T Nation

House at 21?

So, I’m a 21 year old female. I finished Uni a while ago, have very little student debt (had scholarships), own a good car (owned, as in, no payments), and I have been working at the same job for a year, I’m happy with it.

I am actively working towards the goal of living completely debt free. I hate debt. I live frugally, and I am happy. I have the material things I want. I put money in a savings every month and an IRA every year. I am trying to work as hard as possible right now (12 hours or so a day), so that I can enjoy the rest of my life later.

That leaves housing. A mortgage has always been my bane. The thought of getting locked into a huge debt for 30 years kills me. At the same time, I’m simply paying someone elses mortgage right now, thus living in denial of sorts.

Houses are getting really cheap around here, and I’ve toyed with the thought getting one for awhile. People keep telling me I’m too young to get a house, and that I should enjoy the ‘renting’ years. I don’t know what that means. I do enjoy my life. I can’t enjoy my life while paying a mortgage instead of rent?

Two days ago I was driving home and I passed a house that is for sale. The bank just took it over after the owners failed to sell it and now it sits there.

I love this house.

It sits on an acre of land and the house is almost 2000 square feet. The entire yard in front of it is open and fluffy green, while the entire back is surrounded by huge, towering trees. It is a ranch, and it is in good shape. It has a huge front porch, new roof and siding, the furnance is only 4 years old, and the wiring was just redone.

I pulled up records online, and houses in this area of the same size and caliber were going for $125,000+ easily a few years ago. The house is on the market for $48,000. The bank is trying to get rid of it before the copper gets stripped or something bad happens to it from sitting.

I do a lot of work for Habitat for Humanity, and I started envisioning all the stuff I could do to it. I’d build a deck on the back that wraps around to the front porch. The kitchen floor’d get tiles put down; I’d rip out the cupboards, sand them down to their beautiful oak and stain them; build a shed outside the house; tear out the plaster in the dining room and put up some drywall; etc.

I imagine, should the housing market ever go back up, I could easily get three times what I’d pay for it, especially with the good land.

Then the ‘con’ side of me kicks in. What if after I buy it, the furnance blows up, or a tree falls on the house, or foundation cracks, or… You get the point.

I could put $12k on it as a down payment, meaning the monthly payment would be a little over $200 a month, or less than half of what I am paying in rent. If I paid what I am paying in rent, I could have it paid off in less than 8 years.

All this for an almost new house on an acre of beautiful land in a perfect neighborhood that is 15 minutes from the city.

I did out the math, and adding things like property tax, trash and water, home insurance, etc. I’d be about breaking even on the housing costs over renting.

I’m not seeing a negative side, which leads me to believe that I am missing something.

So, for those of you who have purchased a house, am I being young, naive, and stupid? Is there some glaring hole in my logic? If I go to the bank today and get the mortgage, would I be making a huge mistake? Am I acting impulsively and not looking at getting a house the way I should? Is there really an upside to paying rent (aside from the manager doing work, etc)?

Thanks, and sorry about the long post.

If you do decide to buy it, just make sure you wash your feet every day. A lot of people in your age range have itchy feet. Especially fresh out of college.

Purchasing a home really ties a person down. It’s a lot easier to pick up and move when you’re only renting.

If you’re fairly certain that you want to stay around that area for a good while, then by all means take advantage of this deal.

[quote]Shadow Hunter36 wrote:
If you do decide to buy it, just make sure you wash your feet every day. A lot of people in your age range have itchy feet. Especially fresh out of college.

Purchasing a home really ties a person down. It’s a lot easier to pick up and move when you’re only renting.

If you’re fairly certain that you want to stay around that area for a good while, then by all means take advantage of this deal. [/quote]

I’m not fresh out of college, I got my main degree two years ago, and took a few classes after that (hence the minor debt) before deciding enough was enough - I started college when I was fifteen.

I’ve spent about a consecutive year living overseas. I’ve climbed mountains in Switzerland and helped build houses in Peru and drank till I was pissed in Germany and gotten food poisoning in Japan.

