At what age should I start thinking about buying an apartment rather than renting?

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Posted by NFarfan (MONEY FORUMS: 4, Answers: 0)
Asked on May 1, 2016 2:37 pm
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I’ll add to Hanna’s wisdom. Consider the rule-of-thumb that states you should not pay more the 15 x the annual rental value for a property. That means if you rent the apartment you are considering for $1200/month then think hard before you pay more than $216,000 to own it. The assumption is that if you had to move you could pay off a 15-year mortgage from the rental income.

Before buying, I recommend having reached these financial milestones:
1. Debt free
2. 3 – 6 months of living expenses in the bank.
3. Actively accumulating money for less-than-monthly expenses, like holidays, new tires, insurance, etc.

Having reached these milestones, if you can find a place you’d like to buy where the payment will be no more than 35% of your monthly take-home pay (and the closer to 25% the better) and it’s a good value buying will make sense financially. Then you need to consider the lifestyle points Hanna raised – likelihood to stay in the area, family needs, career stability.

Owning a home can be a blessing or a boat anchor. Don’t let the wrong decision drag you down.

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Posted by Matt Kelly (MONEY FORUMS: 0, Answers: 5)
Answered: June 29, 2016 1:30 pm
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I don’t think there’s any age that makes more sense than another; I know a man who has been living in the same apartment (paying rent) for 20 years in Berkeley, CA. His rent has been the same low rate because he was grandfathered in. Meanwhile, the person next door pays 3x what he does (also renting).
So, when does it make sense to rent vs. buy? Renting an apartment absolves you of certain responsibilities such as emergency home repairs, maintenance, or structural upgrades. That can be nice if you don’t budget for repairs. If you’re planning on being there more than 5 years, does it make sense to buy your apartment instead?
There’s not much of a difference in the short run between buying and renting an apartment, in terms of building equity on the property. The exception would be if you were able to afford a 15-year mortgage, but that’s not likely with first-time buyers.
Buying your own apartment might be a good idea IF you are thinking of staying in the area for a long time, have good credit, and can afford a fixed-rate mortgage. You should try to find a place that is 2-3x your annual salary. Also, interest paid on the apartment can be eligible for tax deductions. Any renovations/changes you make will be adding potential value to your property, which is always a good thing.
Personally, I think it depends on your career and family needs more than age. I know I’m holding off on buying any property until I have considerable savings and a better idea of where I’d like to live, what my career path may be, and if I’d like to start a family.

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Posted by Hannah Jane Parkins (MONEY FORUMS: 2, Answers: 4)
Answered: May 3, 2016 3:37 pm