We just went through this decision, and we decided to rent. I am SO happy we made this decision. Our quality of life is so much better, we can actually rent a place that is nicer than we can afford, and without a mortgage, we literally have no debt. I definitely don't consider a mortgage bad debt, but to not have any at all? It feels great to have a ton of flexibility in what we do with our money and to know that if something breaks in the house, we won't have to pay to fix it! This isn't a long term solution, but I'm thrilled with it for the next 3-5 years or so.

To me, this is a no-brainer. I'd rent in NW DC and save as much as I could for as long as I could. Your quality of life will be better (shorter commute, better schools) and your finances will better- able to save vs. just scraping by.

Anonymous wrote:

Anonymous wrote:It's hard to tell whether your ownership expenses are reasonable when you clump them together like that. You should separate out the mortgage (PITI) from the maintenance and utility costs.

Does the $300 include car insurance on car #2?

OP here.

Thanks everyone. It is so helpful to have outside perspective.

Here's my calculation on a 550k house with 10% down:

PITI: $3,500k
Utilities: $500 (gas, electric, internet, water, trash...)
Then assuming maintenance costs of $6k per year or $500/month for things like yard maintenance, random things breaking, having to buy things like a lawnmower for the first time). I think this is an underestimate as I watch friends have roofs leak and pipes break...

As for the second car, I didn't think about insurance (so thanks!!) so maybe that would be more like $350/mo for a second car.

Living in the condo is not an option.

PP here. Also consider state tax differences between DC and MD (and remember MD has the county income tax too). I don't know what the rates are offhand but should be easy to look up. There's also a consumption factor as to whether you prefer being in DC or not and whether the house you buy will be as nice as the one you rent.

Your quality of life does sound like it would be better renting (short commute, living in NW, great schools, etc). I wouldn't buy just because the interest rates are low. The market always fluctuates. Plus, if you rent, you will have more time to save a 20% down payment and avoid PMI.

Why are you estimating that the utilities on the house you buy will be higher than on the house you rent? Almost all SFH rentals will require that you pay all the utilities.

Estimate 1% of purchase price per year for major home repairs.

$550 in MoCo won't buy you much, plus with only 10% down you are going to be paying PMI, which sucks.

I'd stick it out in NW, save your money, enjoy your short commute and walkability for a while longer until you can afford a house that you can be in for 10 years with 20% down.

Anonymous wrote:It's hard to tell whether your ownership expenses are reasonable when you clump them together like that. You should separate out the mortgage (PITI) from the maintenance and utility costs.

Does the $300 include car insurance on car #2?

OP here.

Thanks everyone. It is so helpful to have outside perspective.

Here's my calculation on a 550k house with 10% down:

PITI: $3,500k
Utilities: $500 (gas, electric, internet, water, trash...)
Then assuming maintenance costs of $6k per year or $500/month for things like yard maintenance, random things breaking, having to buy things like a lawnmower for the first time). I think this is an underestimate as I watch friends have roofs leak and pipes break...

As for the second car, I didn't think about insurance (so thanks!!) so maybe that would be more like $350/mo for a second car.

Living in the condo is not an option.

How old are your kids?

I'd go for the rental - excellent schools, good commute and you get to live in NW!

Several issues here. Although I understand and value the sense of permanance issue and without knowing your income level, what you are majorly sacrificing in the buy scenario is your family's financial security. Wiping out savings and assuming large debt puts you at risk. Lender's will consider the former in a negative light as well.

"Buy now or be priced out forever" has gotten untold numbers into very deep trouble. You're already exposed to RE through your DC property, as you've pointed out. Better schools and the short commute are the icing on the cake - don't downplay the difference between 20 minutes and an hour in the car, each way, every day.

2

live in condo and save up for a house

It's hard to tell whether your ownership expenses are reasonable when you clump them together like that. You should separate out the mortgage (PITI) from the maintenance and utility costs.

Does the $300 include car insurance on car #2?

That's a tough decision but given you already own a condo, I'd go for the NW house becausse it will be better quality of life, less financial stress and you can save to buy a house later. The 550K house probably isn't going to serve you long term due to size and school issues so you're not going to have the permanency anyway. Later when the market goes up, you could sell your DC property and combine with savings to buy a longer-term house.

We are really struggling with these two options:

1) Buy a house for approx 550k in MoCo
-45min-1hr commute for DH
-need to buy a second car
-would nearly clear out our savings
-good schools, but not amazing
-building equity (but then again, it could disappear too...)
-sense of permanence (this is a big one for DH)

we are estimating mortgage/tax/insurance + utilities + upkeep expenses at $4500/mo
plus $300/mo second car and $200/mo metro or parking + more on gas as we'd both be driving each day, not sure how to estimate that

So ~5k/mo
Does that seem a reasonable estimate?

2) Rent a house from a friend in NW
-10-20min commute for DH
-don't need a second car
-keep more cash reserves
-excellent schools
-if something breaks, we don't have to fix it!
-keep saving

Cons:
not investing in real estate, friend could want house back in a year or two and we'd have to move again (I think this is unlikely), fear that interest rates and prices will rise and this is our only chance to buy.

Rent: $3,500, guesstimating utilities at $300, parking $200

So 4k

Variables:
We own and rent out a condo downtown so we do have an investment in the DC real estate market
There is minimal tax benefit to owning vs renting in our situation.

What else should we take into account? Other hidden costs of owning? Thanks.