Apartments for Low Income

Questions and Answers

Your Questions About Renting An Apartment Vs Renting A House

July 9, 2013

Susan asks…

Could, and should, I go for a house w/ a mortgage vs. renting (given my situation)?

I’m a single male (literally, no girlfriend), 23, graduated from college at the end of April. I started a new job, on 5/9/2011 making 62k gross yearly income. I’ve worked the entire time during college since I was 18, with co-ops/interns in the same field – engineering. I have money saved – about 32k in bank savings (5k in retirement 401k too). My only monthly debt is my cell phone bill, retirement savings, and miscellaneous (credit card bills). This is about $400-500/month.

So… according to my own research, and running my own credit check (credit score: 727), I believe I should qualify for a loan. I would place a price ceiling of 100K for myself – there are PLENTY of properties here selling for that or less. I want to be able to put 20% down. If I were to go for a house, I’d want to get something, small, inexpensive, something I could pay off very quickly, maybe even less than 10 years! My rationale behind this is, is to upgrade if need be, from very possible life-changing events in the future as I near my 30′s (pay raise, new job, marriage, etc). I don’t want something big that would truly take a long time to pay off – so I’m not too stuck. I’m in southeast Michigan and don’t plan to leave the area, but would move around within the area as necessary.

Supposedly housing markets could be plunging even more, making me timid to go for a house. This house would be for me to live in! I am not trying to get an investment property. I don’t necessarily care to make a ‘killing’ off the house when I could sell it in the future, just enough for another down payment elsewhere, and not ‘waste’ money renting. I am fully aware that renting is better in a declining housing market; or selling a house at a significant loss.

I’ve had an apartment before so the idea of my own house is that much more interesting to me vs. renting. I moved back in with the parents last month, and am living here for now. I really don’t want to stay with the parents long-term, one full year would be pushing it. I want to move as the cooler weather arrives in September/October. Another words: I don’t want to keep saving for a really long time for a house. I would willingly rent if I discovered going for a mortgage would be better years from now. A house is attractive, but I’m not willing to save another year+ for it. I feel I have decent savings already.

Is my idea feasible, given my circumstances? I will say if I don’t qualify, it’ll because I haven’t had credit for that long, or I haven’t been at the same income for at least 1-2 years.
Degree: Bachelor of Science in Electrical Engineering & Computer Engineering

Administrator answers:

There are actually 2 issues here.

1. Should you purchase at all or rent. If you will be in the home for at least 5 years, then I would purchase.

2. Should you buy now or wait? Will prices fall more? It really depends on the area you are buying. Some areas like the DC metro area have increased in prices over the past 2 years. Same for some of the areas hardest hit like Las Vegas and FL. These places fell hard and FAST, and are already increasing in value. You said it yourself. This is a place to live vs a quick buck.

I would recommend buying now. You can NEVER time the market at the bottom or the top.

The other MAJOR!! Factor are interest rates. They are LOW!!! And even a 1% increase in rates, would increase your payments on a 80,000 mortgage by 60 a month. Or to keep the same payment as you would have today, just 1% increase in rates would lower the price price by 9,000 – so you lose 9% buying power.

And YES, rates are to low today. When the econ grows, rates have to go up. If the econ was humming today, rates should be in the 6-7% range. That is 1.5 to 2.5% higher then today.

Mary asks…

Buying a rental property vs. renting out part of your own house, help me decide?

I am a PhD candidate in my first semester with about $10K. I’m currently renting a cheap apartment and want to purchase real estate to financially support me and I won’t have to work while going to school. I would also move into the property I buy so I could live rent free.

SCENARIO #1: I noticed this 2 family rental property for sale at $148K across the street from my school in the busier side of campus. It has 2 apartments and a basement with street side parking.

SCENARIO #2: I also notice a private 1 family residence on the quieter part of campus. It looks like I can surely rent the basement to a graduate student, or on a room for rent basis. This place has a garage and a driveway to fit approx 3 cars.

I am single and don’t want any trouble or major maintenance responsibility. I also feel that either scenario would pay for itself even when I graduate and move on because there will always be students looking for a place to live.

Which scenario would you recommend me spending my money on since this will be my first time being a landlord?

Administrator answers:

The single family house, does it have a seperate entrance? If not, that would be a deal killer to me, I would not want a roommate. If you want a roommate, than do that. The duplex will be harder to qualify for and they will require that you have cash reserves for vacancy. Do you know what the rents are for the duplex? And do you know the average rents for single family rental with the same BR/BA in the area? Are you planning on keeping the house (either the duplex or the Single family) after you graduate? If so you need to do at detailed cashflow analysis on each place and see if they can provide profit at the end of the month. It’s more that Principal Interest Taxes & Insurance. And if you don’t want maintenance responsibility you will need to hire a property manager and that will take 10% right off the top of your profits too. I can email you a spreadsheet I use if you are interested. Email me at my username at yahoo.com.
Also, unless you buy at a deep discount you will not be able to live mortgage free, IMHO.

