Buying A Home
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Our tech team has launched updates to The Nest today. As a result of these updates, members of the Nest Community will need to change their password in order to continue participating in the community. In addition, The Nest community member's avatars will be replaced with generic default avatars. If you wish to revert to your original avatar, you will need to re-upload it via The Nest.
If you have questions about this, please email help@theknot.com.
Thank you.
Note: This only affects The Nest's community members and will not affect members on The Bump or The Knot.
for urban nesties ... is buying a condo/apartment home worth it?
DH and I live in Chicago, and have actually found a great deal renting a place in the prime downtown location for only 950/mo. We aren't 100% sure that we're going to settle in Chicago, but $1,000/mo. is still a lot to throw away. Are downtown properties like condos and lofts really an investment? Are they quick to sell if we relocate? I know rates are really low right now, and I feel that Chicago is growing a lot in terms of Millenials/Gen Y'ers moving to the city. I think it might be a good investment, I'm just not keen on the level of commitment. What have been your experiences?
Re: for urban nesties ... is buying a condo/apartment home worth it?
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Thanks ladies - that's really sound advice. I see no problem with condos either. As a matter of fact, I prefer them. It's going to be a long time before DH and I TTC, and I personally can't justify wasting the resources owning a SFH with just two people.
However, I think we might not be ready to commit long-term (meaning 5+ years) to a particular city. We're still working our way up into careers, and have moved around quite a bit. I love Chicago, but I'm just not sure what will come up. We are also planning on spending a year working abroad within the next few years for DH's job, and it would probably be a hassle to rent our place for a year.
I'm a condo owner, but I don't know anything specific about the condo market in Chicago. However ...
First of all, you have to stop looking at your $950 rent check as throwing away money each month. You're not throwing away $950, you're using it to buy something very important: a place to live.
Yes, it's true that you're not gaining equity by renting, but you don't necessarily gain equity by paying a monthly mortgage payment either. You gain equity if the value of your home increases, or the value remains constant but you're paying down the principle on the loan. But, if you look at any amortization schedule for a mortgage, you'll see that you're paying almost only interest in the first years of your mortgage - most of your monthly mortgage payment goes to interest and very little goes to paying down the principle on the loan.
Real estate is always a gamble, but if you feel like property values will increase in the next several years (in case you need to sell), then it might be a good investment. If the value will stay the same or decrease, it's not worth it to buy if you think you might need to sell in the relatively near future (5 years maybe?). If you own your home a shorter amount of time, you will have paid mostly interest on your mortgage and not really gained much equity.
Also, remember that there are some additional costs to owning that you don't currently have as a renter. You'll need an adequate emergency fund. With a condo, there's less than you're responsible for (the HOA covers some maintenance/repair issues), but you still need to be prepared to cover expenses if your appliances quit working or something.
I'm not against condos in general, although mine was a terrible investment. I had very bad timing. I bought in 2006 for $125K, and the place is currently worth about $55K. Including upgrades I've made such as buying all new appliances, new flooring, new light fixtures, etc., I'm in the hole $75-80K. I no longer live in the condo, but rent it at a loss every month. I would have been so much better off if I had continued to rent rather than buying back in 2006, then I could have just moved out of a rental instead of being stuck with a property worth much less than I owe, and continue to take a loss on every month. Mine is the story of many people who had bad timing on their home purchase like I did - it's not specific to just condos.
Mr. Sammy Dog
Ditto this. Also another thing to keep in mind with a condo is that you could be hit with a $20k special assessment a month after you buy and you have to pay it. There is no getting around it unfortunantly. In order for it to be worth it your property would have to gain about 10% (3% to buy 7% to sell) in the time you own it just to break even after you take into account buying and selling fees. The odds of that happening in less than 5 years is slim to none unless you buy a fixer upper for a steal and rehab it yourself.
Agreed. Everything you said is true, and is much better advice than I gave. I guess my point was that we had NO idea this was coming, we never would have thought that we'd lose money on a house. And that could happen again. It just seems like such a hassle/risk to buy and sell right now - I would rent if I had the choice.
I own a condo in downtown Chicago. The pp had some good points. You should realize the full costs of home ownership and also realize that there is no guarantee that your investment will go up in value. Personally, I think it is a bad idea to buy unless you plan to stay put for the relatively long term. But that is just me. Obviously everyone has a different tolerance for risk, life circumstances and financial picture.
I bought my condo a few years ago when I was single. This is a doorman building, in River North, a few blocks off Michigan (so a great location). Since that time, it has gone down over $100K in value from where I bought it. In addition to my regular principal and interest payments, each month I've been throwing thousands extra towards principal to get the balance to where it needs to be for us to sell. We are there (and I think even might net $10K or so on the sale at this point), but I could have thought of alot of better uses for that money.
There are some really good buys out there now (DH and I are planning to move to a larger place and this will be a very long term thing) but I've seen very nice places in great neighborhoods sitting on MLS for months now and reducing prices tens of thousands as the months go by- and this is since last March. I don't know if the market has hit rock bottom or if there is still room for downward movement. If I were to buy something, and then need to move in the next two years for whatever reason, I still really couldn't guarantee that I'd recoup my investment and (with the costs of sale) might need to bring money to closing. Selling costs in Chicago can be high because in addition to real estate commission, you need to pay for the Chicago of Chicago transfer stamps (you need to do this as both a buyer and seller).
Property taxes are sky high in Chicago, and (depending on what building you live in) monthly assessments can be too. Someone mentioned special assessments. We had one a year or so ago ($2K) and my building is less than 10 years old. A friend of mine (another property) had something like a $15K special assessment for roofing. I can only assume that this is relatively common occurence because in the course of our search for a new place we've spoken to several listing agents who have spoken about improvements to a given property and special assessments (quickly followed up by- "don't worry, the seller has/will be taking care of that").
Time to market in my building (according to one REA I spoke to) can be as long as 160 days.
This is not to say that property ownership is not for you and there are other options if you do need to move suddenly (I have no interest in renting out my unit and being a landlord, for example) but you need to go into it with a full appreciation of all the costs and risks.
It is so much more complicated than avoiding "throwing money away" by renting.
We are in Chicago and just bought a single family in between Bucktown and Logan Square. We were looking at a lot of condos/townhomes in the city and ended up going with a single family. The decision to buy in Chicago was easy for us, we plan on being here for the long term and this current house gives us plenty of room to grow and we plan on staying here at least 5-7 yrs.
If you are looking at buying something that the mortgage will end up being somewhat close to what you are paying in rent then it will be fairly small. The thing we worried about in condos is feeling like we "need" to move bc of space and not being able to sell. This was the position nearly every owner of any condo we looked at was in.
Condos are a dime a dozen in Chicago--take the south loop for example. It was built up quickly at the height of the bubble and many of the condos never sold. Now owners are stuck in buildings where half the units are rentals, which pretty much has killed their prospects of selling.
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