Thursday, April 19, 2007

Rent vs. Buy

As I settle into my work schedule, I have to get off of the free ride I'm getting from my parents. Right now, I am living at home, and the free room and board is hard to find elsewhere.

But I know I need to get out of there. Not that its not great to have a warm meal waiting, or people to talk to after work, but rather I'm losing my independence and its terrible for my social life. However, finding a place to live isn't that easy.

Where work is, the average monthly cost of a 1 bedroom apartment is about $1600 / month. This is steep, and so I have been pondering buying instead of renting. This same amount per month equates to about $250,000 I could get through a mortgage loan.

Now if it was that easy, I wouldn't be blogging about it.

Unfortunately, $250K buying power assumes I have at least 10% to put down, which of course I don't have. In order to make up for the down payment, I can obtain either piggyback loans or private mortgage insurance, both of which add to the monthly payment amount, decreasing my buying power to about $220K.

That $30K is a big difference in the area I'm looking, so I'm have a tough choice between shelling out money for a place that's not mine, but which will be very nice, or something that is mine, but will require additional work to become very nice.

Stay tuned for updates.

Of course, no updates for the weekend, as I will be in Vegas. However, if I do a networth update on Monday, you'll know it went well for me :-)

3 comments:

Your Friend Paul said...

Maybe you can live in your $40,000 car!

Sorry, but if you own a 40k BMW and still live with your parents, your priorities need readjusting...

Anonymous said...

you get to go on a one-week vacation after only a month of work? Thats pretty sweet.

Finance Guy said...

To "My" Friend Paul: I don't know if you read my post, but it specifically states that moving out is at the top of my priorities.

As a matter of fact, the post is about me debating renting versus buying an apartment.

While I understand there could be confusion about how I am spending my money, the plan has always been to have my car and own place within 3 months of work. I am approaching 1 month of work, and the car has been purchased, and I am actively searching for a suitable apartment.

At the same time, I would love to hear you delineate how my priorities are off. Making a car purchase is far easy than deciding to rent or buy an apartment, both in terms of research required, and amount of capital needed.

To Anonymous: I wish I could get a one-week vacation, but I only went away for the weekend.