Lisa asks…

Buying vs. Renting in Washington D.C. area? Mortgage the way to go?

27 years old, married (wife is 23), no kids. My FICO score is 620. Combined take home household income of $5000 per month (after taxes). Currently renting an apartment for $1350 a month. I work in downtown DC so I cannot move to far away into the suburbs – must be metro accessible. I’ve heard a lot about renting being “throwing away your money”. Should I do all I can to find a lender that will lend me money to buy a house or a condo? Would a monthly payment for a house or condo be less than I’m paying in rent at the apartment? Everyone says you must not wait to buy, and that renting is throwing away your money. Because of that, I’ve been thinking of getting a zero-down type loan, or even entering into an ARM mortgage….from what I understand it’s better to do that so long as you own and are not supporting a landlord. Is that true?

Administrator answers:

You face two problems.

1. Your credit score is a bit too low to qualify for a decent rate…or to even qualify for the mortgage.

2. The days of “zero down” mortgage are gone. The best you may get is a 3% down FHA loan.

BTW…try to avoid a ARM mortgage, especially with the rates being so low these days.

Carol asks…

Advice On Buying VS. Renting with financial factors?

I am a 19 y/o male. I am also a small-medium size business owner. I was renting an apartment with a friend for a year and was an easy $250/month rent. At the end of the lease, I moved back home with my parents until I am able to differentiate between the pro’s and con’s of renting and buying.

My personal budget has mostly fixed expenses and slightly variable expenses, this includes putting $435/month into savings.

I am differentiating between a 1,000 sq ft newer apt which also has a pool and gym at the clubhouse ($50/mo savings) and a 1,000 sq. ft home which may need a few updating repairs.

The financial advise I need…. if I rent, after savings and expenses each month I will have about $450 left over in checking… If I buy first, I will have about $100 left over each month in the checking. These are mostly worst case scenarios with expenses estimated higher.

I am considering renting for a year or two so I don’t have the financial stress of “what if” so much and to gain a cushion in my checking account, and to feel a bit more security and not living paycheck to paycheck.

Another factor, if I buy ($120,000 house on an acre) I plan to stay there about 3 years and move up to about a $150k-$165k house as my salary increases, so there are closing costs to factor in for only 2-3 years.

My con of renting is, can’t make changes, can’t add a garage and rent it out to my business (tax deduction, greater personal income, and all business equipment is easily accessible, and kept out of weather)

I am looking for investor and “playing it smart” advice….. THANKS
My minimum gross is $3,000 a month, then possible bonuses at quarter/end of the year. I included $350/month in my expenses for child support. 50/50 chance, crappy situation. Again planning for worst case scenarios
Expense Budget – - Monthly, High estimates
$200 grocery
$85 Electricity
$40 Water
$175 Clothes, Hygiene, Entertainment
$435 Savings
$350 Possible child support
$100 Vacationing
I have no personal debt, as a business owner, all business activity falls back on my SSN which is both bad and good. I have $40k on bus. debt showing on my credit with a $65k credit limit. I have been prequalified for $132,000 with a equal or greater co-signer
note: when I mentioned differentiating between renting and buying I meant I am ready to have my own place 100% whether apt or house. Thanks for all advice so far, seems very helpful
I monitor my credit regularly. It is currently at 791.

Administrator answers:

Here this article should help you out a bit.

Sharon asks…

Buy a house vs renting in Chattanooga?

I’m 25 and I am debating buying my first house in Chattanooga, TN. I have a credit score over 740.

The house has an asking price of $99000 and the seller is willing to negotiate. The house is a good area, has 3 bedrooms and 1 bathroom. It also has a big fenced in yard.

Should I rent an apartment or buy this house with a fixed 15 year mortgage? The monthly payments cost about the same as an apartment with the mortgage. Will house rise in value over the next few years?

Administrator answers:

BUY!! If your mortgage payment is the same as your rent, then buy. Keep in mind the costs of owning a house though, including lawn care, painting, repairs, roof, insurance, taxes, utilities, etc. Sit down and list all these things and make sure your income is enough to cover them and not exceed 25-30%.

If it is in a good neighborhood, and you do some upgrades, yes, it will appreciate in value as the economy recovers. Before you upgrade too much, though, consider the area. Is it one that developers may be interested in tearing down and rebuilding larger homes? If you have a big yard, it might hold a larger home.

Good luck. Sounds like you found a gem.

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