One of the most significant financial decisions anyone can make is when to purchase a home. Arguably, the single most significant expense for anyone, it’s hard to know precisely when the right time to buy is, as the market rises and falls, just as interest rates can be hard to predict.
The whole ‘should you or shouldn’t you’ debate is causing a little bit of angst for one Redditor posting in r/personalfinance. With $250,000 in cash, the goal is to buy a home eventually, but for right now, there is a concern that they would be house poor after leaving their rent-controlled Los Angeles-area apartment.
What’s the Right Move?
One of the things the Redditor points out is that they don’t want to be house poor. As this is something they are currently observing in parents and siblings who pay high mortgages, there is concern about not being able to pursue other opportunities in life.
While the Redditor and their spouse get to travel and do fun things, they see their family members worrying about the house, fixing it, furnishing it, and so on. Instead of worrying about these things, they are currently living in a $1,400 rent-controlled apartment and get to enjoy life.
The original poster is treating their parents and grandparents, and enjoying life with trips, rather than feeling like they have to work to live. This immediately raises the question of what the right next move is. There is a bit of pressure they are feeling that has them wondering if they shouldn’t use this $250,000 in cash and put it toward a home.
Knowing they are in the Los Angeles area, it’s likely this would be more of a down payment and to drop the mortgage a little, but it would still be high. To be honest, owning a home in Southern California right now is not for the faint of heart, as you must be prepared for high costs. Even without considering kids in the future, there is still a lot you have to account for as homeowners, just like your parents and siblings.
Continue Renting For Now
With an inexpensive rent-controlled apartment, it seems pretty obvious that the right move is to simply keep everything as is. Maintaining the status quo with the living situation means enjoying their current lifestyle and building up more savings.
It’s okay to want to analyze the costs of homeownership, including taxes, insurance, and estimated home maintenance, to see where the math stands. If they feel it’s doable based on their current expenses, it might be something to consider.
However, the prospect of saving more and building wealth when you don’t need a home should be a very attractive idea. This is especially true if where you can buy a home means changing your lifestyle, such as moving far away from your current location. The result could be a longer commute to work, or even missing out on your favorite shopping or restaurant locations.
Buying a home isn’t the end-all, be-all of the world, and there are plenty of people who rent for all time. Yes, there is an argument that renting is throwing money away, but this is only true if money is sitting in a bank account. Instead, if this $250,000 is invested and earning a strong return, it’s likely making more money over the next 30 years than a house purchase would.
If interest rates come down and/or home prices drop, then it’s worth considering purchasing a home. Until such a time, which is still likely years away, keeping a rare rent-controlled apartment seems like the best possible scenario.
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