 AM

End of 2009 - so, about 18 months from now, right? A lot can change in 18 months (the real estate market, your financial position, your fiance's financial position), so I wouldn't rush into a decision just yet.

What are housing prices like where you live? Can you get a small house that you like for a lower price, or would you be settling for a real fixer-upper or something in a bad neighborhood? I would try to buy a small house you like and can afford, unless you're planning to start having kids right away. Two people don't need a lot of space, and a bigger house is just more maintenance and more cleaning to do! Or, you might consider renting while you save up more money. Living at your parent's house is kind of okay when you're single but it might get on your nerves really fast once you're married.

**MonkeyMama** · 05-09-2008, 05:27 AM

I would buy what I could afford.

Our first home was a condo simply because it was all we could afford. If you can't afford what you want, then the best strategy is to start small and potentially move up. I'd say this is an excellent strategy.

After that we moved somewhere considerably cheaper and bought our dream home. We saved a lot of money by not going to the "start small and move up" route again. A move would cost much time in stress in moving, and with housing prices here the realtor fees could easily top $30k. (No I would personally never buy or sell without a realtor). Plus our property taxes would skyrocket with a move up, etc. Since we could easily afford the higher end, we grabbed it. & this really made the most sense in this case.

The only deciding factor between these 2 very different strategies was the affordability. Moving up costs a lot of money, particular when real estate prices are high. I would only go that route if I could not afford what I wanted right now.

Likewise, today affords the opportunity to wait until you can afford what you really want. That concept is a little foreign to my own experience, but another strategy worth considering.

**ScrimpAndSave** · 05-09-2008, 05:52 AM

Thank you! I didn't realize I was in the freebie forum...hahaha.

**Scanner** · 05-09-2008, 06:22 AM

I'd get the small house. . .I think now is a good buying opportunity and you need to start becoming upwardly mobile.

If you keep saving and saving, you have to beat inflation consistently to get the downpayment needed.

However, that being said, I wouldn't do it if you only plan to be in the small house 3 years or less. . .if you plan 4-7 years, then go ahead and buy the small house and get the appropriate mortgage.

EDIT: Not to sound old-fashioned, let me apply one caveat - I would not buy anything until vows are exchanged. . .you don't want to have to sell a house during a break-up. So, if you are not scheduled to be married until 2009. . .just keep saving.

**ScrimpAndSave** · 05-09-2008, 06:27 AM

Scanner, I completely agree. I wouldn't buy anything until Dec. 2009. I heard that Christmas is the best time to make an offer! Haha!

We are getting married just a few months before that.

Thanks!

**LuxLiving** · 05-09-2008, 09:27 AM

I think I would buy the MOST house for the least amount of money! Hehehe!!! Sounds sensible right?

I think I already mentioned this to you, but, start out by looking at those houses just a bit above where you'd like to end up. You want to spend 150? Start looking at the 160-170 range and make a low offer. Who knows, you might get lucky.

**maat55** · 05-09-2008, 10:16 AM

In most cases, homes are not an investment. The more cash you pay for one the better. They can be a feel good investment, but not so much of an financial investment.

Having one paid for is the best you can do, leaving you with more money to invest elsewhere. Pay cash for the small one, then save and move up with cash every five to ten years. Thats how I would do it if I were single.

**cschin4** · 05-09-2008, 10:40 AM

I think you should wait. If you can really save up the cash to put a good down payment, then do so. Moving is expensive and why pay $150K for something you don't really want and probably aren't going to be that happy with. Get married, rent, have fun and get to know one another and settle in. Then, you will get a good idea of your direction in life and what you both really want.

**ScrimpAndSave** · 05-09-2008, 10:50 AM

Thanks everyone.

The other option would be to buy my dad's house after a few years. He has invited us to live with him for 2 years after we are married. It is a 4 bedroom colonial...a little over 2,000 sq. ft. not counting an enclosed porch and a 750 sq. ft. basement.

The house was built in 1965, but it is in wonderful condition. It's mostly hardwood and ceramic tile floors, cherry kitchen cabinets that reach up the ceiling and updated bathrooms. It would probably list for about $325 right now.

If we stay there the two years, I will be making about $70,000 and my soon to be husband will be working as a lawyer for two years...no idea what he would make. But at that point - if we save and play our cards right, we would be able to put a sizable downpayment on the house to buy it.

It's also in a fabulous location.

I know my father can't really give us a stellar deal because it is a huge part of the inheritance that I will be splitting with my three other siblings. Not pretty to think about...but we will be splitting the cost of the house and about $400,000 that he has in the stock market. Since it is about half of what there will be - we will have to pay fair market value.

I guess this makes the most sense. It is a house that we could virtually live in forever. It's more house than we need, but still seems very modest to me. We don't plan on having children (but I know that changes sometimes). Unless we have to move because of our careers, I can see us living in the house forever.

Patience is a virtue, right? So hard when my friends are buying there own places. But I think I need to keep myself in check and realize that I am in a very special situation.

**Seeker** · 05-09-2008, 04:07 PM

Originally posted by project15 View Post

Advice from my dad and interpreted by me (since I just went through this debate): A house is a money pit, not an investment. You'll pay for maintenance, repairs, more utilities, taxes, etc...

Long term, any house is an investment. Long term, renting is a money pit.

Short term, yes I agree with the above. If anyone is on-the-move all the time, then buying a house both pros and cons need to be planned out and analyzed from a cost/expense perspective. Short term, it may work out that renting is less of a money pit (in spite of the fact that here you cannot rent anything for less than $1k per month).

And yes, costs are always lower with a smaller house than a larger. Plus cleaning is easier

In reality, money spent without any gain (renting) is the true money pit; not everyone has a choice however.

**jIM_Ohio** · 05-09-2008, 04:13 PM

I think more expensive houses appreciate faster, they will also have more volatile swings in prices (higher risk=higher reward).

Several reasons
1) the cheaper houses are probably in less desireable locations.
2) which implies the more expensive house is in a better location. When you go to sell that better location will allow same house to be worth more.
3) the people looking for upscale houses are looking and competing for prime real estate (lower supply) so that demand will keep price point high.

I live in a new construction neighborhood. I have a wooded lot and live on a dead end cul de sac. The same house exists (same floor plan) in neighborhood, but only a few are on cul de sacs (rest are on thru streets). My location is better, I can ask for more even though the neighborhood and schools are the same. The same floor plan with better schools costs around 50k more in other townships.

**jIM_Ohio** · 05-09-2008, 04:18 PM

Originally posted by ScrimpAndSave View Post

My fiance and I are getting married at the end of 2009. Does it makes sense to buy a small house to start off ($150,000), or wait about two years and save up to buy one that is around $275,000?

My friends are all buying houses and it makes me so sad.

But I know I am in a a great situation bc I pay very low rent at my dad's house and he is inviting us to live there for 2 years after we are married.

I guess I'm just jealous. At least I can admit it.

Moving is an expensive proposition. My estimates are close to an 18k cost.

6% to sell (so that 150k house costs you $9000)
moving out will cost you between 1k and 5k
moving in will cost you between 1k and 5k
closing on new house will cost you around 2k

incidentals for new house will cost you anywhere from a gallon of paint to a new roof, HVAC etc...

My advice to young couples is think ahead around 5-7 years. If you could have 3 kids, don't buy a 3 BR/1 BA house. If you could have new jobs in a new city, that is always a risk. If you control your career/job well, I would look for more expensive house.

If you have a family already I would advise differently. Less likely to need more space, more likely to need to downsize space in less than 18 years.

Save for a house? Or buy a smaller house and hope it appreciates?