I’m good to go for awhile, I’m getting tired of the traveling and anxious to do start working on things that are a bit more permanent and longer lasting.

And yes, the general location I’m in, I’m quite certain I want to stay in.

Squiggles,

As long as you’re comfortable with the level of work the house will take and you’re comfortable taking over a foreclosure (ie assuming you’ve done your research on the property), then it sounds like a sound investment.

If everything checks out and you get the house at that price, then with some work and only a few years or less, you could turn it around for a profit if you wanted to move on (or, if you simply wanted to turn a profit!)

I bought my first house at a reasonably low price for the market at the time. I took a contract which required me to relocate, so I decided to sell the house (could have rented it). When I came back to here two years later, the housing market had exploded. I asked my realtor what the chances were of trying to buy back my old house.

His answer “You can’t afford it…”

[quote]SteelyD wrote:
Squiggles,

As long as you’re comfortable with the level of work the house will take and you’re comfortable taking over a foreclosure (ie assuming you’ve done your research on the property), then it sounds like a sound investment.

If everything checks out and you get the house at that price, then with some work and only a few years or less, you could turn it around for a profit if you wanted to move on (or, if you simply wanted to turn a profit!)

I bought my first house at a reasonably low price for the market at the time. I took a contract which required me to relocate, so I decided to sell the house (could have rented it). When I came back to here two years later, the housing market had exploded. I asked my realtor what the chances were of trying to buy back my old house.

His answer “You can’t afford it…”[/quote]

See, that’s one of the things I’m looking at. If the houses in this area have gone for so much in the past and the city has only increased in size/quality, then if I spend the next 3 - 5 years investing in this, I could theoretically make a very nice return on it.

I’ve also considered, because of the lot size, that perhaps after a few years of building up a savings again, I could have a smaller house built on the opposite side of the lot, rent it out until it pays itself off, and then either split them into two separate properties and sell both, or sell/rent one.

Hmmm…

How’d you manage to start college at 15?! For me thats in 1 month LOL

[quote]ahzaz wrote:
How’d you manage to start college at 15?! For me thats in 1 month LOL[/quote]

Not sure how it’d work in Canada, or if there’s systems for it.

In the US, most universities have programs/scholarship money set aside for high schoolers each year, you just apply, take all the tests, and if you score high enough, then you’re good to go and you just taken classes like every other person. Also, different states have different grants/scholarship’s set aside for high schoolers that you can apply for depending on SAT scores and different crap like that.

I just really hated high school :wink:

[quote]Squiggles wrote:
ahzaz wrote:
How’d you manage to start college at 15?! For me thats in 1 month LOL

Not sure how it’d work in Canada, or if there’s systems for it.

In the US, most universities have programs/scholarship money set aside for high schoolers each year, you just apply, take all the tests, and if you score high enough, then you’re good to go and you just taken classes like every other person. Also, different states have different grants/scholarship’s set aside for high schoolers that you can apply for depending on SAT scores and different crap like that.

I just really hated high school ;)[/quote]

Thats crazy, I wanted to leave HS asap. I guess I gotta take all the cources i need, sigh unless i missed something lol.

[quote]Squiggles wrote:
So, I’m a 21 year old female. I finished Uni a while ago, have very little student debt (had scholarships), own a good car (owned, as in, no payments), and I have been working at the same job for a year, I’m happy with it.

I am actively working towards the goal of living completely debt free. I hate debt. I live frugally, and I am happy. I have the material things I want. I put money in a savings every month and an IRA every year. I am trying to work as hard as possible right now (12 hours or so a day), so that I can enjoy the rest of my life later.

That leaves housing. A mortgage has always been my bane. The thought of getting locked into a huge debt for 30 years kills me. At the same time, I’m simply paying someone elses mortgage right now, thus living in denial of sorts.

Houses are getting really cheap around here, and I’ve toyed with the thought getting one for awhile. People keep telling me I’m too young to get a house, and that I should enjoy the ‘renting’ years. I don’t know what that means. I do enjoy my life. I can’t enjoy my life while paying a mortgage instead of rent?

