“The only thing more expensive than education is ignorance.” – Benjamin Franklin
For all you 18-34 year olds who may be thinking about the next steps in your life (i.e move out from mom and dads), this ones for you.
It’s a scary step indeed BUT sometimes you have to put yourself out of your comfort zone to move forward in life. So for all of you who want to take the next step but really have no idea where to even start, I got you.
First step is educating yourself. I am here to help with that part but please do your own research as well.
The first question you might ask is -is it better to rent or buy? Your grandfather might tell you to buy and build equity and live the “American Dream.” News flash Pops, it isn’t the 1950’s anymore. Keep in mind when our grandparents and even parents were buying houses and growing up, the market was extremely different than it is today. But that’s a topic for another post. All you need to know is that housing prices are literally 340% more than they were 50 years ago. Yes, that means a house cost approximately $8,000 in 1950. Don’t believe me? Here ya go.
Comparing the inflated cost of living today from 1950 to 2014:
RENTING – In 2017, in the Greater Lowell market you can rent an average 2-3 bedroom apartment for anywhere from $1300-$2000 a month. Obviously $1,300 is going to get you a lower end, more inner city apartment with less space. $2,000 will get you a nice newly updated good location apartment. Majority of landlords will require first month, last month, and security deposit to enter into a lease. Also be prepared to pay anywhere from $30-$50 for an application fee including a credit & background check. So all in all – if you are looking to rent be prepared to come up with anywhere from $3,900 to $7,000 to enter into a lease.
Benefits of Renting = flexibility to move, conveniences including no yard work or snow removal, if utilities break most landlords will fix it or get a new one.
Downfalls of Renting = not building equity/ paying someone else mortgage, abiding by landlords rules
BUYING – In 2017, in the Greater Lowell market you can buy an average (not high end) 2-3 bedroom house/ condo for $190,000 – $300,000. Unless you have a that kind of cash laying around, which is doubtful (no offense), you will need to get a mortgage. You can get a mortgage from a variety of banks now-a-days. Most of you will also qualify for a FHA loan (Federal Housing Authority) or a first-time buyer program where down payments are lower than the conventional 20%. On average you’ll be looking at putting 3.5% down with one those loans. So, lets say you go for the FHA or first-time buyer loan – you’ll be looking to put down anywhere from $6,650 – $10,500 (you can put down more if you have it which will make your payments and interest rate less). Coincidentally enough, your monthly payments could be similar to what you would pay for rent, anywhere from $1,300 – $2000 including taxes and insurance.
Benefits of Buying = building equity to own outright, owning your own property
Downfalls to Buying = maintenance on the property, utilities are your responsibility, various liabilities, depreciation with market fluctuation, you may have to sell for less than you bought for
In my opinion, if you want to buy right now, buy a multifamily. Buy something that will make you money instead of cost you money. Especially if your young, don’t have kids, don’t need a ton of space. You can rent out an apartment for the cost of your mortgage. In some cases you may be able to rent out for more than your mortgage costs and profit. Yeah you might have to take care of things that break and you may have difficult tenants but if you budget and make a cushion account (saving money specifically for repairs) and screen your tenants, you will be good to go. Specifically in Lowell right now, you can buy a multifamily for the same price or less than you can buy a single family in Dracut or Chelmsford.
If you have questions on any of this please call me or email me or reach out to me in any way. This is stuff we aren’t taught in school. This is stuff we are expected to just figure out on our own. To be honest, the current housing market is so complex most people have no idea what they are doing. They do what everyone else is doing or they do what they are told to do. If you do nothing else, educate yourself, or reach out for help!
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