Home Ownership vs. Equity?

LeMat,

Property is always a good investment on a long enough time-line. Just like growth stocks.

You can't live in a mutual fund. However, your mutual fund never calls you and asks you to fix its dripping sink either (speaking in terms of later rental use for your condo).

Personally, I like condos. They have a utility-like functionality to them. Also, you can aquire them fairly easily. The resale market for condos is a mixed bag, but the rental market for them has proven pretty strong, especially in the otherwise flailing real estate market.

Something that folks never seem to understand is that retirement is all about income, not how much cash you have in your savings.

You can outlive cash, but not income.

For example, let's say you own 10 condos that you are renting at 1,000 a month by the time you retire.

That is $100,000 a year in income. Take away the 10% management fee you'll have to pay a managment company and you have $90,000 gross income.

Now, let's suppose that you accumulated those properties with non-traditional financing and that your tenants pay the exact amount of your mortgage, taxes and insurance.

That means in theory, you didn't even pay for those investments. You haven't contributed any hard dollars for your investments.

Mutual funds can't touch this principle.

Lets compare opportunity costs. Let's suppose that you buy a condo and it turns into a rental property with the tenant essentially paying off your interest in the property. Your savings can go towards any investment opportunity that presents itself. A minimal opportunity cost right? Growth funds tie up your cash. It is difficult to regain a strong position in a mutual fund when you redeem your shares.

This is just one person's opinion and everyone is different. Because of my work as a banker, I see many variations of financial health. The variation where the individual seems most at peace is low debt and highly consistent income. A theme on this variation is low debt, hightly consistent income and highly capitalizing holdings.

Buying that condo could be a good start towards that kind of financial health.

Good luck

Your starting out Hot as a Firecracker. Myself I'd never buy a Condo as there Notoriously bad at resales same as timeshares. However sometimes if the cookie crumbles just right you could come up smelling like a rose.

I'd save for a while as your still young say another 3-5 years Watching the market and all its up and downs which really doesn't have to affect you in the least.

You see with purchasing Real Estate it take a buyer and seller what a Buyer is willing to pay and a seller is willing to take. So in the Big Picture of things Buy when the Market is down and Sell when its high and hot. But again its just you and 1 little old seller that counts. I would study the market seeing what neighborhoods are grow-thy and stable. Make an Informed decision not just Because the media says its a good time to buy in that type market I'd run just the opposite the media.

Good luck I'm sure you'll be just fine however you go.

You should definitly get into a home as soon as you can reasonably afford to; I'd be saving any excess every month in a high yield money market fund (guaranteed 5% return right now; might even out-do equities for several years). You'll need a pile of cash for a future downpayment, closing costs, and furniture.

By "excess" though, I mean money you can afford to save after contributing to your company's 401k (or an IRA). You can't neglect important goals like retirement and an emergency fund. But the next most important thing is owning a home, so get on that!

Congrats on securing employment after college! I would buy the condo if there is a resale market for it. I would not, however, start investing or buying homes until I was out of debt (including student loans,cars, and credit cards) and had 3 months' worth of expenses in the bank. Then I would look to invest in a home that was in a growing area and had resale potential.

The condo you mention is too expensive for someone whose total household income is $65K, but a bank will probably allow you to borrow it for 30 or more years. You should keep your housing expenses below 30% of income, that would include any mortgage, insurance, taxes, and maintenance.

Investments are important especially if you are depending on your savings for retirement income. You are really poised to get a head start on that if you save early as the power of compounding is immense.

Good Luck!

If you live in Nevada, Arizona, California, or Florida you may rethink the real estate market right now. Condo prices are declining in those states and probally will continue to do so for another year or two. Why not do both. Invest for the next year or two then buy.

find a house at a price you can afford, in a neighborhood with a good school district....that is key to maintaining the value of your property.

you cant afford to throw away $1600 a month.

buy a house now while the market is still unsettled, and hang onto your property in the event it doesnt increase in value over the next two or three years.......then you are in and the market is sure to recover and gain.