Two days ago I was driving home and I passed a house that is for sale. The bank just took it over after the owners failed to sell it and now it sits there.

I love this house.

It sits on an acre of land and the house is almost 2000 square feet. The entire yard in front of it is open and fluffy green, while the entire back is surrounded by huge, towering trees. It is a ranch, and it is in good shape. It has a huge front porch, new roof and siding, the furnance is only 4 years old, and the wiring was just redone.

I pulled up records online, and houses in this area of the same size and caliber were going for $125,000+ easily a few years ago. The house is on the market for $48,000. The bank is trying to get rid of it before the copper gets stripped or something bad happens to it from sitting.

I do a lot of work for Habitat for Humanity, and I started envisioning all the stuff I could do to it. I’d build a deck on the back that wraps around to the front porch. The kitchen floor’d get tiles put down; I’d rip out the cupboards, sand them down to their beautiful oak and stain them; build a shed outside the house; tear out the plaster in the dining room and put up some drywall; etc.

I imagine, should the housing market ever go back up, I could easily get three times what I’d pay for it, especially with the good land.

Then the ‘con’ side of me kicks in. What if after I buy it, the furnance blows up, or a tree falls on the house, or foundation cracks, or… You get the point.

I could put $12k on it as a down payment, meaning the monthly payment would be a little over $200 a month, or less than half of what I am paying in rent. If I paid what I am paying in rent, I could have it paid off in less than 8 years.

All this for an almost new house on an acre of beautiful land in a perfect neighborhood that is 15 minutes from the city.

I did out the math, and adding things like property tax, trash and water, home insurance, etc. I’d be about breaking even on the housing costs over renting.

I’m not seeing a negative side, which leads me to believe that I am missing something.

So, for those of you who have purchased a house, am I being young, naive, and stupid? Is there some glaring hole in my logic? If I go to the bank today and get the mortgage, would I be making a huge mistake? Am I acting impulsively and not looking at getting a house the way I should? Is there really an upside to paying rent (aside from the manager doing work, etc)?

Thanks, and sorry about the long post. [/quote]

…wow, that’s a great deal. I bought a 800 square feet apartment for 126.000 euro last year, and over here that’s considered a good deal. Markets fluctuate, and in 5 years the market will have changed. Most likely your property will gain value and get’s you off to a great start. I’d say, do it!

The downsides of a house at 21 are (off the top of my head):

repairs
wanting to relocate (not being able to sell)
affording it (mortgage/utilities/taxes)
maintaining (cleaning/yard work/redecorating/painting/etc…)
furnishing/appliances
friends using it as a hangout/party location

Now I don’t know you, but if we can take what you posted at face value, you’re likely fine. That said, re-read your post and consider what you want in life and just make sure you’re being truthful to yourself and not just talking yourself into it.

Myself. I was married at 22 and we bought a place at 24, but we knew we were going to settle here.

you already mentioned it but if i were you I would look at this as an investment. If you are looking to buy property, especially in the U.S., now is the time.

This post was flagged by the community and is temporarily hidden.

Hey squiggles,

top post and congratulations on how successful you have been so far. Im 21 myself and i bought my first house at 19.

I live in Australia. My house cost me $400k … wont describe it haha but its quite a nice 4 bedroom house in the western suburbs of Sydney.

I have been paying a mortgage on my own for about 14 months now. Im a high income earner as an IT salesperson (how i got there is a long story).

I only just (finally) deposited a brand new car… and its a beast too.

That puts my debt count at a total of about $430 000, factoring in what i have paid off the house already.

My advice Squiggles… if you can afford it BUY THE HOUSE.

Dont be afraid of debt. my parents are average people and they paid off their house in under 10 years… im working on doing the same!

Work hard, save a deposit. Buy the mother. Property appreciates… you wont lose out, not at that price.

keep it up.
anth.

[quote]Squiggles wrote:
SteelyD wrote:
Squiggles,

As long as you’re comfortable with the level of work the house will take and you’re comfortable taking over a foreclosure (ie assuming you’ve done your research on the property), then it sounds like a sound investment.

