Reply to Skipping starter home and buying 4-5BR house?

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[quote=Anonymous][quote=Anonymous]We're married and have no kids but planning on having 2-3 kids in the next 10 years. Is it weird to skip the starter 2BR house and go straight for a 4-5BR house? Has anyone done this before? We are thinking of getting a row house in the city, so presumably we could rent out the extra space until we need it. Thoughts?[/quote]

How old are you and how soon do you plan on having your first child? If I were you, I would consider renting for a while. My husband and I bought a 2 bedroom condo when we were in our early 20s. Big mistake! We are now living in our third owned home. Here are a few things to consider

Scenario #1: If you were to buy a small place and rent it out in a few years, there is no guarantee that you would even break even on rent. You might not even find a renter. The house may sit vacant for a while as you continue to make payments on it. The renter might not be an ideal tenant. He/she may damage the house or refuse to make payments. That house will still be your responsibility. If there is a leak, you will pay to fix it. If the heater breaks, you will need to replace it. Also, there is the possibility that you will not qualify for a large enough loan for your new house because you already have a mortgage. Trust me... Owning a rental property is not always profitable. I have experience with this.

Scenario #2: If you were to buy a small place and sell it in a few years, you would need to pay loads of fees. A real estate agent usually asks for 6-7% in interest. Even if the house value increases by this amount, you will lose money.

Scenario #3: If you buy a large house, you may not find anyone to share it with you. Also, why would a young married couple want to share a large house with renters? And, your wants in a home might change in the next few years. You may decide you want to move out a little farther and get a backyard. You may discover that you prefer a different school district. Kids change your priorities. You don't want to end up in a house that ends up not suiting your family. Also, in a few years you may be able to afford (and want) something even nicer or bigger. However, you will be stuck in the house you have because it will not be worth the loss to sell it.

My husband and I were very anxious to own our own home and we thought we were making a great financial decision. We would have been better off renting and waiting a few years. Here are my suggestions: 1. If you have debt, pay it off. 2. Build up an emergency fund of six month expenses. 3. Max out your 401(k)s and IRAs. 4. Enjoy living in a rental with no responsibilities. [/quote]

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