If everything checks out and you get the house at that price, then with some work and only a few years or less, you could turn it around for a profit if you wanted to move on (or, if you simply wanted to turn a profit!)

I bought my first house at a reasonably low price for the market at the time. I took a contract which required me to relocate, so I decided to sell the house (could have rented it). When I came back to here two years later, the housing market had exploded. I asked my realtor what the chances were of trying to buy back my old house.

His answer “You can’t afford it…”

See, that’s one of the things I’m looking at. If the houses in this area have gone for so much in the past and the city has only increased in size/quality, then if I spend the next 3 - 5 years investing in this, I could theoretically make a very nice return on it.

I’ve also considered, because of the lot size, that perhaps after a few years of building up a savings again, I could have a smaller house built on the opposite side of the lot, rent it out until it pays itself off, and then either split them into two separate properties and sell both, or sell/rent one.

Hmmm…

[/quote]

kind of like what I did
I bought 5 acres of land 4 years ago it was very cheap
i put a mobile home on the land
I put it in a spot where I could put another home on the lot if i wanted.
I then sole off 2 acres on the other side to a home builder and that paid off the land and home im in now and was enough to build a shop.

so I have 3 acres of home with a auto shop on the side and my water well is in a spot tha tthe home builder had to tap into my water and pay me royalities for that.

that was a great investment.
I was kind of thinking for about a year after like “what the hell did i do I cant afford this,why did I buy this out in the middle of nowhere.” but after I really sat and thought about it I do not regret it at all.
I was in a horrible money situation as well
you are not,do your homework really sit and think about it and I would say if you are comfortable then do it.

owning your own home is one of the first steps to freedom.

You definitely will get ahead financially if you buy now, but that should not be your only consideration.

If I was 21 again and had all my education finished, I would work for a year, and then travel until my money ran out. IMHO this is a great time in your life to see the world.

Now if you can afford to buy the house and can get someone in paying rent who is paying off your mortgage for you, and if you know and trust someone to manage this while you are away, you can do both.

Hey Squiggles, I was in a very similar position as you last year. Graduated and got a great job at 22, no college debt (thanks Hope Scholarship!) and my car is paid off. I also live very frugally but I couldn’t justify renting a place.

The price of my mortgage for my 3 bedroom, 3.5 bath is marginally higher than the rent of a much smaller apartment. 1 bedrooms around here go for about 700 a month and I pay about $1100 for my mortgage. I also rent out one of the rooms so I actually pay much less than I would otherwise and it’s an investment. If you are thinking about buying and have the means, go for it.

my god- buy buy buy…
yeah your market is in the crapper right now, and will probly take 5-7yrs to get back to 2007 values.
That being said, $48K for a house you want?
at 5% thats all of $200/month interest only. And considering all the banks are hurting, you could possibly negotiate down to say 40K.

How much is your rent? I’m sure you could knuckle down and pay a lot of principle off in the first 3yrs. And then your market might be starting to get back on track, and you’d have all that lovely equity to play with.
Factor in utilities, rates and taxes, and I’m sure it would be less per yr than renting.
I say go for it - because the qualitative benefits of owning your own home will far outweigh the cost benefits.

Good on you, Squiggles.

Buying the property, only thing I can recommend is make sure you can acquire the mineral rights as well.

How much college debt?
Any other debt?

EDIT- put 20% down with your savings and keep the rest in savings

I’m a big believer in Dave Ramsey’s approach.

  1. at least $1000 in the bank
  2. eliminate all debt including student loans
  3. 3-6 months emergency fund (living expenses)

he also suggests 20% down for a house, but in this area that is almost out of reach for a 1st time home buyer,

and he also suggests 15 yr mortgage, that would make it seem less daunting than 30 for you, or pay 1 extra payment a year and I believe it takes it down to 21 IIRC

of course I say all this as I just took out a 1 yr loan for a 2nd car (though plans are to have it paid off in 6 mo’s

[quote]ahzaz wrote:
How’d you manage to start college at 15?! For me thats in 1 month LOL[/quote]

I was 16. Skipping kindergarten and having a mother that gets you to a 4th grade reading level before you start school helps.